JULY 31, 1996
OVB [LOGO]
THE OVB FUNDS
PORTFOLIOS OF THE ARBOR FUND
SEMI-ANNUAL
REPORT
TO SHAREHOLDERS
<PAGE>
OVB [LOGO] THE OVB FUNDS
TABLE OF CONTENTS
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Investment Adviser's Report........................1-3
Financial Statements..............................4-31
THE OVB FUNDS:
(BULLET) ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (FDIC) OR ANY OTHER GOVERNMENT AGENCY;
(BULLET) ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY ONE VALLEY BANK, N.A. OR ANY OF ITS AFFILIATES;
(BULLET) INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
SEI FINANCIAL SERVICES COMPANY, THE DISTRIBUTOR OF THE OVB FUNDS, IS NOT
AFFILIATED WITH ONE VALLEY BANK, N.A. ONE VALLEY BANK, N.A. SERVES AS
INVESTMENT ADVISER FOR THE OVB FUNDS.
<PAGE>
INVESTMENT ADVISER'S REPORT
OVB[LOGO]
JULY 31, 1996
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The six-month period ended July 31, 1996 was one of mixed results in both
the stock and bond markets, as the uncertain direction of interest rates once
again dominated investor attention.
After the spectacular markets of 1995, it was unreasonable to expect a
straight-line continuation of double-digit gains. However, we believe that the
results so far this year would be acceptable against virtually any other
backdrop, and that the markets continue to provide attractive opportunities.
MONEY MARKET REVIEW
On July 31, 1996, Class "A" shares of the OVB Funds Prime Obligations
Portfolio produced a seven-day yield of 5.0%. Class "B" shares produced a
seven-day yield of 4.7%.
The portfolio continued to provide total returns in excess of the rate of
inflation, as the market for short-term instruments moved in a relatively narrow
range throughout the six-month period. Looking ahead, we anticipate increases in
short-term rates by the Federal Reserve Board, and are therefore keeping the
portfolio's maturities relatively short in order to take advantage of possible
opportunities for higher yields.
BOND MARKET REVIEW
For the six months ended July 31, 1996, Class "A" and "B" shares of the
Government Securities Portfolio each produced a total return of -3.2%. Class "A"
shares of the West Virginia Tax-Exempt Income Portfolio produced a total return
of -0.8%, while Class "B" shares returned -0.9%.
During the first half of the fiscal year, investors were hyper-alert to any
signs of economic growth, in the belief that a hike by the Federal Reserve Board
would inevitably follow. This skittish attitude dampened enthusiasm throughout
the period, and rates did indeed rise slightly. However, for every positive
economic indicator, there was generally at least one negative report, leading to
a seesaw effect over the course of the period.
Looking ahead, we continue to believe that the economy will slow down
somewhat in the second half of the year, creating a better environment for fixed
income instruments.
In light of this outlook, we have continued to emphasize Treasury and agency
issues in our Government Securities Portfolio, avoiding much representation by
corporate issues, which could be impacted by a slowing economy. We have also
maintained our average weighted maturity in the
(CONTINUED)
1
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INVESTMENT ADVISER'S REPORT (CONTINUED)
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taxable fund within a long-intermediate range of approximately nine years.
On the tax-exempt side, we have extended the average weighted maturity of
the West Virginia Tax-Exempt Income Portfolio somewhat, in order to take
advantage of the higher yields that are currently available. We continue to
invest primarily in issues rated AAA, in order to avoid situations where an
economic slowdown may inhibit the ability of a municipality to service its debt.
Both fixed income funds remain fully invested, with very low cash balances.
EQUITY MARKET REVIEW
For the six months ended July 31, 1996, Class "A" shares of the Capital
Appreciation Portfolio produced a total return of -1.8%, while Class "B" shares
produced a total return of -1.9%. Class "A" shares of the Emerging Growth
Portfolio rose 1.3%, while Class "B" shares rose 1.1%.
Performance in the equity markets began strongly, but was hampered by
growing concerns over interest rates and corporate earnings during the latter
part of the reporting period. As a result, many early gains were eroded in the
two equity funds.
To put this period in perspective, our research has shown that any time when
long-term interest rates have moved higher following a period of decline, stocks
have also moved higher -- but generally only for a period of six months or less.
Then, when rising rates begin to erode corporate earnings, the stock market
begins to reflect the realities of a higher-rate environment. From that point
forward, the future of the stock market is determined by the ongoing trend in
rates. The cycle has been repeated time and again throughout history --
including the first half of fiscal 1996.
This time, however, interest rates appear to have peaked just as their
effects were being felt in the stock market. Having done so, they now appear to
be trending downward once again. Therefore, we are optimistic that the markets
will return to a more positive track during the second half of the year.
In the small capitalization category, much of the weakness was attributable
to an inevitable correction in the technology sector, where prices of a number
of issues had far exceeded any rational definition of value. In addition, the
market for initial public offerings (IPOs) finally began to cool after nearly 18
months of record-
2
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OVB[LOGO]
JULY 31, 1996
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breaking performance. A correction in this category was both healthy and
overdue. At the same time, we believe that the small-cap area continues to offer
excellent values for investors, and we continue to pursue our approach of
seeking promising issues that offer real long-term value.
The volatility in the small-cap market provided an excellent environment for
the introduction of the OVB Equity Income Portfolio, which debuted on August 1,
1996. During times of confusion over the direction of rates and earnings,
investors frequently move to the types of solid, dividend-paying, blue chip
issues that compose the Equity Income Portfolio.
Now that some of the excesses have been purged from the equity markets, we
believe that the current environment of moderating interest rates will allow
earnings and prices to recover once again, and we look forward to a period of
relative stability. During this time, we may increase our cash positions
somewhat in order to take advantage of opportunities as they arise.
CONCLUSION
Our overall goal in 1996 has been to preserve the gains of the previous
year, while moving forward to take advantage of opportunities for the future.
Thus far, this strategy has been largely successful, as our portfolios have
shown mostly positive results for the period, and are well-positioned for what
we believe will be favorable conditions ahead.
/s/J. Randy Valentine
J. Randy Valentine
Senior Vice President
One Valley Bank
3
<PAGE>
STATEMENT OF NET ASSETS
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THE OVB FUNDS PRIME
OBLIGATIONS PORTFOLIO
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A pie chart depicting the percentage of portfolio assets of the OVB Prime
Obligations Portfolio.
BANKER'S ACCEPTANCES 2%
CERTIFICATES OF DEPOSIT/BANK NOTES 12%
REPURCHASE AGREEMENT 3%
COMMERCIAL PAPER 52%
U.S. TREASURY OBLIGATION 4%
U.S. GOVERNMENT AGENCY OBLIGATIONS 15%
FLOATING RATE INSTRUMENTS 12%
% of Total Portfolio Investments
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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COMMERCIAL PAPER -- 52.6%
Apreco
5.320%, 08/20/96 $ 3,000 $ 2,992
BCI Funding
5.340%, 08/02/96 3,000 3,000
Bear Stearns
5.400%, 09/23/96 3,500 3,472
Beneficial
5.350%, 08/14/96 3,000 2,994
BT Securities
5.330%, 08/20/96 1,500 1,496
5.330%, 08/21/96 2,000 1,994
CADES
5.400%, 09/24/96 3,000 2,976
Clipper Receivables
5.320%, 08/21/96 3,000 2,991
Coca Cola Enterprises
5.330%, 08/26/96 3,000 2,989
Electricite de France
5.400%, 09/18/96 2,000 1,986
Emerson Electric
5.300%, 08/19/96 2,900 2,892
General Motors Acceptance
5.450%, 11/08/96 3,000 2,955
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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Matterhorn Capital
5.400%, 08/09/96 $ 3,000 $ 2,996
Merrill Lynch
5.400%, 09/16/96 3,000 2,979
Morgan Stanley
5.400%, 08/07/96 3,000 2,997
National Fuel Gas
5.450%, 08/26/96 2,000 1,992
Ranger Funding
5.300%, 08/02/96 1,500 1,500
Riverwood Funding
5.320%, 08/21/96 3,300 3,290
Sears Roebuck Acceptance
5.440%, 10/08/96 3,000 2,969
Whirlpool Finance
5.420%, 08/01/96 2,500 2,500
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TOTAL COMMERCIAL PAPER (COST $53,960) 53,960
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U.S. GOVERNMENT AGENCY OBLIGATIONS -- 15.5%
FFCB
5.600%, 06/03/97 3,000 2,996
FHLB
5.449%, 08/05/96 5,035 5,032
FHLMC
5.447%, 08/06/96 690 691
FNMA
5.453%, 08/13/96 1,125 1,123
5.520%, 08/25/96 (A) 6,000 6,000
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TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $15,842) 15,842
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U.S. TREASURY OBLIGATION -- 3.9%
U.S. Treasury Note
7.500%, 01/31/97 4,000 4,045
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TOTAL U.S. TREASURY OBLIGATION
(COST $4,045) 4,045
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FLOATING RATE INSTRUMENTS -- 11.7%
General Electric
5.500%, 08/22/96 (A) 2,000 2,000
People's Security Funding
Agreement
5.630%, 10/29/96 (A) 3,000 3,000
PNC Bank
5.420%, 08/06/96 (A) 3,000 2,999
SMM Trust 1995-N
5.550%, 08/15/96 (A) 1,000 1,000
4
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OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
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THE OVB FUNDS PRIME
OBLIGATIONS PORTFOLIO (CONTINUED)
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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FLOATING RATE INSTRUMENTS (CONTINUED)
SMM Trust 1996-I
5.488%, 08/29/96 (A) $ 1,000 $ 1,000
Travelers Insurance
5.640%, 10/29/96 (A) 2,000 2,000
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TOTAL FLOATING RATE INSTRUMENTS (COST $11,999) 11,999
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BANKER'S ACCEPTANCES -- 2.0%
American Express Centurion Bank
5.370%, 09/03/96 1,000 995
First National Bank of Boston
5.430%, 09/13/96 1,050 1,043
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TOTAL BANKER'S ACCEPTANCES (COST $2,038) 2,038
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CERTIFICATES OF DEPOSIT/BANK NOTES -- 11.7%
Bank of Hawaii
5.570%, 11/06/96 3,000 3,001
Bank of Scotland
5.500%, 10/08/96 3,000 3,000
Bank of Tokyo--Mitsubishi
5.520%, 09/09/96 3,000 3,000
Banque National de Paris
5.500%, 10/01/96 3,000 3,000
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TOTAL CERTIFICATES OF DEPOSIT/
BANK NOTES (COST $12,001) 12,001
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REPURCHASE AGREEMENT -- 2.7%
Aubrey Lanston
5.60%, dated 07/31/96, matures 08/01/96,
repurchase price $2,739,426 (collateralized
by U.S. Treasury obligation, par value
$2,798,000, 6.250%, matures 07/31/98,
market value $2,798,874) 2,739 2,739
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TOTAL REPURCHASE AGREEMENT (COST $2,739) 2,739
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TOTAL INVESTMENTS -- 100.1% (COST $102,624) 102,624
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OTHER ASSETS AND LIABILITIES -- (0.1%)
Other Assets and Liabilities, Net (131)
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TOTAL OTHER ASSETS AND LIABILITIES (131)
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VALUE
DESCRIPTION (000)
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NET ASSETS:
Portfolio shares of Class A (unlimited
authorization -- no par value) based on
95,519,277 outstanding shares of beneficial
interest $ 95,519
Portfolio shares of Class B (unlimited
authorization -- no par value) based on
6,980,607 outstanding shares of beneficial
interest 6,981
Accumulated net realized loss on investments (7)
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TOTAL NET ASSETS -- 100.0% $102,493
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NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS A $1.00
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS B $1.00
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(A) Floating Rate Instrument. Rate reflected on the Statement
of Net Assets is the rate in effect on July 31, 1996.
FFCB Federal Farm Credit Bank
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF NET ASSETS
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THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME PORTFOLIO
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A pie chart depicting the percentage of portfolio assets of the OVB West
Virginia Tax-Exempt Income Portfolio.
MUNICIPAL BONDS 99%
MONEY MARKETS 1%
% of Total Portfolio Investments
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS -- 97.5%
West Virginia -- 95.6%
Beckley, Industrial Development
Authority, Beckley Water Project, RB
7.000%, 10/01/17 $ 400 $ 425
Beckley, Sewage System Refunding, RB
6.750%, 10/01/25 400 405
Berkeley County, Board of Education,
GO, FGIC
4.500%, 06/01/09 180 163
4.125%, 06/01/10 600 512
Berkeley County, Sewer System
Refunding, RB, MBIA
5.625%, 10/01/19 395 386
Bluefield, Sewer System Refunding,
RB, MBIA
5.600%, 10/01/97 5 5
Brooke County, Board of Education,
GO, AMBAC
8.800%, 08/01/97 45 47
9.000%, 08/01/98 15 16
8.500%, 08/01/99 75 83
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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West Virginia (continued)
Brooke Pleasant, Tyler Wetzel County,
Single Family Mortgage, RB
5.000%, 08/15/10 $ 500 $ 473
Cabell County, Board of Education,
GO, MBIA
6.500%, 05/01/03 150 164
6.600%, 05/01/04 150 166
Cabell, Putnam & Wayne, Single Family
Residence Mortgage, RB, FGIC
7.375%, 04/01/11 320 370
Charleston, New Public Housing
Authority, RB
5.000%, 02/01/99 15 15
Charleston, Parking Facility Improvements
Project, RB, Ser A
7.000%, 06/01/16 1,080 1,142
Clarksburg, Water Refunding Improvement, RB
6.100%, 09/01/04 75 80
6.200%, 09/01/05 75 80
Fayette County, Pollution Control, Union
Carbide Project, RB
5.200%, 02/01/98 30 30
Greenbrier County, Public Service District
Sewer Project, RB, MBIA
5.850%, 10/01/15 700 708
Harrison County, Board of Education,
GO, FGIC
6.200%, 05/01/04 150 161
6.400%, 05/01/07 175 190
Harrison County, Solid Waste Disposal,
Monongahela Power Company,
RB, Ser A
6.875%, 04/15/22 1,500 1,611
Harrison County, Solid Waste Disposal,
Potomac Edison Project, Ser B, RB,
AMBAC
6.250%, 05/01/23 400 404
Harrison County, Solid Waste Disposal,
RB, MBIA
6.300%, 05/01/23 200 204
Harrison County, Solid Waste Disposal,
West Penn Power Harrison Project,
Ser B, RB, AMT
6.300%, 05/01/23 300 303
Harrison County, United Hospital Center,
RB, AMBAC
4.550%, 04/01/02 500 489
6
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OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
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THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME PORTFOLIO (CONTINUED)
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
Huntington County, Sewer System
Refunding, RB, FSA
5.375%, 11/01/23 $ 1,000 $ 926
Jackson County, Residential Mortgage,
RB, FGIC
7.375%, 06/01/10 120 136
Kanawha County, Building Commission,
Charleston Area Medical Center Project, RB
6.250%, 12/01/98 70 72
Kanawha County, Building Commission,
Charleston Area Medical Center Project,
Ser A, RB, AMBAC
7.500%, 11/01/08 150 167
Kanawha County, Building Commission,
Charleston Area Medical Center Project,
Ser A, RB, MBIA
7.100%, 06/01/13 30 31
Kanawha County, Residential Mortage,
RB, FGIC
7.375%, 09/01/11 45 52
Kanawha County, Residential Mortgage,
RB, FGIC
7.375%, 09/01/10 305 345
Kanawha County, Single Family Mortgage,
RB, FGIC
7.100%, 12/01/99 15 16
7.300%, 12/01/04 120 138
7.400%, 12/01/10 30 35
Kanawha, Mercer & Nicholas Counties,
Single Family Mortgage, RB, Prerefunded
02/01/14 @ 89.8452
0.000%, 02/01/15 2,000 613
Kanawha, Putnam County Huntington/
Charleston, Single Family Mortgage,
RB, Ser A
0.000%, 12/01/16 2,000 585
Logan County, Logan County Health Care,
RB
8.000%, 12/01/16 690 831
Marion County, Single Family Mortgage,
RB, FGIC
7.100%, 08/01/99 20 22
7.375%, 08/01/11 25 29
Marshall County, Pollution Control, Ohio
Power Project, Ser B, RB, MBIA
5.450%, 07/01/14 800 771
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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West Virginia (continued)
Marshall County, Pollution Control, Ohio
Power Project, Ser C, RB, MBIA
6.850%, 06/01/22 $ 600 $ 641
Marshall County, Special Obligation
Refunding, GO
6.500%, 05/15/10 205 216
Mason County, Pollution Control, Ohio
Power Project, Ser B, RB, AMBAC
5.450%, 12/01/16 970 928
Mason County, Single Family Mortgage,
Principal Custody Receipts, RB, FGIC
5.000%, 08/01/11 335 311
Mason County, Single Family Mortgage,
RB, FGIC
7.400%, 08/01/11 608 697
Mercer County, Single Family Mortgage, RB
6.700%, 08/01/96 10 10
Mingo County, Board of Education, GO,
AMBAC
9.700%, 10/01/97 60 64
Monongalia County, Board of Education,
GO, MBIA
7.000%, 04/01/03 150 167
Monongalia County, Single Family
Mortgage, RB
7.200%, 03/01/11 150 150
Morgantown, Building Commission
Municipal Lease, RB, MBIA
5.750%, 01/01/19 250 250
Morgantown, Waterworks Project, RB
5.750%, 08/01/96 30 30
Morgantown, Waterworks Project, RB, BIG
8.100%, 10/01/97 45 47
Ohio County, Board of Education, GO, MBIA
5.250%, 06/01/16 160 153
5.250%, 06/01/17 125 119
Parkersburg, Waterworks & Sewer System
Project, RB, FSA
4.750%, 09/01/02 115 115
5.800%, 09/01/19 1,600 1,592
Pea Ridge, Public Service District Sewer
Project, Ser 1994, RB, AMBAC
7.000%, 05/01/20 10 11
Pleasants County, Pollution Control,
Monongahela Power, Ser C, RB, AMBAC
6.150%, 05/01/15 500 513
(CONTINUED)
7
<PAGE>
STATEMENT OF NET ASSETS
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THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME (CONTINUED)
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
Pleasants County, Pollution Control,
Potomac Edison, RB, AMBAC
6.150%, 05/01/15 $ 500 $ 513
Pleasants County, Pollution Control, West
Penn Power, RB, AMBAC
6.150%, 05/01/15 500 513
Pleasants County, Potomac Edison
Project, RB, MBIA
6.150%, 05/01/15 1,000 1,025
Putnam County, Pollution Control
Revenue, Appalachian Power Project,
Ser D, RB, AMBAC
5.450%, 06/01/19 700 665
Raleigh County, Board of Education,
GO, MBIA
8.000%, 04/01/97 15 15
8.200%, 04/01/97 30 31
8.375%, 04/01/98 75 80
Raleigh County, Parkway Economic
Development & Tourism Authority,
Tamarach Project, RB, Ser 1994
6.600%, 06/01/05 480 513
Raleigh, Fayette & Nicholas Counties,
Special Obligation Bonds
6.150%, 08/01/03 100 108
6.250%, 08/01/11 195 210
South Charleston, GO
5.700%, 09/01/97 20 20
South Charleston, Herbert J. Thomas
Memorial Hospital Project, RB,
Prerefunded 10/01/98 @ 102
8.000%, 10/01/04 75 82
Wayne County, Board of Education,
GO, AMBAC
8.000%, 06/01/99 75 82
Webster County, Multifamily Housing,
Circlebrook Project, Ser A, RB
6.500%, 04/01/18 800 824
Weirton, Medical Center Project, Ser A,
RB, AMBAC
5.750%, 12/01/04 150 155
West Virginia State Board of Regents,
RB, MBIA
5.900%, 04/01/04 60 64
6.000%, 04/01/04 100 105
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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West Virginia (continued)
West Virginia State Board of Regents,
RB, Ser B, MBIA
7.250%, 04/01/03 $ 50 $ 55
West Virginia State College, RB,
AMBAC
5.875%, 04/01/05 150 156
6.000%, 04/01/12 640 657
West Virginia State Economic Development
Tourism Authority, Ser B, RB, FGIC
4.625%, 07/01/19 300 308
West Virginia State Hospital Finance
Authority, Cabell County Project, RB
7.875%, 01/01/19 200 220
West Virginia State Hospital Finance
Authority, Charleston Area Medical
Center Project, Ser A, RB, Prerefunded
06/01/96 @ 102
6.500%, 09/01/23 2,025 2,071
West Virginia State Hospital Finance
Authority, Linked Bears and Bulls,
RB, MBIA
6.100%, 01/01/18 700 704
West Virginia State Housing Development
Fund, Ser E, RB
6.250%, 11/01/12 150 153
West Virginia State Parkways Economic
Development & Tourism Authority,
RB, FGIC
4.800%, 05/15/00 150 150
0.000%, 07/01/03 250 178
0.000%, 05/15/07 500 278
5.800%, 05/15/13 140 141
West Virginia State School Building
Authority, Capital Improvement,
RB, Ser B, MBIA
5.750%, 07/01/15 300 300
6.750%, 07/01/17 475 505
West Virginia State School Building
Authority, RB, MBIA
5.250%, 07/01/99 200 204
7.250%, 07/01/15 560 622
West Virginia State School Building
Authority, RB, MBIA
6.250%, 07/01/01 500 533
6.950%, 07/01/03 200 216
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OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
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THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME PORTFOLIO (CONTINUED)
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FACE AMT. VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
West Virginia State University Revenue
Project, RB, AMBAC
6.000%, 04/01/12 $ 200 $ 205
West Virginia State Water Development
Authority Loan Program II, Ser A, RB, FSA
5.500%, 11/01/23 625 591
West Virginia State Water Development
Authority Loan Program II, Ser A, RB
7.300%, 11/01/11 70 79
7.400%, 11/01/19 70 80
West Virginia State Water Development
Authority Loan Program II, Ser A-II,
RB, FSA
6.050%, 11/01/13 150 149
West Virginia State Water Development
Authority Loan Program II, Ser A-II, RB
5.000%, 11/01/18 950 842
West Virginia State Water Development
Authority Loan Program II, Ser B, RB, FSA
5.375%, 11/01/25 785 720
West Virginia State Water Development
Authority Loan Program, Capital Guaranty
Custodial Receipts
7.500%, 11/01/29 500 554
West Virginia State Water Development
Authority Loan Program, Ser A, RB
7.000%, 11/01/11 150 162
West Virginia State Water Development
Authority Loan Project II, Ser A, RB,
Prerefunded 11/01/01 @ 102
4.400%, 11/01/31 200 200
West Virginia State Water Development
Authority, Ser A, RB
7.700%, 11/01/29 225 255
West Virginia State Water Development
Authority, Ser A-I, RB, FSA
5.250%, 11/01/21 795 722
West Virginia State Water Development
Authority, Sewer System Loan Program, RB
7.100%, 11/01/09 200 230
West Virginia State, Building Commission
Lease, Regional Jail & Correction Facility
Project, Ser A, RB, MBIA
6.300%, 07/01/98 200 207
6.500%, 07/01/00 105 111
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FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
West Virginia (continued)
West Virginia State, GO, Ser A, FGIC
5.750%, 11/01/21 $ 1,340 $ 1,342
5.250%, 11/01/26 500 464
West Virginia State, GO, Ser A
5.400%, 02/01/01 300 309
West Virginia State, GO
5.750%, 11/01/96 15 15
5.250%, 06/01/97 20 20
5.700%, 06/01/98 75 75
6.000%, 06/01/98 15 15
4.000%, 02/01/99 15 15
6.000%, 06/01/02 180 183
West Virginia State, Housing Development
Authority, Ser A, RB
5.450%, 11/01/21 150 138
West Virginia State, Housing Development
Fund, BIG
7.375%, 11/01/05 75 77
West Virginia State, Housing Development
Fund, RB
6.100%, 11/01/99 15 15
6.000%, 12/15/08 90 92
6.000%, 12/15/09 90 92
West Virginia State, Housing Development
Fund, Ser A, RB, AMBAC
5.500%, 11/01/11 80 77
West Virginia State, Housing Development
Fund, Ser A, RB
6.700%, 05/01/08 30 31
6.700%, 11/01/08 40 42
6.700%, 05/01/09 40 41
6.700%, 11/01/09 45 47
West Virginia State, Housing Development
Fund, Ser E, RB
6.350%, 05/01/24 205 208
West Virginia University, Marshall Library
Project, RB, AMBAC
5.750%, 04/01/16 1,000 994
West Virginia Water Development Authority
Loan Program II, Ser A, RB, FSA
5.750%, 11/01/29 150 147
West Virginia Water Development Authority
Loan Program II, Ser B, RB, FSA
5.375%, 11/01/25 920 850
(CONTINUED)
9
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
West Virginia Water Development Authority,
RB, Ser A
7.000%, 11/01/26 $ 200 $ 202
Wheeling, Waterworks & Sewage System,
Ser B, RB, FGIC
6.450%, 12/01/07 150 160
6.650%, 12/01/15 300 313
Wood County, Saint Joseph's Hospital,
Parkesburg Project, RB, AMBAC
6.500%, 01/01/98 50 51
- ----------------------------------------------------------------
TOTAL WEST VIRGINIA 42,993
- ----------------------------------------------------------------
Puerto Rico -- 1.9%
Commonwealth of Puerto Rico, GO, AMBAC
5.850%, 07/01/15 830 841
- ----------------------------------------------------------------
TOTAL PUERTO RICO 841
- ----------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $43,868) 43,834
- ----------------------------------------------------------------
MONEY MARKET -- 0.8%
Federated Tax Free Money Market Portfolio 355 355
- ----------------------------------------------------------------
TOTAL MONEY MARKET (COST $355) 355
- ----------------------------------------------------------------
TOTAL INVESTMENTS -- 98.3% (COST $44,223) 44,189
- ----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 1.7%
Other Assets and Liabilities, Net 762
- ----------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES 762
- ----------------------------------------------------------------
- ----------------------------------------------------------------
VALUE
DESCRIPTION (000)
- ----------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited authorization --
no par value) based on 4,045,876 outstanding shares
of beneficial interest $39,864
Portfolio shares of Class B (unlimited authorization --
no par value) based on 542,896 outstanding shares
of beneficial interest 5,316
Accumulated net realized loss on investments (195)
Net unrealized loss on investments (34)
- ----------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $44,951
- ----------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE -- CLASS A $9.80
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE -- CLASS B $9.79
- ----------------------------------------------------------------
AMT Alternative Minimum Tax
AMBAC American Municipal Bond Assurance Company
BIG Bond Investors Guaranty
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
Ser Series
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
THE OVB FUNDS GOVERNMENT
SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
A pie chart depicting the percentage of portfolio assets of the OVB Government
Securities Portfolio.
COMMON STOCKS 5%
REPURCHASE AGREEMENT 2%
U.S. GOVERNMENT AGENCY OBLIGATIONS 60%
U.S. TREASURY OBLIGATIONS 26%
MUNICIPAL BONDS 6%
CORPORATE OBLIGATION 1%
% of Total Portfolio Investments
- -----------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 59.3%
FFCB
5.690%, 03/03/00 $ 831 $ 806
7.950%, 04/01/02 416 418
8.400%, 12/01/05 623 674
FFCB MTN
5.800%, 12/18/00 400 385
6.150%, 03/03/03 416 400
6.900%, 09/08/15 500 477
FHLB
7.700%, 08/26/96 175 175
7.915%, 01/17/97 500 505
6.520%, 05/23/97 400 402
8.030%, 12/19/97 300 308
8.020%, 08/14/98 415 427
7.040%, 05/24/99 500 506
8.375%, 10/25/99 310 326
7.780%, 10/19/01 500 521
6.380%, 04/29/03 1,660 1,583
5.440%, 10/15/03 415 382
6.410%, 12/29/03 500 476
7.310%, 06/16/04 400 405
- -----------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
FHLB (continued)
8.160%, 10/01/04 $ 450 $ 459
8.090%, 12/28/04 400 424
8.125%, 03/07/05 1,000 1,015
6.345%, 11/01/05 500 474
7.760%, 11/21/06 500 522
7.930%, 02/12/10 1,000 1,058
8.000%, 08/16/10 1,000 981
FHLB MTN
6.880%, 04/26/00 500 503
5.990%, 10/01/03 500 473
7.030%, 05/06/11 500 488
FHLMC
6.900%, 04/04/03 500 491
6.485%, 10/03/05 500 479
6.990%, 07/26/06 500 496
6.590%, 12/09/08 1,000 926
8.640%, 10/14/09 400 415
8.060%, 03/24/10 500 500
Financing Corporation
8.600%, 09/26/19 500 553
Financing Corporation STRIPS
0.000%, 04/05/11 2,000 674
FLB
7.950%, 10/21/96 83 83
FNMA
7.900%, 04/10/02 400 402
6.200%, 07/10/03 500 473
6.320%, 12/23/03 400 379
8.250%, 10/12/04 500 512
Housing Urban Development
94a Abilene, Taxable,
Callable 08/01/03 @ 100
7.180%, 08/01/13 160 159
Housing Urban Development
94a Barberton, Taxable,
Callable 08/01/03 @ 100
7.180%, 08/01/13 520 512
Housing Urban Development
94a Egg Harbor, Taxable,
Callable 08/01/03 @ 100
6.930%, 08/01/08 160 157
7.180%, 08/01/13 220 216
Housing Urban Development
94a-I Montgomery County, Taxable,
Callable 08/01/03 @ 100
6.930%, 08/01/08 55 54
Housing Urban Development
94a Ocean Shores, Taxable,
Callable 08/01/03 @ 100
6.930%, 08/01/08 225 220
(CONTINUED)
11
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
THE OVB FUNDS GOVERNMENT
SECURITIES PORTFOLIO (CONTINUED)
- -----------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Housing Urban Development 94a Pohatcong
Township, Taxable,
Callable 08/01/03 @ 100
6.930%, 08/01/08 $ 240 $ 234
Housing Urban Development 94a
Providence, Taxable,
Callable 08/01/03 @ 100
6.930%, 08/01/08 130 127
Housing Urban Development 94a
Roanoke, Taxable,
Callable 08/01/03 @ 100
7.180%, 08/01/13 100 98
Housing Urban Development 92a
Scranton, Taxable,
Callable 08/01/02 @ 100
7.800%, 08/01/10 400 404
Housing Urban Development 94a
Tacoma, Taxable,
Callable 08/01/03 @ 100
7.080%, 08/01/11 365 348
Private Export Funding
7.300%, 01/31/02 2,100 2,147
7.950%, 11/01/06 1,500 1,553
TVA
6.250%, 08/01/99 416 411
8.375%, 10/01/99 831 873
7.450%, 10/15/01 831 849
6.875%, 01/15/02 500 498
- ------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $31,195) 30,816
- ------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 25.9%
U.S.Treasury Bonds
8.250%, 05/15/05 83 87
9.375%, 02/15/06 125 148
8.375%, 08/15/08 950 1,036
8.750%, 11/15/08 125 138
9.125%, 05/15/09 125 142
7.250%, 05/15/16 1,000 1,018
7.500%, 11/15/16 750 783
7.500%, 11/15/24 500 526
U.S.Treasury Notes
6.875%, 03/31/97 416 419
8.500%, 07/15/97 416 426
7.000%, 04/15/99 831 844
8.750%, 08/15/00 416 449
8.000%, 05/15/01 831 880
7.500%, 11/15/01 623 647
- -----------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
U.S.Treasury Notes (continued)
7.500%, 05/15/02 $ 831 $ 866
6.375%, 08/15/02 831 820
6.250%, 02/15/03 416 407
7.875%, 11/15/04 1,000 1,070
7.625%, 02/15/07 1,000 1,034
U.S.Treasury STRIPS
0.000%, 08/15/05 1,000 542
0.000%, 11/15/18 2,500 512
0.000%, 11/15/20 1,400 250
0.000%, 02/15/25 3,000 418
- ---------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $13,712) 13,462
- ---------------------------------------------------------------
MUNICIPAL BONDS -- 6.1%
Berkeley County, WV Lease Revenue Bond
for IRS Computer Center
Facility Project, Ser 1994, Taxable
7.900%, 07/15/03 640 662
Chicago Heights, IL Ser B,
Taxable GO, Callable 12/01/12 @ 100
7.550%, 12/01/13 1,000 995
Fairview, MN Hospital & Health
Care Services, Ser B, Refunding
Taxable, MBIA 7.000%, 11/15/15 300 292
Henry County, GA Water & Sewer
Authority, Ser B, Revenue
Refunding Taxable, AMBAC
6.000%, 02/01/04 250 232
6.000%, 02/01/05 220 202
Las Vegas, NV Fremont
Street Project, Taxable GO,
Callable 07/01/03 @ 101, FGIC
7.200%, 07/01/15 500 483
San Bernardino County, CA COP,
Taxable, Prerefunded 03/01/04 @ 102
8.500%, 03/01/14 275 302
- ---------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $3,264) 3,168
- ---------------------------------------------------------------
CORPORATE OBLIGATION -- 0.9%
General Electric Capital MTN
6.020%, 12/15/03 500 473
- ----------------------------------------------------------------
TOTAL CORPORATE OBLIGATION (COST $500) 473
- ----------------------------------------------------------------
12
<PAGE>
OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
THE OVB FUNDS GOVERNMENT
SECURITIES PORTFOLIO (CONCLUDED)
- -----------------------------------------------------------------
SHARES/FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
COMMON STOCKS -- 4.7%
Electric Services -- 4.4%
Allegheny Power System 8,300 $ 243
American Electric Power 6,200 257
CMS Energy 10,000 304
Dominion Resources of Virginia 6,200 233
Duke Power 5,000 239
FPL Group 4,200 191
LG&E 20,000 440
Public Service of Colorado 6,200 219
Union Electric Power 4,200 158
- -----------------------------------------------------------------
TOTAL ELECTRIC SERVICES 2,284
- -----------------------------------------------------------------
Telephone Communications -- 0.3%
SBC Telecommunications 3,300 161
- -----------------------------------------------------------------
TOTAL COMMON STOCK (COST $2,293) 2,445
- -----------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.0%
Lehman Brothers
5.08%, dated 07/31/96, matures
08/01/96, repurchase price
$1,047,681 (collateralized by
U.S. Treasury obligation,
par value $728,417, 11.250%,
matures 02/15/15,
market value $1,074,455) $1,048 1,048
- -----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $1,048) 1,048
- -----------------------------------------------------------------
TOTAL INVESTMENTS -- 98.9% (COST $52,012) 51,412
- -----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET -- 1.1%
Other Assets and Liabilities, Net 565
- -----------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES 565
- -----------------------------------------------------------------
- -----------------------------------------------------------------
VALUE
DESCRIPTION (000)
- -----------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited authorization --
no par value) based on 5,261,971 outstanding shares
of beneficial interest $50,936
Portfolio shares of Class B (unlimited authorization --
no par value) based on 180,701 outstanding shares
of beneficial interest 1,762
Accumulated net realized loss on investments (121)
Net unrealized loss on investments (600)
- -----------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $51,977
- -----------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE -- CLASS A $9.55
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE -- CLASS B $9.56
- ------------------------------------------------------------------
AMBAC American Municipal Bond Assurance Company
COP Certificate of Participation
FFCB Federal Farm Credit Bank
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FLB Federal Land Bank
FNMA Federal National Mortgage Association
GO General Obligation
MBIA Municipal Bond Insurance Association
MTN Medium-Term Note
Ser Series
STRIPS Separate Trading of Registered Interest and Principal of Securities
TVA Tennessee Valley Authority
The accompanying notes are an integral part of the financial statements.
(CONTINUED)
13
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
THE OVB FUNDS EMERGING
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
A pie chart depicting the percentage of portfolio assets of the OVB Emerging
Growth Portfolio.
COMMON STOCKS 88%
REPURCHSE AGREEMENT 12%
% of Total Portfolio Investments
- -----------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -----------------------------------------------------------------
COMMON STOCKS -- 87.8%
Apparel/Textiles -- 6.7%
Donnkenny* 47,500 $ 855
Sport-Haley* 72,600 1,044
St. John Knits 37,800 1,493
- -----------------------------------------------------------------
TOTAL APPAREL/TEXTILES 3,392
- -----------------------------------------------------------------
Broadcasting, Newspapers
and Advertising -- 2.5%
Data Broadcasting* 43,000 328
United Video Satellite Group, Ser A* 49,700 969
- -----------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS AND ADVERTISING 1,297
- -----------------------------------------------------------------
Communications Equipment -- 6.3%
Adtran* 9,600 583
Harmonic Lightwaves* 27,000 506
Premisys Communications* 18,900 572
Security Dynamics Technologies* 6,800 415
Uniphase* 42,700 1,110
- -----------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 3,186
- -----------------------------------------------------------------
- -----------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -----------------------------------------------------------------
Computer Networking Products -- 1.5%
Fore Systems* 15,200 $ 416
Shiva* 6,900 357
- -----------------------------------------------------------------
TOTAL COMPUTER NETWORKING PRODUCTS 773
- -----------------------------------------------------------------
Computer Software -- 13.4%
Aspen Technology* 13,800 756
Harbinger* 29,800 693
Indus Group* 21,400 423
McAfee Associates* 23,350 1,173
Project Software & Development* 12,900 381
State of the Art* 63,600 1,105
Transaction Systems Architects* 33,800 1,065
Vantive* 15,000 649
Veritas Software* 17,000 531
- -----------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 6,776
- -----------------------------------------------------------------
Drugs -- 5.5%
Dura Pharmaceuticals* 36,000 837
Idexx Labs* 25,000 969
Jones Medical 27,300 945
- -----------------------------------------------------------------
TOTAL DRUGS 2,751
- -----------------------------------------------------------------
Entertainment -- 3.0%
Dove Audio* 79,200 594
Penske Motorsports* 15,800 448
Speedway Motorsports* 17,000 459
- -----------------------------------------------------------------
TOTAL ENTERTAINMENT 1,501
- -----------------------------------------------------------------
Financial Services -- 2.8%
Americredit* 65,700 977
Jayhawk Acceptance* 37,800 449
- -----------------------------------------------------------------
TOTAL FINANCIAL SERVICES 1,426
- -----------------------------------------------------------------
Hotels & Lodging -- 2.8%
Extended Stay America* 35,700 536
Suburban Lodges of America* 44,100 876
- -----------------------------------------------------------------
TOTAL HOTELS & LODGING 1,412
- -----------------------------------------------------------------
Insurance -- 0.9%
Compdent* 11,500 431
- -----------------------------------------------------------------
Measuring Devices -- 1.6%
Input/Output* 25,000 788
- -----------------------------------------------------------------
14
<PAGE>
OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
THE OVB FUNDS EMERGING
GROWTH PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -----------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Medical Products & Services -- 9.6%
America Service Group* 61,200 $ 857
Chad Therapeutics* 71,000 1,216
Occusystems* 34,200 975
Physicians Reliance* 68,400 923
STAAR Surgical* 71,100 915
- -----------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 4,886
- -----------------------------------------------------------------
Miscellaneous Business Services -- 4.6%
Alternative Resources* 26,100 750
Computer Learning Centers* 44,100 1,091
Whittman-Hart * 15,900 469
- -----------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES 2,310
- -----------------------------------------------------------------
Miscellaneous Manufacturing -- 1.8%
JLG Industries 48,600 899
- -----------------------------------------------------------------
Petroleum & Fuel Products -- 4.0%
Barrett Resources * 39,000 1,121
Sonat Offshore Drilling 18,400 902
- -----------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS 2,023
- -----------------------------------------------------------------
Printing & Publishing -- 1.7%
Applied Graphics Technologies* 62,100 854
- -----------------------------------------------------------------
Retail -- 5.4%
Garden Ridge* 25,700 318
Just For Feet* 10,450 410
Oakley * 23,500 796
Renters' Choice* 59,800 1,181
- -----------------------------------------------------------------
TOTAL RETAIL 2,705
- -----------------------------------------------------------------
Semi-Conductors/Instruments -- 2.1%
SDL* 43,200 1,058
- -----------------------------------------------------------------
Telephones & Telecommunication -- 7.6%
ACC* 24,700 1,318
Pairgain Technologies* 10,800 599
Stanford Telecommunications * 22,200 910
Transaction Network Services* 44,950 641
Wireless Telecom Group 40,000 385
- -----------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATION 3,853
- -----------------------------------------------------------------
- -----------------------------------------------------------------
SHARES/FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
Wholesale -- 4.0%
Daisytek International* 13,500 $ 547
MSC Industrial Direct* 38,200 1,146
Physician Sales and Services* 18,500 324
- -----------------------------------------------------------------
TOTAL WHOLESALE 2,017
- -----------------------------------------------------------------
TOTAL COMMON STOCKS (COST $36,935) 44,338
- -----------------------------------------------------------------
REPURCHASE AGREEMENT -- 12.3%
Lehman Brothers
5.65%, dated 07/31/96,
matures 08/01/96,
repurchase price
$6,199,565 collateralized
by various GNMA obligations
ranging in par value
$40,000 - $19,035,000, 8.000%
- 9.500%, 05/15/02 - 01/15/28;
with total market value of
$6,322,426) $6,199 6,199
- -----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $6,199) 6,199
- -----------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1% (COST $43,134) 50,537
- -----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.1%)
Other Assets and Liabilities, Net (65)
- -----------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (65)
- -----------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited authorization --
no par value) based on 4,088,061 outstanding shares
of beneficial interest 39,632
Portfolio shares of Class B (unlimited authorization --
no par value) based on 273,804 outstanding shares
of beneficial interest 2,951
Accumulated net investment loss (1,029)
Accumulated net realized gain on investments 1,515
Net unrealized gain on investments 7,403
- -----------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $50,472
- -----------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE -- CLASS A $11.58
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE -- CLASS B $11.49
- -----------------------------------------------------------------
* Non-income producing securities
GNMA Government National Mortgage Association
Ser Series
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
THE OVB FUNDS CAPITAL
APPRECIATION PORTFOLIO
- --------------------------------------------------------------------------------
A pie chart depicting the percentage of portfolio assets of the OVB Capital
Appreciation Portfolio.
COMMON STOCKS 90%
REPURCHASE AGREEMENT 10%
% of Total Portfolio Investments
- -----------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -----------------------------------------------------------------
COMMON STOCKS -- 90.3%
Aircraft -- 2.2%
Boeing 23,600 $ 2,089
- -----------------------------------------------------------------
Apparel/Textiles -- 5.5%
Fila Holdings ADR 41,400 3,338
Nike 17,700 1,821
- -----------------------------------------------------------------
TOTAL APPAREL/TEXTILES 5,159
- -----------------------------------------------------------------
Banks -- 4.2%
Citicorp 22,500 1,842
Wells Fargo 9,000 2,096
- -----------------------------------------------------------------
TOTAL BANKS 3,938
- -----------------------------------------------------------------
Communications Equipment -- 6.9%
Cascade Communications* 15,700 966
Qualcomm* 20,000 868
Sony ADR 27,900 1,786
Tellabs* 31,500 1,882
U.S. Robotics* 17,000 914
- -----------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 6,416
- -----------------------------------------------------------------
- -----------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -----------------------------------------------------------------
Computer Networking Products -- 3.2%
Ascend Communications* 16,000 $ 776
Cisco Systems* 43,000 2,225
- -----------------------------------------------------------------
TOTAL COMPUTER NETWORKING PRODUCTS 3,001
- -----------------------------------------------------------------
Computer Software -- 4.9%
Computer Associates International 19,300 982
Netscape Communications* 18,900 747
Oracle Systems* 49,500 1,937
Sterling Commerce* 29,700 939
- -----------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 4,605
- -----------------------------------------------------------------
Computers & Services -- 2.6%
Sun Microsystems* 44,500 2,431
- -----------------------------------------------------------------
Drugs -- 12.7%
American Home Products 36,000 2,043
Chiron * 14,500 1,276
Johnson & Johnson 36,000 1,719
Merck 27,400 1,760
Pfizer 23,400 1,635
Pharmacia & Upjohn 41,800 1,724
SmithKline Beecham 30,200 1,623
- -----------------------------------------------------------------
TOTAL DRUGS 11,780
- -----------------------------------------------------------------
Financial Services -- 5.9%
American Express 37,800 1,654
First Data 25,500 1,979
FNMA 58,700 1,864
- -----------------------------------------------------------------
TOTAL FINANCIAL SERVICES 5,497
- -----------------------------------------------------------------
Food -- 1.8%
Dole Food 41,400 1,661
- -----------------------------------------------------------------
Household Products -- 1.1%
Gillette 16,600 1,056
- -----------------------------------------------------------------
Insurance -- 1.0%
AIG 9,400 885
- -----------------------------------------------------------------
Medical Products & Services -- 5.7%
Boston Scientific* 40,500 1,934
Guidant 50,400 2,558
Medtronic 18,000 853
- -----------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 5,345
- -----------------------------------------------------------------
16
<PAGE>
OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
THE OVB FUNDS CAPITAL
APPRECIATION PORTFOLIO (CONTINUED)
- -----------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -----------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Miscellaneous Business Services -- 4.0%
Computer Sciences* 26,500 $ 1,802
CUC International* 54,000 1,875
- -----------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES 3,677
- -----------------------------------------------------------------
Office Equipment -- 4.7%
Alco Standard 38,200 1,671
Danka Business Systems ADR 36,000 990
Xerox 33,700 1,698
- -----------------------------------------------------------------
TOTAL OFFICE EQUIPMENT 4,359
- -----------------------------------------------------------------
Oil & Gas Well Equipment -- 7.9%
Baker Hughes 55,000 1,616
Global Marine* 120,000 1,605
Halliburton 38,000 1,981
Schlumberger 27,100 2,168
- -----------------------------------------------------------------
TOTAL OIL & GAS WELL EQUIPMENT 7,370
- -----------------------------------------------------------------
Retail -- 8.0 %
Federated Department Stores* 29,100 880
Gap 27,000 803
Melville 43,200 1,690
OfficeMax* 121,000 1,603
TJX 28,500 859
Warnaco Group 66,600 1,573
- -----------------------------------------------------------------
TOTAL RETAIL 7,408
- -----------------------------------------------------------------
Semi-Conductors/Instruments -- 1.0%
Intel 12,100 909
- -----------------------------------------------------------------
Telephones & Telecommunication -- 7.0%
L.M. Ericsson Telephone ADR* 45,600 926
Lucent Technologies 54,000 2,005
Motorola 13,900 751
Nokia, Class A ADR 21,600 761
Worldcom* 80,500 2,083
- -----------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATION 6,526
- -----------------------------------------------------------------
TOTAL COMMON STOCKS (COST $67,762) 84,112
- -----------------------------------------------------------------
- -----------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -----------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.7%
Lehman Brothers
5.65%, dated 07/31/96, matured 08/01/96,
repurchase price $9,081,851(collateralized
by FNMA obligation par value $1,306,437,
0.000%,07/01/24; various GNMA
obligations ranging in par value $75,000 -
$3,305,000, 8.000% - 9.500% 12/15/01 -
01/15/28; with total market value
of $9,264,356) $9,080 $9,080
- -----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $9,080) 9,080
- -----------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (COST $76,842) 93,192
- -----------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.0%
Other Assets and Liabilities, Net (46)
- -----------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (46)
- -----------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited authorization --
no par value) based on 6,888,415 outstanding shares
of beneficial interest 66,669
Portfolio shares of Class B (unlimited authorization --
no par value) based on 240,312 outstanding shares
of beneficial interest 2,942
Distributions in excess of net investment income (14)
Accumulated net realized gain on investments 7,199
Net unrealized gain on investments 16,350
- -----------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $93,146
- -----------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE -- CLASS A $13.07
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE -- CLASS B $13.00
- -----------------------------------------------------------------
* Non-income producing securities
ADR American Depository Receipt
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
The accompanying notes are an integral part of the financial statements.
(CONTINUED)
17
<PAGE>
<TABLE>
<CAPTION>
OVB[LOGO]
STATEMENT OF OPERATIONS JULY 31, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1996
(IN THOUSANDS)
----------------------------------------------------------------------------------------
WEST VIRGINIA GOVERNMENT EMERGING CAPITAL
PRIME OBLIGATIONS TAX-EXEMPT SECURITIES GROWTH APPRECIATION
PORTFOLIO INCOME PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest Income ........................... $2,560 $1,195 $1,838 $ 34 $ 52
Dividend Income ........................... -- -- -- 10 488
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME ................. 2,560 1,195 1,838 44 540
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administrator Fees ........................ 94 42 56 55 101
Investment Advisory Fees .................. 117 94 212 261 481
Less Investment Advisory Fees Waiver ...... (80) (26) (85) (47) (129)
Sub-Advisory Fees ......................... 35 -- -- -- --
Custodian Fees ............................ 7 3 4 4 8
Professional Fees .......................... 13 13 11 11 14
Registration & Filing Fees ................ 10 5 1 3 5
Printing Expenses ......................... 3 1 1 2 4
Trustee Fees .............................. 5 2 3 3 5
Distribution Fees(1) ...................... 8 6 2 4 3
Transfer Agent Fees ....................... 23 21 20 22 25
Amortization of Organization Costs ........ 3 3 3 3 3
Miscellaneous Expenses .................... 1 -- 9 -- 1
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .......................... 239 164 237 321 521
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............ 2,321 1,031 1,601 (277) 19
- -----------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) from Securities Sold 1 (31) (44) 5,684 5,020
Net Change in Unrealized Depreciation
on Investments ........................... -- (1,236) (3,556) (4,831) (6,743)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on
Investments .............................. 1 (1,267) (3,600) 853 (1,723)
===================================================================================================================================
Increase (Decrease) in Net Assets Resulting
From Operations ..........................$2,322 $ (236) $(1,999) $ 576 $(1,704)
===================================================================================================================================
</TABLE>
(1) Distribution Fees are only incurred on Class B shares.
The accompanying notes are an integral part of the financial statements.
18 & 19
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1996 (UNAUDITED) AND THE YEAR ENDED JANUARY 31,
1996
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS WEST VIRGINIA TAX-EXEMPT
PORTFOLIO INCOME PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
2/1/96 2/1/95 2/1/96 2/1/95
to 7/31/96 to 1/31/96 to 7/31/96 to 1/31/96
- ---------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 2,321 $ 5,058 $ 1,031 $ 1,846
Net Realized Gain (Loss) from Securities Sold 1 -- (31) (3)
Net Change in Unrealized Appreciation
(Depreciation) on Investments -- -- (1,236) 2,701
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS 2,322 5,058 (236) 4,544
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Class A (2,168) (4,935) (923) (1,696)
Class B (153) (123) (108) (150)
Realized Net Gains:
Class A -- -- -- --
Class B -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS: (2,321) (5,058) (1,031) (1,846)
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares Issued 74,799 222,222 6,669 13,270
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed (63,947) (214,858) (2,508) (5,221)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 10,852 7,364 4,161 8,049
- ---------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 6,554 8,627 1,831 1,974
Shares Issued in Lieu of Cash Distributions 126 85 92 123
Shares Redeemed (5,854) (3,226) (789) (280)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 826 5,486 1,134 1,817
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS 11,678 12,850 5,295 9,866
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 11,679 12,850 4,028 12,564
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 90,814 77,964 40,923 28,359
- ---------------------------------------------------------------------------------------------------------------------------
End of Period $102,493 $90,814 $44,951 $40,923
===========================================================================================================================
Class A:
Shares Issued 74,799 222,222 682 1,365
Shares Issued in Lieu of Cash Distributions -- -- -- --
Shares Redeemed (63,947) (214,858) (255) (533)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS 10,852 7,364 427 832
- ---------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 6,554 8,627 187 201
Shares Issued in Lieu of Cash Distributions 126 85 10 12
Shares Redeemed (5,854) (3,226) (81) (28)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS 826 5,486 116 185
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS 11,678 12,850 543 1,017
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
OVB[LOGO]
JULY 31, 1996
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1996 (UNAUDITED) AND THE YEAR ENDED JANUARY 31,
1996
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES EMERGING GROWTH CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
2/1/96 2/1/95 2/1/96 2/1/95 2/1/96 2/1/95
to 7/31/96 to 1/31/96 to 7/31/96 to 1/31/96 to 7/31/96 to 1/31/96
- ---------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income $1,601 $3,343 $(277) $(438) $19 $66
Net Realized Gain (Loss) from Securities Sold (44) 125 5,684 6,404 5,020 12,232
Net Change in Unrealized Appreciation
(Depreciation) on Investments (3,556) 6,459 (4,831) 10,258 (6,743) 17,868
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM INVESTMENT OPERATIONS (1,999) 9,927 576 16,224 (1,704) 30,166
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Class A (1,561) (3,302) -- -- (38) (61)
Class B (40) (41) -- -- -- --
Realized Net Gains:
Class A -- -- -- -- -- (1,472)
Class B -- -- -- -- -- (25)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS: (1,601) (3,343) -- -- (38) (1,558)
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares Issued 6,082 12,560 4,442 10,791 8,744 30,408
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed (12,541) (19,904) (5,824) (13,290) (16,676) (29,613)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (6,459) (7,344) (1,382) (2,499) (7,932) 795
- ---------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 861 655 1,075 1,475 1,229 1,493
Shares Issued in Lieu of Cash Distributions 32 26 -- -- -- 24
Shares Redeemed (252) (50) (207) (292) (254) (82)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 641 631 868 1,183 975 1,435
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (5,818) (6,713) (514) (1,316) (6,957) 2,230
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (9,418) (129) 62 14,908 (8,699) 30,838
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 61,395 61,524 50,410 35,502 101,845 71,007
- ---------------------------------------------------------------------------------------------------------------------------
End of Period $51,977 $61,395 $50,472 $50,410 $93,146 $101,845
===========================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares Issued 628 1,292 348 1,057 635 2,627
Shares Issued in Lieu of Cash Distributions -- -- -- -- -- --
Shares Redeemed (1,302) (2,072) (468) (1,276) (1,232) (2,509)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS (674) (780) (120) (219) (597) 118
- ---------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 89 67 86 138 90 121
Shares Issued in Lieu of Cash Distributions 3 3 -- -- -- 2
Shares Redeemed (26) (5) (16) (27) (19) (7)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS 66 65 70 111 71 116
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS (608) (715) (50) (108) (526) 234
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JULY 31, 1996
(UNAUDITED) AND YEARS ENDED JANUARY 31,
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS NET ASSET
VALUE, NET AND UNREALIZED FROM NET VALUE,
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT END OF TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME PERIOD RETURN
- --------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
1996** $ 1.00 $ 0.03 $ 0.00 $(0.03) $ 1.00 5.07%*
1996 1.00 0.06 0.00 (0.06) 1.00 5.65
1995 1.00 0.04 0.00 (0.04) 1.00 4.15
1994(1) 1.00 0.00 0.00 0.00 1.00 2.95
CLASS B
1996** $ 1.00 $ 0.02 $ 0.00 $(0.02) $ 1.00 4.81%*
1996 1.00 0.05 0.00 (0.05) 1.00 5.39
1995(2) 1.00 0.04 0.00 (0.04) 1.00 3.95
- ---------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
1996** $10.12 $ 0.24 $(0.32) $(0.24) $ 9.80 (0.76%)
1996 9.36 0.49 0.76 (0.49) 10.12 13.66
1995 10.17 0.46 (0.81) (0.46) 9.36 (3.38)
1994(1) 10.00 0.07 0.17 (0.07) 10.17 2.43
CLASS B
1996** $10.11 $ 0.23 $(0.32) $(0.23) $ 9.79 (0.88%)
1996 9.36 0.47 0.75 (0.47) 10.11 13.26
1995 10.17 0.43 (0.81) (0.43) 9.36 (3.62)
1994(3) 10.07 0.05 0.10 (0.05) 10.17 1.48
- ---------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
1996** $10.15 $ 0.27 $(0.60) $(0.27) $ 9.55 (3.21%)
1996 9.09 0.55 1.06 (0.55) 10.15 18.14
1995 10.06 0.51 (0.97) (0.51) 9.09 (4.48)
1994(1) 10.00 0.08 0.06 (0.08) 10.06 1.39
CLASS B
1996** $10.15 $ 0.26 $(0.59) $(0.26) $ 9.56 (3.22%)
1996 9.10 0.53 1.05 (0.53) 10.15 17.72
1995 10.06 0.49 (0.96) (0.49) 9.10 (4.62)
1994(4) 10.01 0.04 0.05 (0.04) 10.06 0.89
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
** For the six month period ended July 31, 1996 (Unaudited).
(1) Commenced operations December 1, 1993. All ratios for the period have been
annualized.
(2) Commenced operations February 7, 1994. All ratios for the period have been
annualized.
(3) Commenced operations December 17, 1993. All ratios for the period have been
annualized.
(4) Commenced operations December 31, 1993. All ratios for the period have been
annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
OVB[LOGO]
JULY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JULY 31, 1996
(UNAUDITED) AND YEARS ENDED JANUARY 31,
RATIO OF
NET INVESTMENT
RATIO OF RATIO OF INCOME TO
RATIO OF NET INVESTMENT AVERAGE AVERAGE
NET ASSETS, EXPENSES TO INCOME NET ASSETS NET ASSETS PORTFOLIO
END OF AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- -----------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
1996** $95,513 0.49%* 4.97%* 0.66%* 4.80%* N/A
1996 84,660 0.49 5.50 0.64 5.35 N/A
1995 77,295 0.49 4.08 0.69 3.88 N/A
1994(1) 82,477 0.49 2.89 0.80 2.58 N/A
CLASS B
1996** $ 6,980 0.74%* 4.72%* 0.91%* 4.55%* N/A
1996 6,154 0.74 5.15 0.89 5.00 N/A
1995(2) 669 0.74 4.33 0.93 4.14 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
1996** $39,635 0.75%* 4.95%* 0.88%* 4.82%* 18%
1996 36,611 0.75 5.02 0.89 4.88 43
1995 26,096 0.75 4.88 1.09 4.54 28
1994(1) 20,477 0.75 4.18 1.62 3.31 17
CLASS B
1996** $ 5,316 1.00%* 4.70%* 1.13%* 4.57%* 18%
1996 4,312 1.00 4.78 1.14 4.64 43
1995 2,263 1.00 4.68 1.34 4.34 28
1994(3) 935 1.00 3.87 2.14 2.73 17
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
1996** $50,250 0.83%* 5.68%* 1.13%* 5.38%* 3%
1996 60,228 0.83 5.68 1.11 5.40 28
1995 61,067 0.83 5.61 1.17 5.27 13
1994(1) 34,654 0.83 4.64 1.49 3.98 5
CLASS B
1996** $ 1,727 1.08%* 5.46%* 1.38%* 5.16%* 3%
1996 1,167 1.08 5.39 1.36 5.11 28
1995 457 1.08 5.34 1.42 5.00 13
1994(4) 141 1.08 4.47 2.00 3.35 5
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
** For the six month period ended July 31, 1996 (Unaudited).
(1) Commenced operations December 1, 1993. All ratios for the period have
been annualized.
(2) Commenced operations February 7, 1994. All ratios for the period have
been annualized.
(3) Commenced operations December 17, 1993. All ratios for the period have
been annualized.
(4) Commenced operations December 31, 1993. All ratios for the period have
been annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JULY 31, 1996
(UNAUDITED) AND YEARS ENDED JANUARY 31,
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS DISTRIBUTIONS NET ASSET
VALUE, NET AND UNREALIZED FROM NET FROM VALUE,
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT CAPITAL END OF TOTAL
OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME GAINS PERIOD RETURN
- ---------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1996** $11.43 $(0.07) $0.22 $ 0.00 $0.00 $11.58 1.31%
1996 7.86 (0.10) 3.67 0.00 0.00 11.43 45.42
1995 10.48 (0.06) (2.56) 0.00 0.00 7.86 (25.00)
1994(1) 10.00 0.00 0.48 0.00 0.00 10.48 (4.80)
CLASS B
1996** $11.36 $(0.04) $0.17 $ 0.00 $0.00 $11.49 1.14%
1996 7.83 (0.12) 3.65 0.00 0.00 11.36 45.08
1995 10.48 (0.06) (2.59) 0.00 0.00 7.83 (25.29)
1994(2) 9.77 0.00 0.71 0.00 0.00 10.48 7.27
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
1996** $13.31 $ 0.01 $(0.24) $(0.01) $0.00 $13.07 (1.76)%
1996 9.57 0.01 3.93 (0.01) (0.19) 13.31 41.31
1995 10.53 0.03 (0.96) (0.03) 0.00 9.57 (8.84)
1994(1) 10.00 0.00 0.53 0.00 0.00 10.53 5.30
CLASS B
1996** $13.25 $(0.01) $(0.24) $ 0.00 $0.00 $13.00 (1.89)%
1996 9.55 (0.01) 3.90 0.00 (0.19) 13.25 40.88
1995 10.52 0.01 (0.97) (0.01) 0.00 9.55 (9.11)
1994(3) 10.33 0.00 0.19 0.00 0.00 10.52 1.84
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
** For the six month period ended July 31, 1996 (Unaudited).
(DAGGER) Average commission rate paid per share for security purchases and
sales during the period. Presentation of the rate is only required
for fiscal years beginning after September 1, 1995.
(1) Commenced operations December 1, 1993. All ratios for the period have been
annualized.
(2) Commenced operations December 29, 1993. All ratios for the period have been
annualized.
(3) Commenced operations December 31, 1993. All ratios for the period have been
annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
OVB[LOGO]
JULY 31, 1996
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JULY 31, 1996
(UNAUDITED) AND YEARS ENDED JANUARY 31,
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME (LOSS)
RATIO OF NET INVESTMENT AVERAGE TO AVERAGE
NET ASSETS, EXPENSES TO INCOME (LOSS) NET ASSETS NET ASSETS PORTFOLIO AVERAGE
END OF AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMMISSION
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE RATE(DAGGER)
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH
PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1996** $47,325 1.15%* (1.00)%* 1.33%* (1.18)%* 58% $0.0557
1996 48,090 1.15 (0.92) 1.32 (1.09) 117 N/A
1995 34,772 1.15 (0.75) 1.42 (1.02) 126 N/A
1994(1) 36,670 1.15 (0.83) 1.70 (1.38) 7 N/A
CLASS B
1996** $ 3,147 1.40%* (1.25)%* 1.58%* (1.43)%* 58% $0.0557
1996 2,320 1.40 (1.19) 1.57 (1.36) 117 N/A
1995 730 1.40 (0.98) 1.67 (1.25) 126 N/A
1994(2) 330 1.40 (1.08) 2.15 (1.83) 7 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
1996** $90,021 1.02%* 0.05%* 1.28%* (0.21)%* 36% $0.0758
1996 99,612 1.02 0.08 1.27 (0.17) 119 N/A
1995 70,502 1.02 0.28 1.33 (0.03) 107 N/A
1994(1) 54,022 1.02 0.12 1.51 (0.37) 7 N/A
CLASS B
1996** $ 3,125 1.27%* (0.21)%* 1.53%* (0.47)%* 36% $0.0758
1996 2,233 1.27 (0.16) 1.52 (0.41) 119 N/A
1995 505 1.27 0.02 1.58 (0.29) 107 N/A
1994(3) 171 1.27 0.19 2.01 (0.55) 7 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
** For the six month period ended July 31, 1996 (Unaudited).
(DAGGER) Average commission rate paid per share for security purchases and
sales during the period. Presentation of the rate is only required
for fiscal years beginning after September 1, 1995.
(1) Commenced operations December 1, 1993. All ratios for the
period have been annualized.
(2) Commenced operations December 29, 1993. All ratios for the
period have been annualized.
(3) Commenced operations December 31, 1993. All ratios for the
period have been annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION
The Arbor Fund (the "Trust") was organized as a Massachusetts business trust
under a Declaration of Trust dated July 24, 1992 and had no operations through
February 1, 1993, other than those related to organizational matters and the
sale of initial shares to SEI Fund Resources (the "Administrator"), on October
9, 1992. SEI Financial Management Corporation, a wholly-owned subsidiary of SEI
Corporation, is the owner of all beneficial interest in the Administrator. The
Trust is registered under the Investment Company Act of 1940, as amended, as an
open-end management company. The financial statements included herein relate to
the Trust's OVB Family of Funds. The OVB Family of Funds includes the Prime
Obligations Portfolio (the "Money Market Portfolio"), Capital Appreciation
Portfolio, Emerging Growth Portfolio (the "Equity Portfolios"), Government
Securities Portfolio and West Virginia Tax-Exempt Income Portfolio (the "Fixed
Income Portfolios"). The financial statements of the remaining portfolios are
presented separately. The assets of each Portfolio are segregated, and a
shareholder's interest is limited to the Portfolio in which shares are held. The
Portfolios are registered to offer two classes of shares: Class A and Class B
(see note 3).
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--
Investments in equity securities that are traded on a national securities
exchange (or reported on NASDAQ national market system) are stated at the last
quoted sales price, if readily available for such equity securities on each
business day; other equity securities traded in the over-the-counter market and
listed equity securities for which no sale was reported on that date are stated
at the last quoted bid price. Debt obligations exceeding sixty days to maturity
for which market quotations are readily available are valued at the most
recently quoted bid price. Debt obligations with sixty days or less until
maturity are valued at their amortized cost.
Investment securities held by the Money Market Portfolio are stated at
amortized cost which approximates market value. Under the amortized cost
method, any discount or premium is amortized ratably to the maturity of the
security and is included in interest income.
FEDERAL INCOME TAXES--
It is each Portfolio's intention to continue to qualify as a regulated
investment company for Federal income tax purposes by complying with the
appropriate provisions of the Internal Revenue Code of 1986, as amended.
Accordingly, no provision for Federal income taxes is required in the financial
statements.
26
<PAGE>
OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS AND RELATED INCOME--
Security transactions are accounted for on the date the security is purchased or
sold (trade date). Dividend income is recognized on the ex-dividend date, and
interest income is recognized on the accrual basis. Costs used in determining
realized gains and losses on the sales of investment securities are those of the
specific securities sold. Purchase discounts and premiums on securities held by
the Fixed Income Portfolios are accreted and amortized to maturity using the
scientific interest method, which approximates the effective interest method.
REPURCHASE AGREEMENTS--
The Portfolios, except the West Virginia Tax-Exempt Income Portfolio, invest in
tri-party repurchase agreements. Securities held as collateral for tri-party
repurchase agreements are maintained in a segregated account by the broker's
custodian bank until maturity of the repurchase agreement. Provisions of the
repurchase agreements require that the market value of the collateral, including
accrued interest thereon, is sufficient in the event of default of the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization
and/or retention of the collateral by the Portfolios may be delayed or limited.
NET ASSET VALUE PER SHARE--
The net asset value per share of each Portfolio is calculated each business
day. In general, it is computed by dividing the assets of each Portfolio, less
its liabilities, by the number of outstanding shares of the Portfolio.
CLASSES--
Class specific expenses are borne by that class. Income, expenses, and realized
and unrealized gains/losses are allocated to the respective classes of shares on
the basis of their relative daily net assets.
EXPENSES--
Expenses that are directly related to one of the Portfolios are charged directly
to that Portfolio. Other operating expenses of the Fund are prorated to the
portfolios on the basis of relative net assets.
DISTRIBUTIONS--
Distributions from net investment income for the Equity Portfolios are paid to
shareholders in the form of quarterly dividends. Distributions from net
investment income for the Money Market and Fixed Income Portfolios are declared
daily and paid to shareholders on a monthly basis. Any net realized capital
gains on sales of securities are distributed to shareholders at least annually.
The amounts of distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax regulations,
which may
(CONTINUED)
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid-in capital in the period that the difference arises.
3. INVESTMENT ADVISORY, ADMINISTRATIVE, TRANSFER AGENT, AND DISTRIBUTION
AGREEMENTS:
One Valley Bank, National Association (the "Adviser") serves as investment
adviser to each Portfolio pursuant to an investment advisory agreement (the
"Advisory Agreement") with the Trust. For its services, the Adviser is entitled
to a fee, which is calculated daily and paid monthly, at an annual rate based on
the average daily net assets of each Portfolio as follows: Prime Obligations
Portfolio--.25%, Capital Appreciation Portfolio--.95%, Emerging Growth
Portfolio--.95%, Government Securities Portfolio--.75% and West Virginia
Tax-Exempt Income Portfolio--.45%. The Adviser has agreed to voluntarily waive a
portion of its fee so that the total annual expenses of each portfolio will not
exceed the voluntary expense limitations adopted by the Adviser. In the event
that the total annual expenses of a Portfolio, after reflecting a waiver of all
fees by the Adviser, exceed the specific limitations, the Adviser has agreed to
bear such excess. Fee waivers by the Adviser are voluntary and may be terminated
at any time.
Wellington Management Company (the "Sub-Adviser") serves as the
investment sub-adviser to the Prime Obligations Portfolio pursuant to a
sub-advisory agreement (the "Sub-Advisory Agreement") with the Adviser and the
Trust. Under the Sub-Advisory Agreement, the Sub-Adviser manages the Portfolio,
selects investments, and places all orders for purchases and sales of the
Portfolio's securities, subject to the general supervision of the Trustees of
the Trust and the Adviser. For the services provided and expenses incurred
pursuant to the Sub-Advisory Agreement, the Sub-Adviser is entitled to receive a
fee, computed daily and paid monthly, at the annual rate of .075% of the first
$500 million of "managed assets" and .02% of "managed assets" in excess of $500
million. "Managed assets" are all of the money market fund assets that the
Sub-Adviser manages for the Trust, including assets of funds other than the
Prime Obligations Portfolio. The fee paid by the Portfolio is based on its
proportionate share of "managed assets."
The Trust and the Administrator have entered into an administration
agreement. Under terms of the administration
28
<PAGE>
OVB[LOGO] JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
agreement, the Administrator is entitled to a fee calculated daily and paid
monthly at an annual rate of .20% of the average daily net assets of each
Portfolio. There is a minimum annual fee of $100,000 payable to the
Administrator by each Portfolio. The Administrator has voluntarily agreed to
waive a portion of its fee relating to the West Virginia Tax-Exempt Income
Portfolio in order to limit that Portfolio's administration fee to .20% of its
average daily net assets on an annualized basis. The Administrator also serves
as the shareholder servicing agent for the Trust. Compensation for this service
is paid under the administration agreement.
DST Systems, Inc. serves as the transfer agent and dividend disbursing
agent for the Portfolios under a transfer agency agreement with the Trust.
The Trust and SEI Financial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEI Corporation, have entered into a distribution
agreement. The Class B shares of each Portfolio have a distribution plan
(the "Class B Plan"), pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended. As provided in the Distribution Agreement and the Class B
Plan, the Trust will pay a fee, at an annual rate of .25% of each Portfolio's
average daily net assets attributable to Class B shares to the Distributor as
compensation for its services.
4. ORGANIZATIONAL COSTS AND
TRANSACTIONS WITH AFFILIATES:
Organizational costs have been capitalized by the Trust and are being amortized
over sixty months beginning with the commencement of operations. In the event
any of the initial shares are redeemed by any holder thereof during the period
that the fund is amortizing its organizational costs, the redemption proceeds
payable to the holder thereof by the Trust will be reduced by the unamortized
organizational costs in the same ratio as the number of initial shares being
redeemed bears to the number of initial shares outstanding at the time of the
redemption. These costs include legal fees of approximately $23,000 for
organizational work performed by a law firm of which two officers of the Trust
and a Trustee of the Trust are partners.
Certain officers of the Trust are also officers of the Administrator and/or
Distributor. Such officers are paid no fees by the Trust for serving in their
respective roles.
(CONTINUED)
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from the sale of securities,
other than temporary cash investments, during the period ended July 31, 1996
were as follows:
WEST VIRGINIA TAX-
EXEMPT INCOME PORTFOLIO
U.S.
GOVERNMENT
SECURITIES ALL OTHER TOTAL
(000) (000) (000)
------ ----- ---
Purchases $ -- $13,618 $13,618
Sales -- 7,135 7,135
GOVERNMENT SECURITIES PORTFOLIO
U.S.
GOVERNMENT
SECURITIES ALL OTHER TOTAL
(000) (000) (000)
---------- --------- -----
Purchases $ 1,752 $ -- $ 1,752
Sales 6,416 -- 6,416
EMERGING GROWTH PORTFOLIO
U.S.
GOVERNMENT
SECURITIES ALL OTHER TOTAL
(000) (000) (000)
---------- --------- ------
Purchases $ -- $30,699 $30,699
Sales -- 33,495 33,495
CAPITAL APPRECIATION PORTFOLIO
U.S.
GOVERNMENT
SECURITIES ALL OTHER TOTAL
(000) (000) (000)
---------- --------- -------
Purchases $ -- $35,880 $35,880
Sales -- 50,833 50,833
At July 31, 1996, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation on investment securities at July
31, 1996, for each Equity and Fixed Income Portfolio is as follows:
NET
UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION/
SECURITIES SECURITIES (DEPRECIATION)
(000) (000) (000)
----------- ----------- -------------
West Virginia
Tax-Exempt
Income $ 567 $ (600) $ (33)
Government
Securities 822 (1,421) (599)
Emerging
Growth 9,622 (2,219) 7,403
Capital
Appreciation 19,553 (3,203) 16,350
At January 31, 1996, the following Portfolios had available realized
capital losses to offset future net capital gains through fiscal year ending:
2003 2004
(000) (000)
---- ----
Prime Obligations $ 7 $--
West Virginia Tax-Exempt Income 24 141
Government Securities 3 68
Emerging Growth 4,170 --
30
<PAGE>
OVB[LOGO]
JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
6. CONCENTRATION OF CREDIT RISK:
The Money Market Portfolio invests primarily in money market instruments
maturing in one year or less whose ratings are within the highest ratings
category assigned by a nationally recognized statistical rating organization or,
if not rated, are believed to be of comparable quality. The Fixed Income
Portfolios invest primarily in marketable debt instruments. The market value of
these investments will change in response to interest rate changes and other
factors. During periods of falling interest rates, the values of debt securities
generally rise. Conversely, during periods of rising interest rates the values
of such securities generally decline. The ability of the issuers of the
securities held by these Portfolios to meet their obligations may be affected by
economic and political developments in a specific industry, state or region.
Changes by recognized rating organizations in the ratings of any debt security
and in the ability of an issuer to make payments of interest and principal may
also affect the value of these investments.
31
<PAGE>
Notes
<PAGE>
OVB [LOGO]
<PAGE>
THE OVB FUNDS
PORTFOLIOS OF THE ARBOR FUND
INVESTMENT ADVISER:
One Valley Bank, N.A.
One Valley Square, P.O. Box 1793
Charleston, WV 25326
DISTRIBUTOR:
SEI Financial Services Company
680 East Swedesford Road
Wayne, PA 19087
This material must be preceded or accompanied by a current prospectus.
FOR MORE INFORMATION, CALL:
1-800-545-6331
<PAGE>
THE ARBOR FUNDS
U.S. GOVERNMENT SECURITIES MONEY FUND
PRIME OBLIGATIONS FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS
AS OF JULY 31, 1996
<PAGE>
Dear Shareholder:
The period ended July 31, 1996, was one of strong performance and continued
growth for the Prime Obligations Fund and U.S. Government Securities Money Fund.
Our newest money fund, the Prime Obligations Fund, continued to spark interest
among investors. Total assets in the Fund reached $416 million on July 31. Its
7-day yield was 5.34% and its 7-day effective yield was 5.48% at July 31, 1996.
The Fund's total return for the month placed it in the top 4% of all prime
institutional money funds nationwide according to Lipper Analytical Services.
The U.S. Government Securities Money Fund has also performed well this year. As
of July 31, 1996, the Fund had assets of $431 million, with a 7-day yield of
5.17% and a 7-day effective yield of 5.30%. Its total return placed it in the
top 9% of all institutional money funds in its Lipper Analytical Services
category.
In the year ahead, we plan to continue to provide our investors with added value
through prudent asset management and efficient operating practices. We thank you
for your continued confidence in the Prime Obligations Fund and U.S.
Government Securities Money Fund.
ECONOMIC ENVIRONMENT
The U.S. economy showed nearly amazing resilience in the first half of 1996 on
the heels of a poor Christmas selling season, Federal government shutdowns, and
one of the more severe winters on record. Low mortgage rates helped to revive
consumer spending. Investor fears shifted from economic slump to economic surge
with a renewed threat of higher inflation. This caused long term interest rates
to rise sharply in the first half of the year. The Federal Reserve's monetary
policy has remained steady during this period.
Currently, economic growth appears to be slowing under the weight of higher
interest rates and increasing debt burdens. Both the housing and auto sectors
have softened noticeably in recent reports. However, the relatively low
unemployment rate combined with limited industrial slack have many concerned
about higher inflation and a need for tighter Fed monetary policy.
THE OUTLOOK FOR INTEREST RATES
Currently, growth appears to be slowing, but the economic imbalances that often
lead to recession are limited. Growth is expected to slow to an average or
slightly below average pace in the months ahead which would help keep the
specter of higher inflation at bay.
In this environment of slow growth and continued low inflation, we expect the
Federal Reserve to hold interest rates near current levels for the next several
months. This uneasy balance between continued growth and contained inflation
should keep both the markets and Fed policy makers on edge. However, as the
future pace of growth diminishes, longer term interest rates should decline,
consistent with a steady Fed policy.
We thank you for your participation in the U.S. Government Securities Money Fund
and the Prime Obligations Fund. We will continue to utilize prudent investment
strategies in our quest for strong investor returns.
Sincerely,
(/S/ Ben Jones)
Ben Jones
President and
Chief Investment Officer
Capitoline Investment Services, Inc.
<PAGE>
STATEMENT OF NET ASSETS THE ARBOR FUNDS
July 31, 1996 (Unaudited)
Face
Amount Value
(000) U.S. GOVERNMENT SECURITIES MONEY FUND (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 81.3%
FFCB (A)
$25,000 5.310%, 08/01/96 ................................... $ 24,978
FFCB Discount Note
13,000 5.100%, 09/06/96 ................................... 12,934
15,000 5.811%, 04/10/97 ................................... 14,418
FFCB
10,000 5.840%, 06/18/97 ................................... 9,985
FHLB Callable 10/17/96 @ 100
15,500 5.415%, 01/17/97 ................................... 15,501
FHLB Callable 09/14/96 @ 100
19,800 5.350%, 03/14/97 ................................... 19,800
FHLB
15,000 5.050%, 02/21/97 ................................... 15,000
19,000 5.290%, 03/05/97 ................................... 18,999
FHLB Callable 10/09/96 @ 100
20,000 5.520%, 01/09/97 ................................... 20,000
FHLB
20,000 5.430%, 01/10/97 ................................... 20,000
FNMA (A)
42,500 5.245%, 08/01/96 ................................... 42,474
20,000 5.300%, 08/01/96 ................................... 19,996
30,000 5.330%, 08/01/96 ................................... 29,991
20,000 5.450%, 08/01/96 ................................... 20,008
FNMA Discount Note
20,000 4.890%, 08/29/96 ................................... 19,924
SLMA (A)
15,000 5.490%, 08/06/96 ................................... 15,000
20,000 5.560%, 08/06/96 ................................... 19,983
TVA
11,550 4.190%, 09/09/96 ................................... 11,540
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $350,531) ............................ 350,531
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 3.4%
U.S. Treasury STRIPS
15,000 5.342%, 11/15/96 ................................... 14,787
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $14,787) ............................ 14,787
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 14.7%
First Boston Securities, 5.75%, dated 07/31/96,
matures 08/01/96, repurchase price $20,003,194
(collateralized by various FNMA obligations
ranging in par value $7,750,000 - $13,140,000,
5.09% - 5.27%, 09/16/96 - 12/27/96; with total
20,000 market value of $20,601,905) .......................... 20,000
Greenwich Securities, 5.65%, dated 07/31/96,
matures 08/01/96, repurchase price $43,202,915
(collateralized by various FNMA obligations
ranging in par value $34,006 - $20,559,181,
6.00% - 9.00%, 07/01/03 - 06/01/26; with total
43,196 market value of $44,065,142) .......................... 43,196
- --------------------------------------------------------------------------------
Total Repurchase Agreements (Cost $63,196) ... 63,196
- --------------------------------------------------------------------------------
Total Investments--99.4% (Cost $428,514) ..... 428,514
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--0.6%
Other Assets and Liabilities, Net ....................... 2,422
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUNDS
July 31, 1996 (Unaudited)
Value
U.S. GOVERNMENT SECURITIES MONEY FUND (concluded) (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited authorization --
no par value) based on 430,982,610
outstanding shares of beneficial interest ............. $430,983
Accumulated net realized loss on investments ............ (47)
- --------------------------------------------------------------------------------
Total Net Assets--100.0% ............................. $430,936
- --------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share .................................... $1.00
================================================================================
FFCB -- Federal Farm Credit Bank
FHLB -- Federal Home Loan Bank
FNMA -- Federal National Mortgage Association
SLMA -- Student Loan Marketing Association
STRIPS -- Separately Traded Registered Interest and Principal of Securities
TVA -- Tennessee Valley Authority
(A) Variable Rate Security -- The rate reported in the Statement of Net
Assets is the rate in effect on July 31, 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUNDS
July 31, 1996 (Unaudited)
Face
Amount Value
(000) PRIME OBLIGATIONS FUND (000)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 24.0%
American Brands
$10,000 5.400%, 02/07/97 ................................... $ 9,715
Daimler-Benz N.A.
15,000 5.820%, 01/14/97 ................................... 14,614
Enterprise Funding
15,000 5.300%, 08/21/96 ................................... 14,956
General Motors Acceptance
5,000 5.600%, 02/28/97 ................................... 4,836
International Nederlanden
9,800 5.320%, 08/15/96 ................................... 9,780
Orix America
8,000 5.360%, 08/05/96 ................................... 7,995
Stellar Capital
18,000 5.430%, 08/02/96 ................................... 17,997
Strategic Asset Funding
20,000 5.550%, 10/31/96 ................................... 19,719
- --------------------------------------------------------------------------------
Total Commercial Paper (Cost $99,612) .......... 99,612
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 17.1%
Bear Stearns (A)
10,000 5.810%, 08/01/96 ................................... 10,029
8,000 5.527%, 08/06/96 ................................... 8,000
First Boston (A)
18,000 5.450%, 08/01/96 ................................... 18,000
General Motors Acceptance
10,000 7.125%, 05/23/97 ................................... 10,090
2,000 6.125%, 06/09/97 ................................... 2,003
Merrill Lynch (A)
18,000 5.460%, 08/01/96 ................................... 17,999
Wachovia Bank of North Carolina
5,000 5.950%, 08/11/97 ................................... 4,992
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $71,113) ........... 71,113
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 21.4%
FHLB
5,000 5.780%, 07/08/97 ................................... 4,993
FNMA (A)
35,000 5.300%, 08/01/96 ................................... 34,992
19,000 5.850%, 08/01/96 ................................... 19,045
FFCB (A)
20,000 5.310%, 08/01/96 ................................... 19,983
FFCB
10,000 5.930%, 07/01/97 ................................... 9,992
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations (Cost $89,005) ..... 89,005
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS (concluded) THE ARBOR FUNDS
July 31, 1996 (Unaudited)
Face
Amount Value
(000) PRIME OBLIGATIONS FUND (concluded) (000)
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 10.3%
Bank of Tokyo
$15,000 5.680%, 03/19/97 ................................... $ 15,003
PNC Bank (A)
18,000 5.397%, 08/06/96 ................................... 17,997
Sanwa Bank
10,000 5.550%, 09/30/96 ................................... 10,001
- --------------------------------------------------------------------------------
Total Certificates of Deposit (Cost $43,001) ... 43,001
- --------------------------------------------------------------------------------
BANK NOTES -- 5.9%
National Bank of Detroit
10,000 5.500%, 03/14/97 ................................... 9,996
First of America Bank
4,000 4.980%, 01/15/97 ................................... 3,986
10,770 5.060%, 01/23/97 ................................... 10,732
- --------------------------------------------------------------------------------
Total Bank Notes (Cost $24,714) ................ 24,714
- --------------------------------------------------------------------------------
BANKERS ACCEPTANCE -- 1.2%
NationsBank
5,000 5.000%, 08/26/96 ................................... 4,983
- --------------------------------------------------------------------------------
Total Bankers Acceptance (Cost $4,983) ......... 4,983
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 16.3%
Greenwich Securities, 5.65%, dated 07/31/96,
matures 08/01/96, repurchase price $46,469,526
(collateralized by various FNMA obligations
ranging in par value $62,067 - $14,950,900,
46,462 6.00% - 8.50%,07/01/03 - 07/01/26; with total
market value of $47,393,525) .......................... 46,462
Merrill Lynch Securities, 5.65%, dated 07/31/96,
matures 08/01/96, repurchase price $21,152,507
(collateralized by various FNMA obligations
ranging in par value $85,000 - $21,133,000,
21,149 6.05% - 8.50%, 07/01/26; with total market
value of $21,574,083) ................................. 21,149
- --------------------------------------------------------------------------------
Total Repurchase Agreements (Cost $67,611) ..... 67,611
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 3.6%
Aim Liquid Asset Portfolio
15,000 ..................................................... 15,000
- --------------------------------------------------------------------------------
Total Cash Equivalent (Cost $15,000) ........... 15,000
- --------------------------------------------------------------------------------
Total Investments--99.8% (Cost $415,039) ....... 415,039
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--0.2%
Other Assets and Liabilities, Net ....................... 782
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited authorization --
no par value) based on 415,820,671
outstanding shares of beneficial interest ............. 415,821
- --------------------------------------------------------------------------------
Total Net Assets--100.0% ....................... $415,821
- --------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share .............................. $1.00
================================================================================
FFCB -- Federal Farm Credit Bank
FHLB -- Federal Home Loan Bank
FNMA -- Federal National Mortgage Association
(A) Variable Rate Security -- The rate reported in the Statement of Net Assets
is the rate in effect on July 31, 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS THE ARBOR FUNDS
For the Six Month Period Ended July 31, 1996 (Unaudited)
(IN THOUSANDS)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT PRIME
SECURITIES OBLIGATIONS
MONEY FUND FUND
- --------------------------------------------------------------------------------
Investment Income:
Interest Income .......................... $12,288 $10,354
- --------------------------------------------------------------------------------
Expenses:
Management Fees .......................... 184 151
Waiver of Management Fees ................ (82) (76)
Investment Advisory Fees ................. 461 378
Waiver of Advisory Fees .................. (313) (303)
Custodian Fees ........................... 92 75
Transfer Agent Fees ...................... 69 57
Professional Fees ........................ 9 13
Registration Fees ........................ 30 75
Insurance Expense ........................ 1 1
Directors Fees ........................... 3 2
Printing Fees ............................ 3 3
Pricing Fees ............................. 1 1
Amortization of Organizational Cost ...... 2 2
- --------------------------------------------------------------------------------
Total Expenses ......................... 460 379
- --------------------------------------------------------------------------------
Net Investment Income .................... 11,828 9,975
- --------------------------------------------------------------------------------
Net Realized Loss on Investments ......... (33) --
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting
from Operations ........................ $11,795 $9,975
================================================================================
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS THE ARBOR FUND
For the Six Month Period Ended July 31, 1996 (Unaudited) and for the
Period Ended January 31, 1996
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT PRIME
SECURITIES OBLIGATIONS
MONEY FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
02/01/96 02/01/95 02/01/96 10/25/95(1)
TO 07/31/96 TO 01/31/96 TO 07/31/96 TO 01/31/96
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income ................................. $ 11,828 $ 31,718 $ 9,975 $ 6,362
Net Realized Loss on Investments ...................... (33) (14) -- --
- ----------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations ......... 11,795 31,704 9,975 6,362
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ................................. (11,828) (31,718) (9,975) (6,362)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions ................................. (11,828) (31,718) (9,975) (6,362)
- ----------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (all at $1.00 per share):
Proceeds from Shares Issued ........................... 2,229,349 5,309,363 2,178,866 1,497,447
Reinvestment of Cash Distributions .................... 598 1,480 58 --
Cost of Shares Redeemed ............................... (2,313,848) (5,375,381) (2,145,735) (1,114,815)
- ----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions ............................ (83,901) (64,538) 33,189 382,632
- ----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets ............. (83,934) (64,552) 33,189 382,632
- ----------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ................................. 514,870 579,422 382,632 --
End of Period ....................................... $ 430,936 $ 514,870 $ 415,821 $ 382,632
- ----------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Shares Issued ......................................... 2,229,349 5,309,363 2,178,866 1,497,447
Shares Issued in Lieu of Cash Distributions ........... 598 1,480 58 --
Shared Redeemed ....................................... (2,313,848) (5,375,381) (2,145,735) (1,114,815)
======================================================================================================================
<FN>
(1) Commenced operations on October 25, 1995
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS THE ARBOR FUNDS
For a Share Outstanding Throughout the Period or Year
<TABLE>
<CAPTION>
NET ASSET DIVIDENDS NET NET
VALUE NET FROM ASSET VALUE ASSETS
BEGINNING INVESTMENT NET INVESTMENT END TOTAL END OF PERIOD
OF PERIOD INCOME INCOME OF PERIOD RETURN (000)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------
U.S. GOVERNMENT SECURITIES MONEY FUND
- -------------------------------------
For the Six Months Ended July 31, (unaudited):
1996 $1.00 0.03 (0.03) $1.00 5.16%* $430,936
For the Years Ended January 31,:
1996 $1.00 0.06 (0.06) $1.00 5.88% $514,870
1995(1) $1.00 0.03 (0.03) $1.00 5.03%* $579,422
- ----------------------
PRIME OBLIGATIONS FUND
- ----------------------
For the Six Months Ended July 31, (unaudited):
1996 $1.00 0.03 (0.03) $1.00 5.32%* $415,821
For the Year Ended January 31,:
1996(2) $1.00 0.02 (0.02) $1.00 5.82%* $382,632
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
RATIO RATIO OF
RATIO OF EXPENSES NET INCOME
RATIO OF NET TO AVERAGE TO AVERAGE
OF EXPENSES INCOME NET ASSETS NET ASSETS
TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
NET ASSETS NET ASSETS WAIVERS) WAIVERS)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------
U.S. GOVERNMENT SECURITIES MONEY FUND
- -------------------------------------
For the Six Months Ended July 31, (unaudited):
1996 0.20%* 5.14%* 0.37%* 4.97%*
For the Years Ended January 31,:
1996 0.20% 5.72% 0.37% 5.55%
1995(1) 0.20%* 4.98%* 0.38%* 4.80%*
- ----------------------
PRIME OBLIGATIONS FUND
- ----------------------
For the Six Months Ended July 31, (unaudited):
1996 0.20%* 5.28%* 0.55%* 4.93%*
For the Year Ended January 31,:
1996(2) 0.20%* 5.61%* 0.40%* 5.41%*
==========================================================================
<FN>
(1) Commenced operations on August 1, 1994
(2) Commenced operations on October 25, 1995
*Annualized
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE ARBOR FUNDS
July 31, 1996 (Unaudited)
1. Organization:
THE U. S. GOVERNMENT SECURITIES MONEY AND PRIME OBLIGATIONS FUNDS (the "Funds")
are separate investment portfolios of The Arbor Fund (the "Trust"), an open-end
management investment company. The Trust was organized as a Massachusetts
business trust under a Declaration of Trust dated July 24, 1992. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management company. The financial statements included herein relate only to the
U.S Government Securities Money and Prime Obligations Funds. The Funds'
prospectus provides a description of the Funds' investment objectives, policies
and strategies.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by
the Funds. The policies are in conformity with generally accepted accounting
principles.
SECURITY VALUATION--Investment securities held by the Fund are stated at
amortized cost, which approximates market value. Under this method,
purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
FEDERAL INCOME TAXES--It is the Funds' intention to continue to qualify as
regulated investment companies for Federal income tax purposes by complying
with the appropriate provisions of the Internal Revenue Code of 1986, as
amended. Accordingly, no provision for Federal income taxes is required in
the financial statements.
SECURITY TRANSACTIONS AND RELATED INCOME--Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized using the accrual method of accounting. Costs
used in determining realized gains and losses on sales of investment
securities are those of the specific securities sold adjusted for the
accretion and amortization of purchase discounts and premiums during the
respective holding periods.
REPURCHASE AGREEMENTS--The Funds invest in tri-party repurchase agreements.
Securities held as collateral for tri-party repurchase agreements are
maintained in a segregated account by the broker's custodian bank until
maturity of the repurchase agreement. Provisions of the repurchase
agreements require that the market value of the collateral, including
accrued interest thereon, is sufficient in the event of default of the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding,
realization and/or retention of the collateral by the Fund may be delayed
or limited.
NET ASSET VALUE PER SHARE--The net asset value per share of the Funds is
calculated on each business day. In general, it is computed by dividing the
assets of each Fund, less its liabilities, by the number of outstanding
shares of each Fund.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions from net investment income are
declared daily and paid monthly to shareholders. Any net realized capital
gains on sales of securities are distributed to shareholders at least
annually.
OTHER--On January 31, 1996 the total cost of securities and the net
realized gains or losses on securities sold for federal income tax purposes
was not significantly different from amounts reported for financial
reporting purposes.
3. Administration, Transfer Agent and Distribution Agreements:
SEI Fund Resources (the "Administrator"), a Delaware business trust, serves as
administrator to the Funds. SEI Financial Management Corporation, a wholly-owned
subsidiary of SEI Corporation, is the owner of all beneficial interest in the
Administrator. The Trust and the Administrator have entered into an
administration agreement dated August 1, 1994. Under terms of the Administration
Agreement, the Administrator is entitled to a fee which is calculated daily and
paid monthly at an annual rate of .08% of the average daily net assets of each
Fund. The Administrator and Capitoline Investment Services
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ARBOR FUNDS
July 31, 1996 (Unaudited)
Incorporated (the "Advisor") have agreed to waive a portion of their respective
fees to the extent necessary so that the total operating expenses of the Funds
do not exceed an annual rate of .20% of average daily net assets. During the
period from February 1, 1996 to July 31, 1996, the Administrator received net
administration fees totaling approximately .04% of the average daily net assets
of each Fund. Fee waivers and expense reimbursements are voluntary and may be
terminated at any time.
Crestar Bank (the "Transfer Agent") serves as the transfer agent and dividend
disbursing agent for each Fund. The Transfer Agent also acts as the shareholder
servicing agent and custodian of the Funds.
The Trust and SEI Financial Services Company (the "Distributor"), a wholly-owned
subsidiary of SEI Corporation and an affiliate of the Administrator, have
entered into a distribution agreement (the "Distribution Agreement") dated
August 1, 1994. The Distributor receives no fees for its distribution services
under the Distribution Agreement.
4. Investment Advisory Agreement:
The Trust has entered into an investment advisory agreement with the Advisor
dated August 1, 1994 under which the Advisor is entitled to a fee which is
calculated daily and paid monthly, at an annual rate of .20% of the average
daily net assets of each Fund. During the period from February 1, 1996 to July
31, 1996, the Advisor received net fees totaling approximately .06% and .04% of
the average daily net assets for U.S. Government Securities Money and Prime
Obligations Funds, respectively. Fee waivers and expense reimbursements are
voluntary and may be terminated at any time. The Advisor is a wholly-owned
subsidiary of Crestar Bank, which is a wholly-owned subsidiary of Crestar
Financial Corporation.
5. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Trust and are being amortized
over sixty months beginning with the commencement of operations. In the event
any of the initial shares of the Trust are redeemed by any holder thereof during
the period that the Trust is amortizing its organizational costs, the redemption
proceeds payable to the holder thereof by the Trust will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption. These costs include legal fees for organizational work
performed by a law firm of which two officers of the Funds are partners.
Certain officers and Trustees of the Trust are also officers of the
Administrator and/or Distributor. Such officers and Trustees are paid no fees by
the Trust for serving in their respective roles.
6. Concentration of Credit Risk
The Funds invest primarily in money market instruments maturing in one year or
less whose ratings are within the highest ratings category assigned by a
nationally recognized statistical rating agency or, if not rated, are believed
to be of comparable quality. The ability of the issuers of the securities held
by the Fund to meet their obligations may be affected by economic and political
developments in a specific industry, state or region.
<PAGE>
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Corporation. The report is not
authorized for distribution to prospective investors in the Corporation unless
preceded or accompanied by an effective prospectus. Shares in the Fund are not
deposits or obligations of, or guaranteed or endorsed by Crestar Bank, the
parent corporation of the Fund's investment adviser. Such shares are also not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
<PAGE>
THE ARBOR FUND
CALIFORNIA TAX EXEMPT PORTFOLIO
INSTITUTIONAL TAX FREE PORTFOLIO
SEMI-ANNUAL REPORT
JULY 31, 1996
Advised By
PNC Institutional Management Corporation
<PAGE>
Dear Shareholder:
We are pleased to present this report to shareholders of the California Tax
Exempt and Institutional Tax Free Portfolios of The Arbor Fund for the six
months ended July 31, 1996.
Federal Reserve monetary policy was biased toward ease as the new year
began. Housing activity, consumer confidence and retail sales were all weak as
1995 ended, and the government shutdowns and blizzards experienced in January
pointed to an inauspicious start. The Fed moved quickly to respond to these
signs of weakness and lowered the federal funds rate twice, once in December to
5 1/2%, and again in January to 5 1/4%. A sharp reversal in the Fed's outlook
occurred in early March when a series of economic reports showed a strong
rebound from January levels. Employment, housing and industrial production all
showed strength. Inflation concerns also expanded and fixed income yields rose
quickly.
The March employment report was followed by another surprise in April when
only 2,000 new jobs were created. This news caused a short-lived rally in the
bond market which lowered the yield on the long bond to about 6.80%. A
resumption of stronger economic reports and another far from consensus jobs
report for May pushed bond yields sharply higher. A similar scenario occurred in
early July after the release of a strong employment report for June.
Market sentiment, therefore, has been leaning toward a tightening move by
the Fed since March. The news on inflation, however, remains very positive. This
should give the Fed comfort and allow for an unchanged monetary policy for the
next few months.
Total tax free money fund assets hit record levels during the semi-annual
period ended July 31, 1996. Uncertainty in the stock and bond markets, the
Washington budget impasse, possibility of changes to the tax code as well as
bond calls and coupon interest payments contributed to this growth. This
increase in assets raised demand for high quality short-term municipal
securities causing municipal yields to be unattractive on an after-tax basis
versus taxable alternatives.
The need to maintain liquidity to meet redemptions along with a relatively
flat municipal yield curve and expectations of a tightening of monetary policy
by the Fed contributed to a decline in the California Tax Exempt Portfolio's
average weighted maturity through the end of June. Settlements of one-year notes
issued by California municipalities for seasonal cash flow purposes boosted the
Fund's average weighted maturity at the end of July to 43 days, slightly below
the 46-day average for Donoghue's index. Liquidity considerations prompted a
contraction in the Institutional Tax Free Portfolio's average weighted maturity
to 17 days at the end of July.
Total net assets on July 31, 1996 stood at $472.6 million for the
California Tax Exempt Portfolio and $63.3 million for the Institutional Tax Free
Portfolio.
Your trust and confidence in us is sincerely appreciated. We value the
opportunity to serve your investment needs.
PNC Institutional Management Corporation
<PAGE>
STATEMENT OF NET ASSETS THE ARBOR FUND
July 31, 1996 (Unaudited)
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (000) (000)
- -------------------------------------------------------------------
MUNICIPAL BONDS -- 100.7%
CALIFORNIA -- 96.7%
Abag Finance Authority, California
Certificate of Participation,
Lucile S. Packard
Children's Hospital Project, Ser 93
3.550%, 08/07/96 (A) (B) (C) ...... $ 5,250 $ 5,250
Big Bear Lake, California Industrial
Development Revenue,
Southwest Gas Project,
Ser A, AMT
3.500%, 08/07/96 (A) (B) (C) ...... 6,200 6,200
California Health Facilities Revenue
Bond, Adventist Health Systems
Project, Ser A
3.400%, 08/07/96 (A) (B) (C) ...... 6,000 6,000
California Health Facilities Revenue
Bond, Catholic Healthcare Project,
Ser 88B (A) (B) (C)
3.350%, 08/07/96 .................. 2,700 2,700
California Health Facilities Revenue
Bond, Catholic Healthcare West
Project, Ser D
3.350%, 08/07/96 (A) (B) (C) ...... 2,000 2,000
California Health Facilities Revenue
Bond, Kaiser Permanente
Ser 93A 3C4
3.250%, 08/07/96 (A) (B) .......... 11,600 11,600
California Health Facilities Revenue
Bond, Scripps Memorial Hospital
Project, Ser 91B
3.450%, 08/07/96 (A) (B) (C) ...... 6,700 6,700
California Home Mortgage Revenue
Bond, Ser 96D, AMT
3.550%, 04/01/97 (C) .............. 2,500 2,500
California Home Mortgage Revenue
Bond, Ser E, AMT
3.500%, 02/01/97 (C) .............. 1,500 1,500
California Pollution Control Pacific
Gas & Electric Company,
Ser 88C, TECP
3.250%, 08/08/96 (D) .............. 4,000 4,000
California Pollution Control Pacific
Gas & Electric Company,
Ser 88, TECP
3.250%, 08/01/96 (D) .............. 9,500 9,500
California Pollution Control Pacific
Gas & Electric Company, TECP
3.200%, 08/01/96 (D) .............. 3,800 3,800
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- -------------------------------------------------------------------
California Pollution Control Pacific
Gas & Electric Company, TECP
3.400%, 08/15/96 (D) ........... $ 7,000 $ 7,000
3.500%, 08/15/96 (D) ........... 2,000 2,000
California Pollution Control Revenue
Bond, Colmac Energy Project,
Ser A, AMT
3.500%, 08/07/96 (A) (B) (C) ... 4,000 4,000
California Pollution Control Revenue
Bond, Pacific Gas & Electric
Project, Ser 96F
3.550%, 08/01/96 (A) (B) (C) ... 13,300 13,300
California Pollution Control Revenue
Bond, Pacific Gas & Electric
Project, Ser 96, AMT
3.550%, 08/07/96 (A) (B) (C) ... 1,000 1,000
California Pollution Control Revenue
Bond, Pacific Gas & Electric
Project, Ser 96G
3.600%, 08/01/96 (A) (B) ....... 2,500 2,500
California Pollution Control Revenue
Bond, Shell Oil Project,
Ser 85A, AMT
3.650%, 08/01/96 (A) (B) ....... 2,100 2,100
California Pollution Control Revenue
Bond, Shell Oil Project,
Ser 94B, AMT
3.650%, 08/01/96 (A) (B) ....... 1,100 1,100
California Pollution Control Revenue
Bond, Sierra Pacific Project
3.500%, 08/07/96 (A) (B) (C) ... 7,400 7,400
California Pollution Control Revenue
Bond, Southern California Edison
Project, Ser 86A
3.400%, 08/01/96 (A) (B) ....... 2,100 2,100
California Pollution Control Revenue
Bond, Southern California Edison
Project, Ser 86B
3.400%, 08/01/96 (A) (B) ....... 2,500 2,500
California Pollution Control Revenue
Bond, U.S. Borax Project,
Ser 95A
3.550%, 08/07/96 (A) (B) (C) ... 5,100 5,100
California Pollution Control Revenue
Bond, Wadham Energy Project,
Ser A, AMT
3.550%, 08/07/96 (A) (B) (C) ... 3,680 3,680
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1996 (Unaudited)
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- -------------------------------------------------------------------
California Pollution Control Revenue
Bond, Wadham Energy Project,
Ser B, AMT
3.550%, 08/07/96 (A) (B) (C) ....... $ 3,000 $ 3,000
California Pollution Control Revenue
Bond, Wadham Energy Project,
Ser C, AMT
3.550%, 08/07/96 (A) (B) (C) ....... 1,700 1,700
California Pollution Control, Southern
California Edison Company,
Ser 85, TECP
3.450%, 08/21/96 ................... 4,900 4,900
California Pollution Control, Pacific
Gas & Electric, Ser 96, TECP
3.550%, 10/23/96 (C) ............... 7,000 7,000
California State, RAN, Ser 96A
4.500%, 06/30/97 ................... 5,000 5,023
California Statewide Community
Development Authority Revenue
Bond, Chino Basin Municipal
Water Project, AMT
3.450%, 08/07/96 (A) (B) (C) ....... 4,300 4,300
California Statewide Community
Development Authority Revenue
Bond, Ser 95A - 5
3.500%, 08/07/96 (A) (B) (C) ....... 3,900 3,900
California Statewide Community
Development Authority Revenue
Bond, Ser 95A - 6
3.500%, 08/07/96 (A) (B) (C) ....... 4,500 4,500
Chula Vista, California Industrial
Development Revenue Bond,
San Diego Gas & Electric Company,
Ser 92B, AMT
3.550%, 08/07/96 (A) (B) ........... 1,000 1,000
Contra Costa County, California
Housing Authority Multi-family
Revenue Bond, Park
Regency Project,
Ser A, AMT
3.700%, 08/07/96 (A) (B) (C) ....... 18,800 18,800
Foothill Eastern Transmission Corridor,
California Toll Road Revenue
Bond, Ser E
3.500%, 08/07/96 (A) (B) (C) ....... 8,000 8,000
Golden Empire Schools, California
Educational Revenue Bond, Kern
High School District Project, Ser 96
3.450%, 08/07/96 (A) (B) (C) ....... 5,000 5,000
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- -------------------------------------------------------------------
Irvine Ranch, California Water District
Revenue Bond, Ser B
3.550%, 08/01/96 (A) (B) (C) ........ $ 2,600 $ 2,600
Los Angeles County, California Pension
Obligation Revenue
Bond, Ser 96A
3.400%, 08/07/96 (A) (B) (C) ........ 10,900 10,900
Los Angeles County, California
Metropolitan Transportation Authority
Revenue Bond, Union Station
Project, Ser A
3.250%, 08/07/96 (A) (B) (C) ........ 6,600 6,600
Los Angeles County, California Sales
Tax Revenue Bond, Ser A
3.400%, 08/07/96 (A) (B) (C) ........ 9,750 9,750
Los Angeles County, California TRAN
4.500%, 06/30/97 (C) ................ 4,500 4,528
Los Angeles County, California
TRAN, Ser A
4.500%, 06/30/97 (C) ................ 12,000 12,068
Los Angeles County, Housing Authority
Revenue Bond, Malibu Meadows II
Project, Ser B
3.600%, 08/07/96 (A) (B) (C) ........ 5,000 5,000
Marin County, California Housing
Authority Multi-family Revenue Bond,
Crest Marin II Apartments Project,
Ser A, AMT
3.800%, 08/07/96 (A) (B) (C) ........ 5,000 5,000
Modesto - Santa Clara - Redding,
California Utility Revenue Bond,
San Juan Project, Ser B
3.400%, 08/07/96 (A) (B) (C) ........ 1,900 1,900
Monterey County, California Revenue
Bond, Reclamation and Distribution
Project, Ser 95A
3.550%, 08/07/96 (A) (B) (C) ........ 2,800 2,800
Monterey Peninsula, California
Certificate of Participation,
Wastewater Reclamation Project
3.550%, 08/07/96 (A) (B) (C) ........ 3,700 3,700
Mount Diablo, California TRAN
4.500%, 10/24/96 .................... 12,000 12,016
Northern California, Public Power
Revenue Bond, Geothermal
Project No. 3, Ser 96A
3.400%, 08/07/96 (A) (B) (C) ........ 8,500 8,500
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1996 (Unaudited)
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- -------------------------------------------------------------------
Oakland County, California Certificate
of Participation,
Capital Equipment Project
3.800%, 08/07/96 (A) (B) (C) ....... $ 1,900 $ 1,900
Oakland County, California TRAN
4.750%, 06/30/97 ................... 4,000 4,031
Riverside County, California TRAN,
Ser A
4.500%, 06/30/97 ................... 5,000 5,026
Riverside County, California TRAN,
Ser B
3.400%, 08/07/96 (A) (B) (C) ....... 5,000 5,000
Sacramento Municipal Utility District,
California, Ser I TECP
3.250%, 08/22/96 (C) ............... 7,000 7,000
3.250%, 08/23/96 (C) ............... 8,000 8,000
Sacramento, California Certificate of
Participation, Administration
Center & Court House Project
3.400%, 08/07/96 (A) (B) (C) ....... 3,340 3,340
San Bernadino County, California
Certificate of Participation, Center
Refinancing Project, Ser 96
3.500%, 08/07/96 (A) (B) (C) ....... 2,500 2,500
San Bernadino County, California
TRAN
4.500%, 06/30/97 (C) ............... 5,000 5,027
San Bernardino County, California
Housing Authority Multi-Family
Revenue Bond, Montclair Heritage
Project, Ser A
3.450%, 08/07/96 (A) (B) (C) ....... 4,620 4,620
San Bernardino County, California
Housing Authority Multi-family
Revenue Bond, Rialto Heritage
Park Apartments Project,
Ser 93
3.450%, 08/07/96 (A) (B) (C) ....... 4,330 4,330
San Diego, California Housing Authority
Multi-Family Revenue Bond, Lusk
Mira Apartments
Project, Ser 85E
3.250%, 08/07/96 (A) (B) (C) ....... 3,600 3,600
San Diego, California San Diego Gas &
Electric Company Project TECP
3.200%, 08/08/96 ................... 10,200 10,200
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- -------------------------------------------------------------------
San Francisco, California Financing
Authority Revenue Bond, Yerba
Buena Garden Project
3.400%, 08/07/96 (A) (B) (C) .......... $ 4,850 $ 4,850
San Francisco, California Redevelopment
Agency Multi-family Revenue Bond,
Bayside Village Project, Ser A
3.600%, 08/07/96 (A) (B) (C) .......... 5,100 5,100
San Francisco, California Redevelopment
Agency Multi-Family Revenue Bond,
Fillmore Center Project, Ser 92B - 1
3.400%, 08/07/96 (A) (B) (C) .......... 8,900 8,900
San Jose - Santa Clara, California Water
Financing Authority Revenue
Bond, Ser 95B
3.400%, 08/07/96 (A) (B) (C) .......... 3,400 3,400
San Jose, California Redevelopment
Agency Revenue Bond, Merged
Area Redevelopment
Project, Ser A
3.300%, 08/07/96 (A) (B) (C) .......... 15,900 15,900
Santa Clara, California Electric
Revenue Bond, Ser 85B
3.500%, 08/07/96 (A) (B) (C) .......... 3,005 3,005
Santa Clara, California Transit District
Refunding Equipment
Trust Certificate - Ser 85A
3.550%, 08/01/96 (A) (B) (C) .......... 2,200 2,200
Sonoma County, California, TRAN
4.250%, 11/01/96 ...................... 9,000 9,009
Southeast Resource Recovery, Facility
Authority Lease Revenue
Bond, Ser 95B, AMT
3.700%, 08/07/96 (A) (B) (C) .......... 11,600 11,600
Southeast Resource Recovery, Facility
Authority Lease Revenue
Bond, Ser A
3.600%, 08/07/96 (A) (B) (C) .......... 24,300 24,300
Southern California, Public Power Authority
Revenue Bond, Transmission
Project, Ser 91
3.400%, 08/07/96 (A) (B) (C) .......... 7,670 7,670
Turlock Irrigation District, California
Certificate of Participation, Ser A1
3.300%, 08/07/96 (A) (B) (C) .......... 4,300 4,300
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1996 (Unaudited)
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- -------------------------------------------------------------------
Vallejo, California Housing Authority
Multi-Family Revenue Bond, Crow
Western Project, Phase II - Ser 85C
3.600%, 08/07/96 (A) (B) (C) ...... $ 9,200 $ 9,200
Ventura County, California TRAN
4.750%, 07/02/97 .................. 7,000 7,053
West Covina, California Redevelopment
Agency Revenue Bond, Barranca
Garvey Public Parking Project
3.500%, 08/07/96 (A) (B) (C) ...... 8,000 8,000
--------
Total California .............. 457,076
--------
PUERTO RICO -- 4.0%
Puerto Rico Government
Development Bank
3.250%, 08/07/96 (A) (B) (C) ...... 15,900 15,900
Puerto Rico Government Development
Bank TECP
3.200%, 08/06/96 .................. 3,000 3,000
--------
Total Puerto Rico ............. 18,900
--------
Total Municipal Bonds
(Cost $475,976) ............ 475,976
--------
Total Investments -- 100.7%
(Cost $475,976) ............ 475,976
--------
OTHER ASSETS AND LIABILITIES -- (0.7%)
Other Assets and Liabilities, Net ..... (3,392)
--------
CALIFORNIA TAX EXEMPT Value
PORTFOLIO(concluded) (000)
- ----------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 472,652,655
outstanding shares of
beneficial interest ............... $475,695
Accumulated net realized loss
on investments .................... (3,111)
--------
Total Net Assets-- 100.0% ............. $472,584
========
Net Asset Value, Offering Price and
Redemption Price Per Share ........ $1.00
========
(A) Variable Rate Securities -- the rate reported in the Statement of Net
Assets is the rate in effect on July 31, 1996.
(B) Put or Demand features exist requiring the issuer to repurchase the
instrument prior to maturity. The maturity date shown is the lesser of the
put, demand or maturity date.
(C) Security is held in connection with a guarantee, guaranteed investment
contract, letter of credit or standby bond purchase agreement issued by a
major commercial bank or other financial institution.
(D) Escrowed to maturity.
AMT -- Alternative Minimum Tax
RAN -- Revenue Anticipation Note
Ser -- Series
TECP -- Tax Exempt Commercial Paper
TRAN -- Tax and Revenue Anticipation Note
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1996 (Unaudited)
Face
INSTITUTIONAL TAX FREE Amount Value
PORTFOLIO (000) (000)
- -----------------------------------------------------------------
MUNICIPAL BONDS -- 99.9%
ALABAMA -- 3.6%
Columbia, Alabama Pollution Control
Revenue Bond, Alabama Power
Project, Ser A
3.650%, 08/01/96 (A) (B) .......... $2,300 $2,300
------
ARIZONA -- 3.6%
Apache County, Arizona Industrial
Development Revenue Bond,
Tucson Electric Power
Project, Ser 83A
3.650%, 08/07/96 (A) (B) (C) ...... 2,300 2,300
------
GEORGIA -- 5.5%
Fulton County, Georgia Educational
Revenue Bond, Alfred and Adele
Davis Academy
Project, Ser 95
3.700%, 08/07/96 (A) (B) (C) ...... 3,500 3,500
------
IDAHO -- 2.0%
Custer County, Idaho Pollution Control
Revenue Bond, Amoco
Project, Ser 83
3.400%, 10/01/96 .................. 1,250 1,250
------
ILLINOIS -- 16.1%
Chicago, Illinois O' Hare International
Airport Revenue
Bond, Ser 84A
3.600%, 08/01/96 (A) (B) (C) ...... 2,200 2,200
Illinois State, Educational Revenue
Bond, Art Institute
of Chicago Project
3.700%, 08/07/96 (A) (B) (C) ...... 1,700 1,700
Illinois State, Industrial Development
Authority Revenue Bond, Shell
Oil Wood River Project,
AMT, Ser 92
3.800%, 08/01/96 (A) (B) .......... 800 800
Illinois State, Industrial Development
Authority Revenue Bond, Webster
Wayne Shopping Center Project
3.550%, 08/07/96 (A) (B) (C) ...... 2,500 2,500
Face
INSTITUTIONAL TAX FREE Amount Value
PORTFOLIO (continued) (000) (000)
- ------------------------------------------------------------------
Illinois State, Pollution Control Revenue
Bond, Illinois Power Company
Project, AMT
3.800%, 08/07/96 (A) (B) (C) ....... $ 3,000 $ 3,000
-------
Total Illinois ................. 10,200
-------
LOUISIANA -- 4.1%
Jefferson Parish, Louisiana Hospital
Revenue Bond No. 2, Ser 85
3.600%, 08/07/96 (A) (B) (C) ....... 2,600 2,600
-------
MARYLAND -- 7.1%
Montgomery County, Maryland Housing
Revenue Bond, AMT, FHA, Ser 95B
3.900%, 11/14/96 ................... 4,500 4,500
-------
MISSISSIPPI -- 0.6%
Jackson County, Mississippi Industrial
Development Authority Revenue
Bond, Chevron USA Project
3.600%, 08/01/96 (A) (B) ........... 400 400
-------
MISSOURI -- 8.6%
Missouri State Environmental Improvement
and Energy Resources Authority
Revenue Bond, Monsanto Project,
Ser 88
3.600%, 08/07/96 (A) (B) ........... 2,900 2,900
Missouri State Health and Educational
Facility Authority Revenue Bond,
School District Funding Program
4.500%, 08/19/96 (C) ............... 2,500 2,501
-------
Total Missouri ................. 5,401
-------
MONTANA -- 2.2%
Forsyth Montana, Pollution Control
Revenue Bond, Portland
General Electric Project
3.600%, 08/07/96 (A) (B) (C) ....... 1,400 1,400
-------
NEW YORK -- 4.1%
New York City, New York GO, Ser E4
3.600%, 08/01/96 (A) (B) (C) ....... 1,900 1,900
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1996 (Unaudited)
Face
INSTITUTIONAL TAX FREE Amount Value
PORTFOLIO (continued) (000) (000)
- ------------------------------------------------------------------
New York State Energy Revenue Bond,
Niagara Mohawk
Project, Ser 85B
3.650%, 08/01/96 (A) (B) (C) ...... $ 700 $ 700
------
Total New York ................ 2,600
------
NORTH CAROLINA -- 9.0%
North Carolina State Hospital Revenue
Bond, Moses H. Cone
Memorial Hospital Project
3.550%, 08/07/96 (A) (B) (C) ...... 2,200 2,200
Wake County, North Carolina Pollution
Control Revenue Bond, Carolina
Power and Light
Project, Ser B5
3.800%, 08/07/96 (A) (B) (C) ...... 3,500 3,500
------
Total North Carolina .......... 5,700
------
OHIO -- 5.6%
Clermont County, Ohio Hospital Facility
Revenue Bond, Mercy Health
System Project, Ser B1
3.700%, 08/07/96 (A) (B) .......... 2,100 2,100
Stark County, Ohio BAN
3.900%, 10/01/96 .................. 1,425 1,426
------
Total Ohio .................... 3,526
------
SOUTH DAKOTA -- 4.1%
Lawrence County, South Dakota Pollution
Control Revenue Bond,
Homestake Mining Project
3.400%, 08/07/96 (A) (B) (C) ...... 2,600 2,600
------
TENNESSEE -- 3.8%
Tennessee State BAN, Ser A
3.450%, 08/07/96 (A) (B) .......... 2,400 2,400
------
TEXAS -- 9.8%
Austin, Texas Combined Utility Systems,
Ser A, TECP
3.550%, 08/05/96 (C) .............. 1,200 1,200
Brazos River, Texas Harbor Navigation
District, Dow Chemical Company
Project, TECP
3.500%, 08/21/96 .................. 2,000 2,000
Face
INSTITUTIONAL TAX FREE Amount Value
PORTFOLIO (continued) (000) (000)
- -------------------------------------------------------------------
City of San Antonio, Texas Water
System, TECP
3.450%, 08/07/96 (C) ............... $ 2,300 $ 2,300
Gulf Coast, Industrial Development
Revenue Bond, Citgo Petroleum
Project, Ser 95, AMT
3.850%, 08/01/96 (A) (B) (C) ....... 700 700
-------
Total Texas .................... 6,200
-------
VIRGINIA -- 3.8%
Fairfax County, Virginia Industrial
Development Revenue Bond,
Fairfax Hospital System
Project, Ser 88C
3.750%, 08/07/96 (A) (B) (C) ....... 2,400 2,400
-------
WASHINGTON -- 4.1%
Washington State, Public Power Supply
System Revenue Bond, Nuclear
Project No. 1, Ser 1A-1
3.600%, 08/07/96 (A) (B) (C) ....... 1,400 1,400
Washington State, Public Power Supply
System Revenue Bond, Nuclear
Project No. 1, Ser 93 A3
3.600%, 08/07/96 (A) (B) (C) ....... 1,200 1,200
-------
Total Washington ............... 2,600
-------
WEST VIRGINIA -- 2.2%
West Virginia State Hospital Financing
Authority Revenue Bond, Mid-Atlantic
Capital Asset Project, Ser 85B
3.600%, 08/07/96 (A) (B) (C) ....... 1,400 1,400
-------
Total Municipal Bonds
(Cost $63,277) .............. 63,277
-------
Total Investments -- 99.9%
(Cost $63,277) .............. 63,277
-------
OTHER ASSETS AND LIABILITIES -- 0.1%
Other Assets and Liabilities, Net ...... 37
-------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (concluded) THE ARBOR FUND
July 31, 1996 (Unaudited)
INSTITUTIONAL TAX FREE Value
PORTFOLIO(concluded) (000)
- --------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited authorization --
no par value) based on 63,346,179
outstanding shares of beneficial
interest ................................ $63,346
Accumulated Net Realized Loss on
Investments ............................. (32)
-------
Total Net Assets -- 100.0% .................. $63,314
=======
Net Asset Value, Offering Price and
Redemption Price Per Share .............. $1.00
=======
(A) Variable Rate Security -- the rate reported in the Statement of Net Assets
is the rate in effect on July 31, 1996.
(B) Put or Demand features exist requiring the issuer to repurchase the
instrument prior to maturity. The maturity date shown is the lessor of the
put, demand or maturity date.
(C) Security is held in connection with a guarantee, guaranteed investment
contract, letter of credit or standby bond purchase agreement issued by a
major commercial bank or other financial institution.
AMT -- Alternative Minimum Tax
BAN -- Bond Anticipation Note
FHA -- Federal Housing Authority
GO -- General Obligation
Ser -- Series
TECP -- Tax Exempt Commercial Paper
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS (000) THE ARBOR FUND
For the Six Months Ended July 31, 1996 (Unaudited)
CALIFORNIA INSTITUTIONAL
TAX EXEMPT TAX FREE
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
Investment Income:
Interest Income ............................. $6,830 $1,413
- --------------------------------------------------------------------------------
Total Investment Income .................. 6,830 1,413
- --------------------------------------------------------------------------------
Expenses:
Administration Fees ......................... 472 122
Waiver of Administration Fees ............... (104) (93)
Investment Advisory Fees .................... 192 34
Custodian Fees .............................. 18 5
Transfer Agent Fees ......................... 24 16
Professional Fees ........................... 47 10
Registration Fees ........................... 32 (13)
Trustee Fees ................................ 6 1
Printing Expenses ........................... 8 2
Amortization of Organizational Costs ........ 3 10
Other Expenses .............................. 6 1
- --------------------------------------------------------------------------------
Total Expenses ........................... 704 95
- --------------------------------------------------------------------------------
Net Investment Income ....................... 6,126 1,318
- --------------------------------------------------------------------------------
Net Realized Loss on Investments ............ (5) (10)
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting From
Operations ................................ $6,121 $1,308
================================================================================
The accompanying notes are an integral part of the inancial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) THE ARBOR FUND
For the Six Months Ended July 31, 1996 (Unaudited) and the
Year Ended January 31, 1996
<TABLE>
<CAPTION>
CALIFORNIA INSTITUTIONAL
TAX EXEMPT TAX FREE
PORTFOLIO PORTFOLIO
------------------------- ------------------------
2/1/96 TO 2/1/95 TO 2/1/96 TO 2/1/95 TO
7/31/96 1/31/96 7/31/96 1/31/96
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Operations:
Net Investment Income ............................................... $ 6,126 $ 13,269 $ 1,318 $ 4,190
Net Realized Loss on Security Transactions .......................... (5) (3,043) (10) (4)
Net Change in Unrealized Appreciation on Investments ................ -- 3,012 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Investment Operations ... 6,121 13,238 1,308 4,186
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ............................................... (6,126) (13,269) (1,318) (4,190)
Net Realized Gains .................................................. -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions .............................................. (6,126) (13,269) (1,318) (4,190)
- ----------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ......................................... 914,032 1,185,021 245,290 862,136
Cost of Shares Redeemed ............................................. (833,125) (1,189,342) (298,702) (859,120)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Capital Share
Transactions .................................................. 80,907 (4,321) (53,412) 3,016
- ----------------------------------------------------------------------------------------------------------------------------
Contribution of Capital From Affiliate ................................. -- 30 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets .......................... 80,902 (4,322) (53,422) 3,012
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ................................................. 391,682 396,004 116,736 113,724
- ----------------------------------------------------------------------------------------------------------------------------
End of Period ....................................................... $472,584 $ 391,682 $ 63,314 $ 116,736
============================================================================================================================
Shares Issued and Redeemed:
Issued .............................................................. 914,032 1,185,021 245,290 862,136
Redeemed ............................................................ (833,125) (1,189,342) (298,702) (859,120)
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Share Transactions ....................... 80,907 (4,321) (53,412) 3,016
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS THE ARBOR FUND
For a Share Outstanding Throughout the Period
For the Six Months Ended July 31, 1996 (Unaudited) and the
Periods Ended January 31,
<TABLE>
<CAPTION>
REALIZED NET
NET ASSET AND DISTRIBUTIONS ASSET
VALUE NET UNREALIZED FROM NET VALUE
BEGINNING INVESTMENT LOSSES ON INVESTMENT CONTRIBUTION END OF TOTAL
OF PERIOD INCOME SECURITIES INCOME OF CAPITAL PERIOD RETURN
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA TAX EXEMPT PORTFOLIO
1996..... $1.00 0.015 -- (0.015) -- $1.00 3.00%*
1996..... 1.00 0.034 -- (0.034) -- 1.00 3.42(DAGGER)(DAGGER)
1995..... 1.00 0.027 (.008) (0.027) .008 1.00 2.79(DAGGER)
1994(1).. 1.00 0.007 -- (0.007) -- 1.00 2.17*
INSTITUTIONAL TAX FREE PORTFOLIO
1996..... $1.00 0.016 -- (0.016) -- $1.00 3.31%*
1996..... 1.00 0.036 -- (0.036) -- 1.00 3.69
1995..... 1.00 0.028 -- (0.028) -- 1.00 2.80
1994(1).. 1.00 0.007 -- (0.007) -- 1.00 2.20*
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
RATIO OF RATIO OF
EXPENSES NET
RATIO OF RATIO OF TO INCOME TO
EXPENSES NET AVERAGE AVERAGE
TO INCOME TO NET NET
NET ASSETS AVERAGE AVERAGE ASSETS ASSETS
END OF NET NET (EXCLUDING (EXCLUDING
PERIOD (000) ASSETS ASSETS WAIVERS) WAIVERS)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA TAX EXEMPT PORTFOLIO
1996..... $472,584 0.34%* 2.96%* 0.39%* 2.91%*
1996..... 391,682 0.42 3.36 0.42 3.36
1995..... 396,004 0.28 2.72 0.34 2.66
1994(1).. 402,814 0.28* 2.14* 0.34* 2.08*
INSTITUTIONAL TAX FREE PORTFOLIO
1996..... $ 63,314 0.23%* 3.23%* 0.46%* 3.00%*
1996..... 116,736 0.30 3.60 0.48 3.42
1995..... 113,724 0.30 2.73 0.46 2.57
1994(1).. 130,768 0.30* 2.17* 0.47* 2.00*
==============================================================================
<FN>
* Annualized
(DAGGER) The total return for the period ended January 31, 1995 includes
the effect of a capital contribution from an affiliate of the
former adviser. Without the capital contribution, the total
return would have been .74%.
(DAGGER)(DAGGER) The total return for the period ended January 31, 1996 includes
the effect of a capital contribution from an affiliate of the
former adviser. Without the capital contribution, the total
return would have been 2.42%.
(1) Commenced operations on October 6, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE ARBOR FUND
July 31, 1996 (Unaudited)
1. Organization:
THE CALIFORNIA TAX EXEMPT AND INSTITUTIONAL TAX FREE PORTFOLIOS are separate
investment portfolios of The Arbor Fund (the "Trust"). The Trust was organized
as a Massachusetts business trust under a Declaration of Trust dated July 24,
1992 and had no operations through February 1, 1993 other than those related to
organizational matters and the sale of initial shares to SEI Fund Resources (the
"Administrator"), on October 9, 1992. SEI Financial Management Corporation, a
wholly-owned subsidiary of SEI Corporation, is the owner of all beneficial
interest in the Administrator. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management company. The
financial statements included herein relate to the Trust's California Tax Exempt
Portfolio and the Institutional Tax Free Portfolio (the "Portfolios"). The
Portfolios' prospectus provides a description of each Portfolio's investment
objectives, policies and strategies. The assets of each portfolio are
segregated, and a shareholder's interest is limited to the Portfolio in which
shares are held. The Portfolios commenced operations on October 6, 1993
("commencement of operations").
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--Investment securities held by the Portfolios are stated
at amortized cost, which approximates market value. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably
to maturity and are included in interest income.
FEDERAL INCOME TAXES--It is each Portfolio's intention to continue to
qualify as a regulated investment company for Federal income tax purposes
by complying with the appropriate provisions of the Internal Revenue Code
of 1986, as amended. Accordingly, no provision for Federal income tax is
required in the financial statements.
SECURITY TRANSACTIONS AND RELATED INCOME--Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date, and interest income
is recognized on the accrual method of accounting. Costs used in
determining realized gains and losses on the sale of investment securities
are those of the specific securities sold.
NET ASSET VALUE PER SHARE--The net asset value per share of each Portfolio
is calculated each business day. In general, it is computed by dividing the
assets of each Portfolio, less its liabilities, by the number of
outstanding shares of the Portfolio.
EXPENSES--Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses of the Trust
are prorated to the Portfolios on the basis of relative net assets.
OTHER--Distributions from net investment income are declared daily and paid
monthly to Shareholders. Any net realized gains on sales of securities are
distributed to Shareholders at least annually.
3. Administration and Distribution Agreements:
The Trust and the Administrator have entered into an Administration Agreement
dated January 28,1993 (the "Administration Agreement"). Under terms of the
Administration Agreement, the Administrator is entitled to a fee, which is
calculated daily and paid monthly at an annual rate of .23% and .30% of the
average daily net assets of the California Tax
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) THE ARBOR FUND
July 31, 1996 (Unaudited)
Exempt and Institutional Tax Free Portfolios, respectively. The Administrator
has agreed to voluntarily waive a portion of its fee in order to limit annual
operating expenses to .33% of the California Tax Exempt Portfolio's average
daily net assets and .20% of the average daily net assets of the Institutional
Tax Free Portfolio.Fee waivers by the Administrator are voluntary and may be
terminated at any time. The Administrator also serves as the shareholder
servicing agent for the portfolios. Compensation for this service is paid under
the Administration Agreement.
The Trust and SEI Financial Services Company (the "Distributor"), a wholly-owned
subsidiary of SEI Corporation, have entered into a Distribution Agreement (the
"Distribution Agreement"). The Distributor receives no fees for its services
under the Distribution Agreement.
4. Investment Advisory Agreement:
The Trust has entered into an investment advisory agreement (the"Advisory
Agreement") with PNC Institutional Management Corporation (the "Adviser"), a
wholly-owned subsidiary of PNC Bank, N.A., dated December 1, 1995. Under the
terms of the Advisory Agreement, the Adviser is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of .095% of the average
daily net assets of each of the California Tax Exempt and Institutional Tax Free
Portfolios.
5. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Trust and are being amortized
over sixty months beginning with the commencement of operations. In the event
any of the initial shares of the Trust are redeemed by any holder thereof during
the period that the Trust is amortizing its organizational costs, the redemption
proceeds payable to the holder thereof by the Trust will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption.
Certain officers of the Trust are also officers of the Administrator and/or
Distributor. Such officers are not compensated by the Trust for serving in their
respective roles.
On December 15, 1994, Prudential Securities Group, Inc. ("PSG"), an affiliate of
the former adviser to the Portfolio, granted to the California Tax Exempt
Portfolio (the "California Portfolio") the right to require PSG to purchase from
the California Portfolio sufficient amounts of two bonds, at amortized cost plus
accrued interest, in order to maintain the California Portfolio's marked-to-
market net asset value per share at no less than $.9971 (the "Agreement"). The
California Portfolio's rights under the Agreement provided for immediate
exercise upon the occurrence of certain conditions, including reaching the date
of July 19, 1995.
The securities subject to the Agreement were:
PAR
(000) DESCRIPTION
-------- ----------------------------------------
$ 5,000 Orange County TRAN, 4.5%, 7/19/95
$20,000 Orange County Teeter Note, 4.2%, 6/30/95
On the date of the Agreement, the California Portfolio recorded an unrealized
loss of $3,012,750 for the difference between the market value of the bonds and
their amortized cost and a contribution to capital in the same amount.
On March 13, 1995, PSG extended the date of the Agreement until the maturity
date for each security subject to the Agreement. In connection with this
extension, the California Portfolio recorded an unrealized loss of $29,557 and a
contribution to capital in the same amount.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ARBOR FUND
July 31, 1996 (Unaudited)
On June 30, 1995, the Orange County Teeter Note matured and the California
Portfolio received the full face amount of the note plus accrued interest. On
July 19, 1995, the California Portfolio exercised its right under the Agreement
and put the Orange County TRAN to PSG for an amount equivalent to the full face
amount plus accrued interest.
The California Portfolio then recognized a realized loss of $3,042,307 and a
corresponding reduction in unrealized depreciation in the Statement of
Operations. The realized loss was then reclassified from the California
Portfolio's accumulated net realized losses to paid-in-capital. The
reclassification had no effect on the California Portfolio's net asset value per
share.
6. Investment Transactions:
At January 31, 1996, the following Portfolios had available realized capital
losses to offset future net capital gains through fiscal year ending:
2003 2004
(000) (000)
------ ------
California Tax Exempt 61 2
Institutional Tax Free 18 4
7. Concentration of Credit Risk:
The Portfolios invest primarily in municipal money market instruments maturing
in one year or less whose ratings are within the highest ratings category
assigned by a nationally recognized statistical rating organization or, if not
rated, are believed to be of comparable quality. The ability of the issuers of
the securities held by the Portfolios to meet their obligations may be affected
by economic and political developments in a specific industry, state or region.
8. Shareholder Voting Results:
There was a special meeting of shareholders on February 22, 1996 for the Trust
to approve the selection of PNC Institutional Management Corporation ("PIMC") as
the Investment Adviser and to approve a new Investment Advisory Agreement
between the Trust and PIMC. Due to lack of quorum, the meeting was adjourned for
the Institutional Tax Free Portfolio. The following were the results of the
vote for the California Portfolio:
FOR 238,197,686
AGAINST 2,658,882
ABSTAIN 3,889,497
The special meeting of shareholders was reconvened on April 15, 1996 for the
Institutional Tax Free Portfolio to approve the selection of PIMC as the
Investment Adviser and to approve a new Investment Advisory Agreement between
the Trust and PIMC. The following were the results of the vote:
FOR 58,866,096
AGAINST 70,722
ABSTAIN 1,317,391
There were no other proposals voted upon at such meetings.
<PAGE>
INVESTMENT ADVISER
PNC Institutional Management Corporation
DISTRIBUTOR
SEI Financial Services Company
680 East Swedesford Road
Wayne, PA 19087
FOR MORE INFORMATION CALL:
1-800-545-6331
<PAGE>
The Arbor Fund
Semi-Annual Report
---------------------------------------
AS OF JULY 31, 1996
GOLDEN OAK (LOGO)
[GRAPHIC OMITTED]
Golden Oak
Family of Funds
ADVISED BY
CITIZENS BANK
<PAGE>
TABLE OF CONTENTS
Letter to Shareholders .................................................... 2
Statement of Net Assets ................................................... 4
Statement of Operations ................................................... 11
Statement of Changes in Net Assets ........................................ 12
Financial Highlights ...................................................... 14
Notes to Financial Statements ............................................. 15
<PAGE>
Dear Shareholder:
Hold on to your hat! The changing expectations of investors have contributed to
substantial volatility in the securities markets in recent months.
As our fiscal year unfolded in February, most institutional investors believed
that the economy would continue to grow slowly without any upward pressure on
the inflation rate. A strong employment report, fading hope for a political
agreement to balance the budget, and rising consumer spending combined to cause
bond investors to suddenly become worried about the inflation outlook.
Reinforced in subsequent months by additional news of economic strength,
interest rates were pushed higher until late July.
Stocks, meanwhile, continued to benefit from higher-than-anticipated corporate
earnings. Record net inflows to equity mutual funds helped to extend the rally
even as the bond market sagged. Although many technology stocks have continued
to languish, most equities experienced a "round trip" in July. A rapid plunge in
prices was followed by an equally steep rebound.
At times like this, it is helpful to recall some of the time-tested principles
of investing money. While past performance is no guarantee of future results, it
is a fact that stocks have a superior performance history when compared with
bonds and other financial assets. It is also true that stocks experience
somewhat greater price volatility than bonds. We must keep in mind that this is
not uncommon, and patience during market declines can be viewed as the price to
be paid for higher average returns than other investments.
Peter Lynch, legendary former manager of the Magellan Fund, was making the same
point when he once said that the secret to successful stock investing is not to
get scared and sell them in down markets. Keep in mind that stocks rise in value
during most years, and the market usually recovers faster than it goes down.
Shareholder News:
Investors in Golden Oak retail shares (Class B) have seen some beneficial
operational and service changes in the first half of 1996. A new consolidated
statement was introduced which reports activity and balances on all your Golden
Oak Funds in one statement. A new account change form was provided that makes it
easy to move assets between the Golden Oak Funds. The same form now makes it
possible to automatically invest a preselected amount in each of your chosen
funds on a weekly, monthly or quarterly basis. You choose the amount and the
timing, the rest is taken care of for you.
To remove confusion and possible delays, we now have one 800 number
(800-545-6331) where you can get the
2
<PAGE>
current price and yield information on each fund, and get answers to your
investment questions. You can also call this line for our new SEP/IRA kits that
provide access to tax advantages and the Golden Oak Funds in one package.
We believe these changes will make your investing with Golden Oak a pleasant
experience and we will continue to look for ways to serve you. We sincerely
appreciate the confidence you've expressed by your investment in the Golden Oak
Funds.
Sincerely,
/s/ DANA A. CZMER
Dana A. Czmer
Senior Vice President & Trust Officer
Citizens Bank
3
<PAGE>
STATEMENT OF NET ASSETS GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO (000) (000)
- -----------------------------------------------------------------------
COMMERCIAL PAPER -- 56.0%
Apreco
5.403%, 08/20/96 ..................... $5,000 $4,986
Avco Financial Services
5.565%, 10/17/96 ..................... 3,000 2,965
BCI Funding
5.340%, 08/02/96 ..................... 6,000 5,999
Bear Stearns
5.499%, 09/23/96 ..................... 5,000 4,960
Beneficial
5.435%, 08/14/96 ..................... 5,000 4,990
BT Securities
5.413%, 08/20/96 ..................... 3,000 2,992
5.414%, 08/21/96 ..................... 2,000 1,994
Burlington Northern Santa Fe
5.554%, 08/12/96 ..................... 1,500 1,497
Carter Holt
5.755%, 09/11/96 ..................... 1,464 1,455
Centric Funding
5.550%, 09/30/96 ..................... 5,000 4,955
Chevron Transport
5.466%, 08/20/96 ..................... 4,000 3,989
Clipper Receivable
5.403%, 08/21/96 ..................... 4,000 3,988
General Electric Capital
5.538%, 09/16/96 ..................... 1,600 1,589
General Motors Acceptance
5.450%, 11/08/96 ..................... 3,500 3,448
Illinois Power Fuel
5.590%, 08/19/96 ..................... 849 847
Matterhorn Capital
5.506%, 08/09/96 ..................... 2,000 1,998
Merrill Lynch
5.404%, 08/22/96 ..................... 5,000 4,984
Mont Blanc Capital
5.468%, 08/08/96 ..................... 5,000 4,995
Morgan Stanley Group
5.500%, 08/07/96 ..................... 5,000 4,996
National Fuel Gas
5.577%, 08/26/96 ..................... 5,000 4,981
Ontario Hydro
5.572%, 10/02/96 ..................... 5,000 4,953
Praxair
5.665%, 08/09/96 ..................... 1,200 1,199
Prefco
5.444%, 08/13/96 ..................... 5,000 4,991
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO(continued) (000) (000)
- ----------------------------------------------------------------------
COMMERCIAL PAPER -- (CONTINUED)
Puerto Rico Development Bank
5.414%, 08/21/96 ..................... $ 2,000 $ 1,994
Riverwood Funding
5.404%, 08/21/96 ..................... 5,000 4,985
Sears Roebuck Acceptance
5.547%, 10/08/96 ..................... 2,000 1,979
Whirlpool Finance
5.404%, 08/21/96 ..................... 2,000 1,994
-------
Total Commercial Paper
(Cost $94,703) ................ 94,703
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.3%
FFCB
5.600%, 06/03/97 ..................... 5,000 4,994
FNMA (A)
5.520%, 08/06/96 ..................... 9,000 9,000
-------
Total U.S. Government Agency
Obligations
(Cost $13,994) ................ 13,994
-------
U.S. TREASURY OBLIGATION -- 4.5%
U.S. Treasury Note
7.500%, 01/31/97 ..................... 7,600 7,686
-------
Total U.S. Treasury Obligation
(Cost $7,686) ................. 7,686
-------
FLOATING RATE INSTRUMENTS -- 15.4%
CoreStates Capital (A)
5.500%, 08/05/96 ..................... 4,000 4,000
General Electric Capital (A)
5.500%, 08/22/96 ..................... 3,000 3,000
Peoples Security Life (A)
5.580%, 10/29/96 ..................... 2,000 2,000
5.630%, 10/29/96 ..................... 4,000 4,000
PNC Bank (A)
5.557%, 08/06/96 ..................... 5,000 4,998
SMM Trust 1995-N (A)
5.550%, 08/15/96 ..................... 1,000 1,000
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO(continued) (000) (000)
- ----------------------------------------------------------------------
FLOATING RATE INSTRUMENTS -- (CONTINUED)
SMM Trust 1996-I (A)
5.488%, 08/29/96 ..................... $ 4,000 $ 4,000
Travelers Insurance (A)
5.640%, 10/29/96 ..................... 3,000 3,000
-------
Total Floating Rate Instruments
(Cost $25,998) ................ 25,998
-------
CERTIFICATES OF DEPOSIT -- 3.6%
Banque National de Paris
5.500%, 10/01/96 ..................... 3,000 3,000
South Trust Central Carolina
5.450%, 10/04/96 ..................... 3,000 3,000
-------
Total Certificates of Deposit
(Cost $6,000) ................. 6,000
-------
BANK NOTE -- 3.6%
Bank of Hawaii
5.570%, 11/06/96 ..................... 6,000 6,002
-------
Total Bank Note
(Cost $6,002) ................. 6,002
-------
BANKERS ACCEPTANCES -- 1.6%
Bank of Montreal
5.250%, 10/15/96 ..................... 1,000 989
First National Bank of Boston
5.515%, 09/03/96 ..................... 1,800 1,791
-------
Total Bankers Acceptances
(Cost $2,780) ................. 2,780
-------
REPURCHASE AGREEMENT -- 7.1%
Aubrey G. Lanston 5.60%,
dated 07/31/96, matures 08/01/96,
repurchase price $12,000,867
(collateralized by U.S. Treasury Note,
par value $12,254,000, 6.25%,
matures 07/31/98)
5.600%, 08/01/96 ..................... 11,999 11,999
-------
PRIME OBLIGATION MONEY Value
MARKET PORTFOLIO(concluded) (000)
- ------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $11,999)................. $ 11,999
--------
Total Investments-- 100.1%
(Cost $169,162)................ 169,162
--------
OTHER ASSETS AND LIABILITIES, NET -- (0.1%) (111)
--------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 97,669,264 outstanding shares of
beneficial interest................... 97,669
Portfolio Shares of Class B (unlimited
authorization -- no par value) based
on 71,396,365 outstanding shares of
beneficial interest................... 71,396
Accumulated Net Realized Loss on
Investments........................... (14)
--------
Total Net Assets -- 100.0%................ $169,051
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class A............................... $1.00
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class B............................... $1.00
========
(A) Variable Rate Security -- The rate reported in the Statement of Net Assets
is the rate in effect on July 31, 1996.
FFCB--Federal Farm Credit Bank
FNMA--Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO (000) (000)
- ----------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 25.3%
American Express Credit
8.500%, 06/15/99 .................. $ 500 $ 523
American General Finance
7.375%, 11/15/96 .................. 1,550 1,557
Anheuser Busch, Callable 10/01/99 @ 100
6.900%, 10/01/02 .................. 3,000 2,978
Archer Daniels Midland
10.250%, 01/15/06 ................. 1,000 1,211
Associates Corporation of North America
8.550%, 07/15/09 .................. 2,000 2,210
Chrysler Financial
13.250%, 10/15/99 ................. 1,000 1,181
Comerica
7.250%, 10/15/02 .................. 1,000 1,003
Consolidated Edison of NY
6.500%, 02/01/01 .................. 1,000 980
Eli Lilly
8.375%, 12/01/06 .................. 1,000 1,085
Ford Motor Credit
6.250%, 11/08/00 .................. 1,000 973
8.200%, 02/15/02 .................. 1,000 1,046
Household Finance
9.950%, 03/08/01 .................. 500 558
International Business Machine Credit
5.600%, 11/06/96 .................. 2,500 2,500
JP Morgan
7.625%, 09/15/04 .................. 2,000 2,050
Lehman Brothers Holding
5.750%, 02/15/98 .................. 1,000 985
Martin Marietta
6.500%, 04/15/03 .................. 1,000 964
Pacific Gas and Electric
8.750%, 01/01/01 .................. 1,300 1,381
RR Donnelley & Sons
9.125%, 12/01/00 .................. 500 541
Texas Instruments
9.000%, 07/15/99 .................. 910 912
Union Pacific, Callable 01/15/01 @ 100
6.125%, 01/15/04 .................. 1,000 926
WMX Technologies
7.000%, 05/15/05 .................. 2,000 1,970
-------
Total Corporate Obligations
(Cost $28,230) ............. 27,534
-------
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO (continued) (000) (000)
- ----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY BONDS -- 2.2%
FNMA
5.990%, 10/01/03 ............... $1,500 $ 1,418
SLMA
6.050%, 09/14/00 ............... 1,000 978
-------
Total U.S. Government Agency
Bonds
(Cost $2,510) ........... 2,396
-------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS -- 1.5%
FHLMC
6.500%, 03/15/17 ............... 118 118
FNMA
5.750%, 06/25/06 ............... 1,424 1,400
4.750%, 02/25/09 ............... 146 146
-------
Total U.S. Agency Mortgage-
Backed Obligations
(Cost $1,655) ........... 1,664
-------
U.S. TREASURY OBLIGATIONS -- 57.9%
U.S. Treasury Notes
6.875%, 02/28/97 ............... 11,400 11,477
7.875%, 04/15/98 ............... 18,300 18,801
7.750%, 02/15/01 ............... 11,500 12,036
6.250%, 04/30/01 ............... 8,000 7,894
7.500%, 05/15/02 ............... 3,700 3,857
7.875%, 11/15/04 ............... 7,600 8,130
5.875%, 11/15/05 ............... 800 750
-------
Total U.S. Treasury
Obligations
(Cost $63,639) .......... 62,945
-------
MUNICIPAL BONDS -- 0.6%
Texas State, GO
7.250%, 12/01/99 ............... 210 215
7.250%, 06/01/00 ............... 215 219
7.250%, 12/01/00 ............... 220 224
-------
Total Municipal Bonds
(Cost $683) ............. 658
-------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO (continued) (000) (000)
- ----------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 3.7%
Olympic Automobile Receivables Trust
1996-A A3
5.700%, 04/15/00 ................. $ 2,000 $ 1,982
WFS Financial Owner Trust 1996-B A3
6.650%, 08/20/00 ................. 2,000 2,007
--------
Total Asset-Backed Securities
(Cost $3,979) ............. 3,989
--------
REPURCHASE AGREEMENT -- 7.4%
Lehman Government Securities
5.63%, dated 07/31/96, matures
08/01/96, repurchase price
$8,055,823 (collateralized by
U.S. Treasury Note, par value
$8,130,000, matures 05/15/98;
market value $8,213,868) ......... 8,055 8,055
--------
Total Repurchase Agreement
(Cost $8,055) ............. 8,055
--------
Total Investments -- 98.6%
(Cost $108,752) ........... 107,241
--------
OTHER ASSETS AND LIABILITIES, NET -- 1.4% 1,523
--------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value)
based on 11,127,010 outstanding
shares of beneficial interest .... 110,655
Portfolio Shares of Class B (unlimited
authorization -- no par value)
based on 12,224 outstanding
shares of beneficial interest .... 133
Accumulated Net Realized Loss on
Investments ...................... (513)
Net Unrealized Depreciation on
Investments ...................... (1,511)
--------
Total Net Assets -- 100.0% ........... $108,764
========
INTERMEDIATE-TERM INCOME
PORTFOLIO(concluded)
- ------------------------------------------------------------------------
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class A........................... $9.76
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class B........................... $9.76
========
Maximum Offering Price Per Share --
Class B ($9.76/95.5%)............. $10.22
========
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GO--General Obligation
SLMA--Student Loan Marketing Association
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
Market
DIVERSIFIED GROWTH Value
PORTFOLIO Shares (000)
- ----------------------------------------------------------------
COMMON STOCK -- 95.1%
AEROSPACE -- 1.1%
McDonnell Douglas .................. 7,000 $ 313
------
AIR TRANSPORTATION -- 1.0%
AMR* ............................... 3,600 284
------
APPAREL -- 1.5%
Liz Claiborne ...................... 12,500 408
------
AUTOMOTIVE -- 2.3%
Chrysler ........................... 10,200 289
Ford Motor ......................... 10,100 328
------
Total Automotive ........... 617
------
BROADCASTING, NEWSPAPERS AND
ADVERTISING -- 1.3%
Clear Channel Communications* ...... 4,500 358
------
COMMERCIAL SERVICES -- 2.8%
Paychex ............................ 9,000 412
Service International .............. 6,500 358
------
Total Commercial Services .. 770
------
COMPUTERS/OFFICE AUTOMATION-- 5.0%
Adaptec* ........................... 6,029 250
Cisco Systems* ..................... 9,614 498
Sun Microsystems* .................. 11,400 623
------
Total Computers/Office
Automation .............. 1,371
------
DRUGS -- 4.2%
American Home Products ............. 6,900 392
Johnson & Johnson .................. 7,000 334
Merck .............................. 1,300 83
Schering Plough .................... 6,100 336
------
Total Drugs ................ 1,145
------
ELECTRONIC INSTRUMENTS -- 2.2%
Fore Systems* ...................... 3,900 107
Raychem ............................ 7,500 496
------
Total Electronic Instruments 603
------
Market
DIVERSIFIED GROWTH Value
PORTFOLIO(continued) Shares (000)
- ----------------------------------------------------------------
COMMON STOCK -- (CONTINUED)
ENTERTAINMENT -- 2.1%
MGM Grand* .......................... 7,600 $ 284
Mirage Resorts* ..................... 12,800 288
------
Total Entertainment ......... 572
------
FINANCIAL SERVICES -- 4.6%
Bear Stearns ........................ 15,715 354
Lehman Brothers Holding ............. 21,257 492
Morgan Stanley Group ................ 8,288 404
------
Total Financial Services .... 1,250
------
FOOD, BEVERAGE & TOBACCO -- 0.6%
Philip Morris ....................... 1,500 157
------
GROCERY -- 1.7%
Safeway* ............................ 13,000 468
------
HEALTH INSURANCE -- 0.9%
Oxford Health Plan* ................. 7,200 248
------
HOLDING COMPANIES -- 0.6%
Canadian Pacific Limited ............ 8,000 174
------
HOSPITALS -- 0.6%
Health Management Associates,
Class A* ........................ 8,750 176
------
HOTELS & LODGING -- 4.3%
HFS* ................................ 8,000 480
Hilton Hotels ....................... 2,900 296
Marriott International .............. 7,600 390
------
Total Hotels & Lodging ...... 1,166
------
HOUSEHOLD FURNITURE &
FIXTURES -- 1.3%
Leggett & Platt ..................... 13,200 343
------
HOUSEHOLD PRODUCTS -- 1.3%
Clorox .............................. 4,000 363
------
LEISURE -- 1.6%
Harley-Davidson ..................... 10,400 426
------
MEDICAL SUPPLIES -- 4.1%
Becton Dickinson .................... 3,900 291
Guidant ............................. 6,400 325
Medtronic ........................... 10,400 493
------
Total Medical Supplies ...... 1,109
------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
Market
DIVERSIFIED GROWTH Value
PORTFOLIO(continued) Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- (CONTINUED)
MONEY-CENTER BANKS -- 3.0%
BankAmerica ......................... 4,895 $ 390
NationsBank ......................... 4,900 421
------
Total Money-Center Banks .... 811
------
MULTI-LINE INSURERS -- 3.0%
Providian ........................... 5,300 210
Travelers ........................... 14,616 618
------
Total Multi-line Insurers ... 828
------
OIL & GAS PRODUCTION -- 5.8%
Panenergy ........................... 12,700 403
Phillips Petroleum .................. 8,600 340
Tidewater ........................... 7,500 253
Williams ............................ 12,989 596
------
Total Oil & Gas Production .. 1,592
------
OTHER HEALTH SERVICES -- 2.0%
HBO ................................. 8,778 538
------
OTHER PRODUCTS &
MANUFACTURING -- 0.9%
Avery Dennison ...................... 4,600 238
------
PRINTING & PUBLISHING -- 1.0%
Gartner Group, Class A* ............. 8,400 274
------
PROPERTY-CASUALTY INSURANCE -- 3.0%
American Re ......................... 8,500 478
General Re .......................... 2,300 338
------
Total Property-Casualty
Insurance ................ 816
------
RETAIL -- 6.2%
F.W. Woolworth* ..................... 17,700 341
Gap ................................. 11,400 339
Pep Boys-Manny Moe & Jack ........... 2,700 82
Staples* ............................ 15,700 261
TJX ................................. 10,600 319
Viking Office Products* ............. 11,400 336
------
Total Retail ................ 1,678
------
SHOES/LEATHER -- 3.2%
Fila Holdings ADR ................... 4,300 347
Nike Class B ........................ 5,000 514
------
Total Shoes/Leather ......... 861
------
Shares/ Market
DIVERSIFIED GROWTH Face Amount Value
PORTFOLIO(continued) (000) (000)
- -------------------------------------------------------------------
COMMON STOCK -- (CONTINUED)
SOFTWARE -- 11.3%
America Online* ..................... 3,100 $ 95
BMC Software* ....................... 6,300 403
Cadence Design Systems* ............. 12,750 389
Computer Associates International ... 7,050 359
Microsoft* .......................... 2,400 283
Oracle Systems* ..................... 10,100 395
Parametric Technology* .............. 8,000 333
Peoplesoft* ......................... 6,900 466
Reynolds & Reynolds, Class A ........ 7,500 363
-------
Total Software .............. 3,086
-------
TELECOMMUNICATIONS
EQUIPMENT-- 5.2%
Ascend Communications* .............. 11,500 558
Cascade Communications* ............. 7,200 443
U.S. Robotics* ...................... 7,688 413
-------
Total Telecommunications
Equipment ................ 1,414
-------
TELEPHONES &
TELECOMMUNICATION-- 5.4%
Compania de Telecom Chile ADR ....... 4,100 398
LCI International* .................. 11,200 339
Tellabs* ............................ 6,300 376
Worldcom* ........................... 14,000 362
-------
Total Telephones &
Telecommunication ........ 1,475
-------
Total Common Stock
(Cost $23,110) ........... 25,932
-------
REPURCHASE AGREEMENT -- 5.0%
Lehman Government Securities
5.02%, dated 07/31/96, matures
08/01/96, repurchase price
$1,357,003 (collateralized
by U.S. Treasury Note, par
value $1,333,357, 7.25%,
matures 02/15/98: market value
$1,397,247) ..................... $1,357 1,357
-------
Total Repurchase Agreement
(Cost $1,357) ............ 1,357
-------
Total Investments -- 100.1%
(Cost $24,467) ........... 27,289
-------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATEMENT OF NET ASSETS (concluded) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
Market
DIVERSIFIED GROWTH Value
PORTFOLIO(concluded) (000)
- -------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET -- (0.1%) $ (39)
-------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value)
based on 2,582,242 outstanding
shares of beneficial interest ........ 25,529
Portfolio Shares of Class B (unlimited
authorization -- no par value)
based on 17,846 outstanding
shares of beneficial interest ........ 174
Distributions in Excess of Net
Investment Income .................... (4)
Accumulated Net Realized Loss on
Investments .......................... (1,271)
Net Unrealized Appreciation of
Investments .......................... 2,822
-------
Total Net Assets -- 100.0% ................ $27,250
=======
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class A .............................. $ 10.48
=======
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class B .............................. $ 10.41
=======
Maximum Offering Price Per Share --
Class B($10.41/94.25%) ............... $ 11.05
=======
* Non-income producing security
ADR -- American Depository Receipts
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STATEMENT OF OPERATIONS (000) GOLDEN OAK FAMILY OF FUNDS
For the Six Months Ended July 31, 1996 Unaudited
<TABLE>
<CAPTION>
PRIME OBLIGATION INTERMEDIATE-TERM DIVERSIFIED
MONEY MARKET INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividend Income ...................... $ -- $ -- $123
Interest Income ...................... 4,644 3,176 36
- -----------------------------------------------------------------------------------------------
Total Investment Income ............ 4,644 3,176 159
- -----------------------------------------------------------------------------------------------
Expenses:
Administration Fees .................. 170 104 26
Investment Advisory Fees ............. 254 259 96
Waiver of Investment Advisory Fees ... (229) (85) (3)
Investment Sub-Advisory Fees ......... 64 -- --
Custodian Fees ....................... 9 5 2
Transfer Agent Fees .................. 28 21 14
Professional Fees .................... 19 10 3
Registration Fees .................... 6 13 1
Distribution Fees(1) ................. 80 -- --
Trustee Fees ......................... 4 3 --
Printing Expenses .................... 7 6 2
Amortization of Organizational Costs . 5 -- --
Other Expenses ....................... 2 2 1
- -----------------------------------------------------------------------------------------------
Total Expenses ..................... 419 338 142
- -----------------------------------------------------------------------------------------------
Net Investment Income ................ 4,225 2,838 17
- -----------------------------------------------------------------------------------------------
Net Realized Gain (Loss) on
Securities Sold .................... (9) (3) 363
Net Change in Unrealized
Depreciation on Investments ........ -- (3,918) (67)
- -----------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investments ......... (9) (3,921) 296
- -----------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Resulting From Operations .......... $4,216 $(1,083) $313
===============================================================================================
<FN>
(1) All distribution fees are incurred in the Class B Shares.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
For the Six Months Ended July 31, 1996 (Unaudited) and the Year Ended
January 31, 1996
<TABLE>
<CAPTION>
PRIME OBLIGATION INTERMEDIATE-TERM DIVERSIFIED
MONEY MARKET INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------- ------------------------ -------------------------
2/1/96 TO 2/1/95 TO 2/1/96 TO 2/1/95 TO 2/1/96 TO 2/1/95 TO
7/31/96 1/31/96 7/31/96 1/31/96 7/31/96 1/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Operations:
Net Investment Income .................. $ 4,225 $ 9,082 $ 2,838 $ 5,360 $ 17 $ 224
Net Realized Gain (Loss) on Securities
Sold ................................. (9) 5 (3) 1,628 363 3,411
Net Change in Unrealized Appreciation
(Depreciation) on Investments ........ -- -- (3,918) 4,323 (67) 2,316
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Investment Operations ... 4,216 9,087 (1,083) 11,311 313 5,951
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income
Class A .............................. (2,679) (6,154) (2,834) (5,347) (6) (237)
Class B .............................. (1,546) (2,928) (4) (13) -- (1)
Realized Net Gains
Class A .............................. -- -- -- -- -- (4,216)
Class B .............................. -- -- -- -- -- (22)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions .................. (4,225) (9,082) (2,838) (5,360) (6) (4,476)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Class A:
Proceeds from Shares Issued .......... 111,130 230,201 13,524 28,102 6,996 7,863
Reinvestment of Cash Distributions ... 3 7 -- -- -- 17
Cost of Shares Redeemed .............. (120,879) (231,879) (5,236) (9,830) (5,010) (17,509)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions ..... (9,746) (1,671) 8,288 18,272 1,986 (9,629)
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from Shares Issued .......... 327,268 674,637 14 10 10 46
Reinvestment of Cash Distributions ... 96 123 3 7 -- 22
Cost of Shares Redeemed .............. (331,260) (620,486) (100) (138) (21) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions ..... (3,896) 54,274 (83) (121) (11) 66
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Capital Share Transactions ......... (13,642) 52,603 8,205 18,151 1,975 (9,563)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in
Net Assets ......................... (13,651) 52,608 4,284 24,102 2,282 (8,088)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period .................... 182,702 130,094 104,480 80,378 24,968 33,056
- ------------------------------------------------------------------------------------------------------------------------------------
End of Period .......................... $ 169,051 $ 182,702 $ 108,764 $ 104,480 $ 27,250 $ 24,968
====================================================================================================================================
Shares Issued and Redeemed:
Class A:
Issued ............................... 111,130 230,201 1,380 2,857 633 737
Issued in Lieu of Cash Distributions . 3 7 -- -- -- 2
Redeemed ............................. (120,879) (231,879) (528) (994) (466) (1,617)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions ... (9,746) (1,671) 852 1,863 167 (878)
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Issued ............................... 327,268 674,637 1 1 1 5
Issued in Lieu of Cash Distributions . 96 123 -- 1 -- 2
Redeemed ............................. (331,260) (620,486) (10) (14) (2) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions ... (3,896) 54,274 (9) (12) (1) 6
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Capital Shares .... (13,642) 52,603 843 1,851 166 (872)
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
12-13
<PAGE>
FINANCIAL HIGHLIGHTS GOLDEN OAK FAMILY OF FUNDS
For a Share Outstanding Throughout the Period
For the Six Months Ended July 31, 1996 (Unaudited) and the
Periods Ended January 31,
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS NET NET
ASSET AND -------------------- ASSET ASSETS
VALUE NET UNREALIZED NET NET VALUE END
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT REALIZED END TOTAL OF PERIOD
OF PERIOD INCOME ON INVESTMENTS INCOME GAIN OF PERIOD RETURN (000)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS A
1996** $1.00 0.03 -- (0.03) -- $1.00 5.18%* $97,659
1996 1.00 0.06 -- (0.06) -- 1.00 5.74 107,409
1995 1.00 0.04 -- (0.04) -- 1.00 4.21 109,076
1994(1) 1.00 0.03 -- (0.03) -- 1.00 2.87 117,188
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS B
1996** $1.00 0.02 -- (0.02) -- $1.00 4.92%* $71,392
1996 1.00 0.05 -- (0.05) -- 1.00 5.47 75,292
1995 1.00 0.04 -- (0.04) -- 1.00 3.95 21,018
1994(2) 1.00 -- -- -- -- 1.00 2.90* 104
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS A
1996** $10.15 0.27 (0.39) (0.27) -- $9.76 (1.18)% $108,645
1996 9.52 0.56 0.63 (0.56) -- 10.15 12.83 104,270
1995 10.19 0.50 (0.67) (0.50) -- 9.52 (1.61) 80,064
1994(1) 10.00 0.46 0.23 (0.46) (0.04) 10.19 6.99 64,329
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS B(DAGGER)
1996** $10.15 0.26 (0.39) (0.26) -- $9.76 (1.31)% $119
1996 9.52 0.54 0.63 (0.54) -- 10.15 12.54 210
1995 10.19 0.48 (0.67) (0.48) -- 9.52 (1.85) 314
1994(3) 10.12 0.31 0.11 (0.31) (0.04) 10.19 6.72* 365
DIVERSIFIED GROWTH PORTFOLIO CLASS A
1996** $10.26 -- 0.22 -- -- $10.48 2.17% $27,064
1996 10.00 0.07 1.74 (0.07) (1.48) 10.26 18.81 24,775
1995 10.82 0.08 (0.64) (0.08) (0.18) 10.00 (5.24) 32,931
1994(1) 10.00 0.08 0.82 (0.08) -- 10.82 9.08 24,955
DIVERSIFIED GROWTH PORTFOLIO CLASS B(DAGGER)
1996** $10.20 -- 0.21 -- -- $10.41 2.06% $186
1996 9.96 0.04 1.72 (0.04) (1.48) 10.20 18.43 193
1995 10.81 0.05 (0.67) (0.05) (0.18) 9.96 (5.76) 125
1994(3) 9.54 0.02 1.27 (0.02) -- 10.81 22.00* 173
</TABLE>
<TABLE>
<CAPTION>
RATIO OF RATIO OF
RATIO OF EXPENSES NET INCOME
RATIO OF NET TO AVERAGE TO AVERAGE
EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO AVERAGE
TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMMISSION
NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE RATE(DAGGER)(DAGGER)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS A
1996** 0.40%* 5.06%* 0.67%* 4.79%* n/a n/a
1996 0.40 5.60 0.70 5.30 n/a n/a
1995 0.40 4.20 0.68 3.92 n/a n/a
1994(1) 0.40 2.83 0.67 2.56 n/a n/a
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS B
1996** 0.65%* 4.81%* 0.92%* 4.54%* n/a n/a
1996 0.65 5.31 0.95 5.01 n/a n/a
1995 0.65 3.95 0.93 3.67 n/a n/a
1994(2) 0.65* 2.68* 0.93* 2.40* n/a n/a
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS A
1996** 0.65%* 5.49%* 0.82%* 5.32%* 20.25% n/a
1996 0.65 5.68 0.84 5.49 121.47 n/a
1995 0.65 5.21 0.86 5.00 141.51 n/a
1994(1) 0.65 4.47 0.83 4.29 71.73 n/a
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS B(DAGGER)
1996** 0.90%* 5.20%* 1.07%* 5.03%* 20.25% n/a
1996 0.90 5.49 1.09 5.30 121.47 n/a
1995 0.90 4.96 1.11 4.75 141.51 n/a
1994(3) 0.90* 4.27* 1.08* 4.09* 71.73 n/a
DIVERSIFIED GROWTH PORTFOLIO CLASS A
1996** 1.10%* 0.13%* 1.13%* 0.10%* 70.73% $0.0600
1996 1.10 0.62 1.17 0.55 189.48 n/a
1995 1.10 0.74 1.24 0.60 84.00 n/a
1994(1) 1.10 0.77 1.21 0.66 68.91 n/a
DIVERSIFIED GROWTH PORTFOLIO CLASS B(DAGGER)
1996** 1.35%* (0.11)%* 1.38%* (0.14)%* 70.73% $0.0600
1996 1.35 0.30 1.42 0.23 189.48 n/a
1995 1.35 0.49 1.49 0.35 84.00 n/a
1994(3) 1.35* 0.33* 1.45* 0.23* 68.91 n/a
<FN>
* Annualized
** For the six month period ended July 31, 1996 (Unaudited).
(DAGGER) Total return does not reflect the sales charge.
(DAGGER)(DAGGER) Average commission rate paid per share for security purchases
and sales during the period. Presentation of the rate is
only required for fiscal years beginning after September 1, 1995.
(1) Commenced operations February 1, 1993.
(2) Commenced operations January 20, 1994.
(3) Commenced operations June 18, 1993.
</FN>
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
1. Organization:
THE GOLDEN OAK FAMILY OF FUNDS are separate investment portfolios of The Arbor
Fund (the "Trust"). The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated July 24, 1992 and had no operations through
February 1, 1993 other than those related to organizational matters and the sale
of initial shares to SEI Fund Resources (the "Administrator"), on October 9,
1992. SEI Financial Management Corporation, a wholly-owned subsidiary of SEI
Corporation, is the owner of all beneficial interest in the Administrator. The
Trust is registered under the Investment Company Act of 1940, as amended, (the
"1940 Act") as an open-end management company. The financial statements included
herein relate to the Trust's Golden Oak Prime Obligation Money Market Portfolio
("the Money Market Portfolio"), Golden Oak Diversified Growth Portfolio ("the
Equity Portfolio"), and the Golden Oak Intermediate-Term Income Portfolio ("the
Bond Portfolio") (together, the "Portfolios"). The Portfolios' prospectus
provides a description of each Portfolio's investment objectives, policies and
strategies. The assets of each Portfolio are segregated, and a shareholder's
interest is limited to the Portfolio in which shares are held.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--Investments in equity securities which are traded on a
national securities exchange (or reported on the NASDAQ national market
system) are stated at the last quoted sales price if readily available for
such equity securities on each business day; other equity securities traded
in the over-the-counter market and listed equity securities for which no
sale was reported on that date are stated at the last quoted bid price.
Debt obligations exceeding sixty days to maturity for which market
quotations are readily available are valued at the most recently quoted bid
price. Debt obligations with sixty days or less remaining until maturity
are valued at their amortized cost. Restricted securities for which
quotations are not readily available are valued at fair value using methods
determined in good faith under general trustee supervision.
Investment securities held by the Money Market Portfolio are stated at
amortized cost which approximates market value. Under the amortized cost
method, any discount or premium is amortized ratably to the maturity of the
security and is included in interest income.
FEDERAL INCOME TAXES--It is each Portfolio's intention to continue to
qualify as a regulated investment company for Federal income tax purposes
by complying with the appropriate provisions of the Internal Revenue Code
of 1986, as amended. Accordingly, no provision for Federal income taxes is
required in the financial statements.
SECURITY TRANSACTIONS AND RELATED INCOME--Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date, and interest income
is recognized using the accrual method of accounting. Costs used in
determining realized gains and losses on sales of investment securities are
those of the specific securities sold. Purchase discounts and premiums on
securities held by the Bond Portfolio are accreted and amortized to
maturity using the effective interest method.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
REPURCHASE AGREEMENTS--The Portfolios invest in tri-party repurchase
agreements. Securities held as collateral for tri-party repurchase
agreements are maintained in a segregated account by the broker's custodian
bank until maturity of the repurchase agreement. Provisions of the
repurchase agreements require that the market value of the collateral,
including accrued interest thereon, is sufficient in the event of default
of the counterparty.
If the counterparty defaults and the value of the collateral declines, or
if the counterparty enters an insolvency proceeding, realization and/or
retention of the collateral by the Portfolios may be delayed or limited.
NET ASSET VALUE PER SHARE--The net asset value per share of each Portfolio
is calculated each business day. In general, it is computed by dividing the
assets of each Portfolio, less its liabilities, by the number of
outstanding shares of the Portfolio.
CLASSES OF SHARES--Class specific expenses are borne by that class. Income,
expenses and realized and unrealized gains and losses are allocated to the
respective classes on the basis of their relative daily net assets.
EXPENSES--Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses of the Trust
are prorated to the Portfolios on the basis of relative net assets.
OTHER--Distributions from net investment income are declared and paid
monthly to Shareholders of the Equity Portfolio. Distributions from net
investment income for the Money Market Portfolio and the Bond Portfolio are
declared daily and paid to Shareholders on a monthly basis. Any net
realized capital gains on sales of securities are distributed to
Shareholders at least annually.
3. Administration and Distribution Agreements:
The Trust and the Administrator have entered into an Administration Agreement
(the "Administration Agreement"). Under terms of the Administration Agreement,
the Administrator is entitled to a fee which is calculated daily and paid
monthly at an annual rate of .20% of the average daily net assets of each of the
Portfolios.
The Administrator has voluntarily agreed to waive a portion of its fee on the
Money Market Portfolio. Fee waivers are voluntary and may be terminated at any
time.
The Administrator serves as the shareholder servicing agent for the Portfolios.
Compensation for this service is paid under the Administration Agreement.
The Trust and SEI Financial Services Company (the "Distributor"), a wholly-owned
subsidiary of SEI Corporation, have entered into a Distribution Agreement (the
"Distribution Agreement"). The Distributor receives no fees for its distribution
services under the Distribution Agreement. The Trustees have adopted a
Distribution Plan pursuant to Rule 12b-1 of the 1940 Act (the "Plan") on behalf
of the Class B shares. The Plan provides for payment to the Distributor at an
annual rate of .25% of the average daily net assets for the Class B shares of
each Portfolio.
4. Investment Advisory Agreement:
The Trust has entered into an Investment Advisory Agreement with Citizens Bank
(the "Adviser") dated January 28, 1993 under which the Adviser receives an
annual fee equal to .74% of the
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
average daily net assets of the Equity Portfolio, .50% of the average daily net
assets of the Bond Portfolio and .30% of the average daily net assets of the
Money Market Portfolio. The Adviser has voluntarily agreed to waive all or a
portion of its fees (and to reimburse each Portfolio's expenses) in order to
limit operating expenses of the Class A and Class B shares (exclusive of
distribution expenses) to not more than 1.10% of the average daily net assets of
the Equity Portfolio, .65% of the average daily net assets of the Bond Portfolio
and .40% of the average daily net assets of the Money Market Portfolio. Fee
waivers and expense reimbursements are voluntary and may be terminated at any
time.
Wellington Management Company (the "Sub-Adviser") serves as the investment
Sub-Adviser for the Money Market Portfolio pursuant to a sub-advisory agreement
dated January 28, 1993 with the Trust and the Adviser. The Sub-Adviser receives
an annual fee, computed daily and paid monthly, equal to .075% of the average
daily net assets of the Portfolio.
Nicholas-Applegate Capital Management serves as the investment Sub-Adviser for
the Equity Portfolio pursuant to a sub-advisory agreement dated August 31, 1995
with the Adviser.
5. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Trust and are being amortized
over sixty months beginning with the commencement of operations. In the event
any of the initial shares of the Trust are redeemed by any holder thereof during
the period that the Trust is amortizing its organizational costs, the redemption
proceeds payable to the holder thereof by the Trust will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption.
Certain officers of the Trust are also officers of the Administrator and/or
Distributor. Such officers are not compensated by the Trust for serving in their
respective roles.
6. Investment Transactions:
The cost of security purchases and the proceeds from the sale of securities,
other than short-term investments during the period ended July 31, 1996, were as
follows:
INTERMEDIATE-TERM DIVERSIFIED
INCOME GROWTH
- -------------------------------------------------------------------------
(000) (000)
Purchases:
U.S. Government ..... $12,068 $ --
Other ............... 7,717 19,898
Sales:
U.S. Government ..... $18,023 $ --
Other ............... 1,551 17,669
At July 31, 1996, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts for financial reporting purposes. The aggregate gross
unrealized appreciation and depreciation on investment securities at July 31,
1996 for the Equity and Bond Portfolios are as follows:
INTERMEDIATE-TERM DIVERSIFIED
INCOME GROWTH
- -------------------------------------------------------------------------
(000) (000)
Aggregate Gross
Unrealized
Appreciation ........ $ 63 $3,698
Aggregate Gross
Unrealized
Depreciation ........ (1,574) (876)
------- ------
Net Unrealized
Appreciation
(Depreciation) ...... $(1,511) $2,822
======= ======
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) GOLDEN OAK FAMILY OF FUNDS
July 31, 1996 Unaudited
At January 31, 1996, the following Portfolios had available realized capital
losses to offset future net capital gains through fiscal year ending:
2003
(000)
- -----------------------------------------------------------------
Intermediate-Term Income ............... $534
Diversified Growth ..................... 8
7. Concentration of Credit Risk:
The Money Market Portfolio invests primarily in money market instruments
maturing in one year or less whose ratings are within the highest ratings
category assigned by a nationally recognized statistical rating organization or,
if not rated, are believed to be of comparable quality. The Bond Portfolio
invests primarily in debt marketable instruments. The market value of these
investments will change in response to interest rate changes and other factors.
During periods of falling interest rates, the values of debt securities
generally rise. Conversely, during periods of rising interest rates the values
of such securities generally decline. The ability of the issuers of the
securities held by these Portfolios to meet their obligations may be affected by
economic and political developments in a specific industry, state or region.
Changes by recognized rating organizations in the ratings of any debt security
and in the ability of an issuer to make payments of interest and principal may
also affect the value of these investments.
18
<PAGE>
BUILD YOUR FAMILY'S FUTURE
WITH PEOPLE YOU TRUST.
THE GOLDEN OAK FAMILY OF FUNDS
PRIME OBLIGATION MONEY MARKET PORTFOLIO
INTERMEDIATE-TERM INCOME PORTFOLIO
DIVERSIFIED GROWTH PORTFOLIO
INVESTMENT ADVISER:
CITIZENS BANK
328 SOUTH SAGINAW STREET
FLINT, MI 48502
DISTRIBUTOR:
SEI FINANCIAL SERVICES COMPANY
680 EAST SWEDESFORD ROAD
WAYNE, PA 19087
FOR INFORMATION, CALL:
1-800-545-6331
