The Arbor Fund
Annual Report
----------------------
AS OF JANUARY 31, 1997
Golden Oak
Family of Funds
ADVISED BY
CITIZENS BANK
<PAGE>
TABLE OF CONTENTS
Letter to Shareholders ................................................. 2
Managers' Discussion of Fund Performance ............................... 4
Report of Independent Accountants ...................................... 8
Statements 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:
Following a very strong year for financial assets in 1995, expectations for the
economy and the securities markets were rather modest as 1996 unfolded. A very
optimistic employment report in February, however, proved to be the beginning of
several months of impressive economic data. The better-than-expected news was a
depressant for bonds and a "health tonic" for stocks, as the Dow Jones
Industrial Average pushed into uncharted territory.
By July the economy was clearly exceeding the Federal Reserve's unofficial
"speed limit", and the combination of expected Fed tightening and worry about
the sustainability of corporate earnings resulted in a sharp correction for
stocks. By the end of the month, however, the stock market strengthened again,
and in August, bonds joined the late summer-fall rally as the economy settled
back to a moderate growth rate.
The outlook for the national economy continues to look favorable. Unless
inflation cycles upward, which appears to be a low-odds bet, interest rates
should remain in a reasonably narrow trading range with rising rates sowing the
seeds of the next decline.
Better-than-expected corporate earnings were limited to the financial,
technology, energy and capital goods producers in 1996. If the group of
"champions" continues to narrow this year, then the stock market averages could
have a hard time sustaining the highs reached in January unless corporate
buybacks of stock increase from recent levels.
Once again we feel the need to repeat the truism that financial markets will not
go up each and every year. Therefore, you should concentrate on establishing and
maintaining an investment mix of stocks and bonds which best fits your financial
needs and objectives. Don't succumb to the temptation to simply chase whatever
market fad has been the most rewarding in the recent past. Investment styles
constantly rotate, and last year's leaders are likely to be tomorrow's laggards.
2
<PAGE>
We value the opportunity to serve your investment needs, and we are committed to
making the Golden Oak Funds an important part of your financial wealth-building.
Thank you for your continued confidence in our efforts.
Sincerely,
/S/SIGNATURE
Dana A. Czmer
Senior Vice President & Trust Officer
Citizens Bank
3
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE
Fiscal Year Ended January 31, 1997
GOLDEN OAK INTERMEDIATE-TERM INCOME PORTFOLIO
For the 12-month period ended January 31, 1997 the Class A shares of the Golden
Oak Intermediate-Term Income Portfolio had a total return of 2.31%, as compared
to the benchmark Lehman Intermediate Government/ Corporate Index (the "Index")
measure of 3.57%. The SEC 30-day yield for Class A shares as of January 31, 1997
was 5.73%. Class B shares had a total return of 2.05%. The SEC 30-day yield for
Class B shares as of January 31, 1997 was 5.22%.
As we entered 1996, we expected interest rates to fall and the Federal Reserve
to continue easing. Our economic analysis did not support the view, however,
that the economy would be heading into recession. We believed that the bond
market had already discounted more Fed easing in the near term than was
reasonable to expect. With this uncertainty in the market place, we maintained
portfolio structure near that of the Index with respect to both sector
distribution and duration.
During that first quarter, the Federal Reserve stopped cutting rates as the
strong employment situation raised inflation fears in the bond market. The
sell-off in bonds lasted through mid-year. Near the end of the first quarter,
the portfolio shifted from a neutral duration versus the Index to a modest
defensive position. In addition, a modified barbell structure was created by
overweighting one and five-year Treasuries and underweighting two- and
three-year Treasuries. Both strategies proved insufficient to match the
performance of the Index. In the first two quarters, the portfolio returned
- -1.06% and .46% versus -.83% and .63% Index performance.
Interest rates peaked early in the third quarter on the release of a 4.70%
second quarter GDP growth rate. The strength in the economy proved to be
short-lived, however. As economic fundamentals trended lower, interest rates
began moving in a wide trading range. Believing that the strong employment
situation would eventually lead to a moderate inflation cycle, the portfolio
maintained a below-Index duration throughout most of this period. This proved to
be an overly cautious position.
Performance for the third quarter was 1.30% versus 1.78% for the Index and 2.01%
in the fourth quarter versus 2.45% for the Index.
We are watching energy prices, the employment cost index, the consumer and
producer price indices, and other basic economic indicators for signs of
divergence (positive or negative) from their established trends. We expect
moderate economic growth of 2.50% to 3.00% for the year. The Consumer Price
Index will likely move to 3.25% during 1997 as we begin a mild inflation cycle.
The Federal Reserve should keep monetary policy steady throughout the first
quarter of 1997 and intermediate interest rates should stay in a narrow trading
range.
In an environment of stable interest rates, our focus will be on generating
income in excess of the Index. As rates move to the high end of the trading
range, the portfolio will extend to lock in higher yields. We expect to maintain
an overweighting in mortgage-backed, asset-backed and corporate securities
versus the Index. The duration of the portfolio will remain neutral to
moderately long versus the Index until a better indication of economic direction
presents itself.
4
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE
Fiscal Year Ended January 31, 1997
-------------------- INVESTMENT PERFORMANCE ANALYSIS --------------------
AVERAGE ANNUAL TOTAL RETURN(1)
CLASS A
CLASS B WITHOUT LOAD
CLASS B WITH LOAD(2)
1 YEAR
2.31%
2.05%
-2.56%
INCEPTION
4.99%
4.53%
3.20%
[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 Golden Oak
Intermediate-Term Income Portfolio, Class A from February 28, 1993 through
January 31, 1997 as compared with the growth of $10,000 investment in the
Lehman Brothers Intermediate Government/Corporate Index.
Plot Points
<TABLE>
<CAPTION>
Initial Investment Date 2/28/93 Jan-94 Jan-95 Jan-96 Jan-97
<S> <C> <C> <C> <C> <C>
Golden Oak Intermediate-
Term Income Portfolio, Class A $10,000 $10,569 $10,399 $11,733 $12,004
Lehman Brothers Intermediate
Government/Corporate Index $10,000 $10,622 $10,475 $11,981 $12,409
[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 Golden Oak
Intermediate-Term Income Portfolio, Class B without load from June 30, 1993
through January 31, 1997 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 Jan-97
<S> <C> <C> <C> <C> <C>
Golden Oak Intermediate-
Term Income Portfolio, Class B $ 9,550 $ 9,860 $ 9,678 $10,891 $11,114
Lehman Brothers Intermediate
Government/Corporate Index $10,000 $10,356 $10,213 $11,682 $12,099
<FN>
1 FOR THE PERIOD ENDED JANUARY 31, 1997. PAST PERFORMANCE OF THE PORTFOLIO
IS NOT PREDICTIVE OF FUTURE PERFORMANCE.INDIVIDUAL CLASS B
SHARES WERE OFFERED BEGINNING JUNE 18, 1993. CLASS A SHARES WERE
OFFERED BEGINNING FEBRUARY 1, 1993.
2 PERFORMANCE OF THE CLASS B SHARES REFLECTS THE MAXIMUM FRONT END
SALES CHARGE OF 4.50%.
</FN>
</TABLE>
5
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE
Fiscal Year Ended January 31, 1997
GOLDEN OAK DIVERSIFIED GROWTH PORTFOLIO
As was the case in 1995 the dominant factor in determining investment results
was market capitalization with the largest issues having the highest returns.
While all of the capitalization groups participated in the up move during the
first three quarters of the year, the market narrowed in the fourth quarter,
with only the largest issues generating substantial returns. This was
particularly true in the technology area, a sector that we maintained a
significant position in all year. According to Vestek, on a capitalization
weighted basis the technology group, driven by IBM, Intel and Microsoft, was up
9.3% during the quarter. On an equal weighted basis, the group was off 4.3%. The
divergence was even wider for the full year, with the cap weighted returns at
30.6% and equal weighted returns at 12.2%. Our policy of equal weighting our
positions negatively impacted returns, but only in the fourth quarter. Through
the first three quarters we were running 3.7% ahead of the S&P/BARRA Large Cap
Growth Index (the "Index") on a year to date basis. The market's narrowing in
the fourth quarter caused us to lag the Index by roughly what we were ahead
through September. The effect was to give us our Index-like return for the year.
As we enter 1997, our bottom up stock selection process has led us to an
overweighting relative to the Index in the technology, financial services,
energy and retail sectors. We are underweighted in consumer stocks, both
durables and non-durables, and in the healthcare sector. From a valuation point
of view the portfolio is well structured. The growth rate on a forward-looking
basis is 32% higher than the Index while the price/earnings ratio is the same as
the Index at 18.
6
<PAGE>
MANAGERS' DISCUSSION OF FUND PERFORMANCE
Fiscal Year Ended January 31, 1997
- -------------------- INVESTMENT PERFORMANCE ANALYSIS --------------------
AVERAGE ANNUAL TOTAL RETURN(1)
CLASS A
CLASS B WITHOUT LOAD
CLASS B WITH LOAD(2)
1 YEAR
23.79%
23.56%
16.48%
INCEPTION
11.04%
13.18%
11.36%
[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 Golden Oak
Diversified Growth Portfolio, Class A from February 28, 1993 through
January 31, 1997 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 Jan-97
Golden Oak Diversified
Growth Portfolio, Class A $10,000 $11,048 $10,469 $12,439 $15,398
Frank Russell Growth Index $10,000 $10,820 $11,089 $15,393 $19,625
[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 Golden Oak
Diversified Growth Portfolio, Class B without load from June 30, 1993 through
January 31, 1997 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 Jan-97
Golden Oak Diversified
Growth Portfolio, Class B $ 9,425 $10,519 $ 9,913 $11,740 $14,506
Frank Russell Growth Index $10,000 $10,783 $11,050 $15,340 $19,557
1 FOR THE PERIOD ENDED JANUARY 31, 1997. PAST PERFORMANCE OF THE PORTFOLIO
IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INDIVIDUAL CLASS B SHARES WERE
OFFERED BEGINNING JUNE 18, 1993. CLASS A SHARES WERE OFFERED BEGINNING
FEBRUARY 1, 1993.
2 PERFORMANCE OF THE CLASS B SHARES REFLECTS THE MAXIMUM FRONT END SALES
CHARGE OF 5.75%.
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
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
Golden Oak Prime Obligation Money Market Portfolio, Golden Oak Intermediate-Term
Income Portfolio and Golden Oak Diversified Growth Portfolio (separately managed
portfolios of The Arbor Fund, hereafter referred to as the "Fund") at January
31, 1997, the results of each of their operations for the year ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the 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, 1997 by
correspondence with the custodian and brokers, and with respect to unsettled
securities transactions, the application of alternative auditing procedures,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Philadelphia, PA
March 14, 1997
8
<PAGE>
STATEMENTS OF NET ASSETS GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 52.2%
BANKING -- 9.0%
Bank of Scotland
5.522%, 05/12/97 .............. $4,000 $ 3,941
Commerzbank
5.629%, 02/05/97 .............. 3,350 3,348
Dresdner
5.438%, 02/05/97 .............. 1,790 1,789
National Bank of Canada
5.638%, 07/21/97 .............. 6,000 5,847
-------
Total Banking ............. 14,925
-------
FINANCIAL SERVICES -- 23.0%
BCI Funding
5.498%, 04/22/97 .............. 5,000 4,940
BHF Finance
5.450%, 02/25/97 .............. 5,500 5,481
Enterprise Funding
5.508%, 04/28/97 .............. 2,034 2,008
Eureka Securities
5.514%, 03/19/97 .............. 2,000 1,986
Kitty Hawk Funding
5.529%, 03/03/97 .............. 5,000 4,978
Ranger Funding
5.522%, 02/28/97 .............. 6,000 5,976
Rose Funding
5.635%, 02/24/97 .............. 5,000 4,982
Unifunding
5.604%, 04/21/97 ............. 5,000 4,941
Westpac Capital
5.517%, 05/09/97 ............. 3,000 2,957
-------
Total Financial Services . 38,249
-------
INDUSTRIAL -- 19.3%
Burlington Northern Santa Fe
5.727%, 02/24/97 ............. 1,500 1,495
Carter Holt
5.590%, 02/20/97 ............. 1,500 1,495
Chrysler Financial
5.494%, 02/13/97 ............. 5,000 4,991
Cie de Saint Gobain
5.530%, 04/28/97 ............. 6,000 5,924
Ciesco
5.491%, 02/26/97 ............. 6,000 5,978
General Motors Acceptance
5.731%, 07/14/97 ............. 6,000 5,851
Praxair
5.626%, 02/21/97 ............. 1,500 1,495
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO(continued) (000) (000)
- --------------------------------------------------------------------------------
Toshiba America
5.576%, 04/18/97 ............. $2,000 $ 1,977
5.588%, 05/16/97 ............. 3,000 2,953
-------
Total Industrial .......... 32,159
-------
UTILITIES -- 0.9%
Illinois Power
5.609%, 02/13/97 ............. 1,500 1,497
-------
Total Utilities .......... 1,497
-------
Total Commercial Paper
(Cost $86,830) ........ 86,830
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.7%
FAMC
5.411%, 04/01/97 ............. 390 387
FFCB
5.600%, 06/03/97 ............. 5,000 4,998
FNMA (A)
5.380%, 02/05/97 ............. 9,000 9,000
-------
Total U.S. Government Agency
Obligations
(Cost $14,385) ........ 14,385
-------
FLOATING RATE INSTRUMENTS -- 7.8%
Peoples Security Life (A)
5.600%, 05/06/97 ............. 2,000 2,000
5.670%, 05/06/97 ............. 4,000 4,000
SMM Trust (A)
5.488%, 05/29/97 ............. 4,000 4,000
Travelers Insurance (A)
5.640%, 05/06/97 ............. 3,000 3,000
-------
Total Floating Rate Instruments
(Cost $13,000) ........ 13,000
-------
CERTIFICATES OF DEPOSIT -- 18.1%
Bank of Tokyo-Mitsubishi
5.460%, 02/05/97 ............. 5,000 5,000
BankAmerica, Illinois
5.490%, 04/07/97 ............. 5,000 5,000
Banque Nationale de Paris
5.400%, 03/10/97 ............. 5,000 5,000
Chase Manhattan Delaware
5.500%, 07/01/97 ............. 5,000 5,000
First Alabama Bank
5.700%, 02/03/97 ............. 5,000 5,000
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATEMENTS OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
Face
PRIME OBLIGATION MONEY Amount Value
MARKET PORTFOLIO(concluded) (000) (000)
- -------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- (CONTINUED)
Svenska Handelsbanken
5.380%, 02/19/97 ............. $3,000 $ 3,000
5.430%, 05/19/97 ............. 2,000 2,000
--------
Total Certificates Of Deposit
(Cost $30,000) ........ 30,000
--------
BANK NOTES -- 13.2%
Bank One, Columbus (A)
5.370%, 02/11/97 ............. 6,000 5,993
First National Bank of Boston
5.470%, 02/12/97 ............. 5,000 5,000
Key Bank of Utah (A)
5.380%, 10/30/97 ............. 5,000 4,997
Southtrust, Central Carolina
5.500%, 04/30/97 ............. 6,000 6,000
--------
Total Bank Notes
(Cost $21,990) ........ 21,990
--------
Total Investments-- 100.0%
(Cost $166,205) ....... 166,205
--------
OTHER ASSETS AND LIABILITIES, NET -- 0.0% (11)
--------
NET ASSETS:
Portfolio shares of Class A
(unlimited authorization --
no par value) based on 94,519,711
outstanding shares of beneficial interest .... 94,520
Portfolio shares of Class B (unlimited authorization --
no par value) based on 71,691,042 outstanding
shares of beneficial interest ................ 71,691
Accumulated Net Realized Loss on Investments (17)
--------
Total Net Assets-- 100.0% ................ $166,194
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class A .............................. $1.00
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class B .............................. $1.00
========
(A) Variable Rate Security -- The rate reported in the Statement
of Net Assets is the rate in effect on January 31, 1997.
The date reported is the next reset date.
FAMC--Federal Agricultural Mortgage Corporation
FFCB--Federal Farm Credit Bank
FNMA--Federal National Mortgage Association
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 21.7%
BANKING --1.8%
JP Morgan
7.625%, 09/15/04 ............. $2,000 $ 2,087
--------
Total Banking ............ 2,087
--------
FINANCIAL SERVICES -- 4.6%
American Express Credit
8.500%, 06/15/99 ............. 500 524
Associates Corporation of North America
8.550%, 07/15/09 ............. 2,000 2,232
Comerica
7.250%, 10/15/02 ............. 1,000 1,025
Household Finance
9.950%, 03/08/01 ............. 500 558
Lehman Brothers Holding
5.750%, 02/15/98 ............. 1,000 996
--------
Total Financial Services .. 5,335
--------
INDUSTRIAL -- 13.3%
Anheuser Busch, Callable
10/01/99 @ 100
6.900%, 10/01/02 ............. 3,000 3,011
Archer Daniels Midland
10.250%, 01/15/06 ............ 1,000 1,216
Chrysler Financial
13.250%, 10/15/99 ............ 1,000 1,167
Eli Lilly
8.375%, 12/01/06 ............. 1,000 1,104
Ford Motor Credit
6.250%, 11/08/00 ............. 1,000 990
8.200%, 02/15/02 ............. 1,000 1,060
Kaiser Permanente
9.550%, 07/15/05 ............. 1,390 1,604
Martin Marietta
6.500%, 04/15/03 ............. 1,000 985
RR Donnelley & Sons
9.125%, 12/01/00 ............. 500 543
Union Pacific, Callable
01/15/01 @ 100
6.125%, 01/15/04 ............. 1,000 940
US Air
6.760%, 04/15/08 ............. 974 945
WMX Technologies
7.000%, 05/15/05 ............. 2,000 2,002
--------
Total Industrial ......... 15,567
--------
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STATEMENTS OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO(continued) (000) (000)
- --------------------------------------------------------------------------------
UTILITIES -- 2.0%
Consolidated Edison of NY
6.500%, 02/01/01 ............. $1,000 $ 995
Pacific Gas and Electric
8.750%, 01/01/01 ............. 1,300 1,399
--------
Total Utilities .......... 2,394
--------
Total Corporate Obligations
(Cost $25,756) ........ 25,383
--------
U.S. GOVERNMENT AGENCY BONDS -- 4.8%
FHLB
8.120%, 09/26/06 ............. 1,760 1,768
FNMA
6.000%, 12/15/00 ............. 1,500 1,472
5.990%, 10/01/03 ............. 1,500 1,430
SLMA
6.050%, 09/14/00 ............. 1,000 991
--------
Total U.S. Government Agency
Bonds
(Cost $5,759) ......... 5,661
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS -- 8.6%
FHLMC
5.600%, 09/15/00 ............. 2,174 2,134
6.500%, 03/15/17 ............. 17 18
FNMA REMIC
7.268%, 04/25/20 ............. 2,371 2,377
FNMA
5.750%, 06/25/06 ............. 1,220 1,208
7.230%, 11/01/06 ............. 2,337 2,347
GNMA CMO/REMIC
7.000%, 02/16/24 ............. 2,000 1,921
--------
Total U.S. Agency Mortgage-Backed
Obligations
(Cost $10,070) ........ 10,005
--------
U.S. TREASURY OBLIGATIONS -- 54.7%
U.S. Treasury Notes
6.875%, 02/28/97 ............. 11,400 11,413
7.875%, 04/15/98 ............. 15,300 15,677
7.750%, 02/15/01 ............. 11,500 12,120
Face Market
INTERMEDIATE-TERM INCOME Amount Value
PORTFOLIO(continued) (000) (000)
- -------------------------------------------------------------------------------
U.S. Treasury Notes-- (CONTINUED)
6.250%, 04/30/01 ............. $6,000 $ 6,000
7.500%, 05/15/02 ............. 3,700 3,899
7.875%, 11/15/04 ............. 7,600 8,249
5.875%, 11/15/05 ............. 6,800 6,514
--------
Total U.S. Treasury Obligations
(Cost $64,079) ........ 63,872
--------
MUNICIPAL BONDS -- 0.6%
Texas State, GO
7.250%, 12/01/99 ............. 210 217
7.250%, 06/01/00 ............. 215 222
7.250%, 12/01/00 ............. 220 228
--------
Total Municipal Bonds
(Cost $677) ........... 667
--------
ASSET-BACKED SECURITIES -- 5.2%
Bay View 1997-Ra-1
6.290%, 01/01/98 ............. 2,000 2,000
Olympic Automobile Receivables
Trust 1996-A A3, Callable
03/12/98 @ 100
5.700%, 04/15/00 ............. 2,000 1,992
WFS Financial Owner Trust 1996-B A3
6.650%, 08/20/00 ............. 2,000 2,025
--------
Total Asset-Backed Securities
(Cost $5,985) ......... 6,017
--------
REPURCHASE AGREEMENTS -- 3.9%
Lehman Government Securities (A)
5.48%, dated 01/31/97, matures
02/03/97, repurchase price
$4,537,702 (collateralized by
U.S. Treasury Bonds, par value
$3,053,000, 13.875%, 05/15/11;
market value $4,643,247) ..... 4,536 4,536
--------
Total Repurchase Agreements
(Cost $4,536) ......... 4,536
--------
Total Investments-- 99.5%
(Cost $116,862) ....... 116,141
--------
OTHER ASSETS AND LIABILITIES, NET-- 0.5% 632
--------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATEMENTS OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
Market
INTERMEDIATE-TERM INCOME Value
PORTFOLIO (concluded) (000)
- -------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited
authorization -- no par value) based
on 11,870,458 outstanding shares
of beneficial interest ......... $117,952
Portfolio shares of Class B (unlimited
authorization -- no par value)
based on 8,515 outstanding shares
of beneficial interest ....... 97
Accumulated Net Realized Loss on Investments (555)
Net Unrealized Depreciation on Investments (721)
--------
Total Net Assets-- 100.0% ........ $116,773
========
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class A ...................... $9.83
========
Net Asset Value and Redemption
Price Per Share --
Class B ...................... $9.83
========
Maximum Offering Price Per Share --
Class B ($9.83/95.5%) ........ $10.29
========
(A) Variable Rate Security -- The rate reported in the Statement of Net Assets
is the rate in effect on January 31, 1997.
CMO--Collateralized Mortgage Obligation
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
GO--General Obligation
REMIC--Real Estate Mortgage Investment Conduit
SLMA--Student Loan Marketing Association
Market
DIVERSIFIED GROWTH Value
PORTFOLIO Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 95.3%
APPAREL -- 7.5%
Fruit of the Loom, Class A* ...... 10,800 $ 433
Liz Claiborne .................... 12,500 527
Nike, Class B .................... 10,000 679
Tommy Hilfiger* .................. 7,900 405
VF Corporation ................... 6,700 446
------
Total Apparel ............ 2,490
------
AUTOMOTIVE -- 1.2%
Chrysler ......................... 12,000 418
------
BANKS -- 1.4%
Star Banc ........................ 12,500 459
------
BEAUTY PRODUCTS -- 1.6%
Amway Asia Pacific ............... 11,500 530
------
BIOTECHNOLOGY -- 1.4%
Biogen* .......................... 10,000 467
------
CHEMICALS -- 0.4%
Mallinckrodt ..................... 3,500 143
------
COMMERCIAL SERVICES -- 2.5%
ADT Limited* ..................... 6,700 150
Paychex 9,000 436
Service International ............ 8,200 238
------
Total Commercial Services 824
------
COMPUTERS/OFFICE AUTOMATION-- 9.6%
3Com* ............................ 5,500 369
Cisco Systems* ................... 9,614 670
Compaq Computer* ................. 5,600 486
Dell Computer* ................... 12,400 820
Gateway 2000* .................... 8,900 544
Sun Microsystems* ................ 9,100 289
------
Total Computers/Office Automation 3,178
------
DRUGS -- 3.0%
American Home Products ........... 4,600 292
Merck ............................ 1,300 118
Schering Plough .................. 1,900 144
Warner Lambert ................... 5,600 451
------
Total Drugs .............. 1,005
------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STATEMENTS OF NET ASSETS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
Market
DIVERSIFIED GROWTH Value
PORTFOLIO (continued) Shares (000)
- --------------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS -- 2.7%
American Power Conversion* ....... 15,200 $ 409
Raychem .......................... 5,800 502
------
Total Electronic Instruments 911
------
ENVIRONMENTAL SERVICES -- 1.3%
Republic Industries* ............. 10,500 440
------
FINANCIAL SERVICES -- 7.2%
Bear Stearns ..................... 4,515 135
Countrywide Credit Industries .... 14,800 442
Equifax .......................... 14,000 441
MBNA ............................. 13,100 452
Morgan Stanley Group ............. 5,488 314
SLMA ............................. 5,700 621
------
Total Financial Services . 2,405
------
HEALTH SERVICES -- 3.1%
HBO .............................. 8,778 550
Oxford Health Plan* .............. 9,000 489
------
Total Health Services .... 1,039
------
HOSPITALS -- 0.4%
Health Management Associates, Class A* 4,350 120
------
HOTELS & LODGING -- 2.1%
HFS* ............................. 8,000 560
Marriott International ........... 2,500 133
------
Total Hotels & Lodging ... 693
------
HOUSEHOLD FURNITURE & FIXTURES -- 1.3%
Leggett & Platt .................. 13,200 424
------
INSURANCE -- 3.2%
Conseco .......................... 8,700 639
Progressive of Ohio .............. 6,200 412
------
Total Insurance .......... 1,051
------
INTEGRATED OIL COMPANIES -- 2.0%
Phillips Petroleum ............... 8,600 379
Sonat Inc. ....................... 5,500 293
------
Total Integrated Oil
Companies ............. 672
------
LEISURE/GAMING -- 1.1%
International Game Technology .... 20,000 355
------
Market
DIVERSIFIED GROWTH Value
PORTFOLIO (continued) Shares (000)
- -------------------------------------------------------------------------------
MACHINERY -- 1.5%
Tyco International Ltd. .......... 8,700 $ 497
------
MEDICAL SUPPLIES -- 1.1%
Guidant .......................... 6,400 357
------
MISCELLANEOUS BUSINESS SERVICES-- 2.5%
Ecolab ........................... 10,900 403
Total System Services ............ 15,800 446
------
Total Miscellaneous Business
Services .............. 849
------
MONEY-CENTER BANKS -- 0.7%
BankAmerica ...................... 1,995 223
------
MULTI-LINE INSURERS -- 3.4%
Providian ........................ 2,200 119
Travelers ........................ 19,488 1,021
------
Total Multi-line Insurers 1,140
------
OIL & GAS PRODUCTION -- 1.2%
Union Pacific Resources Group .... 14,300 406
------
PAPER & PAPER PRODUCTS -- 1.3%
James River Corporation .......... 13,100 421
------
PETROLEUM & FUEL PRODUCTS-- 2.8%
Global Marine* ................... 21,800 488
Rowan* ........................... 17,400 439
------
Total Petroleum & Fuel Products 927
------
PRINTING & PUBLISHING -- 0.9%
Gartner Group, Class A* .......... 8,400 288
------
RETAIL -- 6.6%
Dollar General ................... 14,700 456
F.W. Woolworth* .................. 17,700 361
Gap .............................. 11,400 328
Safeway* ......................... 13,000 621
TJX .............................. 10,600 421
------
Total Retail ............. 2,187
------
SEMI-CONDUCTORS/INSTRUMENTS-- 3.1%
Intel ............................ 3,100 503
Western Digital* ................. 7,200 522
------
Total Semi-Conductors/Instruments 1,025
------
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STATEMENTS OF NET ASSETS (concluded) GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
Shares/Face Market
DIVERSIFIED GROWTH Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
SOFTWARE -- 8.2%
BMC Software* .................... 12,600 $ 547
Cadence Design Systems* .......... 12,750 488
Computer Associates International 7,050 320
Oracle Systems* .................. 3,700 144
Parametric Technology* ........... 8,200 474
Peoplesoft* ...................... 13,800 752
------
Total Software ........... 2,725
------
TELECOMMUNICATIONS EQUIPMENT-- 6.3%
ADC Telecommunications* .......... 13,300 477
Ascend Communications* ........... 11,500 801
Cascade Communications* .......... 7,200 286
Tellabs* ......................... 12,600 519
------
Total Telecommunications Equipment 2,083
------
TELEPHONES -- 0.2%
LCI International* ............... 2,800 63
------
TRANSPORTATION -- 2.5%
British Airways, Public Limited .. 4,300 409
Canadian Pacific Limited ......... 15,600 423
------
Total Transportation ..... 832
------
Total Common Stock
(Cost $24,943) ........ 31,647
------
REPURCHASE AGREEMENTS -- 7.1%
Morgan Stanley Government Securities (A)
5.48%, dated 01/31/97, matures
02/03/97, repurchase price
$2,346,867 (collateralized by
U.S. Treasury Bonds, par value
$1,712,000, 14.25%, 02/15/02;
market value $2,402,927) ..... $2,346 2,346
------
Total Repurchase Agreements
(Cost $2,346) ......... 2,346
------
Total Investments-- 102.4%
(Cost $27,289) ........ 33,993
------
OTHER ASSETS AND LIABILITIES, NET -- (2.4%) (794)
------
Market
DIVERSIFIED GROWTH Value
PORTFOLIO(concluded) (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited
authorization -- no par value) based on
2,604,959 outstanding shares of
beneficial interest .......... $25,824
Portfolio shares of Class B (unlimited
authorization -- no par value) based
on 18,028 outstanding shares of
beneficial interest .......... 176
Distributions in Excess of Net
Investment Income ............ (18)
Accumulated Net Realized Gain
on Investments ............... 513
Net Unrealized Appreciation
of Investments ............... 6,704
-------
Total Net Assets-- 100.0% ........ $33,199
=======
Net Asset Value, Offering Price and
Redemption Price Per Share --
Class A ...................... $12.66
=======
Net Asset Value and Redemption
Price Per Share --
Class B ...................... $12.57
=======
Maximum Offering Price Per Share --
Class B ($12.57/94.25%) ...... $13.34
=======
* Non-income producing security
(A) Variable Rate Security--The rate reported in the Statement of Net Assets is
the rate in effect on January 31, 1997.
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, 1997
<TABLE>
<CAPTION>
PRIME OBLIGATION INTERMEDIATE-TERM DIVERSIFIED
MONEY MARKET INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Dividend Income $ -- $ -- $ 239
Interest Income 9,314 6,619 86
- -----------------------------------------------------------------------------------------------------------------
Total Investment Income 9,314 6,619 325
- -----------------------------------------------------------------------------------------------------------------
Expenses:
Administration Fees 339 215 57
Investment Advisory Fees 509 539 210
Less: Waiver of Investment Advisory Fees (468) (167) (3)
Investment Sub-Advisory Fees 127 -- --
Custodian Fees 20 11 4
Transfer Agent Fees 49 43 30
Professional Fees 38 21 6
Registration Fees 10 12 2
Distribution Fees(1) 169 -- 1
Trustee Fees 7 6 1
Printing Expenses 15 12 4
Amortization of Deferred Organizational Costs 28 7 --
Other Expenses 4 3 2
- -----------------------------------------------------------------------------------------------------------------
Total Expenses 847 702 314
- -----------------------------------------------------------------------------------------------------------------
Net Investment Income 8,467 5,917 11
- -----------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) on Securities Sold (11) (45) 2,230
Net Change in Unrealized Appreciation
(Depreciation) on Investments -- (3,128) 3,815
- -----------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments (11) (3,173) 6,045
- -----------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations $8,456 $2,744 $6,056
=================================================================================================================
<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,
GOLDEN OAK FAMILY OF FUNDS
<TABLE>
<CAPTION>
PRIME OBLIGATION
MONEY MARKET
PORTFOLIO
-------------------------------
1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Operations:
Net Investment Income $ 8,467 $ 9,082
Net Realized Gain (Loss) on Securities Sold (11) 5
Net Change in Unrealized Appreciation (Depreciation) on Investments -- --
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Investment Operations 8,456 9,087
- ---------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income
Class A (5,202) (6,154)
Class B (3,265) (2,928)
Realized Net Gains
Class A -- --
Class B -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (8,467) (9,082)
- ---------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Class A:
Shares Issued 202,332 230,201
Shares Issued in Lieu of Cash Distributions 6 7
Shares Redeemed (215,233) (231,879)
- ---------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions (12,895) (1,671)
- ---------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 498,815 674,637
Shares Issued in Lieu of Cash Distributions 227 123
Shares Redeemed (502,644) (620,486)
- ---------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions (3,602) 54,274
- ---------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Capital Share Transactions (16,497) 52,603
- ---------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (16,508) 52,608
- ---------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period 182,702 130,094
- ---------------------------------------------------------------------------------------------------------------
End of Period $166,194 $182,702
===============================================================================================================
Shares Issued and Redeemed
Class A:
Issued 202,332 230,201
Issued in Lieu of Cash Distributions 6 7
Redeemed (215,233) (231,879)
- ---------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions (12,895) (1,671)
- ---------------------------------------------------------------------------------------------------------------
Class B:
Issued 498,815 674,637
Issued in Lieu of Cash Distributions 227 123
Redeemed (502,644) (620,486)
- ---------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions (3,602) 54,274
- ---------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Capital Shares (16,497) 52,603
===============================================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
GOLDEN OAK FAMILY OF FUNDS
INTERMEDIATE-TERM DIVERSIFIED
INCOME GROWTH
PORTFOLIO PORTFOLIO
---------------------- -----------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Operations:
Net Investment Income $ 5,917 $ 5,360 $ 11 $ 224
Net Realized Gain (Loss) on Securities Sold (45) 1,628 2,230 3,411
Net Change in Unrealized Appreciation (Depreciation) on Investments (3,128) 4,323 3,815 2,316
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Investment Operations 2,744 11,311 6,056 5,951
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income
Class A (5,911) (5,347) (15) (237)
Class B (6) (13) -- (1)
Realized Net Gains
Class A -- -- (82) (4,216)
Class B -- -- (1) (22)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (5,917) (5,360) (98) (4,476)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Class A:
Shares Issued 27,079 28,102 8,771 7,863
Shares Issued in Lieu of Cash Distributions -- -- -- 17
Shares Redeemed (11,494) (9,830) (6,628) (17,509)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions 15,585 18,272 2,143 (9,629)
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares Issued 15 10 150 46
Shares Issued in Lieu of Cash Distributions 5 7 1 22
Shares Redeemed (139) (138) (21) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions (119) (121) 130 66
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Capital Share Transactions 15,466 18,151 2,273 (9,563)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 12,293 24,102 8,231 (8,088)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period 104,480 80,378 24,968 33,056
- ------------------------------------------------------------------------------------------------------------------------------------
End of Period $116,773 $104,480 $33,199 $24,968
====================================================================================================================================
Shares Issued and Redeemed
Class A:
Issued 2,757 2,857 790 737
Issued in Lieu of Cash Distributions -- -- -- 2
Redeemed (1,162) (994) (601) (1,617)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions 1,595 1,863 189 (878)
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Issued 1 1 1 5
Issued in Lieu of Cash Distributions -- 1 -- 2
Redeemed (14) (14) (2) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Class B Share Transactions (13) (12) (1) 6
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Capital Shares 1,582 1,851 188 (872)
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 & 17
<PAGE>
FINANCIAL HIGHLIGHTS GOLDEN OAK FAMILY OF FUNDS
For a Share Outstanding Throughout each Period
For the Periods Ended January 31,
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS NET NET
ASSET AND --------------- ASSET ASSETS RATIO OF RATIO OF
VALUE NET UNREALIZED NET NET VALUE END EXPENSES NET INCOME
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT REALIZED END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME ON INVESTMENTS INCOME GAIN OF PERIOD RETURN (000) NET ASSETS NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 0.05 -- (0.05) -- $1.00 5.21% $94,508 0.40% 5.08%
1996 1.00 0.06 -- (0.06) -- 1.00 5.74 107,409 0.40 5.60
1995 1.00 0.04 -- (0.04) -- 1.00 4.21 109,076 0.40 4.20
1994(1) 1.00 0.03 -- (0.03) -- 1.00 2.87 117,188 0.40 2.83
PRIME OBLIGATION MONEY MARKET PORTFOLIO CLASS B
1997 $1.00 0.05 -- (0.05) -- $1.00 4.95% $71,686 0.65% 4.83%
1996 1.00 0.05 -- (0.05) -- 1.00 5.47 75,293 0.65 5.31
1995 1.00 0.04 -- (0.04) -- 1.00 3.95 21,018 0.65 3.95
1994(2) 1.00 -- -- -- -- 1.00 2.90* 104 0.65* 2.68*
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS A
1997 $10.15 0.54 (0.32) (0.54) -- $9.83 2.31% $116,689 0.65% 5.48%
1996 9.52 0.56 0.63 (0.56) -- 10.15 12.83 104,270 0.65 5.68
1995 10.19 0.50 (0.67) (0.50) -- 9.52 (1.61) 80,064 0.65 5.21
1994(1)10.00 0.46 0.23 (0.46) (0.04) 10.19 6.99 64,329 0.65 4.47
INTERMEDIATE-TERM INCOME PORTFOLIO CLASS B+
1997 $10.15 0.52 (0.32) (0.52) -- $9.83 2.05% $ 84 0.90% 5.20%
1996 9.52 0.54 0.63 (0.54) -- 10.15 12.54 210 0.90 5.49
1995 10.19 0.48 (0.67) (0.48) -- 9.52 (1.85) 314 0.90 4.96
1994(3)10.12 0.31 0.11 (0.31) (0.04) 10.19 6.72* 365 0.90* 4.27*
DIVERSIFIED GROWTH PORTFOLIO CLASS A
1997 $10.26 -- 2.44 (0.01) (0.03) $12.66 23.79% $32,973 1.10% 0.04%
1996 10.00 0.07 1.74 (0.07) (1.48) 10.26 18.81 24,775 1.10 0.62
1995 10.82 0.08 (0.64) (0.08) (0.18) 10.00 (5.24) 32,931 1.10 0.74
1994(1)10.00 0.08 0.82 (0.08) -- 10.82 9.08 24,955 1.10 0.77
DIVERSIFIED GROWTH PORTFOLIO CLASS B+
1997 $10.20 (0.03) 2.43 -- (0.03) $12.57 23.56% $ 226 1.35% (0.20)%
1996 9.96 0.04 1.72 (0.04) (1.48) 10.20 18.43 193 1.35 0.30
1995 10.81 0.05 (0.67) (0.05) (0.18) 9.96 (5.76) 125 1.35 0.49
1994(3) 9.54 0.02 1.27 (0.02) -- 10.81 22.00* 173 1.35* 0.33*
======================================================================================================================
RATIO OF RATIO OF
EXPENSES NET INCOME
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO AVERAGE
(EXCLUDING (EXCLUDING TURNOVER COMMISSION
WAIVERS) WAIVERS) RATE RATE++
---------------------------------------------
0.68% 4.80% N/A N/A
0.70 5.30 N/A N/A
0.68 3.92 N/A N/A
0.67 2.56 N/A N/A
0.93% 4.55% N/A N/A
0.95 5.01 N/A N/A
0.93 3.67 N/A N/A
0.93* 2.40* N/A N/A
0.80% 5.33% 34.67% N/A
0.84 5.49 121.47 N/A
0.86 5.00 141.51 N/A
0.83 4.29 71.73 N/A
1.05% 5.05% 34.67% N/A
1.09 5.30 121.47 N/A
1.11 4.75 141.51 N/A
1.08* 4.09* 71.73 N/A
1.11% 0.03% 130.69% $0.0600
1.17 0.55 189.48 N/A
1.24 0.60 84.00 N/A
1.21 0.66 68.91 N/A
1.36% (0.21)% 130.69% $0.0600
1.42 0.23 189.48 N/A
1.49 0.35 84.00 N/A
1.45* 0.23* 68.91 N/A
================================================================================
<FN>
* Annualized
+ Total return does not reflect the sales charge.
++ Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal
years beginning after September 1, 1995.
(1) Commenced operations February 1, 1993.
(2) Commenced operations January 20, 1994.
(3) Commenced operations June 18, 1993.
</FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
1. Organization:
THE GOLDEN OAK FAMILY OF FUNDS are separate investment portfolios of
The Arbor Fund (the "Trust"). The Trust was organized as a Massachusetts
business trust under a Declaration of Trust dated July 24, 1992 and had no
operations through February 1, 1993 other than those related to organizational
matters and the sale of initial shares to SEI Fund Resources (the
"Administrator") on October 9, 1992. SEI Financial Management Corporation, a
wholly-owned subsidiary of SEI Investments Company, is the owner of all
beneficial interest in the Administrator. The Trust is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management company. These financial statements 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 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 accrued as earned. 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.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
REPURCHASE AGREEMENTS--The Portfolios invest in tri-party repurchase
agreements. It is the Trust's policy that securities held as collateral for
tri-party repurchase agreements are maintained in a segregated account by
the broker's custodian bank until maturity of the repurchase agreement.
Provisions of the repurchase agreements require that the market value of
the collateral, including accrued interest thereon, is sufficient in the
event of default of the counterparty.
If the counterparty defaults and the value of the collateral declines, or
if the counterparty enters an insolvency proceeding, realization and/or
retention of the collateral by the Portfolios may be delayed or limited.
NET ASSET VALUE PER SHARE--The net asset value per share of each Portfolio
is calculated each business day. In general, it is computed by dividing the
assets of each Portfolio, less its liabilities, by the number of
outstanding shares of the Portfolio.
CLASSES OF SHARES--Class specific expenses are borne by that class. Income,
expenses and realized and unrealized gains and losses are allocated to the
respective classes on the basis of their relative daily net assets.
EXPENSES--Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses of the Trust
are prorated to the Portfolios on the basis of relative net assets. Class B
bears a class specific 12b-1 fee. Income, other expenses and accumulated
realized and unrealized gains and losses of a Portfolio are allocated to
the respective class on the basis of relative net asset value each day.
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 that 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 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 Investments Company, have entered into a Distribution
Agreement (the "Distribution Agreement"). The Distributor receives no fees for
its distribution services under the Distribution Agreement. The Trustees have
adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act (the "Plan")
on behalf of the Class B shares. The Plan provides for payment to the
Distributor at an annual rate of .25% of the average daily net assets for the
Class B shares of each Portfolio.
4. Investment Advisory Agreement:
The Trust has entered into an Investment Advisory Agreement with Citizens Bank
(the "Adviser") dated January 28, 1993 under which the Adviser receives an
annual fee equal to .74% of the average daily net assets of the Equity
Portfolio, .50% of the average daily net assets of the Bond Portfolio and .30%
of the average daily net assets of the Money Market Portfolio. The Adviser has
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
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 LLP (the "Sub-Adviser") serves as the investment
Sub-Adviser for the Money Market Portfolio pursuant to a sub-advisory agreement
dated January 28, 1993 with the Trust and the Adviser. The Sub-Adviser receives
an annual fee, computed daily and paid monthly, equal to .075% of the average
daily net assets of the Portfolio.
Nicholas-Applegate Capital Management serves as the investment sub-adviser for
the Equity Portfolio pursuant to a sub-advisory agreement dated August 31, 1995
with the Adviser and receives an annual fee, computed daily and paid quarterly,
equal to .40% of the average daily net assets of the Equity Portfolio.
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 a trustee of the Trust are also officers of the
Administrator and/or Distributor. Such officers and trustee 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, 1997, were
as follows:
INTERMEDIATE-TERM DIVERSIFIED
INCOME GROWTH
(000) (000)
- ---------------------------------------------------
Purchases:
U.S. Government $37,255 $ --
Other 10,317 36,346
Sales:
U.S. Government $30,754 $ --
Other 4,011 34,602
At January 31, 1997, 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,
1997 for the Equity and Bond Portfolios are as follows:
INTERMEDIATE-TERM DIVERSIFIED
INCOME GROWTH
(000) (000)
- ---------------------------------------------------
Aggregate Gross
Unrealized
Appreciation $ 274 $7,083
Aggregate Gross
Unrealized
Depreciation (995) (379)
----- ------
Net Unrealized
Appreciation
(Depreciation) $(721) $6,704
===== ======
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) GOLDEN OAK FAMILY OF FUNDS
January 31, 1997
At January 31, 1997, the Portfolios had available realized capital losses to
offset future net capital gains as follows through fiscal year ending:
2003 2005
(000) (000)
----- -----
Prime Obligation $ -- $16
Intermediate-Term Income 534 45
7. Concentration of Credit Risk:
The Money Market Portfolio invests primarily in money market instruments
maturing in 397 days or less whose ratings are within the two highest ratings
categories assigned by a nationally recognized statistical rating organization
or, if not rated, are believed by the Sub-Adviser to be of comparable quality.
The Bond Portfolio invests 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.
22
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE GOLDEN OAK FAMILY OF FUNDS
(UNAUDITED)
For shareholders that do not have a January 31, 1997 tax year end, this notice
is for informational purposes only. For shareholders with a January 31, 1997 tax
year end, please consult your tax adviser as to the pertinence of this notice.
For the fiscal year ended January 31, 1997, 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 55% 45% 100%
================================================================================
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
PORTFOLIO DIVIDENDS(1) INTEREST(2) TAX CREDIT
- --------------------------------------------------------------------------------
Prime Obligation 0% 0% 0%
Intermediate-Term Income 0% 0% 0%
Diversified Growth 100% 0% 0%
================================================================================
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
(2) The Golden Oak Intermediate-Term Income Portfolio satisfies California's,
Connecticut's and New York's statutory requirements to pass through income
from Federal obligations. Accordingly, the pro rata portion of income from
Federal obligations may be exempt from these respective states' income tax.
Income from Federal obligations is 66.38% of the total "Ordinary Income
Distributions" in column (B) above. No other fund within this complex
qualifies in California, Connecticut, or New York to pass through exempt
interest dividends from U.S. Government obligations.
* 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 BANK
328 SOUTH SAGINAW STREET
FLINT,MI 48502
DISTRIBUTOR:
SEI FINANCIAL SERVICES COMPANY
OAKS, PA 19456
FOR INFORMATION, CALL:
1-800-545-6331
CIT-F-006-05
