THE ARBOR FUND
ANNUAL REPORT
AS OF JANUARY 31, 1996
GOLDEN OAK
FAMILY OF FUNDS
ADVISED BY
CITIZENS COMMERCIAL & SAVINGS BANK
<PAGE>
TABLE OF CONTENTS
Letter to Shareholders ..................................................... 2
Managers' Discussion of Fund Performance ................................... 4
Report of Independent Accountants .......................................... 8
Statement of Net Assets .................................................... 9
Statement of Operations ....................................................15
Statement of Changes in Net Assets .........................................16
Financial Highlights .......................................................18
Notes to Financial Statements ..............................................19
Notice to Shareholders .....................................................23
<PAGE>
Dear Shareholder:
With 1995 behind us, investors can reflect on just how remarkable the year was.
Who wouldn't want a replay of 1995? The Dow Jones Industrial Average was 3844 at
the end of our prior fiscal year (1/31/95) and closed fiscal year 1996 at 5395,
an advance of 40%. The S&P, closing at around the 636 level, showed a 35%
increase while the NASDAQ, led by its technology component for much of the year,
also advanced 40%. Bonds more than retraced the prior year's decline, as the
Lehman Brothers Intermediate Government/Corporate Index recorded a total return
of more than 14%. Government bond yields hovered around the 6% level during
January 1996 compared with 7 3/4% a year ago. All in all, it was a very
rewarding time for investors in domestic financial assets.
Historically, a year with high returns for stocks has been followed by another
positive year. 1996 may prove to be a challenge (or an exception), however. Over
the last few years, corporations have experienced very strong earnings growth as
a result of restructuring gains and lower interest rates. Although most analysts
continue to forecast good year-over-year earnings growth in 1996 (5 to 10%), we
believe that the forecast is too optimistic. Stock prices may experience much
more volatility this year as earnings growth slows, especially if expectations
are not met.
Even if earnings growth does slow down, we see several sources of support for
stock prices. Mergers, designed to reduce excess capacity and the supply of
common stock outstanding, appear to offer opportunities across many industry
groups. Also, even though a 10 to 15% correction in stocks is long overdue, a
decline in short-term rates could cushion a fall in stock prices. All things
considered, we recommend a dose of caution and careful stock selection.
Golden Oak's Diversified Growth Fund turned in positive results for the one year
period ended January 31, 1996, with a return of 18.81% for Class A shares and
18.43% for Class B shares. While this performance represents a significant
increase from the previous year, the fund substantially underperformed the
growth style index. As explained in the Managers' Discussion of Fund
Performance, the period tended to favor large, multi-national companies over the
faster-growing, medium-size firms that substantially comprise the Diversified
Growth Portfolio.
On September 1, 1995, Nicholas Applegate Capital Management (NACM) was hired as
sub-advisor for the Diversified Growth Portfolio. NACM is a highly-respected San
Diego firm that has built a strong reputation in the money management business.
The need for substantial ongoing investment in technology to evaluate investment
opportunities, along with lower-than-desired performance, prompted our
nationwide search for an equity manager to maximize shareholder value, which is
our commitment to you. We believe NACM's management style will prove to be
rewarding for you.
2
<PAGE>
A clear trend to lower interest rates continued throughout Golden Oak's fiscal
year with the Federal Reserve cutting the overnight rate in July and December
and again on the last day of the fiscal year. A development which has the
potential to significantly affect the future course of the economy is the
political agenda to downsize the federal government and reduce the budget
deficit. A continuing stalemate could drive rates up as bond investors envision
$200 billion deficits as far as the eye can see. In the face of weak economic
growth, however, the Fed Funds rate should be cut at least 25 basis points by
mid-year.
Expect to see a change in bond managers for the Intermediate-Term Income
Portfolio as we realign bond management responsibilities along specialty lines.
Our current manager, Richard Ranville, will be shifting his focus from taxable
to non-taxable bond fund management. He will be replaced for taxable management
by another member of the fixed income team, Chris Wheeler, in early 1996.
The total net asset size of the Golden Oak portfolios continues to grow. We
ended the year at $312.1 million, up 28% from a year ago. As the funds begin
their fourth year, we are encouraged by progress in the areas of cost
containment, customer satisfaction and marketing potential.
Thank you for your continued support of the Golden Oak Family of Funds. As
always, we continue to look for ways to enhance your investment and welcome any
comments you may have.
Sincerely,
/s/Dana A. Czmer
Dana A. Czmer
Senior Vice President &Trust Officer
Citizens Commercial &Savings Bank
3
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE
Fiscal Year Ended January 31, 1996
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO
For the 12-month period ended January 31, 1996 the Class A shares of the Golden
Oak Intermediate-Term Income Portfolio had a total return of 12.83%, as compared
to the benchmark Lehman Intermediate Government/Corporate Index ( the"Index")
measure of 14.40%. The SEC 30-day yield for Class A shares as of January 31,
1996 was 4.88%. Class B shares had a total return of 12.54%. The SEC 30-day
yield for Class B shares as of January 31, 1996 was 4.42%.
As we entered 1995, interest rates were expected to continue rising, accompanied
by a flattening of the yield curve. Moderating economic activity during the
second half of the year was expected to reverse the process -- interest rates
would fall and the yield curve would steepen. Consequently, the portfolio was
structured in a "barbell", with a large position in short duration corporate
bonds balanced by a smaller, longer duration position in U.S. Treasury
securities, and overall portfolio duration short of the Index.
Economic fundamentals and Federal Reserve policy gave mixed signals early in the
year and we held to our defensive strategy as the bond market embarked on a
major rally, taking intermediate yields from near 8% in January to near 5 3/4%
by mid year. As economic data began to confirm the market's action, we
maintained the corporate/treasury barbell, a significant overweighting versus
the Index in corporate bonds and in high coupon bonds, but lengthened portfolio
duration to equal the Index. These measures proved insufficient to match the
market's performance on two main points: (i) intermediate securities
outperformed the short/long barbell structure and (ii) with the sharp fall in
rates, capital gain dominated income in the total return mix and our focus on
high coupon "cushion" bonds, designed to enhance income production and stability
of principal, limited our principal appreciation versus the market. In the first
two quarters, the portfolio earned 3.75% and 4.45% versus 4.39% and 5% Index
performance.
Early in the third quarter, yields on intermediate securities rose from the 5
3/4% area to about 6 3/8% as market participants became doubtful of more
reductions in rates by the Federal Reserve. Believing that economic trends would
continue to weaken, we took advantage of this interruption in the rally to
restructure the portfolio. The barbell structure was eliminated and the
portfolio was reconfigured to match the Index in sector allocation as well as
duration. With the uncertainty that developed in the third quarter, and
persisted through the fourth quarter, regarding the course of U.S. fiscal policy
and the consequences for the market, we maintained Index duration and sector
allocation and focused on buying the best priced bonds versus the market we
could identify. We did continue to invest in higher coupon bonds, as these were
often available at positive spreads to current coupon bonds.
Performance in the third quarter was 1.42% versus 1.66% for the Index and 3.40%
in the fourth quarter versus 3.52% for the Index.
Our outlook has been that trends in employment, manufacturing activities and
inflation support the view that yields could go lower in 1996. It is possible,
however, that the bond market has discounted more Fed easing near term than is
reasonable to expect. There is little evidence supporting the view that the
economy is heading into recession within the next two quarters. The short end of
the market is vulnerable to setbacks until economic data confirms the market's
view that slow economic conditions will call for aggressive Fed easing. Longer
bonds continue to be fully valued on a fundamental economic basis.
With the uncertainty in the market place, we maintained portfolio structure near
that of the Index with respect to both sector distribution and duration. Both
the portfolio and Index had a duration af approximately 3.4 years and sector
distribution of approximately 74 percent U.S. Treasury Securities, 20 percent
Corporate Securities and 6 percent Mortgage Backed and U.S. Agency Securities.
Near term we expect to remain neutral versus the Index emphasizing security
selection in the corporate sector to add value until more definite signs of
economic direction emerge.
4
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE
Fiscal Year Ended January 31, 1996
-------------------- INVESTMENT PERFORMANCE ANALYSIS --------------------
AVERAGE ANNUAL TOTAL RETURN(1)
------------------------------------------
1 YEAR INCEPTION
------------------------------------------
CLASS A 12.83% 5.91%
------------------------------------------
CLASS B WITHOUT LOAD 12.54% 5.49%
------------------------------------------
CLASS B WITH LOAD 7.46% 3.64%
------------------------------------------
Comparison of Change in the Value of a $10,000 Investment
in the Golden Oak Intermediate-Term Income Portfolio,
Class A, versus the Lehman Brothers Intermediate
Government/Corporate Index
[GRAPIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in the Golden Oak
Intermediate-Term Income Portfolio, Class A from February 28, 1993 through
January 31, 1996 as compared with the growth of $10,000 investment in the
Lehman Brothers Intermediate Government/Corporate Index.
Plot Points
Initial Investment Date 2/28/93 Jan-94 Jan-95 Jan-96
Golden Oak Intermediate-
Term Income Portfolio, Class A $10,000 $10,569 $10,399 $11,733
Lehman Brothers Intermediate
Government/Corporate Index $10,000 $10,622 $10,475 $11,981
Comparison of Change in the Value of a $10,000 Investment
in the Golden Oak Intermediate-Term Income Portfolio,
Class B, versus the Lehman Brothers Intermediate
Government/Corporate Index
[GRAPIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in the Golden Oak
Intermediate-Term Income Portfolio, Class B from June 30, 1993 through
January 31, 1996 as compared with the growth of $10,000 investment in the
Lehman Brothers Intermediate Government/Corporate Index.
Plot Points
Initial Investment Date 6/30/93 Jan-94 Jan-95 Jan-96
Golden Oak Intermediate-Term
Income Portfolio, Class B $ 9,550 $ 9,860 $ 9,678 $10,891
Lehman Brothers Intermediate
Government/Corporate Index $10,000 $10,356 $10,213 $11,682
1 For the period ended January 31, 1996. Past performance of the Portfolio is
not predictive of future performance. Individual Class B shares were offered
beginning June 18, 1993. Performance of the Class B shares reflects the
maximum front end sales charge of 4.50%. Class A shares commenced operations
on February 1, 1993.
5
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE
Fiscal Year Ended January 31, 1996
GOLDEN OAK DIVERSIFIED GROWTH PORTFOLIO
1995 was a banner year for common stocks, marking the 9th year in the postwar
period that the S&P 500 return exceeded 30%. Many investors, reeling from the
dismal results achieved in 1994, feared a continuation of 1994 into 1995. What
went unnoticed by most was the fact that on a 3-year rolling basis, the period
ending 1994 was the 6th worst since 1926 and that we had effectively come
through a rolling correction without any major damage to stock prices. This,
combined with an improving profit picture, declining interest rates, and
improving productivity, all contributed to the strong returns.
Inside of the S&P 500 growth index, five sectors had returns of 40% or better;
consumer non-durables, technology, producers/manufacturers, health, and
financial services. On a relative basis, the single most important determinant
of return was capitalization. Over 31% of the total return of the index was
attributable to companies with market capitalizations greater than $10 billion.
We were underweighted in this capitalization group which, together with our
policy of equal weighting our positions regardless of size, acted as a drag on
performance, particularly in the second half of the year.
As we move into 1996, we continue to focus on companies with accelerating,
sustainable earnings growth. Relative to the market, we are overweighted in
technology, financial services, and producers/manufacturers.
6
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE
Fiscal Year Ended January 31, 1996
-------------------- INVESTMENT PERFORMANCE ANALYSIS --------------------
AVERAGE ANNUAL TOTAL RETURN(1)
------------------------------------------
1 YEAR INCEPTION
------------------------------------------
CLASS A 18.81% 7.08%
------------------------------------------
CLASS B WITHOUT LOAD 18.43% 9.46%
------------------------------------------
CLASS B WITH LOAD 11.59% 7.02%
------------------------------------------
Comparison of Change in the Value of a $10,000 Investment
in the Golden Oak Diversified Growth
Portfolio, Class A, versus the Frank Russell Growth Index
[GRAPIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in the Golden Oak
Diversified Growth Portfolio, Class A from February 28, 1993 through
January 31, 1996 as compared with the growth of $10,000 investment in the
Frank Russell Growth Index.
Plot Points
Initial Investment Date 2/28/93 Jan-94 Jan-95 Jan-96
Golden Oak Diversified
Growth Portfolio, Class A $10,000 $11,048 $10,469 $12,439
Frank Russell Growth Index $10,000 $10,820 $11,089 $15,393
Comparison of Change in the Value of a $10,000
Investment in the Golden Oak Diversified Growth
Portfolio, Class B, versus the Frank Russell Growth Index
[GRAPIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in the Golden Oak
Diversified Growth Portfolio, Class B from June 30, 1993 through January 31,
1996 as compared with the growth of $10,000 investment in the Frank Russell
Growth Index.
Plot Points
Initial Investment Date 6/30/93 Jan-94 Jan-95 Jan-96
Golden Oak Diversified Growth
Portfolio, Class B $ 9,425 $10,519 $ 9,913 $11,740
Frank Russell Growth Index $10,000 $10,783 $11,050 $15,340
1 For the period ended January 31, 1996. Past performance of the Portfolio is
not predictive of future performance. Individual Class B shares were offered
beginning June 18, 1993. Performance of the Class B shares reflects the
maximum front end sales charge of 5.75%. Class A shares commenced operations
on February 1, 1993.
7
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
Golden Oak Prime Obligation Money Market,
Golden Oak Intermediate-Term Income and
Golden Oak Diversified Growth Portfolios of
The Arbor Fund
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Golden Oak Prime Obligation Money Market, Golden Oak Intermediate-Term
Income and Golden Oak Diversified Growth Portfolios of The Arbor Fund (hereafter
referred to as the "Fund") at January 31, 1996, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for each of the respective periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at January 31, 1996, by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Philadelphia, PA
March 8, 1996
8
<PAGE>
STATEMENT OF NET ASSETS GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO (000) (000)
- ------------------------------------------------------
COMMERCIAL PAPER -- 53.0%
Abbey National PLC
5.610%, 02/29/96 $5,000 $4,978
American Express Credit
5.600%, 02/29/96 5,000 4,978
American Home Products
5.720%, 02/02/96 2,000 2,000
Banque National de Paris
5.510%, 05/21/96 5,000 4,916
Burlington Northern Santa Fe
5.900%, 02/28/96 1,500 1,493
Canadian Wheat Board
5.670%, 03/04/96 5,000 4,975
Cariplo Finance
5.610%, 03/04/96 1,000 995
Chevron Transport
5.520%, 04/17/96 5,600 5,535
CIESCO
5.580%, 03/08/96 6,000 5,967
ESC Securitization
5.680%, 02/22/96 2,000 1,993
General Electric Capital
5.700%, 02/09/96 2,000 1,998
Goldman Sachs Group
5.440%, 03/11/96 5,000 4,971
Household International
5.650%, 03/08/96 4,000 3,977
ING Finance
5.440%, 04/08/96 6,000 5,939
International Business
Machines Credit
5.650%, 02/13/96 1,000 998
5.510%, 04/24/96 5,000 4,937
Kredietbank NA Finance
5.740%, 02/05/96 2,000 1,999
NationsBank
5.190%, 06/28/96 6,000 5,872
Norwest Financial
5.690%, 02/28/96 3,000 2,987
PNC Funding
5.770%, 02/05/96 1,000 999
Province of Quebec
5.080%, 07/17/96 6,200 6,054
Sears Roebuck Acceptance
5.720%, 02/13/96 5,000 4,990
Toshiba America
5.400%, 04/02/96 2,500 2,477
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO(continued) (000) (000)
- ------------------------------------------------------
COMMERCIAL PAPER--(CONTINUED)
Westpac Banking
5.530%, 04/30/96 $5,000 $4,932
Zeneca Wilmington
5.350%, 04/17/96 6,000 5,932
-------
Total Commercial Paper
(Cost $96,891,592) 96,892
-------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 8.2%
FFCB
5.562%, 11/15/96 1,000 958
FNMA
5.330%, 05/10/96 5,000 4,927
FNMA (A)
5.340%, 05/25/99 9,000 9,000
-------
Total U.S. Government
Agency Obligations
(Cost $14,885,113) 14,885
-------
FLOATING RATE INSTRUMENTS -- 11.5%
First Bank of South Dakota (A)
5.605%, 05/06/96 5,000 5,000
General Electric Capital (A)
5.867%, 08/22/96 3,000 3,001
Peoples Security Life (A)
6.090%, 3,000 3,000
PNC Bank (A)
5.549%, 01/06/97 5,000 4,996
SMM Trust 1995-I (A)
5.582%, 05/29/96 4,000 4,000
SMM Trust 1995-N (A)
5.925%, 11/15/96 1,000 1,000
-------
Total Floating Rate Instruments
(Cost $20,996,693) 20,997
-------
CERTIFICATES OF DEPOSITS -- 16.4%
Bank of Tokyo
5.590%, 03/12/96 6,000 6,000
BankAmerica
5.270%, 06/25/96 6,000 6,000
Chase Manhattan
5.770%, 04/15/96 4,000 4,000
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO(continued) (000) (000)
- ------------------------------------------------------
CERTIFICATES OF DEPOSITS -- (CONTINUED)
First of America Bank
5.340%, 05/23/96 $5,000 $5,000
National Westminster Bank
5.760%, 02/22/96 6,000 6,000
Wilmington Trust of Delaware
5.680%, 03/27/96 3,000 3,000
-------
Total Certificates Of Deposits
(Cost $30,000,054) 30,000
-------
BANKERS ACCEPTANCE -- 3.3%
Barnett Banks
5.590%, 03/06/96 6,000 5,968
-------
Total Bankers Acceptance
(Cost $5,968,323) 5,968
-------
BANK NOTES -- 4.9%
Bank of Hawaii
5.570%, 11/06/96 6,000 6,006
Bank of New York
5.520%, 05/22/96 3,000 2,999
-------
Total Bank Notes
(Cost $9,004,651) 9,005
-------
REPURCHASE AGREEMENT -- 6.2%
Aubrey G. Lanston Incorporated
5.90%, dated 01/31/96, matures
02/01/96, repurchase price
$11,296,851 (collateralized
by U.S. Treasury Note, par
value $10,960,000, 6.50%,
matures 08/15/97: market
value $11,514,034) 11,295 11,295
-------
Total Repurchase Agreement
(Cost $11,295,000) 11,295
-------
Total Investments -- 103.5%
(Cost $189,041,425) 189,042
-------
OTHER ASSETS AND LIABILITIES,
NET-- (3.5%) (6,340)
--------
PRIME OBLIGATION MONEY Value
MARKET PORTFOLIO(concluded) (000)
- ------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited
authorization--no par value) based
on 107,414,718 outstanding shares
of beneficial interest $107,415
Portfolio shares of Class B (unlimited
authorization--no par value) based
on 75,292,829 outstanding shares
of beneficial interest 75,293
Accumulated Net Realized Loss
on Investments (6)
-------
Net Assets-- 100.0% $182,702
========
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
========
FFCB--Federal Farm Credit Bank
FNMA--Federal National Mortgage Association
PLC--Private Limited Corporation
(A) Variable Rate Security - The rate reported in the Statement of Net Assets is
the rate in effect on January 31, 1996.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO (000) (000)
- ------------------------------------------------------
CORPORATE OBLIGATIONS -- 23.2%
American Express Credit
8.500%, 06/15/99 $ 500 $542
American General Finance
7.375%, 11/15/96 1,550 1,573
Anheuser Busch
6.900%, 10/01/02 3,000 3,097
Archer Daniels Midland
10.250%, 01/15/06 1,000 1,315
Chrysler Financial
13.250%, 10/15/99 1,000 1,245
Comerica
7.250%, 10/15/02 1,000 1,086
Consolidated Edison of NY
6.500%, 02/01/01 1,000 1,029
Eli Lilly
8.375%, 12/01/06 1,000 1,185
Ford Motor Credit
6.250%, 11/08/00 1,000 1,019
8.200%, 02/15/02 2,000 2,225
JP Morgan
7.625%, 09/15/04 2,000 2,203
Lehman Brothers Holding
5.750%, 02/15/98 1,000 1,000
Martin Marietta
6.500%, 04/15/03 1,000 1,017
Merck
7.750%, 05/01/96 500 503
Pacific Gas and Electric
8.750%, 01/01/01 1,300 1,453
RR Donnelley & Sons
9.125%, 12/01/00 500 577
Union Pacific
6.125%, 01/15/04 1,000 993
WMX Technologies
7.000%, 05/15/05 2,000 2,128
-------
Total Corporate Obligations
(Cost $23,673,695) 24,190
-------
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO(continued) (000) (000)
- ------------------------------------------------------
U.S. GOVERNMENT AGENCY BONDS -- 2.4%
FNMA
5.990%, 10/01/03 $ 1,500 $1,489
SLMA
6.050%, 09/14/00 1,000 1,023
-------
Total U.S. Government Agency Bonds
(Cost $2,503,255) 2,512
-------
U.S. TREASURY OBLIGATIONS -- 66.7%
U.S. Treasury Note
6.875%, 02/28/97 20,000 20,402
7.875%, 04/15/98 14,300 15,153
7.750%, 02/15/01 18,500 20,512
7.500%, 05/15/02 3,700 4,115
7.875%, 11/15/04 7,600 8,787
5.875%, 11/15/05 800 817
-------
Total U.S. Treasury Obligations
(Cost $67,957,060) 69,786
-------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS -- 3.5%
FHLMC
4.750%, 04/15/10 1,000 995
6.500%, 03/15/17 304 304
FNMA
5.750%, 06/25/06 1,621 1,623
4.750%, 02/25/09 732 728
-------
Total U.S. Agency Mortgage-
Backed Obligations
(Cost $3,595,681) 3,650
-------
MUNICIPAL BONDS -- 0.7%
Texas State, GO
7.250%, 12/01/99 210 222
7.250%, 06/01/00 215 228
7.250%, 12/01/00 220 234
-------
Total Municipal Bonds
(Cost $684,829) 684
-------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO (continued) (000) (000)
- ------------------------------------------------------
REPURCHASE AGREEMENT -- 2.4%
Lehman Government Securities 5.90%,
dated 01/31/96, matures 02/01/96,
repurchase price $2,504,410
(collateralized by U.S. T-Bill,
par value $2,615,000, matures
07/11/96: market value
$2,556,973) $2,504 $2,504
-------
Total Repurchase Agreement
(Cost $2,504,000) 2,504
-------
Total Investments -- 98.9%
(Cost $100,919,089) 103,326
-------
OTHER ASSETS AND LIABILITIES,
NET-- 1.1% 1,154
-------
- ------------------------------------------------------
Market
INTERMEDIATE-TERM INCOME Value
PORTFOLIO(concluded) (000)
- ------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited
authorization--no par value) based
on 10,275,420 outstanding shares
of beneficial interest $102,367
Portfolio shares of Class B (unlimited
authorization--no par value) based
on 20,697 outstanding shares of
beneficial interest 216
Accumulated Net Realized Loss
on Investments (510)
Net Unrealized Appreciation
of Investments 2,407
--------
Net Assets-- 100.0% $104,480
========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Class A $10.15
========
Net Asset Value, Offering Price and
Redemption Price Per Share--
Class B $10.15
========
Maximum Offering Price Per Share--
Class B ($10.15/95.5%) $10.63
========
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.
12
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
Market
DIVERSIFIED GROWTH Value
PORTFOLIO Shares (000)
- --------------------------------------------------------
COMMON STOCK -- 93.7%
AEROSPACE -- 4.4%
McDonnell Douglas 5,924 $527
Textron 7,200 566
-------
Total Aerospace 1,093
-------
APPAREL -- 1.4%
Liz Claiborne 12,500 348
-------
MONEY-CENTER BANKS -- 4.5%
BankAmerica 8,595 579
NationsBank 8,000 559
-------
Total Money-Center Banks 1,138
-------
CHEMICALS -- 2.8%
IMC Global 9,100 341
Sigma Aldrich 7,004 368
-------
Total Chemicals 709
-------
TELECOMMUNICATIONS EQUIPMENT-- 7.7%
Ascend Communications* 24,200 941
Glenayre Technologies* 11,100 444
U.S. Robotics* 6,144 542
-------
Total Telecommunications
Equipment 1,927
-------
COMPUTERS/OFFICE AUTOMATION-- 11.0%
Adaptec* 9,029 397
Bay Networks* 15,073 641
Cisco Systems* 7,207 600
Seagate Technology* 9,826 582
Sun Microsystems* 11,400 524
-------
Total Computers/Office
Automation 2,744
-------
DRUGS/PHARMACEUTICALS -- 1.5%
Glaxo PLC ADR 12,900 376
-------
ELECTRONIC INSTRUMENTS -- 2.0%
Raychem 7,500 502
-------
FINANCIAL SERVICES -- 5.8%
Bear Stearns 22,396 515
Lehman Brothers Holding 21,257 545
Morgan Stanley Group 8,288 395
-------
Total Financial Services 1,455
-------
Market
DIVERSIFIED GROWTH Value
PORTFOLIO(continued) Shares (000)
- -------------------------------------------------------
GROCERY PRODUCTS -- 3.2%
Dole Food 7,800 $291
IBP 14,200 378
Philip Morris 1,500 139
-------
Total Grocery Products 808
-------
HOSPITALS -- 1.4%
Health Management Associates,
Class A* 11,700 352
-------
HOTELS & LODGING -- 1.4%
HFS* 4,000 332
-------
OTHER PRODUCERS & MANUFACTURING-- 3.1%
Avery Dennison 6,900 368
Johnson Controls 5,600 405
-------
Total Other Producers &
Manufacturing 773
-------
MACHINERY & EQUIPMENT -- 1.4%
Applied Materials* 9,370 347
-------
MANAGED HEALTHCARE -- 1.9%
Foundation Health* 10,700 463
-------
MEDICAL SUPPLIES -- 4.9%
Boston Scientific* 12,415 636
Medtronic 10,400 594
-------
Total Medical Supplies 1,230
-------
METALS -- 2.0%
Phelps Dodge 7,800 491
-------
MULTI-LINE INSURERS -- 4.7%
Safeco 14,900 534
Travelers 9,744 640
-------
Total Multi-Line Insurers 1,174
-------
OIL & GAS PRODUCTION -- 5.7%
Panhandle Eastern 16,100 465
Shell Transport and Trading 4,400 347
Williams 12,989 612
-------
Total Oil & Gas Production 1,424
-------
OTHER HEALTH SERVICES -- 2.2%
HBO 6,689 562
-------
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STATEMENT OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
Market
DIVERSIFIED GROWTH Value
PORTFOLIO(continued) Shares (000)
- ------------------------------------------------------
PAPER & PAPER PRODUCTS -- 1.3%
Kimberly-Clark 4,100 $331
-------
PETROLEUM REFINING -- 1.3%
Norsk Hydro A.S. ADR 7,900 323
-------
PRINTING & PUBLISHING -- 1.4%
Gartner Group, Class A* 6,300 348
-------
PROPERTY-CASUALTY INSURANCE-- 4.3%
General Re 3,100 474
Loews 7,260 600
-------
Total Property/Casualty
Insurance 1,074
-------
RAILROADS -- 1.5%
Canadian Pacific 18,900 369
-------
REAL ESTATE -- 0.2%
Castle & Cooke* 3,733 52
-------
RESTAURANTS -- 0.2%
McDonald's 1,200 60
-------
SEMI-CONDUCTORS/INSTRUMENTS-- 6.6%
Altera* 7,497 494
Avnet 9,400 403
KLA Instruments* 11,070 327
Xilinx* 11,212 433
-------
Total Semi-Conductors/
Instruments 1,657
-------
SOFTWARE -- 1.3%
Microsoft* 3,400 315
-------
TELEPHONE -- 0.8%
Sprint 4,400 190
-------
WHOLESALE -- 1.8%
McKesson 8,800 440
-------
Total Common Stock
(Cost $20,518,181) 23,407
-------
Face Market
DIVERSIFIED GROWTH Amount Value
PORTFOLIO(concluded) (000) (000)
- -------------------------------------------------------
REPURCHASE AGREEMENTS -- 4.6%
Lehman Government Securities (A)
5.42%, dated 01/31/96,
matures 02/01/96, repurchase
price $1,136,314 (collateralized
by U.S. Treasury Note, par value
$1,064,307, 7.75%, matures
11/30/99: market valu
$1,168,864) $1,136 $1,136
-------
Total Repurchase Agreements
(Cost $1,136,143) 1,136
-------
Total Investments -- 98.3%
(Cost $21,654,324) 24,543
-------
OTHER ASSETS AND LIABILITIES,
NET-- 1.7% 425
-------
NET ASSETS:
Portfolio shares of Class A (unlimited
authorization--no par value) based
on 2,415,724 outstanding shares of
beneficial interest $23,543
Portfolio shares of Class B (unlimited
authorization--no par value) based
on 18,895 outstanding shares of
beneficial interest 185
Distributions in Excess of Net
Investment Income (14)
Accumulated Net Realized Loss
on Investments (1,635)
Net Unrealized Appreciation
of Investments 2,889
-------
Net Assets-- 100.0% $24,968
=======
Net Asset Value, Offering Price and
Redemption Price Per Share--
Class A $10.26
=======
Net Asset Value, Offering Price and
Redemption Price Per Share--
Class B $10.20
=======
Maximum Offering Price Per Share--
Class B ($10.20/94.25%) $10.82
=======
* Non-income producing security
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STATEMENT OF OPERATIONS (000) GOLDEN OAK FAMILY OF FUNDS
For the Year Ended January 31, 1996
<TABLE>
<CAPTION>
PRIME OBLIGATION INTERMEDIATE-TERM DIVERSIFIED
MONEY MARKET INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividend Income $ -- $ -- $188
Interest Income 9,881 5,974 432
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Income 9,881 5,974 620
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Administration Fees 330 189 72
Waiver of Administration Fees (6) -- --
Investment Advisory Fees 495 472 267
Waiver of Investment Advisory Fees (477) (177) (26)
Investment Sub-Advisory Fees 124 -- --
Custodian Fees 14 9 5
Transfer Agent Fees 67 35 30
Professional Fees 37 22 7
Registration Fees 33 15 6
Distribution Fees(1) 138 1 --
Trustee Fees 6 4 2
Printing Expenses 15 12 3
Amortization of Organizational Costs 17 29 28
Other Expenses 6 3 2
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 799 614 396
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income 9,082 5,360 224
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized Gain on Securities Sold 5 1,628 3,411
Net Change in Unrealized Appreciation on Investments -- 4,323 2,316
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments 5 5,951 5,727
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 9,087 11,311 5,951
===========================================================================================================================
<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.
15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
For the Periods Ended January 31,
<TABLE>
<CAPTION>
PRIME OBLIGATION
MONEY MARKET
PORTFOLIO
-------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Operations:
Net Investment Income $9,082 $4,371
Net Realized Gain (Loss) on Securities Sold 5 (13)
Net Change in Unrealized Appreciation (Depreciation) on Investments -- --
- ------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Investment Operations 9,087 4,358
- ------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income
Class A (6,154) (3,990)
Class B (2,928) (382)
Realized Net Gains
Class A -- --
Class B -- --
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (9,082) (4,372)
- ------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Class A:
Proceeds from Shares Issued 230,201 155,032
Reinvestment of Cash Distributions 7 4
Cost of Shares Redeemed (231,879) (163,135)
- ------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions (1,671) (8,099)
- ------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from Shares Issued 674,637 107,197
Reinvestment of Cash Distributions 123 6
Cost of Shares Redeemed (620,486) (86,288)
- ------------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions 54,274 20,915
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Capital Share Transactions 52,603 12,816
- ------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 52,608 12,802
- ------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period 130,094 117,292
- ------------------------------------------------------------------------------------------------------------------
End of Period $182,702 $130,094
==================================================================================================================
Shares Issued and Redeemed
Class A:
Issued 230,201 155,032
Issued in Lieu of Cash Distributions 7 4
Redeemed (231,879) (163,135)
- ------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions (1,671) (8,099)
- ------------------------------------------------------------------------------------------------------------------
Class B:
Issued 674,637 107,197
Issued in Lieu of Cash Distributions 123 6
Redeemed (620,486) (86,288)
- ------------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions 54,274 20,915
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Capital Shares 52,603 12,816
==================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
GOLDEN OAK FAMILY OF FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE-TERM DIVERSIFIED
INCOME GROWTH
PORTFOLIO PORTFOLIO
------------------ --------------------
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Operations:
Net Investment Income $5,360 $3,778 $224 $209
Net Realized Gain (Loss) on Securities Sold 1,628 (2,162) 3,411 (376)
Net Change in Unrealized Appreciation (Depreciation) on Investments 4,323 (2,504) 2,316 (1,320)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Investment Operations 11,311 (888) 5,951 (1,487)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income
Class A (5,347) (3,761) (237) (209)
Class B (13) (17) (1) (1)
Realized Net Gains
Class A -- (5) (4,216) (562)
Class B -- -- (22) (2)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (5,360) (3,783) (4,476) (774)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Class A:
Proceeds from Shares Issued 28,102 29,647 7,863 13,863
Reinvestment of Cash Distributions -- 1 17 --
Cost of Shares Redeemed (9,830) (9,266) (17,509) (3,639)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions 18,272 20,382 (9,629) 10,224
- -----------------------------------------------------------------------------------------------------------------------------------
Class B:
Proceeds from Shares Issued 10 25 46 38
Reinvestment of Cash Distributions 7 9 22 3
Cost of Shares Redeemed (138) (61) (2) (76)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions (121) (27) 66 (35)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Capital Share Transactions 18,151 20,355 (9,563) 10,189
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 24,102 15,684 (8,088) 7,928
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period 80,378 64,694 33,056 25,128
- -----------------------------------------------------------------------------------------------------------------------------------
End of Period $104,480 $80,378 $24,968 $33,056
===================================================================================================================================
Shares Issued and Redeemed
Class A:
Issued 2,857 3,060 737 1,341
Issued in Lieu of Cash Distributions -- -- 2 --
Redeemed (994) (961) (1,617) (352)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions 1,863 2,099 (878) 989
- -----------------------------------------------------------------------------------------------------------------------------------
Class B:
Issued 1 3 5 4
Issued in Lieu of Cash Distributions 1 1 2 --
Redeemed (14) (7) (1) (7)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions (12) (3) 6 (3)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Capital Shares 1,851 2,096 (872) 986
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
FINANCIAL HIGHLIGHTS GOLDEN OAK FAMILY OF FUNDS
For a Share Outstanding Throughout the Period
For the Periods Ended January 31,
<TABLE>
<CAPTION>
RATIO RATIO
OF OF
REALIZED NET NET NET NET RATIO OF RATIO OF
NET AND DISTRIBUTIONS ASSET ASSETS INCOME INCOME EXPENSES NET INCOME
ASSET UNREALIZED ------------------- VALUE END TO TO TO AVERAGE TO AVERAGE
VALUE NET GAIN (LOSS) NET NET END OF AVERAGE AVERAGE NET ASSETS NET ASSETS PORTFOLIO
BEGINNING INVESTMENT ON INVESTMENT REALIZED OF TOTAL PERIOD NET TO NET (EXCLUDING (EXCLUDING TURNOVER
OF PERIOD INCOME INVESTMENTS INCOME GAIN PERIOD RETURN (000) ASSETS ASSETS WAIVERS) WAIVERS) RATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS A
1996 $1.00 0.06 -- (0.06) -- $1.00 5.74% $107,409 0.40% 5.60% 0.70% 5.30% N/A
1995 1.00 0.04 -- (0.04) -- 1.00 4.21 109,076 0.40 4.20 0.68 3.92 N/A
1994(1) 1.00 0.03 -- (0.03) -- 1.00 2.87 117,188 0.40 2.83 0.67 2.56 N/A
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS B
1996 $1.00 0.05 -- (0.05) -- $1.00 5.47% $75,293 0.65% 5.31% 0.95% 5.01% N/A
1995 1.00 0.04 -- (0.04) -- 1.00 3.95 21,018 0.65 3.95 0.93 3.67 N/A
1994(2) 1.00 -- -- -- -- 1.00 2.90* 104 0.65* 2.68* 0.93* 2.40* N/A
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS A
1996 $9.52 0.56 0.63 (0.56) -- $10.15 12.83% $104,270 0.65% 5.68% 0.84% 5.49% 121.47%
1995 10.19 0.50 (0.67) (0.50) -- 9.52 (1.61) 80,064 0.65 5.21 0.86 5.00 141.51
1994(1) 10.00 0.46 0.23 (0.46) (0.04) 10.19 6.99 64,329 0.65 4.47 0.83 4.29 71.73
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS B+
1996 $9.52 0.54 0.63 (0.54) -- $10.15 12.54% $210 0.90% 5.49% 1.09% 5.30% 121.47%
1995 10.19 0.48 (0.67) (0.48) -- 9.52 (1.85) 314 0.90 4.96 1.11 4.75 141.51
1994(3) 10.12 0.31 0.11 (0.31) (0.04) 10.19 6.72* 365 0.90* 4.27* 1.08* 4.09* 71.73
DIVERSIFIED GROWTH PORTFOLIO CLASS A
1996 $10.00 0.07 1.74 (0.07) (1.48) $10.26 18.81% $24,775 1.10% 0.62% 1.17% 0.55% 189.48%
1995 10.82 0.08 (0.64) (0.08) (0.18) 10.00 (5.24) 32,931 1.10 0.74 1.24 0.60 84.00
1994(1) 10.00 0.08 0.82 (0.08) -- 10.82 9.08 24,955 1.10 0.77 1.21 0.66 68.91
DIVERSIFIED GROWTH PORTFOLIO CLASS B+
1996 $9.96 0.04 1.72 (0.04) (1.48) $10.20 18.43% $193 1.35% 0.30% 1.42% 0.23% 189.48%
1995 10.81 0.05 (0.67) (0.05) (0.18) 9.96 (5.76) 125 1.35 0.49 1.49 0.35 84.00
1994(3) 9.54 0.02 1.27 (0.02) -- 10.81 22.00* 173 1.35* 0.33* 1.45* 0.23* 68.91
===================================================================================================================================
<FN>
* Annualized
+ Total return does not reflect the sales charge.
(1) Commenced operations February 1, 1993.
(2) Commenced operations January 20, 1994.
(3) Commenced operations June 18, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
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 Financial Management Corporation (the "Administrator"),
a wholly-owned subsidiary of SEI Corporation, on October 9, 1992. 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. REPURCHASE AGREEMENTS--The
Portfolios invest in tri-party repurchase agreements. Securities held as
collateral for tri-party
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
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 on 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
Commercial &Savings Bank (the "Adviser") dated January 28, 1993 under which the
Adviser receives an annual fee equal to .74% of the 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
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
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 September 1,
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 and Trustees of the Trust are also officers of the
Administrator and/or Distributor. Such officers and Trustees 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 year ended January 31, 1996, were
as follows:
INTERMEDIATE-TERM DIVERSIFIED
INCOME GROWTH
- ----------------------------------------------------
(000) (000)
Purchases:
U.S. Government $106,093 $ --
Other 21,853 60,992
Sales:
U.S. Government $77,288 $ --
Other 21,463 70,934
At January 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 January 31,
1996 for the Equity and Bond Portfolios are as follows:
INTERMEDIATE-TERM DIVERSIFIED
INCOME GROWTH
- --------------------------------------------------------
(000) (000)
Aggregate Gross
Unrealized
Appreciation $2,454 $3,391
Aggregate Gross
Unrealized
Depreciation (47) (502)
------ ------
Net Unrealized
Appreciation $2,407 $2,889
====== ======
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) GOLDEN OAK FAMILY OF FUNDS
January 31, 1996
At January 31, 1996, the following Portfolios had available realized capital
losses to offset future net capital gains through fiscal year ended:
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.
SHAREHOLDER VOTING RESULTS (UNAUDITED)
- --------------------------------------
There was a special meeting of shareholders on May 15, 1995 for the Trust to
approve the selection of Nicholas-Applegate Capital Management
("Nicholas-Applegate") as the Investment Sub-Adviser for the Diversified Growth
Portfolio, and to approve a new Investment Sub-Advisory Agreement relating to
the Portfolio between Citizens Commercial & Savings Bank, the Portfolio's
investment adviser, and Nicholas-Applegate. At the same meeting it was proposed
to amend the investment objective of the Diversified Growth Portfolio to state
that the Portfolio seeks to provide total return. The following were the results
of the vote:
SUB-ADVISER CHANGE INVESTMENT OBJECTIVE
For 3,320,343 3,320,343
Against 0 0
Abstain 0 0
There were no other proposals voted upon at such meeting.
22
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE GOLDEN OAK FAMILY OF FUNDS
(UNAUDITED)
For shareholders that do not have a January 31, 1996 tax year end, this notice
is for informational purposes only. For shareholders with a January 31, 1996 tax
year end, please consult your tax adviser as to the pertinence of this notice.
For the fiscal year ended January 31, 1996, each portfolio is designating the
following items with regard to distributions paid during the year.
(A) (B) (C)
LONG TERM ORDINARY INCOME TOTAL
CAPITAL GAINS DISTRIBUTIONS DISTRIBUTIONS
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS)
- -------------------------------------------------------------------------------
Prime Obligation 0% 100% 100%
Intermediate-Term Income 0% 100% 100%
Diversified Growth 63% 37% 100%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
PORTFOLIO DIVIDENDS(1) INTEREST TAX CREDIT
- -------------------------------------------------------------------------------
Prime Obligation 0% 0% 0%
Intermediate-Term Income 0% 0% 0%
Diversified Growth 52% 0% 0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction. * Items (A) and (B) are based on a percentage of
each portfolio's distributions. ** Items (D), (E), and (F) are based on a
percentage of ordinary income distributions of each portfolio.
23
<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 COMMERCIAL &SAVINGS BANK
328 SOUTH SAGINAW STREET
FLINT,MI 48502
DISTRIBUTOR:
SEI FINANCIAL SERVICES COMPANY
680 EAST SWEDESFORD ROAD
WAYNE, PA 19087
FOR INFORMATION, CALL:
1-800-808-4920
CIT-F-006-04
<PAGE>
THE ARBOR FUND
[GRAPHIC OMITTED]
CALIFORNIA TAX-EXEMPT PORTFOLIO
INSTITUTIONAL TAX-FREE PORTFOLIO
ANNUAL REPORT
JANUARY 31, 1996
Advised By
PNC Institutional Management Corporation
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
California Tax-Exempt and Institutional
Tax-Free Portfolios of
The Arbor Fund
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the California Tax-Exempt and Institutional Tax-Free Portfolios of The Arbor
Fund (hereafter referred to as the "Fund") at January 31, 1996, the results of
each of their operations, the changes in each of their net assets and the
financial highlights for each of the respective periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at January 31, 1996, by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Philadelphia, PA
March 8, 1996
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS THE ARBOR FUND
January 31, 1996 Face
CALIFORNIA TAX-EXEMPT Amount Value
PORTFOLIO (000) (000)
- ----------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 99.5%
CALIFORNIA -- 98.2%
Big Bear Lake, California Industrial
Development Revenue, Southwest Gas
Project, Ser A, AMT (A) (B) (C)
3.050%, 02/07/96 ........................... $ 5,100 $ 5,100
California Department of Water Resources,
Central Valley Project, Ser N-V1 (A) (B) (C)
3.100%, 02/07/96 ........................... 7,100 7,100
California Health Facilities Financing
Authority, Adventist Health
Systems, Ser A (A) (B) (C)
2.900%, 02/07/96 ........................... 6,000 6,000
California Health Facilities Financing
Authority, Catholic Healthcare West,
Ser 95C, MBIA (A) (B) (C)
2.850%, 02/07/96 ........................... 10,000 10,000
California Health Facilities Financing
Authority, Kaiser Permanente,
Ser 93A (A) (B)
2.800%, 02/07/96 ........................... 8,000 8,000
California Health Facilities Financing
Authority, Kaiser Permanente,
Ser 93B (A) (B)
2.800%, 02/07/96 ........................... 3,600 3,600
California Health Facilities Financing
Authority, Scripps Memorial Hospital,
Ser 91B, MBIA (A) (B) (C)
2.900%, 02/07/96 ........................... 6,700 6,700
California Pollution Control Financing
Authority, Burney Forrest Project,
Ser 84, AMT (A) (B) (C)
3.750%, 02/01/96 ........................... 1,000 1,000
California Pollution Control Financing
Authority, Exxon Project (A) (B)
3.500%, 02/01/96 ........................... 1,600 1,600
California Pollution Control Financing
Authority, Pacific Gas & Electric,
Ser 88A, TECP (C)
3.150%, 02/01/96 ........................... 7,000 7,000
California Pollution Control Financing
Authority, Pacific Gas & Electric,
Ser 88C, TECP (C)
3.050%, 02/07/96 ........................... 3,800 3,800
California Pollution Control Financing
Authority, Pacific Gas & Electric,
Ser C, TECP (C)
3.150%, 02/02/96 ........................... 4,000 4,000
3.650%, 02/09/96 ........................... 9,500 9,500
</TABLE>
<TABLE>
<CAPTION>
Face
CALIFORNIA TAX-EXEMPT Amount Value
PORTFOLIO(continued) (000) (000)
- ------------------------------------------------------------
<S> <C> <C>
California Pollution Control Financing
Authority, Shell Oil Project,
Ser 85A, AMT (A) (B)
3.700%, 02/01/96 ................... $ 2,300 $ 2,300
California Pollution Control Financing
Authority, Shell Oil Project,
Ser 94B, AMT (A) (B)
3.700%, 02/01/96 ................... 200 200
California Pollution Control Financing
Authority, Sierra Pacific Project
(A) (B) (C)
3.300%, 02/07/96 ................... 7,400 7,400
California Pollution Control Financing
Authority, U.S. Borax Project,
Ser 95A (A) (B) (C)
3.200%, 02/07/96 ................... 5,100 5,100
California State RAW, BTP92
Ser 94C (A) (B) (C) (D)
3.390%, 02/07/96 ................... 10,000 10,000
California State RAW, Ser C, FGIC (C)
5.750%, 04/25/96 ................... 9,150 9,192
California Statewide Communities
Development Authority, Chevron
USA Project, Ser 94, AMT (A) (B)
3.700%, 02/01/96 ................... 1,190 1,190
California Statewide Communities
Development Authority, Irvine County
Project, Ser 95A-1 (A) (B) (C)
2.800%, 02/07/96 ................... 6,000 6,000
California Statewide Communities
Development Authority, Irvine County
Project, Ser 95A-5 (A) (B) (C)
2.850%, 02/07/96 ................... 3,900 3,900
California Statewide Communities
Development Authority, Irvine County
Project, Ser 95A-6 (A) (B) (C)
2.850%, 02/07/96 ................... 4,500 4,500
California Statewide Communities
Development Authority, St. Joseph
Health Systems Group (A) (B) (C)
3.200%, 02/01/96 ................... 1,300 1,300
Chula Vista, California, San Diego Gas
& Electric, Ser 92B, AMT (A) (B)
3.050%, 02/07/96 ................... 1,000 1,000
Contra Costa County, California, Multi-
Family Housing Park Regency,
Ser A, AMT (A) (B) (C)
3.400%, 02/07/96 ................... 20,400 20,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
January 31, 1996 Face
CALIFORNIA TAX-EXEMPT Amount Value
PORTFOLIO(continued) (000) (000)
- --------------------------------------------------------------
<S> <C> <C>
Contra Costa, California, Transportation
Authority Sales Tax Revenue,
Ser A, FGIC (A) (B) (C)
2.900%, 02/07/96 .................... $ 3,500 $ 3,500
Corona, California, Multi-Family
Housing Revenue, Cog Partners
Project, Ser 85D (A) (B) (C)
3.475%, 02/07/96 .................... 5,200 5,200
Cupertino, California, TRAN
4.750%, 07/05/96 .................... 5,225 5,243
Glendale, California, Reliance
Development, Glendale Public
Parking Project, Ser 84 (A) (B) (C)
3.650%, 02/15/96 .................... 6,200 6,200
Huntington Park, California,
Redevelopment Agency, Casa Rita
Apartments, Ser 94A, AMT (A) (B) (C)
3.350%, 02/07/96 .................... 4,000 4,000
Kings County, California, Edgewater
Isle Project, Ser 85A (A) (B) (C)
3.100%, 02/07/96 .................... 7,570 7,570
Los Angeles County, California,
Housing Authority, Malibu
Meadows II Project, Ser B (A) (B)
3.350%, 02/07/96 .................... 2,300 2,300
Los Angeles County, California,
Metropolitan Transportation
Authority, Union Station Project,
Ser A (A) (B) (C)
2.950%, 02/07/96 .................... 14,000 14,000
Los Angeles County, California, Sales Tax
Revenue, Ser A, FGIC (A) (B) (C)
2.750%, 02/07/96 .................... 5,050 5,050
Los Angeles County, California, TRAN (C)
4.500%, 07/01/96 .................... 22,200 22,264
Los Angeles, California,
Redevelopment Agency,
Multi-Family Housing,
Lanewood Apartments (A) (B) (C)
3.100%, 02/07/96 .................... 300 300
Milpitas, California, TRAN
4.750%, 07/05/96 .................... 2,450 2,458
Monterey County, California,
Reclamation & Distribution Project,
Ser 95A (A) (B) (C)
3.400%, 02/07/96 .................... 4,000 4,000
Mount Diablo, California, TRAN
4.500%, 10/24/96 .................... 12,000 12,050
</TABLE>
<TABLE>
<CAPTION>
Face
CALIFORNIA TAX-EXEMPT Amount Value
PORTFOLIO(continued) (000) (000)
- ------------------------------------------------------------------
<S> <C> <C>
Oakland, California, TRAN
4.500%, 07/31/96 .................... $ 5,000 $ 5,015
Pasadena, California, Historical
Rehabilitation Revenue, Dodsworth
Building Project (A) (B) (C)
3.100%, 02/07/96 .................... 3,900 3,900
Sacramento, California, Administration
Center and Courthouse
Project (A) (B) (C)
2.850%, 02/07/96 .................... 3,000 3,000
Sacramento, California, Municipal Utility
District, Ser I, TECP (C)
3.100%, 03/19/96 .................... 8,000 8,000
3.100%, 03/20/96 .................... 7,000 7,000
San Bernardino County, California,
Housing Authority, Multifamily
Housing Revenue, Montclair
Heritage Project, Ser A (A) (B) (C)
2.900%, 02/07/96 .................... 4,620 4,620
San Bernardino County, California,
Housing Authority, Multifamily
Housing Revenue, Rialto Heritage
Park Apartments, Ser 93 (A) (B) (C)
2.900%, 02/07/96 .................... 4,330 4,330
San Diego, California, Housing
Authority, Multifamily Housing
Revenue, Lusk Mira Apartments,
Ser 85E (A) (B) (C)
3.050%, 02/07/96 .................... 3,600 3,600
San Diego, California, San Diego Gas
& Electric Co., Ser 95A, TECP
3.100%, 02/01/96 .................... 2,000 2,000
3.050%, 02/07/96 .................... 10,200 10,200
San Diego, California, TECP
3.600%, 02/22/96 .................... 5,000 5,000
San Francisco, California, City & County
Financing Authority Revenue, Yerba
Buena Garden Project (A) (B) (C)
3.350%, 02/07/96 .................... 5,000 5,000
San Francisco, California, City & County
Redevelopment Agency, Bayside
Village Project, Ser A (A) (B) (C)
3.250%, 02/07/96 .................... 7,200 7,200
San Francisco, California, City & County
Redevelopment Agency, Multifamily
Revenue, Fillmore Center Project,
Ser 92B-1 (A) (B) (C)
3.050%, 02/07/96 .................... 8,900 8,900
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
January 31, 1996 Face
CALIFORNIA TAX-EXEMPT Amount Value
PORTFOLIO(continued) (000) (000)
- ------------------------------------------------------------------
<S> <C> <C>
San Francisco, California, TRAN
4.500%, 07/25/96 ...................... $ 10,000 $ 10,027
San Juan Modesto-Santa Clara-Redding,
California, San Juan Project,
Subordinate Lien Revenue,
Ser B, AMBAC (A) (B) (C)
2.900%, 02/07/96 ...................... 1,900 1,900
Sonoma County, California, TRAN
4.250%, 11/01/96 ...................... 9,000 9,026
Southeast Resource Recovery Facilities
Authority, California Lease Revenue,
Ser A (A) (B) (C)
3.300%, 02/07/96 ...................... 2,900 2,900
Southern California Public Power Authority,
Transmission Project Revenue,
Southern Transmission,
Ser 91, AMBAC (A) (B) (C)
2.750%, 02/07/96 ...................... 12,100 12,100
Southern California Public Power Authority,
Transmission Project Revenue,
San Juan Power Project,
MBIA (A) (B) (C) (D)
3.300%, 02/07/96 ...................... 3,360 3,360
State of California, Various Purpose GO,
Ser 92A-2, Custodial Receipts -
Topstar, FGIC (A) (B) (C) (D)
3.050%, 02/07/96 ...................... 10,500 10,500
Vallejo, California, Housing Authority,
Multifamily Revenue, Crow Western
Project-Phase II, Ser 85C (A) (B) (C)
3.200%, 02/07/96 ...................... 9,200 9,200
West Covina, California, Redevelopment
Agency, Barranca Garvey Public
Package (A) (B) (C)
3.050%, 02/07/96 ...................... 8,000 8,000
--------
Total California .................. 384,795
--------
PUERTO RICO -- 1.3%
Puerto Rico Industrial, Medical, Higher
Education and Environmental
Pollution Control Facilities Authority
(Ana G. Mendez Educational
Foundation, FEAGM Project)
(A) (B) (C)
3.200%, 02/07/96 ...................... 5,000 5,000
--------
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT Value
PORTFOLIO(concluded) (000)
- -------------------------------------------------
<S> <C>
Total Municipal Bonds
(Cost $389,795,506) ..... $ 389,795
---------
Total Investments -- 99.5%
(Cost $389,795,506) ..... 389,795
---------
OTHER ASSETS AND LIABILITIES -- 0.5%
Other Assets and Liabilities, Net .. 1,887
---------
Total Other Assets and Liabilities . 1,887
---------
NET ASSETS:
Portfolio Shares (unlimited
authorization - no par value)
based on 391,745,363 outstanding
shares of beneficial interest .. 394,787
Accumulated Net Realized Loss
on Investments ................. (3,105)
---------
Total Net Assets: (100.0%) ......... $ 391,682
=========
Net Asset Value, Offering Price
and Redemption Price Per Share-- $ 1.00
=========
<FN>
(A) Variable Rate Securities - the rate reported in the Statement of Net Assets
is the rate in effect on January 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) Securities are held in connection with a letter of credit or standby bond
purchase agreement issued by a major commercial bank or other financial
institution.
(D) Tax-exempt derivative securities relating to municipal obligations,
including tender option bonds, participations, beneficial interests in
trusts and partnership interests.
AMBAC -- American Municipal Bond Assurance Company
AMT -- Alternative Minimum Tax
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
RAW -- Revenue Anticipation Warrant
Ser -- Series
TECP -- Tax Exempt Commercial Paper
TRAN -- Tax and Revenue Anticipation Note
</FN>
</TABLE>
The accompanying notes are an integral part of thefinancial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
January 31, 1996 Face
INSTITUTIONAL TAX-FREE Amount Value
PORTFOLIO (000) (000)
- ---------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 99.7%
ARIZONA -- 2.6%
Maricopa County, Arizona, PCRB,
Arizona Public Services
Corporation, (C)
3.400%, 02/01/96 ................ $3,000 $3,000
------
CALIFORNIA -- 4.4%
California State, Higher Education
Loan Authority, Student Loan
Refunding, Ser 95E-5,
AMT, (C)
4.250%, 06/01/96 ................ 1,000 1,000
California State, Higher Education
Loan Authority Student Loan
Refunding, Ser 87-A, (C)
3.900%, 07/01/96 ................ 2,300 2,300
Southeast Resource Recovery
Facilities Authority, California,
Ser A, (A) (B) (C)
3.300%, 02/07/96 ................ 1,800 1,800
------
Total California ............ 5,100
------
COLORADO -- 1.8%
Arapahoe County, Colorado CSX
Beckett Aviation Project,
Ser 83 (A) (B) (C)
3.480%, 02/15/96 ................ 1,900 1,900
Colorado State, Frasier Meadows
Manor Project,
Ser 94, (A) (B) (C)
3.250%, 02/01/96 ................ 210 210
------
Total Colorado .............. 2,110
------
GEORGIA -- 4.2%
Burke County, Georgia, PCRB,
Ogelthorpe Power Corporation
Project, Ser A
3.050%, 02/07/96 ................ 1,400 1,400
Fulton County, Georgia, The Alfred
and Adele Davis Academy Project,
Ser 1995, (A) (B) (C)
3.300%, 02/01/96 ................ 3,500 3,500
------
Total Georgia ............... 4,900
------
</TABLE>
<TABLE>
<CAPTION>
Face
INSTITUTIONAL TAX-FREE Amount Value
PORTFOLIO(continued) (000) (000)
- ----------------------------------------------------------------------
<S> <C> <C>
HAWAII -- 4.0%
State of Hawaii, GO, Custodial Receipts -
Topstar, Ser A-7, (A) (B) (C)
3.150%, 02/07/96 ............................ $ 4,700 $ 4,700
-------
ILLINOIS -- 14.1%
Chicago, Illinois, GO, (A) (B) (C)
3.750%, 05/01/96 ............................ 2,800 2,800
Illinois State, Development Finance
Authority, Illinois Power Company
Project, Ser B, (A) (B) (C)
3.200%, 02/07/96 ............................ 3,300 3,300
Illinois State, Development Authority,
Webster Wayne Shopping Center
Project, (A) (B) (C)
3.300%, 02/08/96 ............................ 3,000 3,000
Illinois State, Educational Facilities Authority,
Depaul University Project, (A) (B) (C)
3.450%, 02/07/96 ............................ 2,300 2,300
Illinois State, Educational Facilities Authority,
Art Institute of Chicago, (A) (B) (C)
3.150%, 02/07/96 ............................ 3,000 3,000
3.450%, 02/07/96 ............................ 2,000 2,000
-------
Total Illinois .......................... 16,400
-------
INDIANA -- 0.1%
Hammond, Indiana, PCRB, Amoco Oil
Project, (A) (B)
3.650%, 02/01/96 ............................ 100 100
-------
LOUISIANA -- 1.8%
Jefferson Parish, Louisiana, Hospital
Service District No.2, FGIC, (A) (B),
3.100%, 02/07/96 ............................ 2,100 2,100
-------
MARYLAND -- 8.1%
Maryland State, Health and Higher
Education Authority, Helix Health
Hospital Issue, Ser A, (A) (B) (C)
3.300%, 02/08/96 ............................ 5,000 5,000
Montgomery County, Maryland, Housing
Opportunities Commission,
Ser B, Annual Mandatory Tender, FHA
3.900%, 11/14/96 ............................ 4,500 4,500
-------
Total Maryland .......................... 9,500
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
January 31, 1996
Face
INSTITUTIONAL TAX-FREE Amount Value
PORTFOLIO(continued) (000) (000)
- --------------------------------------------------------------
<S> <C> <C>
MISSISSIPPI -- 3.1%
Jackson County, Mississippi, Chevron USA
Project, Ser 93, (A) (B)
3.650%, 02/01/96 ...................... $3,610 $3,610
------
MISSOURI -- 7.6%
Missouri State, Health and Educational
Facilities Authority, School District
Funding Program, Ser 95 H
4.500%, 08/19/96 ...................... 2,500 2,507
Missouri State, Health and Educational
Facilities Authority, Saint Anthony's
Medical Center, (A) (B) (C)
3.500%, 02/06/96 ...................... 3,700 3,700
St. Louis, Missouri, Industrial Development
Authority, American Cancer Society,
(A) (B) (C)
3.650%, 02/07/96 ...................... 2,700 2,700
------
Total Missouri .................... 8,907
------
NEW YORK -- 4.5%
Nassau County, New York,
Ser 95-B, TAN
4.500%, 04/15/96 ...................... 1,500 1,502
New York State, Local Government
Assistance Corporation,
Ser 95-E (A) (B) (C)
2.950%, 02/07/96 ...................... 3,700 3,700
------
Total New York .................... 5,202
------
NORTH CAROLINA -- 7.5%
Raleigh Durham, North Carolina, Airport
Authority, American Airlines Project
Ser B, (A) (B) (C)
3.750%, 02/01/96 ...................... 4,200 4,200
Wake County, North Carolina, Pollution
Control Authority, Carolina Power and
Light Project, Ser B, (A) (B) (C)
3.550%, 02/07/96 ...................... 4,500 4,500
------
Total North Carolina .............. 8,700
------
OREGON -- 8.0%
Klamath Falls, Oregon, Electric Revenue,
Salt Caves Hydroelectric Project,
Ser 86D
4.400%, 05/02/96 ...................... 4,380 4,380
</TABLE>
<TABLE>
<CAPTION>
Face
INSTITUTIONAL TAX-FREE Amount Value
PORTFOLIO(continued) (000) (000)
- ------------------------------------------------------------------
<S> <C> <C>
Oregon State, Health, Housing, Educational,
& Cultural Facilities Authority, Guide
Dogs For the Blind Project,
Ser A, (A) (B) (C)
3.100%, 02/08/96 ......................... $3,000 $3,000
Oregon State, GO, Ser 73-G, (A) (B) (C)
3.350%, 02/07/96 ......................... 2,000 2,000
------
Total Oregon ......................... 9,380
------
PENNSYLVANIA -- 4.1%
Beaver County, Pennsylvania, Toledo
Edison Project, Ser 92-E, (C)
3.850%, 03/06/96 ......................... 1,200 1,200
Pennsylvania State, Higher Education
Authority, Carnegie Melon University,
(A) (B) (C)
3.700%, 02/01/96 ......................... 200 200
Sayre, Pennsylvania, Health Care Facilities
Authority, Ser K, AMBAC (A) (B) (C)
3.100%, 02/07/96 ......................... 3,400 3,400
------
Total Pennsylvania ................... 4,800
------
SOUTH CAROLINA -- 2.9%
York County, South Carolina, PCRB, Saluda
River National Rural Utilities Cooperative
Financing Corporation, Ser 84E-1
3.800%, 02/15/96 ......................... 3,400 3,400
------
SOUTH DAKOTA -- 1.8%
Lawrence County, South Dakota, PCRB,
Homestake Mining Project, Ser 83
(A) (B) (C)
3.250%, 02/07/96 ......................... 2,100 2,100
------
TENNESSEE -- 2.7%
Metropolitan Tennessee, Nashville &
Davidson General Accident Insurance
Project, Ser 86, AMT,
4.100%, 05/01/96 ......................... 3,200 3,200
------
TEXAS -- 4.7%
Brazos River, Texas, Dow Chemical Project,
Ser 91, TECP
3.500%, 03/25/96 ......................... 2,000 2,000
Gulf Coast, Texas, PCRB, Amoco Oil
Company Project, Ser 92, (A) (B)
3.400%, 02/01/96 ......................... 800 800
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
January 31, 1996
Face
INSTITUTIONAL TAX-FREE Amount Value
PORTFOLIO(continued) (000) (000)
- -------------------------------------------------------------------------
<S> <C> <C>
Red River, Texas, PCRB, Southwestern
Public Service Corporation Project,
(A) (B) (C)
3.100%, 02/08/96 ..................... $ 2,700 $ 2,700
--------
Total Texas ...................... 5,500
--------
UTAH -- 2.8%
Intermountain, Utah, Power Agency,
Ser 85F, (C)
3.750%, 03/15/96 ..................... 3,300 3,300
--------
VERMONT -- 2.2%
Vermont State, Educational & Health
Facilities Authority, VHA New England,
Ser 85-G, AMBAC (A) (B) (C)
3.150%, 02/07/96 ..................... 2,560 2,560
--------
WASHINGTON -- 3.9%
Washington State, Public Power Supply
System, Nuclear Project Number 1,
Ser 1A2 (A) (B) (C)
3.100%, 02/07/96 ..................... 4,600 4,600
--------
WISCONSIN -- 2.8%
Whitewater, Wisconsin, Trek Bicycle
Corporation Project, Ser 95,
AMT, (A) (B) (C)
3.450%, 02/08/96 ..................... 3,235 3,235
--------
Total Municipal Bonds
(Cost $116,403,978) ........... 116,404
--------
Total Investments -- 99.7%
(Cost $116,403,978) ........... 116,404
--------
OTHER ASSETS AND LIABILITIES -- 0.3%
Other Assets and Liabilities, Net ........ 332
--------
Total Other Assets and Liabilities ....... 332
--------
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL TAX-FREE Value
PORTFOLIO(concluded) (000)
- ----------------------------------------------------
<S> <C>
NET ASSETS:
Portfolio Shares (unlimited
authorization - no par value) based
on 116,758,647 outstanding shares
of beneficial interest ............ $ 116,759
Accumulated Net Realized Loss
on Investments .................... (23)
---------
Total Net Assets: (100.0%) ............ 116,736
=========
Net Asset Value, Offering Price
and Redemption Price Per Share-- .. $ 1.00
=========
<FN>
(A) Variable Rate Security - the rate reported in the Statement of Net Assets
is the rate in effect on January 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 date or maturity date.
(C) Security is held in connection with a letter of credit or standby bond
purchase agreement issued by a major commercial bank or other financial
institution.
AMBAC -- American Municipal Bond Assurance Company
AMT -- Alternative Minimum Tax
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Authority
GO -- General Obligation
PCRB -- Pollution Control Revenue Bonds
Ser -- Series
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS (000) THE ARBOR FUND
For the Year Ended January 31, 1996
<TABLE>
<CAPTION>
CALIFORNIA INSTITUTIONAL
TAX-EXEMPT TAX-FREE
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Interest Income.................................... $14,944 $4,541
- -----------------------------------------------------------------------------------
Total Investment Income......................... 14,944 4,541
- -----------------------------------------------------------------------------------
Expenses:
Administration Fees................................ 908 349
Waiver of Administration Fees...................... -- (203)
Investment Advisory Fees........................... 286 87
Custodian Fees..................................... 38 16
Transfer Agent Fees................................ 56 31
Professional Fees.................................. 225 10
Registration Fees.................................. 85 6
Trustee Fees....................................... 15 2
Printing Expenses.................................. 6 2
Amortization of Organizational Costs............... 36 47
Other Expenses..................................... 20 4
- -----------------------------------------------------------------------------------
Total Expenses.................................. 1,675 351
- -----------------------------------------------------------------------------------
Net Investment Income.............................. 13,269 4,190
Realized Loss on Security Transactions............. (3,043) (4)
Change in Unrealized Depreciation on Investments... 3,012 --
- -----------------------------------------------------------------------------------
Net Realized and Unrealized Loss on Investments.. (31) (4)
- -----------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations... $13,238 $4,186
===================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) THE ARBOR FUND
For the Periods Ended January 31,
<TABLE>
<CAPTION>
CALIFORNIA INSTITUTIONAL
TAX-EXEMPT TAX-FREE
PORTFOLIO PORTFOLIO
-------------------------------- --------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Operations:
Net Investment Income ................... $ 13,269 $ 11,084 $ 4,190 $ 3,432
Net RealizedLoss on Security Transactions (3,043) (61) (4) (18)
Net Change in Unrealized Depreciation
on Investments ........................ 3,012 (3,012) -- --
- ------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Investment Operations .......... 13,238 8,011 4,186 3,414
- ------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ................... (13,269) (11,084) (4,190) (3,432)
Net Realized Gains ...................... -- (49) -- (8)
- ------------------------------------------------------------------------------------------------------------
Total Distributions .................. (13,269) (11,133) (4,190) (3,440)
- ------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ............. 1,185,021 1,243,534 862,136 739,857
Cost of Shares Redeemed ................. (1,189,342) (1,250,234) (859,120) (756,875)
- ------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Capital Share Transactions .... (4,321) (6,700) 3,016 (17,018)
- ------------------------------------------------------------------------------------------------------------
Contribution of Capital From Affiliate .... 30 3,012 -- --
- ------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in
Net Assets ......................... (4,322) (6,810) 3,012 (17,044)
- ------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ..................... 396,004 402,814 113,724 130,768
- ------------------------------------------------------------------------------------------------------------
End of Period ........................... $ 391,682 $ 396,004 $ 116,736 $ 113,724
- ------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Issued .................................. 1,185,021 1,243,534 862,136 739,857
Redeemed ................................ (1,189,342) (1,250,234) (859,120) (756,875)
- ------------------------------------------------------------------------------------------------------------
NetIncrease (Decrease) in Share
Transactions .......................... (4,321) (6,700) 3,016 (17,018)
============================================================================================================
</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 thePeriods 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 0.034 -- (0.034) -- $1.00 3.42%(DOUBLE 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 0.036 -- (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
RATIO OF EXPENSES NET
RATIO OF NET TO INCOME TO
EXPENSES INCOME AVERAGE AVERAGE
TO 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..... $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..... $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%.
(DOUBLE 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
January 31, 1996
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 Financial
Management Corporation (the "Administrator"), a wholly-owned subsidiary of SEI
Corporation, on October 9, 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 to the Trust's California Tax-Exempt
Portfolio and the Institutional Tax-Free Portfolio (the "Portfolios"). The
Portfolio's 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 on 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-Exempt and Institutional Tax-Free
Portfolios, respectively. The Administrator has agreed to
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) THE ARBOR FUND
January 31, 1996
voluntarily waive a portion of its fee in order to limit annual operating
expenses to .30% 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. Formerly, the
Adviser was The Prudential Investment Corporation. 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 .075% of the average daily net assets of
each of the California Tax-Exempt and Institutional Tax-Free Portfolios up to
$300 million; .070% of the average daily net assets of each such Portfolio from
$300 million to $500 million; and .050% of each such Portfolio's average daily
net assets over $500 million.
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 and Trustees of the Trust are also Officers of the
Administrator and/or Distributor. Such Officers and Trustees are not compensated
by the Trust for servicing 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 "Portfolio") the right to require PSG to purchase from the
Portfolio sufficient amounts of two bonds, at amortized cost plus accrued
interest, in order to maintain the Portfolio's marked-to-market net asset value
per share at no less than $.9971 (the "Agreement"). The 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 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ARBOR FUND
January 31, 1996
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 Portfolio recorded an unrealized loss of $29,557 and a
contribution to capital in the same amount.
On June 30, 1995, the Orange County Teeter Note matured and the Portfolio
received the full face amount of the note plus accrued interest. On July 19,
1995, the 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 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 Portfolio's accumulated net
realized losses to paid-in-capital. The reclassification had no effect on the
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 ended:
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.
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE ARBOR FUND
(UNAUDITED)
For shareholders that do not have a January 31, 1996 tax year end, this notice
is for informational purposes only. For shareholders with a January 31, 1996 tax
year end, please consult your tax adviser as to the pertinence of this notice.
For the fiscal year ended January 31, 1996, each portfolio is designating the
following items with regard to distributions paid during the year.
<TABLE>
<CAPTION>
(A) (B) (C)
LONG TERM ORDINARY INCOME TOTAL
CAPITAL GAINS DISTRIBUTIONS DISTRIBUTIONS
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Tax-Exempt ................... 0% 100% 100%
Institutional Tax-Free .................. 0% 100% 100%
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
PORTFOLIO DIVIDENDS(1) INTEREST TAX CREDIT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Tax-Exempt ................... 0% 100% 0%
Institutional Tax-Free .................. 0% 100% 0%
===============================================================================================
<FN>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of each portfolio's total
distributions.
** Items (D), (E), and (F) are based on a percentage of ordinary income
distributions of each portfolio.
</FN>
</TABLE>
<PAGE>
INVESTMENT ADVISOR
PNC Institutional Management Corporation
DISTRIBUTOR
SEI Financial Services Company
680 East Swedesford Road
Wayne, PA 19087
FOR MORE INFORMATION CALL:
1-800-545-6331
PIC-F-003-03
<PAGE>
JANUARY 31, 1996
[LOGO]
THE OVB FUNDS
PORTFOLIOS OF THE ARBOR FUND
ANNUAL
REPORT
TO SHAREHOLDERS
<PAGE>
[LOGO] THE OVB FUNDS
TABLE OF CONTENTS
Letter to Shareholders...............................1
Investment Adviser's Report........................2-4
Management's Discussion & Analysis................5-11
Report of Independent Accountants...................12
Financial Statements.............................13-41
Notice to Shareholders..............................42
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>
[LOGO]
JANUARY 31,1996
LETTER TO SHAREHOLDERS
[GRAPHIC OMITTED]
Photo of David Lee,President
DEAR OVB FUNDS SHAREHOLDER:
IT IS ALWAYS A PLEASURE TO REPORT ON SUCCESS, AND THE YEAR 1995 BROUGHT
NUMEROUS SUCCESSES FOR THE OVB FUNDS FAMILY.
IN THEIR SECOND FULL YEAR OF OPERATION, THE OVB FUNDS GAINED MANY
NEW INVESTORS, AND ENDED THE YEAR WITH A RECORD LEVEL OF NET ASSETS. CLEARLY,
INVESTORS RECOGNIZE THE VALUE OF A FAMILY OF FUNDS THAT ARE ADVISED BY THE
EXPERIENCED PROFESSIONALS OF ONE VALLEY BANK.
THIS GROWTH IN POPULARITY MAKES IT PARTICULARLY GRATIFYING THAT 1995 WAS
ALSO A YEAR OF OUTSTANDING PERFORMANCE BY OUR INVESTMENT MANAGEMENT TEAM. AS
DETAILED IN THIS REPORT, MANY OF OUR FUNDS OUTPERFORMED THEIR RESPECTIVE
BENCHMARKS, AND BOTH OF OUR EQUITY FUNDS WERE SINGLED OUT FOR NATIONAL
RECOGNITION.
AND WHILE WE CANNOT EXPECT TO ATTAIN RECORD-SETTING PERFORMANCE EVERY YEAR,
INVESTORS CAN REST ASSURED THAT WE WILL REMAIN DEDICATED TO THE PRINCIPLES THAT
HAVE BROUGHT OUR FUND FAMILY SO FAR, IN SO SHORT A SPAN OF TIME, INCLUDING:
(BULLET) LOW-COST INVESTING: MUTUAL FUNDS ARE AN EXTREMELY AFFORDABLE WAY TO
PARTICIPATE IN THE FINANCIAL MARKETS, SINCE ALL TRANSACTION COSTS AND
MANAGEMENT FEES ARE SHARED BY A LARGE POOL OF INVESTORS. THE OVB FUNDS
TAKE AFFORDABILITY AN IMPORTANT STEP FURTHER BY IMPOSING ABSOLUTELY NO
SALES CHARGES, OR "LOADS," WHEN SHARES ARE PURCHASED OR SOLD.
(BULLET) CONVENIENCE: THE OVB FUNDS MAKE IT EASY TO INVEST IN THE STOCK, BOND,
AND MONEY MARKETS AT ANY TIME, WITH RELATIVELY MODEST SUMS OF MONEY.
THE MINIMUM INITIAL INVESTMENT IS JUST $1,000 PER PORTFOLIO, OR JUST
$500 FOR RETIREMENT ACCOUNTS, AND ADDITIONAL PURCHASES MAY BE MADE FOR
AS LITTLE AS $50 PER PORTFOLIO. IN ADDITION, OUR AUTOMATIC INVESTMENT
PLAN ALLOWS INVESTORS TO ARRANGE FOR MONTHLY TRANSFERS OF $100 OR MORE
FROM THEIR CHECKING OR SAVINGS ACCOUNTS INTO ANY OVB FUNDS PORTFOLIO.
(BULLET) PROFESSIONALISM: THE OVB FUNDS ARE ADVISED BY THE INVESTMENT
PROFESSIONALS OF ONE VALLEY BANK, WHO HAVE OVER SEVENTY YEARS OF
EXPERIENCE IN THE FIELD OF INVESTMENT MANAGEMENT. JUST AS IMPORTANT,
THEY ARE OFFERED THROUGH EXPERIENCED INVESTMENT REPRESENTATIVES WHO
HELP GUIDE EACH INVESTOR TOWARD SOUND FINANCIAL DECISIONS.
REGARDLESS OF THE DIRECTION THE MARKETS TAKE IN THE COMING YEAR, WE BELIEVE
THAT THE OVB FUNDS WILL CONTINUE TO OFFER A VALUABLE ALTERNATIVE FOR INDIVIDUAL
AND INSTITUTIONAL INVESTORS. AND WE WOULD LIKE TO TAKE THIS OPPORTUNITY TO THANK
YOU, OUR VALUED AND GROWING FAMILY OF SHAREHOLDERS, FOR YOUR CONTINUED
CONFIDENCE IN THE OVB FUNDS.
/s/David Lee
David Lee
President
The Arbor Fund
1
<PAGE>
INVESTMENT ADVISER'S REPORT
What a difference a year makes. Twelve months ago, in the face of disappointing
results in both the stock and bond markets, we were advising our investors to
remain calm and stay the course.
Today, those who heeded this advice have been rewarded with strong, even
historic gains in all three major asset classes.
Having weathered many such market fluctuations, our portfolio managers
recognized that the challenges of 1994 were a temporary aberration, brought on
primarily by the Federal Reserve Board's series of interest rate hikes. As a
result, they avoided panic and were able to take advantage of weaknesses in the
market. The results of their patience and perspective can been seen in this
report, as many of our stock, bond, and even money market funds outperformed
their benchmarks by a substantial margin.
In fact, a survey published in the January 15, 1996 edition of BANK
INVESTMENT PRODUCT NEWS ranked The OVB Funds #2 among bank-sponsored proprietary
mutual fund families nationwide on the basis of combined performance for the
calendar year 1995.
In addition, The OVB Emerging Growth Fund Class A tied for third place among
all bank-sponsored proprietary mutual funds in the nation in that same BANK
INVESTMENT PRODUCT NEWS survey.
The OVB Emerging Growth Portfolio Class A was also rated 25th among all
growth funds nationwide for the calendar year 1995 in the January 2, 1996
edition of INVESTOR'S BUSINESS DAILY, and was singled out as one of the top 100
growth funds overall in the February 19, 1996 edition of THE WALL STREET
TRANSCRIPT.
While we are proud of results like these, we understand that the rally of
1995 was temporary in nature, and the market cannot be expected to provide this
type of strong upward momentum on a regular basis. Therefore, we continue to
manage our funds' assets prudently and cautiously, seeking values that are not
dependent on market excesses in either direction.
We urge our shareholders to continue taking a similar approach in their own
investment programs. That is, invest for the long run, avoiding the temptation
to "time" your investments based on market predictions. And equally important,
diversify among stock, bond, and money market funds based on your individual
needs and time horizon. Finally, invest on a consistent basis, regardless of
whether the markets are up or down.
These approaches are the keys to long-term satisfaction from any investment
program. And we encourage all our shareholders to work with their investment
representatives to design a strategy to employ these time-tested practices.
2
<PAGE>
[LOGO]
JANUARY 31,1996
MONEY MARKET REVIEW
Money market funds performed well
overall during 1995, providing relatively steady yields at levels that
significantly exceeded the current rate of inflation.
During most of the year, the yield curve was relatively flat, meaning that
there was little additional yield to be gained by extending the maturities of
the money market portfolio. Therefore, it was generally beneficial to remain at
the shorter end of the maturity spectrum.
In the year ahead, we believe that money market rates may fall still
further, as the market anticipates further easing by the Federal Reserve Board.
However, we expect to continue to see real returns after inflation, along with
the liquidity and relative stability of principal that are the traditional
hallmarks of money market fund investing.
BOND MARKET REVIEW
After a traumatic year in 1994, the bond markets recovered strongly, providing
exceptional levels of both income and capital appreciation.
In a reversal of its policies from the previous year, the Federal Reserve
Board declined to raise rates further, and actually appeared to ease rates
somewhat. This, combined with low inflation and strong evidence that the desired
"soft landing" for the economy had been achieved, led to dramatic gains in bonds
across the board.
Going forward, we believe that the fundamentals for bonds continue to be
positive, as interest rate and inflation trends worldwide remain favorable.
Potential negatives on the horizon include the continuing stalemate over a
Federal budget and the ongoing debate over various flat tax proposals, which
could pose challenges for municipal bonds. Still, we feel that bonds are poised
for a year of better than current coupon performance, where investors earn the
coupon rate and enjoy the potential for a modest measure of capital
appreciation.
(CONTINUED)
3
<PAGE>
INVESTMENT ADVISOR'S REPORT (CONTINUED)
EQUITY MARKET REVIEW
For the equity markets, fiscal 1995 was a history-making year. During the twelve
month period ended January 31, 1996, the Dow Jones Industrial Average recorded
no fewer than 75 record highs, ending the year at a level unimaginable even a
few years ago: 5395.30.
The market's surge was all the more gratifying because it followed a dismal
1994. And, like 1994, it was very much a reaction to the bond market and
interest rates.
The most interesting sector trend for the year was technology, which led the
market for several months, only to lag later in the year as investors punished
any hint of earnings disappointment from technology companies. Otherwise, there
were broad gains in virtually all major sectors, particularly the medical and
financial services industries.
For 1996, we believe the fundamentals for equities remain positive, with
moderate inflation and declining short-term interest rates providing the
environment for healthy corporate earnings and further expansion in
price/earnings ratios.
CONCLUSION
Ultimately, we can be grateful that the lessons of 1994 and 1995 coincided with
the first two full years of our fund family's operations. No two years in recent
memory better illustrate the value of patience and perseverance when approaching
the investment markets.
We hope these examples from the past, through their sharp contrasts and
divergent results, will prove helpful in guiding our investors toward sound
long-term investment strategies in the future.
/s/J. Randy Valentine
J. Randy Valentine
Senior Vice President
One Valley Bank
4
<PAGE>
[LOGO]
JANUARY 31,1996
MANAGEMENT'S DISCUSSION & ANALYSIS
THE OVB FUNDS PRIME
OBLIGATIONS PORTFOLIO
- -------------------------------------------------------------------------------
SUB-ADVISOR: WELLINGTON MANAGEMENT COMPANY
For the fiscal year ended January 31, 1996, The OVB Funds Prime Obligations
Portfolio, Class A, posted a total return of 5.65%, outperforming its benchmark,
the Donoghue's First Tier Index, which had a total return of 5.43%. For Class B
shares, total return was 5.39%.
The fund's performance is attributable to its use of maturity strategies
throughout the year. During the first few months of 1995, maturities were kept
at the shorter end of the spectrum in order to take advantage of any increases
in rates, however modest. By mid-year, with the
Comparison of Change in the Value of a $10,000 Investment
in The OVB Prime Obligation Money Market, Class A,
versus the IBC/Donoghue First Tier Average
[GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the OVB Prime
Obligation Money Market, Class A from December 31, 1993 through January 31, 1996
as compared with the growth of a $10,000 investment in the IBC/Donoghue First
Tier Average.
The plot points used to draw the line graph were as follows:
Period Ended Growth of $10,000 Growth of $10,000
Invested in OVB Prime Invested in IBC/Donoghue
Obligation Money Market, First Tier Average
Class A
12/31/93 $10,000 $10,000
01/31/94 $10,025 $10,022
01/31/95 $10,441 $10,413
01/31/96 $11,031 $10,978
One Year Annualized Cumulative
Return Inception to Date Inception to Date
Class A 5.65% 4.75% 10.58%
For the period ended 1/31/96. Past performance of the portfolio is not
predictive of future performance. Class A shares were offered beginning 12/1/93.
Comparison of Change in the Value of a $10,000 Investment
in The OVB Prime Obligation Money Market, Class B,
versus the IBC/Donoghue First Tier Average
[GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the OVB Prime
Obligation Money Market, Class B from February 28, 1994 through January 31, 1996
as compared with the growth of a $10,000 investment in the IBC/Donoghue First
Tier Average.
The plot points used to draw the line graph were as follows:
Period Ended Growth of $10,000 Growth of $10,000
Invested in OVB Prime Invested in IBC/Donoghue
Obligation Money Market, First Tier Average
Class B
02/28/94 $10,000 $10,000
01/31/95 $10,368 $10,370
01/31/96 $10,927 $10,933
One Year Annualized
Return Inception to Date
Class B 5.39% 4.67%
For the period ended 1/31/96. Past performance of the portfolio is not
predictive of future performance. Class A shares were offered beginning 2/8/94.
Fed beginning to ease rates, the fund began extending maturities in order to
lock in the higher prevailing yields. By November, the fund's average weighted
maturity reached its peak of nearly 80 days, just before the Fed's final rate
cut of the year, which occurred in mid-December.
Throughout the year, the portfolio's holdings consisted primarily of
commercial paper and U.S. agency securities.
Looking ahead, we believe that the Fed will continue to lower short-term
interest rates over the next few months but that the moves will be in small
increments and will be infrequent. The central bank's actions will follow
continued slow
(continued)
5
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS (CONTINUED)
domestic growth and continued decline in long-term inflation expectations.
As in recent quarters, the key to performance will be to maintain a longer
average maturity in order to lock in prevailing yields for shareholders. In this
environment, we continue to look for value in floating rate securities, callable
CDs, and other innovative but appropriately structured instruments.
THE OVB FUNDS WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
- -------------------------------------------------------------------------------
For the fiscal year ended January 31, 1996, The OVB Funds West Virginia
Tax-Exempt Portfolio, Class A, posted a total return of 13.66%. For Class B
shares, total return was 13.26%. The fund's performance is now compared to two
new benchmarks which have been selected for their appropriateness to the
portfolio's style. The previous benchmark was the Lehman Brothers Municipal Bond
Index, which returned 15.06% for the period. The new benchmarks are the Lipper
Intermediate Term Muni Debt Funds Average, which returned 11.60% for the year;
and the Lipper General Municipal Debt Funds Average, which returned 14.03% for
the period.
This strong performance was attributable to our anticipation of a market
rally during the depths of the previous year's declines. Confident that the
market was oversold in 1994, the fund began extending its duration from the
eight-year range to approximately ten years. When the market eventually rallied
in 1995, the fund was able to benefit from a strong combination of income and
capital gains.
The market hesitated at times during the year, particularly in the second
quarter when rumors of a flat tax began to appear. However, in the belief that
any real legislation would be years in the making, the fund maintained its
strategy of
Comparison of Change in the Value of a $10,000
Investment in The OVB West Virginia Tax-Exempt
Income Portfolio, Class A or B,
versus the Lehman Municipal Bond Index, the Lipper General Muni
Debt Funds Average and the Lipper Intermediate Muni Debt Funds Average
[GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the OVB West Virginia
Tax-Exempt Income Portfolio, Class A and B from December 31, 1993 through
January 31, 1996 as compared with the growth of a $10,000 investment in the
Lehman Municipal Bond Index, Lipper General Muni Debt Funds Average and Lipper
Intermediate Muni Debt Funds Average. The plot points used to draw the line
graph were as follows:
<TABLE>
<CAPTION>
Period Ended Growth of $10,000 Growth of $10,000 Growth of $10,000
Invested in OVB West Invested in OVB West Invested in Lehman
Virginia Tax-Exempt Income, Virginia Tax-Exempt Income, Municipal Bond
Class A Class B Index
<S> <C> <C> <C>
12/31/93 $10,000 $10,000 $10,000
01/31/94 $10,094 $10,092 $10,114
01/31/95 $ 9,753 $ 9,727 $ 9,754
01/31/96 $11,085 $11,016 $11,223
</TABLE>
Growth of $10,000 Growth of $10,000
Invested in Lipper General Invested in Lipper Intermediate
Muni Debt Funds Average Muni Debt Funds Average
12/31/93 $10,000 $10,000
01/31/94 $10,115 $10,104
01/31/95 $ 9,635 $ 9,839
01/31/96 $10,986 $10,981
One Year Annualized Cumulative
Return Inception to Date Inception to Date
Class A 13.66% 5.58% 12.48%
Class B 13.26% 4.94% 10.78%
For the period ended 1/31/96. Past performance of the portfolio is not
predictive of future performance. Class A shares were offered beginning 12/1/93.
Class B shares were offered beginning 12/17/93.
6
<PAGE>
[LOGO]
JANUARY 31,1996
extending duration in order to capture higher yields. This proved effective
during the stronger market conditions of the third and fourth quarters.
Looking ahead, we envision a good year for high-quality municipal issues in
1996 as the market remains in what appears to be a secular trend toward lower
rates. This trend is fueled by continued moderation in economic growth,
employment growth, and inflation.
Further, we believe that market fears of a flat tax may be overdone, based
on recent reports suggesting that the benefits of a flat tax have been
exaggerated. Once the realities behind these proposals come to light, the result
may be a diluted version of a flat tax that could allow some continued exemption
for municipal bond income. For the immediate future, the fund will continue with
its current strategy, working at the longer end of the maturity spectrum in
order to optimize yield.
THE OVB FUNDS GOVERNMENT
SECURITIES PORTFOLIO
- -------------------------------------------------------------------------------
For the fiscal year ended January 31, 1996, The OVB Funds Government Securities
Portfolio, Class A, posted a total return of 18.14%. For Class B shares, total
return was 17.72%. This compares to the fund's existing benchmark, the Lehman
Brothers Government/Corporate Index, which returned 17.72% for the period. In
addition, to better reflect the portfolio's style the fund has added a second
benchmark, the Lipper Intermediate
Comparison of Change in the Value of a $10,000
Investment in The OVB Government Securities
Portfolio, Class A or B,
versus the Lehman Government/Corporate Index, and the
Lipper Intermediate Investment-Grade Debt Funds Average
[Graphic Omitted]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the OVB Government
Securities, Class A and B from December 31, 1993 through January 31, 1996 as
compared with the growth of a $10,000 investment in the Lehman
Government/Corporate Index and Lipper Intermediate Investment-Grade Debt Funds
Average. The plot points used to draw the line graph were as follows:
Period Growth of $10,000 Growth of $10,000 Growth of $10,000
Ended Invested in OVB Invested in OVB Invested in Lehman
Government Securities Government Securities Government/Corporate
Class A Class B Index
12/31/93 $10,000 $10,000 $10,000
01/31/94 $10,100 $10,098 $10,150
01/31/95 $ 9,648 $ 9,631 $ 9,834
01/31/96 $11,398 $11,338 $11,577
Growth of $10,000
Invested in Lipper Intermediate
Investment-Grade Debt
Funds Average
12/31/93 $10,000
01/31/94 $10,125
01/31/95 $ 9,818
01/31/96 $11,336
One Year Annualized Cumulative
Return Inception to Date Inception to Date
Class A 18.14% 6.41% 14.42%
Class B 17.72% 6.21% 13.40%
For the period ended 1/31/96. Past performance of the portfolio is not
predictive of future performance. Class A shares were offered beginning 12/1/93.
Class B shares were offered beginning 12/31/93.
Investment-Grade Debt Funds Average, which returned 15.46% for the period.
The fund's outstanding performance was in part the result of strategies that
began in the previous year. In the belief that the market had grown overly
pessimistic in late 1994, we began extending the portfolio's duration late in
the year, and continued on that path into 1995. As market conditions steadily
improved, the
(continued)
7
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS (CONTINUED)
portfolio was well positioned to reap strong capital gains while retaining
higher yields in a falling-rate environment.
A second factor that contributed to the fund's performance was the decision
to emphasize credit quality throughout 1995. Forecasting a weak economy and a
bond market rally, we emphasized Treasury and agency securities over potentially
less liquid corporate and mortgage-backed issues. Ultimately, Treasuries and
agencies provided the best total return for the year.
A third factor that aided performance was the decision to avoid the lure of
callable issues. In recent years, many investors pursued callable bonds in order
to capture incremental yield, only to find that these issues were indeed called
during 1995 or will be called in 1996, leaving their former holders with cash to
be invested at the current lower rates. Because we believe that callables are a
no-win proposition in this type of environment, the fund tends to avoid these
types of issues.
Looking ahead, we remain optimistic about the bond market, and believe that
conditions are in place for at least a near-term continuation of the trend that
began in 1995. Inflation remains low, economic growth is moderate, and
productivity gains continue to climb. Therefore, we plan to keep the Government
Securities Portfolio near the longer end of the maturity spectrum in order to
capture both the incremental yields that are available and potential capital
gains, while maintaining the portfolio's overall quality.
THE OVB FUNDS EMERGING
GROWTH PORTFOLIO
- -------------------------------------------------------------------------------
For the fiscal year ended January 31, 1996, The OVB Funds Emerging Growth
Portfolio, Class A, posted a total return of 45.42%. For Class B shares, total
return was 45.08%. The fund's performance is now compared to a new benchmark
which has been selected for its appropriateness to the portfolio's growth style.
The previous benchmark was the NASDAQ/OTC Index, which returned 40.34% for the
period. The new benchmark is the Frank Russell 2000 Growth Index, which returned
32.65% for the period.
The fund's exceptional performance was the result of its ability to
anticipate major market trends, and then capitalize on them through timely
sector strategies. In addition, the fund's relatively small size gave it the
agility to implement these strategies quickly once portfolio decisions were
made.
Early in the year, the fund was heavily overweighted in technology issues,
which experienced strong gains for much of the year. At times, technology stocks
accounted for nearly half of the portfolio's holdings. More than any other
single factor, this overweighting contributed to the fund's outperformance of
its benchmark, as technology stocks surged during the first and second quarters.
Beginning in the third quarter, however, we began taking profits in the
technology sector, reducing our exposure to roughly
8
<PAGE>
[LOGO]
JANUARY 31,1996
one-third of the portfolio. In particular, the fund shed most of its computer
memory issues, such as those in the fields of memory chips and disk drives. This
position was based on our view that overcapacity and softening demand would soon
reduce their attractiveness, which proved to be the case as the entire sector
experienced sharp declines later in the year.
Having trimmed our technology weighting, we adopted a strategy that placed
more emphasis on such sectors as
Comparison of Change in the Value of a $10,000
Investment in The OVB Emerging Growth Portfolio,
Class A or B, versus the
NASDAQ/OTC Index, and the Frank Russell 2000 Growth Index
[Graphic Omitted]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the OVB Emerging
Growth Portfolio, Class A and B from December 31, 1993 through January 31, 1996
as compared with the growth of a $10,000 investment in the NASDAQ/OTC Index and
the Frank Russell 2000 Growth Index.
The plot points used to draw the line graph were as follows:
Period Ended Growth of $10,000 Growth of $10,000 Growth of $10,000
Invested in OVB Invested in OVB Invested in
Emerging Growth Emerging Growth NASDAQ/OTC
Class A Class B Index
12/31/93 $10,000 $10,000 $10,000
01/31/94 $10,325 $10,325 $10,305
01/31/95 $ 7,744 $ 7,714 $ 9,723
01/31/96 $11,261 $11,191 $13,645
Growth of $10,000
Invested in Frank Russell
2000 Growth Index
12/31/93 $10,000
01/31/94 $10,266
01/31/95 $ 9,558
01/31/96 $12,678
One Year Annualized Cumulative
Return Inception to Date Inception to Date
Class A 45.42% 6.36% 14.30%
Class B 45.08% 6.80% 14.75%
For the period ended 1/31/96. Past performance of the portfolio is not
predictive of future performance. Class A shares were offered beginning 12/1/93.
Class B shares were offered beginning 12/29/93.
medical, financial-related, and specialty retailing. We believe that there is
real earnings growth potential in a number of small companies within these
industries, and we will continue to select those which have already proven their
ability to generate profits.
Among the stocks that were purchased late in the fund year were Genzyme
Tissue Repair, a biomedical company; Martek Biosciences, producers of a unique
infant formula additive; Authentic Fitness, manufacturers of the popular Speedo
brand of athletic apparel; Applix, a developer of real-time financial software
applications; and Sunglass Hut, a successful niche retailer.
Looking ahead, we are optimistic that 1996 will be a year of gains, although
we do not expect corporate profits or interest rate cuts to support the level of
advance seen in 1995. Further, we believe that small cap issues continue to
offer good potential, particularly since many companies in this category do not
rely on consumer spending or a strong export market in order to remain
successful. With this in mind, we will continue to select sectors and issues
where we believe real value exists, while seeking to avoid excesses in the
markets.
(continued)
9
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS (CONTINUED)
THE OVB FUNDS CAPITAL
APPRECIATION PORTFOLIO
- -------------------------------------------------------------------------------
For the fiscal year ended January 31, 1996, The OVB Funds Capital Appreciation
Portfolio, Class A, posted a total return of 41.31%, compared with a 38.66%
return for its benchmark, the Standard & Poor's 500 Composite Stock Index. For
Class B shares, total return was 40.88%.
The strong outperformance of the benchmark is attributable to advantageous
portfolio moves throughout the year. Chief among these was our phasing out of
semiconductor and computer memory stocks during the second half of the year,
from which the fund not only realized large capital gains, but also avoided
subsequent price declines.
In place of these issues, the fund has recently favored such sectors as
medical and financial services, where earnings are more predictable.
In 1995, the portfolio acquired or retained a number of leading
pharmaceutical and biotechnology issues, including Merck, Pfizer, Johnson &
Johnson, SmithKline Beecham, Pharmacia & Upjohn, and Amgen.
In the financial services sector, we focused on large institutions that have
demonstrated strong cost controls and continued earnings acceleration. Among the
financial issues in the portfolio at year-end were Citicorp, Wells Fargo,
Merrill Lynch, and Federal National Mortgage Association ("Fannie Mae").
For international exposure, the fund also added Sony Corporation, in the
belief that the Japanese market is entering a recovery phase, and that Sony
offers strong, consistent earnings momentum.
Despite our trimming of the technology sector, we continue to hold issues in
the client/server market, where earnings growth and product demand remain
strong. These include Digital Equipment Corporation, Bay Networks, and Cisco
Systems. Also, our position in Sun Microsystems offers exposure to both
networking and, through Sun's popular Java software, the Internet trend.
Comparison of Change in the Value of a $10,000
Investment in The OVB Capital Appreciation
Portfolio, Class A & B,
versus the Standard & Poor's 500 Composite Index
[GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the OVB Capital
Appreciation Portfolio, Class A and B from December 31, 1993 through January 31,
1996 as compared with the growth of a $10,000 investment in the Standard &
Poor's 500 Composite Index.
The plot points used to draw the line graph were as follows:
Period Ended Growth of $10,000 Growth of $10,000 Growth of $10,000
Invested in OVB Invested in OVB Invested in
Capital Appreciation Capital Appreciation Standard & Poor's
Class A Class B 500 Composite Index
12/31/93 $10,000 $10,000 $10,000
01/31/94 $10,203 $10,204 $10,340
01/31/95 $ 9,301 $ 9,274 $10,393
01/31/96 $13,143 $13,066 $14,411
One Year Annualized Cumulative
Return Inception to Date Inception to Date
Class A 41.31% 15.11% 35.65%
Class B 40.88% 13.66% 30.65%
For the period ended 1/31/96. Past performance of the portfolio is not
predictive of future performance. Class A shares were offered beginning 12/1/93.
Class B shares were offered beginning 12/31/93.
10
<PAGE>
[LOGO]
JANUARY 31,1996
Looking ahead, we believe that 1996 may provide less excitement than 1995,
but should still produce good results within the large-cap growth sector. We
have adopted a more defensive approach than at this time last year, in the
belief that the market will not experience as broadly-based a rally as it did in
1995. However, we feel confident that our holdings represent good value for the
future, regardless of where the overall market moves in the near term.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OVBPRIME OBLIGATIONS,
OVBWEST VIRGINIA TAX-EXEMPT INCOME,
OVBGOVERNMENT SECURITIES,
OVBEMERGING GROWTH AND
OVBCAPITAL APPRECIATION PORTFOLIOS OFTHEARBOR FUND
In our opinion, the accompanying statements of net assets and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the
financial position of the OVBPrime Obligations,OVBWest Virginia
Tax-Exempt Income,OVBGovernment Securities,OVBEmerging Growth and
OVBCapitalAppreciation Portfolios of The Arbor Fund (hereafter referred
to as the "Fund") at January 31, 1996, the results of each of their
operations, the changes in each of their net assets and the financial
highlights for each of the respective periods presented, in conformity
with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits.We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at January 31, 1996 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICEWATERHOUSELLP
Philadelphia, PA
March 8, 1996
12
<PAGE>
[LOGO]
JANUARY 31,1996
STATEMENT OF NET ASSETS
THE OVB FUNDS PRIME
OBLIGATIONS PORTFOLIO
[GRAPHIC OMITTED]
A pie chart depicting the percent of total portfolio investments for the
following investment classifications:
Commercial Paper 48%
U.S. Government Agency Obligations 9%
Floating Rate Instruments 15%
Banker's Acceptances 3%
Certificates of Deposit/Bank Notes 21%
Repurchase Agreement 4%
% of Total Portfolio Investments
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
COMMERCIAL PAPER--49.8%
BCI Funding
5.710%, 02/16/96 $3,000 $ 2,993
Banque National de Paris
5.510%, 05/21/96 3,000 2,949
Canadian Wheat Board
5.670%, 03/04/96 3,000 2,985
Chevron Transport
5.520%, 04/17/96 4,400 4,349
Ciesco
5.580%, 03/08/96 1,000 994
ESC Securitization
5.720%, 02/02/96 3,000 2,999
General Electric Capital
5.700%, 02/09/96 1,000 999
Goldman Sachs Group
5.440%, 03/11/96 1,000 994
Kredietbank
5.740%, 02/05/96 2,000 1,999
National Westminster Bank
5.380%, 04/11/96 1,000 989
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
NationsBank
5.190%, 06/28/96 $3,000 $ 2,936
Norwest
5.690%, 02/28/96 4,000 3,983
Quebec Province
5.080%, 07/17/96 3,200 3,125
Sears Roebuck Acceptance
5.720%, 02/13/96 4,000 3,992
Toshiba America
5.400%, 04/02/96 3,000 2,973
Westpac Banking
5.530%, 04/30/96 3,000 2,959
Zeneca Wilmington
5.350%, 04/17/96 3,000 2,966
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST $45,184,000) 45,184
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--9.3%
FNMA
5.530%, 05/10/96 2,500 2,463
5.340%, 02/06/96 (A) 6,000 6,000
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $8,463,000) 8,463
- -------------------------------------------------------------------------------
FLOATING RATE INSTRUMENTS --15.4%
First Bank of South Dakota
5.605%, 02/21/96 (A) 3,000 3,000
General Electric
5.867%, 02/22/96 (A) 2,000 2,001
People's Security Funding Agreement
6.090%, 04/30/96 (A) 3,000 3,000
PNC Bank
5.549%, 02/06/96 (A) 3,000 2,998
SMM Trust 1995-N
5.925%, 02/15/96 (A) 1,000 1,000
SMM Trust 1995-1
5.582%, 02/29/96 (A) 2,000 2,000
- -------------------------------------------------------------------------------
TOTAL FLOATING RATE INSTRUMENTS
(COST $13,999,000) 13,999
- -------------------------------------------------------------------------------
BANKER'S ACCEPTANCES--2.7%
First National Bank of Boston
5.310%, 03/29/96 1,500 1,488
5.200%, 06/10/96 1,000 981
- -------------------------------------------------------------------------------
TOTAL BANKER'S ACCEPTANCES (COST $2,469,000) 2,469
- -------------------------------------------------------------------------------
(CONTINUED)
13
<PAGE>
STATEMENT OF NET ASSETS
THE OVB FUNDS PRIME
OBLIGATIONS PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT/BANK NOTES--22.0%
BankAmerica
5.270%, 06/25/96 $3,000 $ 3,000
Bank of Hawaii
5.570%, 11/06/96 3,000 3,003
Bank of New York
5.520%, 05/22/96 3,000 2,999
Bank of Tokyo Limited
5.590%, 03/12/96 3,000 3,000
Chase Manhattan
5.770%, 04/15/96 3,000 3,000
First of America Bank
5.375%, 05/17/96 3,000 3,000
National Westminster Bank
5.760%, 02/22/96 2,000 2,000
- -------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES
(COST $20,002,000) 20,002
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT--4.4%
Aubrey Lanston 5.90%, dated
01/31/96, matures 02/01/96,
repurchase price $3,986,653
(collateralized by U.S.
Treasury Note, par value
$3,950,000, 6.875%, matures
10/31/96, market value
$4,069,117) 3,986 3,986
- -------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $3,986,000) 3,986
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS--103.6%
(COST $94,103,000) 94,103
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
VALUE
DESCRIPTION (000)
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--(3.6%)
Other Assets and Liabilities, Net $(3,289)
- -------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (3,289)
- -------------------------------------------------------------------------------
NET ASSETS 90,814
- -------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization--no
par value) based on 84,667,179
outstanding shares of beneficial
interest 84,667
Portfolio shares of Class B
(unlimited authorization--no
par value) based on 6,154,655
outstanding shares of beneficial
interest 6,155
Accumulated net realized loss on
investments (8)
- -------------------------------------------------------------------------------
TOTAL NET ASSETS--100.0% $90,814
- -------------------------------------------------------------------------------
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) Floating Rate Instrument. Rate reflected on the Statement of Net Assets is
the rate in effect on January 31, 1996.
FNMA Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
[LOGO]
JANUARY 31,1996
THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME PORTFOLIO
[GRAPHIC OMITTED]
A pie chart depicting the percent of total portfolio investments for the
following investment classifications:
Municipal Bonds 96%
Money Markets 4%
% of Total Portfolio Investments
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS--94.7%
West Virginia--91.3%
Beckley, Industrial Development,
Beckley Water Project, RB
7.000%, 10/01/17 $ 400 $ 436
Beckley, Sewage System
Refunding, RB
6.750%, 10/01/25 400 424
Berkeley County, Board of
Education, GO, BIG
7.375%, 04/01/03 75 89
Berkeley County, Board of
Education, GO, FGIC
4.500%, 06/01/09 180 171
Berkeley County, GO, FGIC
4.125%, 06/01/10 600 539
Bluefield, Sewer, RB, MBIA
5.600%, 10/01/97 10 10
Brooke County, Board of
Education, GO, AMBAC
8.800%, 08/01/97 45 48
9.000%, 08/01/98 15 17
8.500%, 08/01/99 75 86
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
Brooke Pleasant, Tyler Wetzel
County, Single Family
Mortgage, RB
5.000%, 08/15/10 $ 700 $ 692
Cabell County, Board of
Education, GO, MBIA
6.500%, 05/01/03 150 169
6.600%, 05/01/04 150 172
Cabell, Putnam & Wayne, Single
Family Residence Mortgage,
RB, FGIC
7.375%, 04/01/11 320 388
Charleston, GO
5.700%, 06/01/96 15 15
Charleston, New Public Housing
Authority, RB
5.000%, 02/01/99 15 15
Charleston, Parking Facility
Improvements, RB
6.000%, 06/01/13 880 901
Charleston, Parking Facility
Improvements, Ser A
7.000%, 06/01/16 1,080 1,195
Clarksburg, Water Refunding
Improvement, RB
6.100%, 09/01/04 75 82
6.200%, 09/01/05 75 82
Fayette County, Board of
Education, GO
5.500%, 12/01/01 20 21
Fayette County, Pollution Control,
Union Carbide Project, RB
5.200%, 02/01/98 40 40
Grant County, Grant Memorial
Hospital Project, RB, Ser C
7.300%, 10/01/19 200 216
Harrison County, Board of
Education, GO, FGIC
6.200%, 05/01/04 150 166
6.400%, 05/01/07 175 198
Harrison County, Solid Waste
Disposal, Monongahela Power
Company, RB, Ser A
6.875%, 04/15/22 1,500 1,650
Harrison County, Solid Waste
Disposal, Potomac Edison
Project, Ser B, AMBAC
6.250%, 05/01/23 400 416
(CONTINUED)
15
<PAGE>
STATEMENT OF NET ASSETS
THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
Harrison County, Solid Waste
Disposal, RB, MBIA
6.300%, 05/01/23 $ 200 $ 210
Harrison County, Solid Waste
Disposal, West Penn Power
Harrison Project, Ser B, AMT
6.300%, 05/01/23 300 313
Harrison County, Special
Obligation Refunding,
Ser A, GO
6.350%, 05/15/04 95 107
Harrison County, United Hospital
Center, AMBAC
4.550%, 04/01/02 500 503
Jackson County, Residential
Mortgage, RB, FGIC
7.375%, 06/01/10 55 65
Kanawha County, Building
Commission, Charleston Area
Medical Center Project,
Ser A, RB, AMBAC
7.500%, 11/01/08 150 171
Kanawha County, Building
Commission, Charleston Area
Medical Center Project,
Ser A, RB, MBIA
7.100%, 06/01/13 30 32
Kanawha County, Building
Commission, Charleston Area
Medical Center Project, RB
6.250%, 12/01/98 70 73
Kanawha County, Residential
Mortgage, RB, FGIC
7.375%, 09/01/10 305 360
7.375%, 09/01/11 45 54
Kanawha County, Single Family
Mortgage, RB, FGIC
7.100%, 12/01/99 15 17
7.300%, 12/01/04 120 142
7.400%, 12/01/10 30 36
Kanawha, Mercer & Nicholas
Counties, Single Family
Mortgage, RB, Prerefunded
02/01/14 @ 89.8452
Zero Coupon, 02/01/15 2,000 638
Kanawha, Putnam County
Huntington/Charleston,
Single Family Mortgage,
Ser A Zero Coupon, 12/01/16 800 243
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
Logan County, Logan County
Health Care
8.000%, 12/01/16 $ 690 $ 876
Marion County, Single Family
Mortgage, RB, FGIC
7.100%, 08/01/99 20 22
7.375%, 08/01/11 25 30
Marshall County, Pollution
Control, Ohio Power Project,
Ser B, RB, MBIA
5.450%, 07/01/14 500 503
Marshall County, Pollution
Control, Ohio Power Project,
Ser C, RB, MBIA
6.850%, 06/01/22 600 656
Marshall County, Special
Obligation Refunding, GO
6.500%, 05/15/10 205 221
Mason County, Pollution Control,
Ohio Power Project, Ser B,
RB, AMBAC
5.450%, 12/01/16 1,220 1,222
Mason County, Single Family
Mortgage, Principal Custody
Receipts, RB, FGIC
5.000%, 08/01/11 335 326
Mason County, Single Family
Mortgage, RB, FGIC
7.400%, 08/01/11 608 730
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 66
Monongalia County, Board o
Education, GO, MBIA
7.000%, 04/01/03 150 173
Monongalia County, Single
Family Mortgage, RB
7.200%, 03/01/11 150 150
Morgantown, Building Commission
Municipal Lease, RB, MBIA
5.750%, 01/01/19 250 257
Morgantown, Water RB
5.750%, 08/01/96 30 30
Morgantown, Waterworks Project,
RB, BIG
8.100%, 10/01/97 45 48
16
<PAGE>
[LOGO]
JANUARY 31,1996
THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME (CONTINUED)
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
Ohio County, Board of
Education, GO, MBIA
5.250%, 06/01/16 $ 160 $ 161
5.250%, 06/01/17 125 126
Parkersburg, Sewer Authority,
RB, MBIA
5.750%, 06/01/00 115 118
Parkersburg, Water Refunding,
RB, MBIA
7.375%, 09/01/06 35 36
Pea Ridge, Public Service
District Sewer, Ser 1994,
AMBAC
7.000%, 05/01/20 210 236
Pleasants County, Pollution
Control, Monongahela Power,
Ser C, RB, AMBAC
6.150%, 05/01/15 500 530
Pleasants County, Pollution
Control, Potomac Edison,
RB, AMBAC
6.150%, 05/01/15 500 530
Pleasants County, Pollution
Control, West Penn Power,
RB, AMBAC
6.150%, 05/01/15 500 530
Putnam County, Pollution
Control Revenue, Appalachian
Power Project, Ser D,
RB, AMBAC
5.450%, 06/01/19 800 801
Raleigh County, Board of
Education, GO, MBIA
8.000%, 04/01/97 15 16
8.200%, 04/01/97 30 32
8.375%, 04/01/98 75 82
Raleigh County, Commercial
Development
6.850%, 06/01/10 1,045 1,057
Raleigh County, Parkway
Economic Development &
Tourism Authority,
Tamarach Project, Ser 1994
6.600%, 06/01/05 480 532
Raleigh, Fayette & Nicholas
Counties, Special Obligation
Bonds
6.150%, 08/01/03 100 111
6.250%, 08/01/11 195 220
South Charleston, GO
5.700%, 09/01/97 20 21
South Charleston, Herbert J.
Thomas Memorial Hospital
Project, RB
8.000%, 10/01/04 75 84
South Charleston, Herbert J.
Thomas Memorial Hospital
Project, Ser A, MBIA
5.500%, 10/01/09 80 81
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
Wayne County, Board of
Education, GO
3.700%, 06/01/96 $ 150 $ 150
Wayne County, GO, AMBAC
8.000%, 06/01/99 75 84
Webster County, Multifamily
Housing, Circlebrook
Project, Ser A
6.500%, 04/01/18 800 835
Weirton, Medical Center Project,
Ser A, RB, AMBAC
5.750%, 12/01/04 150 158
West Virginia State Board of
Regents, RB, MBIA
5.900%, 04/01/04 60 66
6.000%, 04/01/04 115 124
West Virginia State Board of
Regents, RB, Ser A
5.750%, 04/01/96 20 20
7.750%, 04/01/03 30 31
West Virginia State Board of
Regents, RB, Ser B, MBIA
7.250%, 04/01/03 50 56
West Virginia State College,
RB, AMBAC
5.875%, 04/01/05 150 162
6.000%, 04/01/06 75 81
6.000%, 04/01/07 75 81
6.000%, 04/01/12 640 671
West Virginia State Economic
Development Tourism Authority,
Ser B, FGIC
4.625%, 07/01/19 300 311
West Virginia State Hospital
Finance Authority, Charleston
Area Medical Center Project,
Ser A, Prerefunded 06/01/96
@ 102
6.500%, 09/01/23 2,025 2,136
West Virginia State Hospital
Finance Authority, West
Virginia University
Hospital Project, MBIA
7.125%, 06/01/06 95 98
7.200%, 06/01/16 75 77
West Virginia State Hospital
Finance Authority, Cabell
County Project
7.875%, 01/01/19 200 224
West Virginia State Housing
Development Fund, Ser E
6.250%, 11/01/12 150 156
(CONTINUED)
17
<PAGE>
STATEMENT OF NET ASSETS
THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
West Virginia State Parkways,
Economic Development &
Tourism Authority, FGIC
4.800%, 05/15/00 $ 150 $ 152
Zero Coupon, 07/01/03 250 178
Zero Coupon, 05/15/07 500 284
5.800%, 05/15/13 140 145
West Virginia State School
Building Authority, Capital
Improvement, RB, Ser B, MBIA
5.750%, 07/01/15 300 306
6.750%, 07/01/17 475 507
West Virginia State School
Building Authority, RB, MBIA
5.250%, 07/01/99 200 208
6.250%, 07/01/01 500 548
6.950%, 07/01/03 200 222
7.250%, 07/01/15 560 640
West Virginia State University
Revenue Project, RB, AMBAC
6.000%, 04/01/12 200 211
West Virginia State Water
Development Authority, Ser A
7.000%, 11/01/26 270 277
7.700%, 11/01/29 225 263
West Virginia State Water
Development Authority
Ser A-I, FSA
5.250%, 11/01/21 795 767
West Virginia State Water
Development Authority Loan
Program, Ser A
7.000%, 11/01/11 150 165
West Virginia State Water
Development Authority Loan
Program II, Ser A
7.300%, 11/01/11 70 82
7.400%, 11/01/19 70 82
West Virginia State Water
Development Authority Loan
Program II, Ser A, FSA
5.500%, 11/01/23 625 623
West Virginia State Water
Development Authority Loan
Program II, Ser A-II
5.000%, 11/01/18 550 518
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
West Virginia State Water
Development Authority Loan
Program II, Ser A-II, FSA
6.050%, 11/01/13 $ 150 $ 154
West Virginia State Water
Development Authority Loan
Program, Capital Guaranty
Custodial Receipts
7.500%, 11/01/29 500 569
West Virginia State Water
Development Authority, Sewer
System Loan Program
7.100%, 11/01/09 200 240
West Virginia State, Building
Commission Lease, Regional
Jail & Correction Facility
Project, Ser A, RB, MBIA
6.300%, 07/01/98 200 211
West Virginia State, Building
Commission Lease, West Virginia
Regional Jail & Correction
Project, Ser A, MBIA
6.500%, 07/01/00 105 114
West Virginia State, GO
5.750%, 11/01/96 15 15
5.250%, 06/01/97 20 20
5.700%, 06/01/98 75 76
6.000%, 06/01/98 15 15
4.000%, 02/01/99 15 15
6.000%, 06/01/02 180 183
West Virginia State, GO, Ser A
5.400%, 02/01/01 300 316
West Virginia State, Housing
Development Authority, Ser A
5.450%, 11/01/21 150 143
West Virginia State, Housing
Development Fund
6.600%, 07/01/96 20 20
6.100%, 11/01/99 15 15
6.000%, 12/15/08 90 93
6.000%, 12/15/09 90 92
West Virginia State, Housing
Development Fund, BIG
7.375%, 11/01/05 75 78
18
<PAGE>
[LOGO]
JANUARY 31,1996
THE OVB FUNDS WEST VIRGINIA
TAX-EXEMPT INCOME PORTFOLIO (CONCLUDED)
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (CONTINUED)
West Virginia (continued)
West Virginia State, Housing
Development Fund, Ser A
6.700%, 05/01/08 $ 30 $ 32
6.700%, 11/01/08 40 42
6.700%, 05/01/09 40 42
6.700%, 11/01/09 45 47
West Virginia State, Housing
Development Fund, Ser A,
AMBAC
5.500%, 11/01/11 80 79
West Virginia State, Housing
Development Fund, Ser E
6.350%, 05/01/24 205 211
West Virginia State, Resource
Recovery, BIG, Prerefunded
06/01/96 @ 102
8.250%, 06/01/09 50 52
West Virginia Water Development
Authority, RB, Ser A
7.000%, 11/01/26 200 205
West Virginia Water Development
Loan Program II, Ser A, FSA
5.750%, 11/01/29 150 153
Wetzel County, Board of
Education, GO, MBIA
7.000%, 05/01/04 75 88
Wheeling, Waterworks & Sewage
System, Ser B, FGIC
6.450%, 12/01/07 150 165
6.650%, 12/01/15 300 320
Wood County, Saint Josephs
Hospital, Parkesburg Project,
RB, AMBAC
6.500%, 01/01/98 50 51
- -------------------------------------------------------------------------------
TOTAL WEST VIRGINIA 37,381
- -------------------------------------------------------------------------------
Puerto Rico--3.4%
Commonwealth of Puerto Rico,
GO, AMBAC
5.850%, 07/01/15 830 858
Commonwealth of Puerto Rico,
GO, MBIA
5.500%, 07/01/09 500 520
- -------------------------------------------------------------------------------
TOTAL PUERTO RICO 1,378
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $37,556,000) 38,759
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
MONEY MARKET--4.3%
SEI Tax Exempt Trust Tax
Free Portfolio 1,742$ 1,742
- -------------------------------------------------------------------------------
TOTAL MONEY MARKET (COST $1,742,000) 1,742
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS--99.0%
(COST $39,298,000) 40,501
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--1.0%
Other Assets and Liabilities, Net 422
- -------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES 422
- -------------------------------------------------------------------------------
NET ASSETS 40,923
- -------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization--no par
value) based on 3,618,960 outstanding
shares of beneficial interest 35,703
Portfolio shares of Class B (unlimited
authorization--no par value) based on
426,442 outstanding shares of
beneficial interest 4,181
Accumulated net realized loss on
investments (164)
Net unrealized appreciation on
investments 1,203
- -------------------------------------------------------------------------------
TOTAL NET ASSETS--100.0% $40,923
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE--CLASS A $10.12
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE--CLASS B $10.11
- -------------------------------------------------------------------------------
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.
19
<PAGE>
STATEMENT OF NET ASSETS
THE OVB FUNDS GOVERNMENT
SECURITIES PORTFOLIO
[GRAPHIC OMITTED]
A pie chart depicting the percent of total portfolio investments for the
following investment classifications:
U.S. Government Agency Obligations 57%
U.S. Treasury Obligations 29%
Municipal Bonds 6%
Corporate Obligations 1%
Common Stocks 4%
Repurchase Agreement 3%
% of Total Portfolio Investments
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--56.5%
FFCB
5.690%, 03/03/00 $ 831 $ 838
7.950%, 04/01/02 416 426
8.400%, 12/01/05 623 739
FFCB MTN
5.800%, 12/18/00 400 400
6.150%, 03/03/03 416 429
6.900%, 09/08/15 500 534
FHLB
8.100%, 03/25/96 850 854
7.810%, 07/17/96 500 506
8.000%, 07/25/96 625 634
7.700%, 08/26/96 175 177
7.915%, 01/17/97 500 513
6.520%, 05/23/97 400 407
8.030%, 12/19/97 300 315
8.020%, 08/14/98 415 442
7.040%, 05/24/99 500 526
8.375%, 10/25/99 310 341
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
FHLB (continued)
7.780%, 10/19/01 $ 500 $ 552
7.540%, 02/07/02 100 100
6.380%, 04/29/03 1,660 1,663
5.440%, 10/15/03 415 405
6.410%, 12/29/03 500 500
7.310%, 06/16/04 400 438
8.090%, 12/28/04 400 460
8.125%, 03/07/05 1,000 1,076
6.345%, 11/01/05 500 517
7.760%, 11/21/06 500 571
7.930%, 02/12/10 1,000 1,185
8.000%, 08/16/10 1,000 1,010
FHLB MTN
6.880%, 04/26/00 500 525
5.990%, 10/01/03 500 495
8.160%, 10/01/04 450 482
FHLMC
6.485%, 10/03/05 500 523
6.590%, 12/09/08 1,000 997
8.640%, 10/14/09 400 433
8.000%, 03/24/10 500 536
Financing Corporation
8.600%, 09/26/19 500 629
Financing Corporation STRIPS
Zero Coupon, 04/05/11 2000 758
FLB
7.950%, 10/21/96 83 85
FNMA
8.875%, 07/10/01 415 421
7.900%, 04/10/02 400 409
6.200%, 07/10/03 500 500
6.320%, 12/23/03 400 403
8.250%, 10/12/04 500 536
6.350%, 06/10/05 1,000 1,036
Housing Urban Development 94a
Abilene, Taxable, Callable
08/01/03 @ 100
7.180%, 08/01/13 160 168
Housing Urban Development 94a
Barberton, Taxable, Callable
08/01/03 @ 100
7.180%, 08/01/13 520 543
Housing Urban Development 94a
Egg Harbor, Taxable, Callable
08/01/03 @ 100
6.930%, 08/01/08 160 167
7.180%, 08/01/13 220 230
Housing Urban Development 94a-I
Montgomery County, Taxable,
Callable 08/01/03 @ 100
6.930%, 08/01/08 55 58
20
<PAGE>
[LOGO]
JANUARY 31,1996
THE OVB FUNDS GOVERNMENT
SECURITIES PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Housing Urban Development 94a
Ocean Shores, Taxable, Callable
08/01/03 @ 100
6.930%, 08/01/08 $ 225 $ 233
Housing Urban Development 94a
Pohatcong, Taxable, Callable
08/01/03 @ 100
6.930%, 08/01/08 240 249
Housing Urban Development 94a
Providence, Taxable, Callable
08/01/03 @ 100
6.930%, 08/01/08 130 135
Housing Urban Development 94a
Roanoke, Taxable, Callable
08/01/03 @ 100
7.180%, 08/01/13 100 104
Housing Urban Development 92a
Scranton, Taxable, Callable
08/01/02 @ 100
7.800%, 08/01/10 400 439
Housing Urban Development 94a
Tacoma, Taxable, Callable
08/01/03 @ 100
7.080%, 08/01/11 365 374
Private Export Funding
7.300%, 01/31/02 2,100 2,278
7.950%, 11/01/06 1,500 1,699
TVA
6.250%, 08/01/99 416 425
8.375%, 10/01/99 831 915
7.450%, 10/15/01 831 884
6.875%, 01/15/02 500 516
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $33,257,000) 34,743
- -------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--28.4%
U.S.Treasury Bonds
8.250%, 05/15/05 83 92
9.375%, 02/15/06 125 161
8.375%, 08/15/08 950 1,111
8.750%, 11/15/08 125 149
9.125%, 05/15/09 125 153
7.250%, 05/15/16 1,000 1,133
7.500%, 11/15/16 750 873
6.250%, 08/15/23 300 305
7.500%, 11/15/24 500 595
U.S.Treasury Notes
6.875%, 03/31/97 416 425
8.500%, 07/15/97 416 437
7.000%, 04/15/99 831 877
7.750%, 01/31/00 800 873
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (CONTINUED)
U.S. Treasury Notes (continued)
5.500%, 04/15/00 $ 831 $ 842
8.750%, 08/15/00 416 474
8.000%, 05/15/01 831 934
7.500%, 11/15/01 623 689
7.500%, 05/15/02 831 924
6.375%, 08/15/02 831 875
6.250%, 02/15/03 416 435
7.875%, 11/15/04 1,000 1,156
7.625%, 02/15/07 2,000 2,203
U.S.Treasury STRIPS
Zero Coupon, 08/15/05 1,000 583
Zero Coupon, 11/15/18 2,500 604
Zero Coupon, 02/15/25 3,000 518
- -------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $16,384,000) 17,421
- -------------------------------------------------------------------------------
MUNICIPAL BONDS--5.6%
Berkeley County, WV Lease Revenue
Bond for IRS Computer Center
Facility Project, Series 1994,
Taxable
7.900%, 07/15/03 640 700
Chicago Heights, IL Series B,
Taxable GO, Callable 12/01/12
@ 100
7.550%, 12/01/13 1,000 1,087
Fairview, MN Hospital & Health
Care Services, Series B,
Refunding Taxable, MBIA
7.000%, 11/15/15 300 319
Henry County, GA Water & Sewer
Authority, Series B, Revenue
Refunding Taxable, AMBAC
6.000%, 02/01/04 250 246
6.000%, 02/01/05 220 215
Las Vegas, NV Taxable GO-Taxable
Fremont Street Project, Callable
07/01/03 @ 101, FGIC
7.200%, 07/01/15 500 538
San Bernardino County, CA COP,
Taxable, Prerefunded 03/01/04
@ 102
8.500%, 03/01/14 275 319
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $3,266,000) 3,424
- -------------------------------------------------------------------------------
(CONTINUED)
21
<PAGE>
STATEMENT OF NET ASSETS
THE OVB FUNDS GOVERNMENT
SECURITIES PORTFOLIO (CONCLUDED)
- -------------------------------------------------------------------------------
FACE AMT./
SHARES VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
CORPORATE OBLIGATIONS--0.8%
General Electric Capital MTN
6.020%, 12/15/03 500 $ 503
- -------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(COST $500,000) 503
- -------------------------------------------------------------------------------
COMMON STOCK--4.2%
Electric Services--3.9%
Allegheny Power System 8,300 251
American Electric Power 6,200 274
CMS Energy 10,000 311
Dominion Resources of Virginia 6,200 266
Duke Power 5,000 249
FPL Group 4,200 195
LG&E 10,000 431
Public Service of Colorado 6,200 223
Union Electric Power 4,200 179
- -------------------------------------------------------------------------------
TOTAL ELECTRIC SERVICES 2,379
- -------------------------------------------------------------------------------
Telephone Communications--0.3%
SBC Telecommunications 3,300 187
- -------------------------------------------------------------------------------
TOTAL TELEPHONE COMMUNICATIONS 187
- -------------------------------------------------------------------------------
TOTAL COMMON STOCK (COST $2,293,000) 2,566
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT--3.3%
Lehman Brothers
5.93%, dated 01/31/96, matures
02/01/96, repurchase price
$2,003,123 (collateralized by
U.S. Treasury Note, par value
$2,005,000, 5.50%, matures
11/15/98, market value
$2,045,651) $ 2,003 2,003
- -------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $2,003,000) 2,003
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.8%
(COST $57,703,000) 60,660
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--1.2%
Other Assets and Liabilities, Net 735
- -------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES 735
- -------------------------------------------------------------------------------
NET ASSETS 61,395
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
VALUE
DESCRIPTION (000)
- -------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization--no par
value) based on 5,935,452 outstanding
shares of beneficial interest $57,395
Portfolio shares of Class B (unlimited
authorization--no par value) based on
114,903 outstanding shares of beneficial
interest 1,121
Accumulated net realized loss on
investments (78)
Net unrealized appreciation on
investments 2,957
- -------------------------------------------------------------------------------
TOTAL NET ASSETS--100.0% $61,395
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE--CLASS A $10.15
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE--CLASS B $10.15
- -------------------------------------------------------------------------------
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
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.
22
<PAGE>
[LOGO]
JANUARY 31,1996
THE OVB FUNDS EMERGING
GROWTH PORTFOLIO
[GRAPHIC OMITTED]
A pie chart depicting the percent of total portfolio investments for the
following investment classifications:
Common Stocks 93%
Repurchase Agreement 7%
% of Total Portfolio Investments
- -------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS--91.8%
Apparel/Textiles--3.8%
Authentic Fitness 39,000 $ 941
St. John Knits 21,000 969
- -------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES 1,910
- -------------------------------------------------------------------------------
Broadcasting, Newspapers and
Advertising--3.5%
New World Communications,
Class A* 50,000 775
United Video Satellite Group,
Series A* 27,600 969
- -------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS
AND ADVERTISING 1,744
- -------------------------------------------------------------------------------
Communications Equipment--3.1%
Lo Jack* 30,800 306
Microcom* 50,000 1,244
- -------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 1,550
- -------------------------------------------------------------------------------
Computer Software--20.7%
Applix* 56,200 1,560
Aspen Technology* 15,300 581
Borland International* 51,400 957
Global Village Communication* 26,000 416
Harbinger* 33,100 604
- -------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Computer Software (continued)
Macromedia* 41,800 $ 1,672
McAfee Associates* 11,400 570
Open Environment* 38,000 532
Quarterdeck Office Systems* 56,500 904
Shiva Corporation* 7,800 560
Smith Micro Software* 92,000 644
Transaction Systems Architects* 18,800 651
Veritas Software* 21,600 805
- -------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 10,456
- -------------------------------------------------------------------------------
Computers and Services--2.4%
Madge, NV* 10,500 415
Radisys * 71,300 802
- -------------------------------------------------------------------------------
TOTAL COMPUTERS AND SERVICES 1,217
- -------------------------------------------------------------------------------
Drugs--6.6%
Genzyme* 38,300 1,034
Idexx Labs* 35,000 1,758
Martek Biosciences* 15,000 525
- -------------------------------------------------------------------------------
TOTAL DRUGS 3,317
- -------------------------------------------------------------------------------
Entertainment--2.0%
Dove Audio* 88,000 990
- -------------------------------------------------------------------------------
TOTAL ENTERTAINMENT 990
- -------------------------------------------------------------------------------
Financial Services--3.5%
Americredit* 63,300 839
Data Broadcasting* 80,000 930
- -------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 1,769
- -------------------------------------------------------------------------------
Insurance--2.9%
CMAC Investment 18,000 1,035
Compdent* 12,800 451
- -------------------------------------------------------------------------------
TOTAL INSURANCE 1,486
- -------------------------------------------------------------------------------
Machinery--1.6%
Zoltek* 36,400 828
- -------------------------------------------------------------------------------
TOTAL MACHINERY 828
- -------------------------------------------------------------------------------
Measuring Devices--4.9%
Cognex* 29,000 645
Fore Systems* 22,000 1,205
Input/Output* 25,000 606
- -------------------------------------------------------------------------------
TOTAL MEASURING DEVICES 2,456
- -------------------------------------------------------------------------------
(CONTINUED)
23
<PAGE>
STATEMENT OF NET ASSETS
THE OVB FUNDS EMERGING
GROWTH PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Medical Products & Services--13.4%
Chad Therapeutics* 78,900 $ 907
De Rigo S.P.A. ADR* 46,200 1,155
Healthdyne Technology* 72,700 845
Medpartners/Mullikin* 32,300 1,163
Physicians Reliance* 38,000 1,729
Staar Surgical* 79,000 958
- -------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 6,757
- -------------------------------------------------------------------------------
Miscellaneous Business Services--3.1%
Alternative Resources* 29,000 834
Medaphis* 18,000 720
- -------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES 1,554
- -------------------------------------------------------------------------------
Miscellaneous Manufacturing--3.2%
Oakley * 32,100 1,180
Vista 2000 * 44,700 458
- -------------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING 1,638
- -------------------------------------------------------------------------------
Petroleum & Fuel Products--3.0%
Barrett Resources* 39,000 994
Sonat Offshore Drilling 10,800 498
- -------------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS 1,492
- -------------------------------------------------------------------------------
Retail--10.6%
Department 56* 25,000 991
Garden Ridge* 14,300 472
Just For Feet* 15,150 471
MSC Industrial Direct* 42,500 1,094
Renters' Choice* 66,400 1,087
Sunglass Hut International* 45,000 1,252
- -------------------------------------------------------------------------------
TOTAL RETAIL 5,367
- -------------------------------------------------------------------------------
Steel & Steel Works--1.9%
Imco Recycling 46,000 966
- -------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS 966
- -------------------------------------------------------------------------------
Wholesale--1.6%
Physician Sales and Services* 27,500 784
- -------------------------------------------------------------------------------
TOTAL WHOLESALE 784
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $34,046,000) 46,281
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT--7.0%
Lehman Brothers
5.93%, dated 01/31/96, matures
02/01/96, repurchase price
$3,536,485 (collateralized
by U.S. Treasury Bill, par
value $95,000, 0.00%, matures
03/07/96, market value $94,514;
U.S. Treasury Note, par value
$3,213,000, 7.75%, matures
12/31/99, market value
$3,513,352; with total
market value of $3,607,866) $3,536 $ 3,536
- -------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $3,536,000) 3,536
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS--98.8%
(COST $37,582,000) 49,817
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--1.2%
Other Assets and Liabilities, Net 593
- -------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES 593
- -------------------------------------------------------------------------------
NET ASSETS 50,410
- -------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization--no par
value) based on 4,207,846
outstanding shares of beneficial
interest 40,282
Portfolio shares of Class B (unlimited
authorization--no par value) based on
204,192 outstanding shares of
beneficial interest 2,062
Accumulated net realized loss on
investments (4,169)
Net unrealized appreciation on
investments 12,235
- -------------------------------------------------------------------------------
TOTAL NET ASSETS--100.0% $50,410
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE--CLASS A $11.43
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE--CLASS B $11.36
- -------------------------------------------------------------------------------
* Non-income producing securities
ADR American Depository Receipt
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
[LOGO]
JANUARY 31,1996
THE OVB FUNDS CAPITAL
APPRECIATION PORTFOLIO
[GRAPHIC OMITTED]
A pie chart depicting the percent of total portfolio investments for the
following investment classifications:
Common Stocks 99%
Repurchase Agreement 1%
% of Total Portfolio Investments
- -------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS--99.0%
Agriculture--3.8%
Dole Food 54,000 $ 2,011
Pioneer Hi Bred International 35,800 1,826
- -------------------------------------------------------------------------------
TOTAL AGRICULTURE 3,837
- -------------------------------------------------------------------------------
Aircraft--2.0%
Boeing 26,200 2,034
- -------------------------------------------------------------------------------
TOTAL AIRCRAFT 2,034
- -------------------------------------------------------------------------------
Apparel/Textiles--2.3%
Fila Holdings ADR 48,000 2,328
- -------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES 2,328
- -------------------------------------------------------------------------------
Banks--5.8%
Citicorp 25,000 1,847
J P Morgan 20,500 1,666
Wells Fargo 10,000 2,346
- -------------------------------------------------------------------------------
TOTAL BANKS 5,859
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Communications Equipment--3.2%
L.M. Ericsson Telephone ADR 62,900 $ 1,297
Sony ADR 31,000 1,922
- -------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 3,219
- -------------------------------------------------------------------------------
Computer Networking Products--9.0%
3Com* 20,000 918
Bay Networks* 41,850 1,779
Cisco Systems* 23,900 1,990
Computer Sciences* 29,500 2,249
Sun Microsystems 49,400 2,272
- -------------------------------------------------------------------------------
TOTAL COMPUTER NETWORKING PRODUCTS 9,208
- -------------------------------------------------------------------------------
Computer Peripherals--2.9%
Digital Equipment* 26,000 1,882
Hewlett Packard 12,700 1,076
- -------------------------------------------------------------------------------
TOTAL COMPUTER PERIPHERALS 2,958
- -------------------------------------------------------------------------------
Computer Software--3.6%
Computer Associates
International 30,600 2,092
Oracle Systems* 34,000 1,624
- -------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 3,716
- -------------------------------------------------------------------------------
Drugs--20.1%
American Home Products 20,000 2,040
Amgen* 31,500 1,894
Biogen* 15,000 1,054
Boston Scientific* 22,700 1,163
Genzyme Warrants* 10,000 420
Genzyme* 34,000 2,580
Johnson & Johnson 24,000 2,304
Merck 30,500 2,143
Pfizer 37,400 2,571
Pharmacia & Upjohn* 55,000 2,303
Smithkline Beecham 36,000 2,025
- -------------------------------------------------------------------------------
TOTAL DRUGS 20,497
- -------------------------------------------------------------------------------
Entertainment--1.0%
Walt Disney 15,200 977
- -------------------------------------------------------------------------------
TOTAL ENTERTAINMENT 977
- -------------------------------------------------------------------------------
(CONTINUED)
25
<PAGE>
STATEMENT OF NET ASSETS
THE OVB FUNDS CAPITAL
APPRECIATION PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------------------
Value
Description Shares (000)
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Financial Services--7.8%
American Express 42,000 $ 1,932
First Data 28,300 2,002
FNMA 65,200 2,249
Merrill Lynch 31,500 1,792
- -------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 7,975
- -------------------------------------------------------------------------------
Food, Beverage & Tobacco--4.9%
Coca-Cola 26,400 1,990
CPC International 14,000 1,019
HJ Heinz 28,800 990
Sara Lee 29,900 1,009
- -------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO 5,008
- -------------------------------------------------------------------------------
Household Products--1.9%
Gillette 35,600 1,909
- -------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS 1,909
- -------------------------------------------------------------------------------
Insurance--2.0%
AIG 21,000 2,034
- -------------------------------------------------------------------------------
TOTAL INSURANCE 2,034
- -------------------------------------------------------------------------------
Medical Products & Services--6.1%
Guidant 56,000 2,569
McKesson 18,800 940
Medtronic 20,000 1,143
Nellcor* 25,500 1,581
- -------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 6,233
- -------------------------------------------------------------------------------
Miscellaneous Business Services--3.1%
ADT Limited* 65,500 950
CUC International* 60,000 2,212
- -------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES 3,162
- -------------------------------------------------------------------------------
Office Equipment--4.5%
Alco Standard 42,400 1,664
Danka Business Systems ADR 29,000 1,069
Xerox 15,000 1,854
- -------------------------------------------------------------------------------
TOTAL OFFICE EQUIPMENT 4,587
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Oil & Gas Well Equipment--3.8%
Halliburton 38,000 $ 1,962
Schlumberger 27,100 1,900
- -------------------------------------------------------------------------------
TOTAL OIL & GAS WELL EQUIPMENT 3,862
- -------------------------------------------------------------------------------
Photographic Equipment &
Supplies--1.8%
Eastman Kodak 24,400 1,790
- -------------------------------------------------------------------------------
TOTAL PHOTOGRAPHIC EQUIPMENT
& SUPPLIES 1,790
- -------------------------------------------------------------------------------
Restaurants--1.1%
McDonalds 21,500 1,080
- -------------------------------------------------------------------------------
TOTAL RESTAURANTS 1,080
- -------------------------------------------------------------------------------
Retail--2.9%
OfficeMax* 90,000 2,070
Warnaco Group 40,000 915
- -------------------------------------------------------------------------------
TOTAL RETAIL 2,985
- -------------------------------------------------------------------------------
Specialty Machinery--1.7%
American Standard* 60,000 1,748
- -------------------------------------------------------------------------------
TOTAL SPECIALTY MACHINERY 1,748
- -------------------------------------------------------------------------------
Telephones & Telecommunication--1.9%
US West Media Group* 48,000 1,014
Worldcom* 25,000 916
- -------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATION 1,930
- -------------------------------------------------------------------------------
Testing Laboratories--1.8%
Chiron * 16,100 1,852
- -------------------------------------------------------------------------------
TOTAL TESTING LABORATORIES 1,852
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $77,694,000) 100,788
- -------------------------------------------------------------------------------
26
<PAGE>
[LOGO]
JANUARY 31,1996
THE OVB FUNDS CAPITAL
APPRECIATION PORTFOLIO (CONCLUDED)
- -------------------------------------------------------------------------------
FACE AMT. VALUE
DESCRIPTION (000) (000)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT--1.0%
Lehman Brothers
5.93%, dated 01/31/96,
matures 02/01/96, repurchase
price $1,062,570 (collateralized
by FNMA STRIPS Principal Only,
par value $1,650,000, 0.00%,
matures 02/01/24, market
value $1,085,719) $1,062 $ 1,062
- -------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $1,062,000) 1,062
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(COST $78,756,000) 101,850
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--0.0%
Other Assets and Liabilities, Net (5)
- -------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (5)
- -------------------------------------------------------------------------------
NET ASSETS 101,845
- -------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization--no
par value) based on 7,486,078
outstanding shares of
beneficial interest 74,601
Portfolio shares of Class B
(unlimited authorization--no
par value) based on 168,502
outstanding shares of
beneficial interest 1,967
Undistributed net investment income 4
Accumulated net realized gain
on investments 2,179
Net unrealized appreciation on
investments 23,094
- -------------------------------------------------------------------------------
TOTAL NET ASSETS--100.0% $101,845
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE--CLASS A $13.31
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE--CLASS B $13.25
- -------------------------------------------------------------------------------
* Non-income producing securities
ADR American Depository Receipt
FNMA Federal National Mortgage Association
STRIPS Separate Trading of Registered Interest and Principal of Securities
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
STATEMENT OF OPERATIONS
===============================================================================
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS WEST VIRGINIA TAX-EXEMPT
PORTFOLIO INCOME PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest Income $5,515 $2,131
Dividend Income -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTALINVESTMENT INCOME 5,515 2,131
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administrator Fees 184 100
Less Administrator Fees Waiver -- (26)
Investment Advisory Fees 230 166
Less Investment Advisory Fees Waiver (138) (27)
Sub-Advisory Fees 69 --
Custodian Fees 13 5
ProfessionalFees 26 12
Registration & Filing Fees 10 6
Printing Expense 10 4
Trustee Fees 6 2
Pricing Fees -- 3
Distribution Fees(1) 6 8
Transfer Agency Fees 37 29
Amortization of Organization Costs 3 3
Miscellaneous Expenses 1 --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 457 285
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 5,058 1,846
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) FromSecurities Sold -- (3)
Net Change in Unrealized Appreciation
on Investments -- 2,701
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain on
Investments -- 2,698
===========================================================================================================================
Increase in Net Assets Resulting From
Operations $5,058 $4,544
===========================================================================================================================
<FN>
(1) Distribution Fees are only incurred on Class B shares.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
[LOGO]
JANUARY 31,1996
===============================================================================
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES EMERGING GROWTH CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $3,748 $86 $141
Dividend Income 86 20 851
- ---------------------------------------------------------------------------------------------------------------------
TOTALINVESTMENT INCOME 3,834 106 992
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administrator Fees 118 100 181
Less Administrator Fees Waiver -- -- --
Investment Advisory Fees 442 446 863
Less Investment Advisory Fees Waiver (165) (79) (231)
Sub-Advisory Fees -- -- --
Custodian Fees 8 6 12
ProfessionalFees 18 15 26
Registration & Filing Fees 10 4 8
Printing Expense 13 5 10
Trustee Fees 4 3 6
Pricing Fees 3 3 5
Distribution Fees(1) 2 4 3
Transfer Agency Fees 35 34 39
Amortization of Organization Costs 3 3 3
Miscellaneous Expenses -- -- 1
- ---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 491 544 926
- ---------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 3,343 (438) 66
- ---------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) FromSecurities Sold 125 6,404 12,232
Net Change in Unrealized Appreciation
on Investments 6,459 10,258 17,868
- ---------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain on
Investments 6,584 16,662 30,100
=====================================================================================================================
Increase in Net Assets Resulting From
Operations $9,927 $16,224 $30,166
=====================================================================================================================
<FN>
(1) Distribution Fees are only incurred on Class B shares.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
STATEMENT OFCHANGES IN NET ASSETS
===============================================================================
FOR THE YEAR ENDED JANUARY 31
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS WEST VIRGINIA TAX-EXEMPT
PORTFOLIO INCOME PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $5,058 $3,319 $1,846 $1,279
Net Realized Gain (Loss) from Securities
Sold -- (8) (3) (157)
Net Change in Unrealized Appreciation
(Depreciation) on Investments -- -- 2,701 (1,781)
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM INVESTMENT OPERATIONS 5,058 3,311 4,544 (659)
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Class A (4,935) (3,304) (1,696) (1,198)
Class B (123) (15) (150) (81)
Net Realized Gains
Class A -- -- -- --
Class B -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS: (5,058) (3,319) (1,846) (1,279)
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARETRANSACTIONS:
Class A:
Shares Issued 222,222 175,644 13,270 11,418
Shares Issued in Lieu of Cash
Distributions -- -- -- --
Shares Redeemed (214,858) (180,818) (5,221) (3,937)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS 7,364 (5,174) 8,049 7,481
- ---------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 8,627 831 1,974 1,777
Shares Issued in Lieu of Cash
Distributions 85 8 123 61
Shares Redeemed (3,226) (170) (280) (404)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 5,486 669 1,817 1,434
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS 12,850 (4,505) 9,866 8,915
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 12,850 (4,513) 12,564 6,977
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 77,964 82,477 28,359 21,382
- ---------------------------------------------------------------------------------------------------------------------------
End of Year $90,814 $77,964 $40,923 $28,359
===========================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
ShareIssued 222,222 175,644 1,365 1,201
Shares Issued in Lieu of Cash
Distributions -- -- -- --
Shares Redeemed (214,858) (180,818) (533) (425)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS 7,364 (5,174) 832 776
- ---------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 8,627 831 201 187
Shares Issued in Lieu of Cash
Distributions 85 8 12 6
Shares Redeemed (3,226) (170) (28) (43)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS 5,486 669 185 150
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS 12,850 (4,505) 1,017 926
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
[LOGO]
JANUARY 31,1996
===============================================================================
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES EMERGING GROWTH CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 3,343 $ 2,550 $ (438) $ (268) $ 66 $ 179
Net Realized Gain (Loss) from Securities
Sold 125 (216) 6,404 (9,871) 12,232 (8,352)
Net Change in Unrealized Appreciation
(Depreciation) on Investments 6,459 (3,686) 10,258 (494) 17,868 2,516
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM INVESTMENT OPERATIONS 9,927 (1,352) 16,224 (10,633) 30,166 (5,657)
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Class A (3,302) (2,530) -- -- (61) (189)
Class B (41) (20) -- -- -- (1)
Net Realized Gains
Class A -- -- -- -- (1,472) --
Class B -- -- -- -- (25) --
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS: (3,343) (2,550) -- -- (1,558) (190)
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARETRANSACTIONS:
Class A:
Shares Issued 12,560 38,847 10,791 14,902 30,408 30,455
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed (19,904) (8,566) (13,290) (6,355) (29,613) (8,158)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (7,344) 30,281 (2,499) 8,547 795 22,297
- -------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 655 393 1,475 707 1,493 394
Shares Issued in Lieu of Cash
Distributions 26 8 -- -- 24 1
Shares Redeemed (50) (51) (292) (119) (82) (31)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 631 350 1,183 588 1,435 364
- -------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (6,713) 30,631 (1,316) 9,135 2,230 22,661
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (129) 26,729 14,908 (1,498) 30,838 16,814
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 61,524 34,795 35,502 37,000 71,007 54,193
- -------------------------------------------------------------------------------------------------------------------------
End of Year $ 61,395 $ 61,524 $ 50,410 $ 35,502 $ 101,845 $ 71,007
=========================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
ShareIssued 1,292 4,210 1,057 1,638 2,627 3,087
Shares Issued in Lieu of Cash
Distributions -- -- -- -- -- --
Shares Redeemed (2,072) (939) (1,276) (709) (2,509) (851)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS (780) 3,271 (219) 929 118 2,236
- -------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 67 41 138 76 121 40
Shares Issued in Lieu of Cash
Distributions 3 1 -- -- 2 --
Shares Redeemed (5) (6) (27) (14) (7) (3)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS 65 36 111 62 116 37
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS (715) 3,307 (108) 991 234 2,273
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
FINANCIAL HIGHLIGHTS
===============================================================================
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS NET ASSET
VALUE, NET AND UNREALIZED FROM NET VALUE,
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT END OF
OF PERIOD INCOME ON INVESTMENTS INCOME PERIOD
- ---------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
CLASS A
1996 $ 1.00 $ 0.06 $ 0.00 $(0.06) $ 1.00
1995 1.00 0.04 0.00 (0.04) 1.00
1994(1) 1.00 0.00 0.00 0.00 1.00
CLASS B
1996 $ 1.00 $ 0.05 $ 0.00 $(0.05) $ 1.00
1995(2) 1.00 0.04 0.00 (0.04) 1.00
- ---------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
1996 $ 9.36 $ 0.49 $ 0.76 $(0.49) $10.12
1995 10.17 0.46 (0.81) (0.46) 9.36
1994(9) 10.00 0.07 0.17 (0.07) 10.17
CLASS B
1996 $ 9.36 $ 0.47 $ 0.75 $(0.47) $10.11
1995 10.17 0.43 (0.81) (0.43) 9.36
1994(10) 10.07 0.05 0.10 (0.05) 10.17
- ---------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
1996 $ 9.09 $ 0.55 $ 1.06 $(0.55) $10.15
1995 10.06 0.51 (0.97) (0.51) 9.09
1994(7) 10.00 0.08 0.06 (0.08) 10.06
CLASS B
1996 $ 9.10 $ 0.53 $ 1.05 $(0.53) $10.15
1995 10.06 0.49 (0.96) (0.49) 9.10
1994(8) 10.01 0.04 0.05 (0.04) 10.06
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Prime Obligations Class A commenced operations on December 1, 1993. All
ratios for the period have been annualized.
(2) Prime Obligations Class B commenced operations on February 7, 1994. All
ratios for the period have been annualized.
(3) Capital Appreciation Class A commenced operations on December 1, 1993. All
ratios for the period have been annualized.
(4) Capital Appreciation ClassB commenced operations on December 31, 1993. All
ratios for the period have been annualized.
(5) Emerging Growth Class A commenced operations on December 1, 1993. All
ratios for the period have been annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
[LOGO]
JANUARY 31,1996
===============================================================================
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME TO
RATIO OF NET INVESTMENT AVERAGE AVERAGE
NET ASSETS, EXPENSES TO INCOME NET ASSETS NET ASSETS PORTFOLIO
TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- -----------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1996 5.65% $84,660 0.49% 5.50% 0.64% 5.35% N/A
1995 4.15 77,295 0.49 4.08 0.69 3.88 N/A
1994(1) 2.95 82,477 0.49 2.89 0.80 2.58 N/A
CLASS B
1996 5.39% $ 6,154 0.74% 5.15% 0.89% 5.00% N/A
1995(2) 3.95 669 0.74 4.33 0.93 4.14 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
1996 13.66% $36,611 0.75% 5.02% 0.89% 4.88% 43%
1995 (3.38) 26,096 0.75 4.88 1.09 4.54 28
1994(9) 2.43 20,477 0.75 4.18 1.62 3.31 17
CLASS B
1996 13.26% $ 4,312 1.00% 4.78% 1.14% 4.64% 43%
1995 (3.62) 2,263 1.00 4.68 1.34 4.34 28
1994(10) 1.48 935 1.00 3.87 2.14 2.73 17
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
1996 18.14% $60,228 0.83% 5.68% 1.11% 5.40% 28%
1995 (4.48) 61,067 0.83 5.61 1.17 5.27 13
1994(7) 1.39 34,654 0.83 4.64 1.49 3.98 5
CLASS B
1996 17.72% $ 1,167 1.08% 5.39% 1.36% 5.11% 28%
1995 (4.62) 457 1.08 5.34 1.42 5.00 13
1994(8) 0.89 141 1.08 4.47 2.00 3.35 5
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(6) Emerging Growth Class B commenced operations on December 29, 1993.
All ratios for the period have been annualized.
(7) Government Securities Class A commenced operations on December 1, 1993.
All ratios for the period have been annualized.
(8) Government Securities ClassB commenced operations on December 31, 1993.
All ratios for the period have been annualized.
(9) West Virginia Tax-Exempt Class A commenced operations on December 1, 1993.
All ratios for the period have been annualized.
(10) West Virginia Tax-Exempt Class B commenced operations on December 17, 1993.
All ratios for the period have been annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
FINANCIAL HIGHLIGHTS
===============================================================================
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<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
OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME GAINS PERIOD
- ---------------------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
CLASS A
1996 $ 7.86 $(0.10) $3.67 $ 0.00 $0.00 $11.43
1995 10.48 (0.06) (2.56) 0.00 0.00 7.86
1994(5) 10.00 0.00 0.48 0.00 0.00 10.48
CLASS B
1996 $ 7.83 $(0.12) $3.65 $ 0.00 $0.00 $11.36
1995 10.48 (0.06) (2.59) 0.00 0.00 7.83
1994(6) 9.77 0.00 0.71 0.00 0.00 10.48
- ---------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
CLASS A
1996 $ 9.57 $ 0.01 $3.93 $(0.01) $(0.19) $13.31
1995 10.53 0.03 (0.96) (0.03) 0.00 9.57
1994(3) 10.00 0.00 0.53 0.00 0.00 10.53
CLASS B
1996 $ 9.55 $(0.01) $3.90 $ 0.00 $(0.19) $13.25
1995 10.52 0.01 (0.97) (0.01) 0.00 9.55
1994(4) 10.33 0.00 0.19 0.00 0.00 10.52
- ---------------------------------------------------------------------------------------------------------------
<FN>
(1) Prime Obligations Class A commenced operations on December 1, 1993.
All ratios for the period have been annualized.
(2) Prime Obligations Class B commenced operations on February 7, 1994.
All ratios for the period have been annualized.
(3) Capital Appreciation Class A commenced operations on December 1, 1993.
All ratios for the period have been annualized.
(4) Capital Appreciation ClassB commenced operations on December 31, 1993.
All ratios for the period have been annualized
(5) Emerging Growth Class A commenced operations on December 1, 1993.
All ratios for the period have been annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
[LOGO]
JANUARY 31,1996
===============================================================================
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TOINCOME (LOSS)
RATIO OF NET INVESTMENT AVERAGE TO AVERAGE
NET ASSETS, EXPENSES TO INCOME (LOSS) NET ASSETS NET ASSETS PORTFOLIO
TOTAL END OF AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
RETURN PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- -----------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1996 45.42% $48,090 1.15% (0.92)% 1.32% (1.09)% 117%
1995 (25.00) 34,772 1.15 (0.75) 1.42 (1.02) 126
1994(5) (4.80) 36,670 1.15 (0.83) 1.70 (1.38) 7
CLASS B
1996 45.08% $ 2,320 1.40% (1.19)% 1.57% (1.36)% 117%
1995 (25.29) 730 1.40 (0.98) 1.67 (1.25) 126
1994(6) 7.27 330 1.40 (1.08) 2.15 (1.83) 7
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
CLASS A
1996 41.31% $99,612 1.02% 0.08% 1.27% (0.17)% 119%
1995 (8.84) 70,502 1.02 0.28 1.33 (0.03) 107
1994(3) 5.30 54,022 1.02 0.12 1.51 (0.37) 7
CLASS B
1996 40.88% $ 2,233 1.27% (0.16)% 1.52% (0.41)% 119%
1995 (9.11) 505 1.27 0.02 1.58 (0.29) 107
1994(4) 1.84 171 1.27 0.19 2.01 (0.55) 7
- -----------------------------------------------------------------------------------------------------------------------
<FN>
(6) Emerging Growth Class B commenced operations on December 29, 1993.
All ratios for the period have been annualized.
(7) Government Securities Class A commenced operations on December 1, 1993.
All ratios for the period have been annualized.
(8) Government Securities ClassB commenced operations on December 31, 1993.
All ratios for the period have been annualized.
(9) West Virginia Tax-Exempt Class A commenced operations on December 1, 1993.
All ratios for the period have been annualized.
(10) West Virginia Tax-Exempt Class B commenced operations on December 17, 1993.
All ratios for the period have been annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<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 Financial Management Corporation (the
"Administrator"), a wholly-owned subsidiary of SEI Corporation, on October 9,
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 to the Trust's OVBFamily of Funds. The OVB Family of Funds include
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 IncomePortfolio
(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 which 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.
FEDERALINCOME 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.
36
<PAGE>
[LOGO]
JANUARY 31,1996
===============================================================================
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 on 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)
37
<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.
$438,000 relating to permanent differences attributable to cumulative net
operating losses of the Emerging Growth Portfolio as of January 31, 1996, has
been reclassified from that portfolio's accumulated net investment losses to
paid-in capital. This reclassification has no effect on net assets or net asset
value per share.
3. INVESTMENT ADVISORY, ADMINISTRATIVE, TRANSFER AGENT, AND DISTRIBUTION
AGREEMENTS:
One Valley Bank, National Association (the "Advisor") serves as investment
advisor 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 IncomePortfolio--.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
38
<PAGE>
[LOGO]
JANUARY 31,1996
===============================================================================
paid by the Portfolio is based on its proportionate share of "managed assets."
The Trust and theAdministrator have entered into an administration
agreement. Under terms of the administration 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 SEIFinancial Services Company (the "Distributor"), a
wholly-owned subsidiary of SEICorporation, 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 an officer of the Trust and
a Trustee of the Trust is a partner.
Certain officers of the Trust are also officers of the Administrator and/or
Distributor.Such officers are paid no fees by theTrust for serving in their
respective roles.
5. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from the sale of securities,
other than temporary cash investments, during
(CONTINUED)
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
the year ended January 31, 1996 were as follows:
WEST VIRGINIA TAX-
EXEMPT INCOME PORTFOLIO
U.S.
GOVERNMENT
SECURITIES ALL OTHER TOTAL
(000) (000) (000)
---------- ----------- --------
Purchases ....... $ -- $23,310 $23,310
Sales ........... -- 15,024 15,024
GOVERNMENT SECURITIES PORTFOLIO
U.S.
GOVERNMENT
SECURITIES ALL OTHER TOTAL
(000) (000) (000)
---------- ----------- --------
Purchases ....... $13,372 $2,096 $15,468
Sales ........... 14,308 1,357 15,665
EMERGING GROWTH PORTFOLIO
U.S.
GOVERNMENT
SECURITIES ALL OTHER TOTAL
(000) (000) (000)
---------- ----------- --------
Purchases ....... $ -- $52,612 $52,612
Sales ........... -- 54,181 54,181
CAPITAL APPRECIATION PORTFOLIO
U.S.
GOVERNMENT
SECURITIES ALL OTHER TOTAL
(000) (000) (000)
---------- ----------- --------
Purchases ....... $ -- $108,248 $108,248
Sales ........... -- 104,619 104,619
At January 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
January 31, 1996, for each Equity and Fixed Income Portfolio is as follows:
NET
APPRECIATED DEPRECIATED UNREALIZED
SECURITIES SECURITIES APPRECIATION
(000) (000) (000)
----------- ----------- ------------
West Virginia
Tax-Exempt
Income ......... $ 1,340 $ (137) $ 1,203
Government
Securities ..... 3,018 (61) 2,957
Emerging
Growth ......... 13,751 (1,516) 12,235
Capital
Appreciation ... 23,379 (285) 23,094
At January 31, 1996, the following Portfolios had available realized
capital losses to offset future net capital gains through fiscal year ended:
2003 2004
(000) (000)
---- ----
Prime Obligations ................. $ 7 $--
West Virginia Tax-Exempt Income ... 24 141
Government Securities ............. 3 68
Emerging Growth ................... 4,170 --
40
<PAGE>
[LOGO]
JANUARY 31,1996
===============================================================================
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.
41
<PAGE>
NOTICE TO SHAREHOLDERS OF THE OVB FUNDS
===============================================================================
UNAUDITED
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
For the fiscal year ended January 31, 1996 the portfolios of the OVB Family of
Funds are designating long term capital gains and qualifying dividend income
with regard to distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY
CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS)
- --------- ------------- ------------- -------------
<S> <C> <C> <C>
Prime Obligations Money Market.......................... 0% 100% 100%
Capital Appreciation.................................... 96% 4% 100%
Emerging Growth......................................... 0% 0% 0%
Government Securities................................... 0% 100% 100%
WestVirginia Tax-Exempt Income.......................... 0% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
(C) (D)
QUALIFYING TAX EXEMPT
PORTFOLIO DIVIDENDS (1) INTEREST
- --------- ------------- ----------
<S> <C> <C>
Prime Obligations Money Market.......................... 0% 0%
Capital Appreciation.................................... 6% 0%
Emerging Growth......................................... 0% 0%
Government Securities................................... 0% 0%
WestVirginia Tax-Exempt Income.......................... 0% 99%
<FN>
(1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction.
* Items (A) and (B) are based on the percentage of each Portfolio's total distribution.
** Item (C) is based on the percentage of ordinary income of the fund.
*** Item (D) is based on the percentage of the gross income of the fund.
</FN>
</TABLE>
42
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
[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
OVB-F-004-03
<PAGE>
THE ARBOR FUND
U.S. GOVERNMENT SECURITIES MONEY FUND
PRIME OBLIGATIONS FUND
ANNUAL REPORT TO SHAREHOLDERS
AS OF JANUARY 31, 1996
<PAGE>
Dear Shareholder:
The fiscal year ended January 31, 1996, was one of positive change and strong
performance for the Arbor Funds institutional money market funds.
The most significant development during the year was the addition of a new
portfolio, the Prime Obligations Money Fund, which opened for business on
October 25, 1995. The Fund invests primarily in high-quality corporate debt
securities and maintains an average maturity on a dollar-weighted basis of 90
days or less. Since being launched, the Prime Obligations Money Fund has
performed well. Its 7-day yield was 5.47% and its 7-day effective yield was
5.62% at January 31, 1996.
This new portfolio complements our existing U.S. Government Securities Money
Fund, which also exhibited healthy returns this year. The Fund had a 7-day
yield of 5.41% and a 7-day effective yield of 5.55% on January 31, 1996.
ECONOMIC ENVIRONMENT
In our last report, we voiced our continuing concern that the economy was losing
momentum, and the Federal Reserve would be inclined to gradually lower short
term interest rates in the coming months. The sluggish Christmas holiday
spending confirmed this fear, and the Federal Reserve lowered overnight rates in
two steps to 5.25% from 5.75% last July.
Currently, there are no overt imbalances in the economy and inflation remains
very much contained. This is the good news. The other news is that the current
expansion is completing five years and there is no single sector in the economy
that is strong, which often provides a cushion in the event of an unexpected
shock to growth.
THE OUTLOOK FOR INTEREST RATES
The combination of extreme winter weather and the two Federal Government
shutdowns have made interpretation of economic data very difficult. We continue
to believe that the economy will grow in the months ahead, but the pace is
likely to be softer and the risk of recession is noticeably higher.
In this environment of slow growth and low inflation, we expect the Federal
Reserve to continue to gradually lower short-term interest rates as a means of
supporting the aging economic expansion. The pace of this ease by the Fed will
be influenced by any unexpected news suggesting unusual economic strength or
weakness.
We thank you for your participation in the U.S. Government Securities Money Fund
and the Prime Obligations Fund. We will continue to do our best to provide a
good return utilizing prudent investment strategies.
Sincerely,
/S/Alan M. Gayle
Alan M. Gayle
Senior Vice President and Director
Cash Investment Management Services
Capitoline Investment Services, Inc.
<PAGE>
STATEMENT OF NET ASSETS THE ARBOR FUND
January 31, 1996
<TABLE>
<CAPTION>
Face
Amount Value
(000) U.S. GOVERNMENT SECURITIES MONEY FUND (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATION -- 1.9%
U.S. Treasury STRIPS
$10,000 5.670% (DAGGER), 05/15/96................................. $ 9,840
- -------------------------------------------------------------------------------
Total U.S. Treasury Obligation
(Cost $9,839,901)........................... 9,840
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 68.7%
FFCB
15,000 6.120%, 02/08/96 ......................................... 15,000
25,000 5.630%, 03/01/96 ......................................... 25,000
20,000 5.400%, 12/02/96 ......................................... 19,982
FHLB
5,000 5.575%, 06/12/96 ......................................... 4,998
15,000 6.000%, 08/07/96 ......................................... 15,000
5,000 6.000%, 08/16/96 ......................................... 5,000
20,000 5.520%, 01/09/97 ......................................... 20,000
FHLB Callable 02/11/96 @ 100
25,000 5.825%, 11/11/96 ......................................... 25,000
FHLB Callable 04/10/96 @ 100
20,000 5.430%, 01/10/97 ......................................... 20,000
FHLB Callable 04/17/96 @ 100
2,500 5.415%, 01/17/97 ......................................... 2,500
FHLMC
10,000 4.200%, 09/09/96 ......................................... 9,922
FHLMC Discount Note
10,000 5.220%, 04/25/96 ......................................... 9,878
FNMA
10,000 9.350%, 02/12/96 ......................................... 10,010
5,000 6.430%, 04/18/96 ......................................... 5,000
30,000 5.370%, 02/21/97 (A) ..................................... 29,984
FNMA Callable 02/01/96 @ 100
5,000 8.610%, 02/01/00 ......................................... 5,000
FNMA Discount Note
15,000 5.520%, 02/08/96 ......................................... 14,984
10,000 5.450%, 05/02/96 ......................................... 9,862
10,000 5.520%, 04/04/96 ......................................... 9,903
SLMA
4,000 6.831%, 02/21/96 ......................................... 4,001
15,000 5.310%, 09/23/96 (A) ..................................... 15,000
20,000 5.380%, 08/02/99 (A) ..................................... 19,980
Tennessee Valley Authority
13,000 4.375%, 03/04/96 ......................................... 12,986
9,990 4.600%, 12/15/96 ......................................... 9,912
Tennessee Valley Authority Discount Note
15,000 5.200%, 04/25/96 ......................................... 14,818
World Bank Discount Note
20,000 5.700%, 02/13/96 ......................................... 19,963
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $353,683,882)................................... 353,683
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
January 31, 1996
Face
Amount Value
(000) U.S. GOVERNMENT SECURITIES MONEY FUND (continued) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 29.1%
First Boston Securities, 6.00%, dated 01/31/96,
matures 02/01/96, repurchase price $24,004,000
(collateralized by various FHLB obligations,
ranging in par value $3,640,000-$3,775,000,
rates 7.500%-7.600%, maturities 09/30/10-11/08/00;
FNMA obligations, ranging in par value $4,735,000-
$10,380,000, rates 6.550%-7.930%, maturities
$ 24,000 09/12/05-02/14/25, total market value $24,603,713)....... $ 24,000
Greenwich Securities, 5.95%, dated 01/31/96,
matures 02/01/96, repurchase price $102,812,990
(collateralized by various FHLMC obligations,
ranging in par value $14,700,000-$53,815,000, rates
5.125%-8.000%, maturities 09/15/06-04/15/22, total
102,796 market value $104,853,724)................................ 102,796
Nomura Securities, 5.95%, dated 01/31/96, matures
02/01/96, repurchase price $23,192,833 (collateralized
by various FHLMC obligations, ranging in par value
$5,582,900-$90,650,000, rates 2.650%-6.158%, maturities
07/15/20-10/01/23;FNMA obligations, ranging in par value
$144,000-$20,336,486, rates 0.000%-8.176%, maturities
23,189 05/01/21-04/25/22, total market value $23,652,324)........ 23,189
------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $149,984,564)............................... 149,985
- -------------------------------------------------------------------------------
Total Investments--99.7%
(Cost $513,508,347)............................... 513,508
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.3%
Other Assets and Liabilities, Net .......................... 1,362
- -------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares (unlimited authorization-- no par value)
based on 514,884,536 outstanding shares of beneficial
interest................................................... 514,884
Realized Loss on Investments ............................... (14)
- -------------------------------------------------------------------------------
Total Net Assets (100.0%).......................... $514,870
===============================================================================
Net Asset Value, Offering Price and Redemption
Price Per Share.................................. $1.00
===============================================================================
<FN>
FFCB -- Federal Farm Credit Bank
FHLB -- Federal Home Loan Bank
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
SLMA -- Student Loan Marketing Association
STRIPS -- Separately Traded Registered Interest and Principal of Securities
(A) Variable Rate Security -- The rate reported in the Statement of Net Assets
is the rate in effect on January 31, 1996.
(DAGGER) Effective yield
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
January 31, 1996
<TABLE>
<CAPTION>
Face
Amount Value
(000) PRIME OBLIGATIONS FUND (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 69.9%
AT&T
$ 14,000 5.460%, 05/02/96.......................................... $ 13,807
AT&T Capital
4,700 5.480%, 04/04/96.......................................... 4,655
Chase Manhattan Bank
9,000 5.380%, 05/09/96.......................................... 8,868
CIESCO
20,000 5.610%, 02/28/96.......................................... 19,916
Daimler Benz
15,000 5.500%, 03/29/96.......................................... 14,869
Enterprise Funding
7,607 5.680%, 02/15/96.......................................... 7,590
10,000 5.822%, 02/21/96.......................................... 9,969
E.I. Du Pont de Nemours
10,000 5.470%, 05/09/96.......................................... 9,851
10,000 5.400%, 05/23/96.......................................... 9,832
First Boston (A)
20,000 5.450%, 07/11/96.......................................... 20,000
General Electric Capital
20,000 5.520%, 04/04/96.......................................... 19,807
Guangdong Enterprises
15,000 5.540%, 05/01/96.......................................... 14,792
Hanson PLC
9,450 5.660%, 02/09/96.......................................... 9,438
10,000 5.650%, 02/22/96.......................................... 9,967
International Nederlanden
15,000 5.610%, 03/05/96.......................................... 14,923
6,000 5.600%, 03/15/96.......................................... 5,960
NationsBank
17,000 5.640%, 02/13/96.......................................... 16,968
Stellar Capital
17,421 5.380%, 06/21/96.......................................... 17,054
Strategic Asset Funding
19,800 5.370%, 04/30/96.......................................... 19,537
Svenska Handelsbanken
5,000 5.560%, 03/11/96.......................................... 4,970
15,000 5.270%, 04/26/96.......................................... 14,813
- -------------------------------------------------------------------------------
Total Commercial Paper (Cost $267,586,116) ........... 267,586
- -------------------------------------------------------------------------------
CORPORATE OBLIGATION -- 3.9%
Exxon Capital
15,000 7.750%, 02/14/96.......................................... 15,009
- -------------------------------------------------------------------------------
Total Corporate Obligation (Cost $15,008,833)......... 15,009
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS (concluded) THE ARBOR FUND
January 31, 1996
<TABLE>
<CAPTION>
Face
Amount Value
(000) PRIME OBLIGATIONS FUND (continued) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF DEPOSIT -- 11.8%
First Alabama Bank
$20,000 5.330%, 07/09/96.......................................... $ 20,000
National Bank of Detroit
5,000 5.850%, 06/05/96.......................................... 5,001
Sanwa Bank
10,000 5.600%, 04/05/96.......................................... 10,000
10,000 5.550%, 09/30/96.......................................... 10,003
- -------------------------------------------------------------------------------
Total Certificates Of Deposit
(Cost $45,004,384).................................. 45,004
- -------------------------------------------------------------------------------
BANKERS ACCEPTANCES -- 8.9%
American Express
8,000 5.550%, 03/07/96.......................................... 7,957
Bank of Tokyo
15,000 5.780%, 03/15/96.......................................... 14,896
Mellon Bank
7,300 5.550%, 03/08/96.......................................... 7,260
NationsBank
4,100 5.350%, 06/24/96.......................................... 4,012
- -------------------------------------------------------------------------------
Total Bankers Acceptances (Cost $34,125,020).......... 34,125
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 5.5%
Nomura Securities, 5.95%, dated 01/31/96, matures
02/01/96, repurchase price $20,896,453 (collateralized
by various FNMA obligations ranging in par value
$3,000,000 - $3,750,000, 5.90% - 6.00%, 07/25/08 -
07/25/15; FHLMC obligations ranging in par value
$4,850,000 - $8,725,000, 7.50% - 8.00%, 07/15/07 -
20,893 04/15/22; with total market value of $21,312,316)......... 20,893
- -------------------------------------------------------------------------------
Total Repurchase Agreement (Cost $20,892,763)...... 20,893
- -------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.3%
Dreyfus Government Cash Management Fund
1,000 ............................................................ 1,000
- -------------------------------------------------------------------------------
Total Cash Equivalent (Cost $1,000,000)............... 1,000
- -------------------------------------------------------------------------------
Total Investments--100.3% (Cost $383,617,116)......... 383,617
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.3%)
Other Assets and Liabilities, Net........................... (985)
- -------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares (unlimited authorization-- no par
value) based on 382,631,520 outstanding shares
of beneficial interest.................................... 382,632
- -------------------------------------------------------------------------------
Total Net Assets (100.0%).......................... $382,632
===============================================================================
Net Asset Value, Offering Price and
Redemption Price Per Share....................... $1.00
===============================================================================
<FN>
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
PLC -- Private Limited Corporation
(A) Variable Rate Security -- The rate reported in the Statement of Net Assets
is the rate in effect on January 31, 1996.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS THE ARBOR FUND
For the Period Ended January 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(IN THOUSANDS)
-------------------------------
U.S. GOVERNMENT PRIME
SECURITIES OBLIGATIONS
MONEY FUND FUND(1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Interest Income........................... $32,824 $6,589
- -------------------------------------------------------------------------------
Expenses:
Management Fees........................... 443 91
Waiver of Management Fees................. (207) (47)
Investment Advisory Fees.................. 1,108 227
Waiver of Advisory Fees................... (753) (181)
Custodian Fees............................ 219 45
Transfer Agent Fees....................... 166 34
Professional Fees......................... 30 13
Registration Fees......................... 5 1
Insurance Expense......................... 5 1
Directors Fees............................ 9 1
Printing Fees............................. 11 1
Pricing Fees.............................. 1 1
Amortization of Organizational Cost....... 69 40
- -------------------------------------------------------------------------------
Total Expenses.......................... 1,106 227
- -------------------------------------------------------------------------------
Net Investment Income..................... 31,718 6,362
- -------------------------------------------------------------------------------
Net Realized Loss on Investments.......... (14) --
- -------------------------------------------------------------------------------
Increase in Net Assets Resulting
from Operations......................... $31,704 $6,362
===============================================================================
<FN>
(1) Commenced operations on October 25, 1995
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS THE ARBOR FUND
For the Period Ended January 31, 1996
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT PRIME
SECURITIES OBLIGATIONS
MONEY FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
02/01/95 08/01/94(1) 10/25/95(2)
TO 01/31/96 TO 01/31/95 TO 01/31/96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Activities:
Net Investment Income.............................................. $ 31,718 $ 13,742 $ 6,362
Net Realized Loss on Investments................................... (14) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations...................... 31,704 13,742 6,362
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income.............................................. (31,718) (13,742) (6,362)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................................. (31,718) (13,742) (6,362)
- ---------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (all at $1.00 per share):
Proceeds from Shares Issued........................................ 5,309,363 3,724,167 1,497,447
Reinvestment of Cash Distributions................................. 1,480 640 --
Cost of Shares Redeemed............................................ (5,375,381) (3,145,385) (1,114,815)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets from Capital
Share Transactions............................................... (64,538) 579,422 382,632
- ---------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets.......................... (64,552) 579,422 382,632
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period.............................................. 579,422 -- --
End of Period.................................................... $ 514,870 $ 579,422 $ 382,632
- ---------------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Shares Issued...................................................... 5,309,363 3,724,167 1,497,447
Shares Issued in Lieu of Cash Distributions........................ 1,480 640 --
Shared Redeemed.................................................... (5,375,381) (3,145,385) (1,114,815)
===========================================================================================================================
<FN>
(1) Commenced operations on August 1, 1994
(2) Commenced operations on October 25, 1995
</FN>
</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
<TABLE>
<CAPTION>
U.S. GOVERNMENT PRIME
SECURITIES OBLIGATIONS
MONEY FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
02/01/95 08/01/94(1) 10/25/95(2)
TO 01/31/96 TO 01/31/95 TO 01/31/96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......................................... $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income..................................................... 0.06 0.03 0.02
- ---------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations........................................ 0.06 0.03 0.02
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends From Net Investment Income...................................... (0.06) (0.03) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions..................................................... (0.06) (0.03) (0.02)
===========================================================================================================================
Net Asset Value, End of Period............................................... $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------------
Total Return................................................................. 5.88% 4.98%* 5.82%*
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000).............................................. 514,870 579,422 382,632
===========================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
Ratio of Expenses to Average Net Assets...................................... 0.20% 0.20%* 0.20%*
Ratio of Expenses to Average Net Assets Excluding Fee Waivers................ 0.37% 0.38%* 0.40%*
Ratio of Net Investment Income to Average Net Assets......................... 5.72% 4.98%* 5.61%*
Ratio of Net Investment Income to Average Net Assets
Excluding Fee Waivers................................................... 5.55% 4.80%* 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 FUND
January 31, 1996
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 Prime
Obligations Fund had no operations through October 24, 1995 ("commencement of
operations") other than those related to organizational matters and the sale of
initial shares to SEI Financial Management Corporation (the "Administrator"), a
wholly-owned subsidiary of SEI Corporation. 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ARBOR FUND
January 31, 1996
3. Administration, Transfer Agent and Distribution Agreements:
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 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, 1995 to
January 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, 1995 to
January 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 an officer of the Funds is a partner.
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>
NOTICE TO SHAREHOLDERS THE ARBOR FUND
January 31, 1996 (Unaudited)
For shareholders that do not have a January 31, 1996 tax year end, this notice
is for informational purposes only. For shareholders with a January 31, 1996 tax
year end, please consult your tax advisor as to the pertinence of this notice.
For the fiscal year ended January 31, 1996, each portfolio is designating the
following items with regard to distributions paid during the year.
<TABLE>
<CAPTION>
(A) (B) (C)
LONG TERM ORDINARY INCOME TOTAL
CAPITAL GAINS DISTRIBUTIONS DISTRIBUTIONS
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities Money Fund 0% 100% 100%
Prime Obligations Fund 0% 100% 100%
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
PORTFOLIO DIVIDENDS(1) INTEREST TAX CREDIT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities Money Fund 0% 0% 0%
Prime Obligations Fund 0% 0% 0%
===========================================================================================================================
<FN>
(1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction.
* Items (A) and (B) are based on a percentage of each portfolio's total distributions.
** Items (D), (E) and (F) are based on a percentage of ordinary income distributions of each portfolio.
</FN>
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
U.S. Government Securities Money Portfolio and
Prime Obligations Portfolio of The Arbor Fund
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the U.S. Government Securities Money Portfolio and Prime Obligations Portfolio
of The Arbor Fund (hereafter referred to as the "Fund") at January 31, 1996, the
results of each of their operations, the changes in each of their net assets and
the financial highlights for each of the respective periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at January 31, 1996, by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Philadelphia, PA
March 8, 1996
<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.
