THE ARBOR
FUND
CALIFORNIA TAX EXEMPT PORTFOLIO
INSTITUTIONAL TAX FREE PORTFOLIO
SEMI-ANNUAL REPORT
JULY 31, 1997
Advised By
PNC Institutional Management Corporation
<PAGE>
STATEMENT OF NET ASSETS THE ARBOR FUND
July 31, 1997 (Unaudited)
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 100.0%
CALIFORNIA -- 96.2%
Alameda/Contra Costa, School Financing
Authority Capital Improvements,
Ser D (A) (B) (C)
3.450%, 10/01/97 ...................... $ 5,000 $ 5,000
Alameda/Contra Costa, School Financing
Authority Certificate of Participation,
Capital Improvement Project,
Ser 1996A (A) (B) (C)
3.350%, 10/01/97 ...................... 12,000 12,000
Big Bear Lake, Industrial Development
Revenue Bond, Southwest Gas
Project, Ser A, AMT (A) (B) (C)
3.400%, 08/01/97 ...................... 6,200 6,200
Chula Vista, Industrial Development
Revenue Bond, San Diego Gas &
Electric Company, Ser 92B, AMT (A) (B)
3.500%, 08/01/97 ...................... 1,000 1,000
Chula Vista, Industrial Development
Revenue Bond, San Diego Gas &
Electric, Ser A (A) (B)
3.450%, 08/01/97 ...................... 8,550 8,550
Contra Costa County, Housing Authority
Multi-Family Revenue Bond, Park
Regency Project, Ser A, AMT (A) (B) (C)
3.600%, 08/01/97 ...................... 18,925 18,925
Foothill/Eastern Corridor Revenue Bond,
Ser D (A) (B) (C)
3.450%, 08/01/97 ...................... 18,900 18,900
Golden Empire Schools, Educational
Revenue Bond, Kern High School
District Project, Ser 96 (A) (B) (C)
3.500%, 08/01/97 ...................... 5,000 5,000
Hayward, Multi-Family Housing Revenue
Bond, Sharewood Housing Project,
Ser 1984A (A) (B) (C)
3.350%, 08/01/97 ...................... 1,000 1,000
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
Irvine Ranch Water Distribution Revenue
Bond, Ser A (A) (B) (C)
3.550%, 08/01/97 ...................... $ 7,700 $ 7,700
Irvine Ranch Water Distribution Revenue
Bond, Ser B (A) (B) (C)
3.550%, 08/01/97 ...................... 500 500
Los Angeles County, Certificate of Participation,
Unified School District, Parking Project,
Ser B (A) (B) (C)
3.800%, 10/01/97 ...................... 2,000 2,000
Los Angeles County, Housing Authority
Revenue Bond, Malibu Meadows II
Project, Ser B (A) (B) (C)
3.650%, 08/01/97 ...................... 5,000 5,000
Los Angeles County, Pension Obligation
Revenue Bond, Ser A (A) (B) (C)
3.350%, 12/31/97 ...................... 3,900 3,900
Los Angeles County, Pension Obligation
Revenue Bond, Ser C (A) (B) (C)
3.350%, 12/31/97 ...................... 4,000 4,000
Los Angeles County, Sales Tax Revenue
Bond, Ser A (A) (B) (C)
3.350%, 01/01/98 ...................... 8,850 8,850
Modesto/Santa Clara/Redding Utility
Revenue Bond, San Juan Project,
Ser B (A) (B) (C)
3.350%, 08/01/97 ...................... 1,900 1,900
Monterey Peninsula, Certificate of
Participation, Wastewater Reclamation
Project (A) (B) (C)
3.550%, 08/01/97 ...................... 600 600
MSR Public Power Agency Revenue Bond,
San Juan Project, Ser B (A) (B) (C)
3.350%, 08/01/97 ...................... 3,300 3,300
MSR Public Power Agency Revenue Bond,
San Juan Project, Ser D (A) (B) (C)
3.400%, 01/01/98 ...................... 1,000 1,000
Northern California Public Power Agency
Revenue Bond, Geothermal Project
No. 3-A (A) (B) (C)
3.350%, 08/01/97 ...................... 10,000 10,000
Oakland, Children Hospital Medical Center
Revenue Bond, Ser B (A) (B) (C)
3.400%, 11/15/97 ...................... 4,100 4,100
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1997 (Unaudited)
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
Pollution Control Authority Re venue Bond,
Plant Industrial Development Chevron
USA Project, Ser 83
3.900%, 08/01/97 ...................... $ 2,400 $ 2,401
Pollution Control Finance Authority Revenue
Bond, Exxon Project (A) (B)
3.400%, 08/01/97 ...................... 1,600 1,600
Pollution Control Finance Authority
Revenue Bond, Shell Oil Project,
Ser 85A, AMT (A) (B)
3.550%, 08/01/97 ...................... 7,200 7,200
Pollution Control Finance Authority
Revenue Bond, Southern California
Edison, Ser B (A) (B)
3.400%, 08/01/97 ...................... 200 200
Pollution Control Finance Authority
Revenue Bond, Southern California
Edison, Ser C (A) (B)
3.400%, 08/01/97 ...................... 7,100 7,100
Pollution Control Finance Authority
Revenue Bond, Southern California
Edison, Ser D (A) (B)
3.400%, 08/01/97 ...................... 9,900 9,900
Pollution Control Resource Recovery
Revenue Bond, Atlantic Richfield
Project, Ser 94, AMT (A) (B)
3.650%, 08/01/97 ...................... 12,400 12,400
Pollution Control Revenue Bond,
AMT (A) (B) (C)
3.450%, 08/06/97 ...................... 7,100 7,100
Pollution Control Revenue Bond, Colmac
Energy Project, Ser A, AMT (A) (B) (C)
3.400%, 08/01/97 ...................... 4,000 4,000
Pollution Control Revenue Bond, Pacific
Gas & Electric Project, Ser 96,
AMT (A) (B) (C)
3.450%, 08/15/97 ...................... 1,000 1,000
Pollution Control Revenue Bond, Pacific Gas
and Electric Project, Ser 96G (A) (B)
3.550%, 08/01/97 ...................... 3,600 3,600
Pollution Control Revenue Bond, Sierra
Pacific Project (A) (B) (C)
3.500%, 08/01/97 ...................... 7,400 7,400
Pollution Control Revenue Bond, Southern
California Edison Project,
Ser A (A) (B) (C)
3.400%, 09/01/97 ...................... 2,500 2,500
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
Pollution Control Revenue Bond, Southdown
Project, Ser B (A) (B) (C)
3.600%, 08/01/97 ...................... $ 600 $ 600
Pollution Control Revenue Bond, U.S. Borax
Project, Ser 95A (A) (B) (C)
3.550%, 08/01/97 ...................... 5,100 5,100
Redlands, Multi-Family Revenue Bond,
Ser A (A) (B) (C)
3.400%, 08/01/97 ...................... 3,000 3,000
Riverside County, California Riverside
County Public Facilities Certificate of
Participation, Ser 85A (A) (B) (C)
3.550%, 08/01/97 ...................... 1,000 1,000
Riverside County, Industrial Development
Authority Revenue Bond, Cal-Mold
Project, Ser 97, AMT (A) (B) (C)
3.550%, 08/06/97 ...................... 1,000 1,000
San Bernardino County, Certificate of
Participation, Center Refinancing
Project, Ser 96 (A) (B) (C)
3.400%, 08/01/97 ...................... 2,500 2,500
San Bernardino County, Housing Authority
Revenue Bond, Mountain View
Apartments, Ser A (A) (B) (C)
3.450%, 08/01/97 ...................... 2,800 2,800
San Diego, Housing Authority Multi-Family
Revenue Bond, Lusk Mira Apartments
Project, Ser 85E (A) (B) (C)
3.400%, 08/01/97 ...................... 3,600 3,600
San Diego, Housing Authority Revenue
Bond, LA Cima Apartments
Project (A) (B) (C)
3.400%, 08/01/97 ...................... 8,300 8,300
San Francisco, City & County Redevelopment
Agency, Multi-Family Revenue Bond,
Fillmore Center Project,
Ser 92B - 1 (A) (B) (C)
3.350%, 10/01/97 ...................... 8,900 8,900
San Francisco, City & County
Redevelopment Agency Revenue
Bond, Bayside Village Project,
Ser A (A) (B) (C)
3.700%, 08/06/97 ...................... 5,100 5,100
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1997 (Unaudited)
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
San Jose, Redevelopment Agency Revenue
Bond, Merged Area Redevelopment
Project Ser A (A) (B) (C)
3.350%, 08/01/97 ...................... $ 8,600 $ 8,600
San Jose, Redevelopment Agency Revenue
Bond, Merged Area Redevelopment
Project (A) (B) (C)
3.600%, 08/01/97 ...................... 7,800 7,800
San Jose/Santa Clara, Water Financing
Authority Revenue Bond,
Ser 95B (A) (B) (C)
3.350%, 08/01/97 ...................... 3,400 3,400
Santa Clara County, El Camino Hospital
District Revenue Bond, Valley Medical
Center Project, Ser 85A (A) (B) (C)
3.400%, 08/01/97 ...................... 7,800 7,800
Santa Clara County, El Camino Hospital
District Revenue Bond, Valley Medical
Center Project, Ser 85B (A) (B) (C)
3.400%, 08/01/97 ...................... 10,000 10,000
Santa Clara, Electric Revenue Bond,
Ser 85B (A) (B) (C)
3.400%, 08/01/97 ...................... 2,905 2,905
Santa Clara, Transit Revenue Bond
(A) (B) (C)
3.500%, 08/01/97 ...................... 1,100 1,100
Simi Valley, Public Finance Authority
Revenue Bond (A) (B) (C)
3.350%, 08/01/97 ...................... 5,700 5,700
Southeast Resource Recovery Facilities
Authority Revenue Bond,
Ser A (A) (B) (C)
3.500%, 08/01/97 ...................... 9,500 9,500
Southeast Resource Recovery Facilities
Authority Revenue Bond, Ser 95B,
AMT (A) (B) (C)
3.600%, 08/01/97 ...................... 3,800 3,800
Southern California Public Power Authority
Revenue Bond, Palo Verde Project,
Ser B (A) (B) (C)
3.350%, 08/06/97 ...................... 3,670 3,670
Southern California Public Power Authority
Revenue Bond, Transmission Project,
Ser 91 (A) (B) (C)
3.350%, 01/01/98 ...................... 10,000 10,000
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
State Health Facilities Finance Authority
Revenue Bond, St. Joseph Hospital
Project (A) (B)
3.500%, 08/01/97 ...................... $4,100 $4,100
State Health Facilities Finance Authority
Revenue Bond, Sutter Health Project,
Ser B (A) (B) (C)
3.500%, 08/01/97 ...................... 1,900 1,900
State Health Facilities Industrial
Development Revenue Bond,
Scripps Memorial Hospital Project,
Ser 85B (A) (B) (C)
3.600%, 08/07/97 ...................... 3,700 3,700
State Health Facilities Revenue Bond,
Catholic Healthcare Project,
Ser 88B (A) (B) (C)
3.600%, 08/01/97 ...................... 2,700 2,700
State Health Facilities Revenue Bond,
Catholic Healthcare West Project,
Ser D (A) (B) (C)
3.550%, 08/01/97 ...................... 2,000 2,000
State Health Facilities Revenue Bond,
Kaiser Permanente Project,
Ser 93A (A) (B)
3.450%, 08/01/97 ...................... 8,000 8,000
State Health Facilities Revenue Bond,
Kaiser Permanente Project,
Ser 93B (A) (B)
3.450%, 08/01/97 ...................... 3,600 3,600
State Health Facilities Revenue Bond,
Scripps Memorial Hospital Project,
Ser 91B (A) (B) (C)
3.350%, 08/01/97 ...................... 6,700 6,700
State Hospital Revenue Bond California
Health Facility Finance
Authority (A) (B) (C)
3.500%, 08/01/97 ...................... 800 800
State Housing Finance Agency, Single
Family Mortgage Revenue Bond,
Ser 97B AMT (A) (B) (C)
3.700%, 04/01/98 ...................... 3,540 3,540
State Housing Finance Agency, Multi-Family
Revenue Bond, Ser 95, AMT (A) (B) (C)
3.550%, 08/01/97 ...................... 6,100 6,100
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1997 (Unaudited)
Face
CALIFORNIA TAX EXEMPT Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
Statewide Community Development Authority
Revenue Bond, Apartment Development,
Ser 95 A (A) (B) (C)
3.400%, 08/15/97 ...................... $ 1,200 $ 1,200
Statewide Community Development Authority
Revenue Bond, Irvine County Project,
Ser 95A-6 (A) (B) (C)
3.400%, 08/15/97 ...................... 7,100 7,100
Vallejo, Multi-Family Housing Authority
Revenue Bond, Crow Western Project,
Phase I, Ser 85C (A) (B) (C)
3.550%, 08/01/97 ...................... 9,200 9,200
West Basin Municipal Water Revenue
Bond, Ser B (A) (B) (C)
3.350%, 08/06/97 ...................... 8,000 8,000
--------
Total California .................. 380,641
--------
PUERTO RICO -- 3.8%
Puerto Rico Commonwealth Government
Development Revenue Bond
(A) (B) (C)
3.250%, 08/06/97 ...................... 12,000 12,000
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Bond,
Ser X (A) (B) (C)
3.250%, 08/06/97 ...................... 3,000 3,000
--------
Total Puerto Rico ................. 15,000
--------
Total Municipal Bonds
(Cost $395,641) ................ 395,641
--------
Total Investments -- 100.0%
(Cost $395,641) ................ 395,641
--------
OTHER ASSETS AND LIABILITIES -- 0.0%
Other Assets and Liabilities, Net ......... 24
--------
CALIFORNIA TAX EXEMPT Value
PORTFOLIO (concluded) (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited authorization -- no
par value) based on 395,754,317
outstanding shares of beneficial interest $395,754
Accumulated Net Realized Loss
on Investments ........................ (89)
--------
Total Net Assets -- 100.0% ................ $395,665
========
Net Asset Value, Offering and Redemption
Price Per Share ....................... $1.00
========
(A) Variable Rate Securities -- The rate reported in the Statement of Net Assets
is the rate in effect on July 31, 1997.
(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 guarantee, guaranteed investment
contract, letter of credit or standby bond purchase agreement issued by a
major commercial bank or other financial institution.
AMT -- Alternative Minimum Tax
Ser -- Series
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1997 (Unaudited)
Face
INSTITUTIONAL TAX FREE Amount Value
PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 99.7%
ARIZONA -- 3.7%
Apache County, Industrial Development
Authority, Revenue Bond, Tucson
Electric Power Project, Ser 83A (A) (B)
3.650%, 08/15/97 ...................... $ 2,100 $ 2,100
-------
DISTRICT OF COLUMBIA -- 6.5%
General Obligation, Ser A-5 (A) (B) (C)
3.850%, 08/01/97 ...................... 2,700 2,700
Metropolitan Airport Authority
Project, TECP (C)
3.700%, 09/26/97 ...................... 1,000 1,000
-------
Total District of Columbia ........ 3,700
-------
FLORIDA -- 0.2%
Dade County, Industrial Development
Authority, Revenue Bond, Power &
Light Project (A) (B)
3.700%, 08/01/97 ...................... 100 100
-------
GEORGIA -- 5.1%
Fulton County, Educational Revenue
Bond, Alfred and Adele Davis
Academy Project (A) (B) (C)
3.700%, 08/01/97 ...................... 2,000 2,000
Monroe County, Pollution Control
Development Authority,
Revenue Bond (A) (B)
3.650%, 08/01/97 ...................... 900 900
-------
Total Georgia ..................... 2,900
-------
ILLINOIS -- 13.1%
Chicago, O'Hare International Airport,
Revenue Bond (A) (B) (C)
3.650%, 08/01/97 ...................... 2,200 2,200
State Development Authority Finance,
Pollution Control Revenue Bond,
Power Company Project,
AMT (A) (B) (C)
3.850%, 08/01/97 ...................... 1,100 1,100
State Educational Revenue Bond, Art
Institute of Chicago Project (A) (B) (C)
3.650%, 08/01/97 ...................... 1,700 1,700
Face
INSTITUTIONAL TAX FREE Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
State Industrial Development Authority,
Revenue Bond, Webster Wayne
Shopping Center Project (A) (B) (C)
3.700%, 08/01/97 ...................... $ 2,440 $ 2,440
-------
Total Illinois .................... 7,440
-------
INDIANA -- 7.8%
Indiana Health Facility Finance Authority
Revenue Bond (A) (B) (C)
3.650%, 08/01/97 ...................... 2,200 2,200
Sullivan, National Rural Utilities Finance,
Ser 1985-L-2 TECP
3.500%, 08/07/97 ...................... 2,200 2,200
-------
Total Indiana ..................... 4,400
-------
IOWA -- 3.5%
State Higher Education Learning Authority,
Revenue Bond (A) (B) (C)
3.650%, 08/01/97 ...................... 2,000 2,000
-------
MISSOURI -- 10.1%
State Environmental Improvement and
Energy Resource Authority, Revenue
Bond, Monsanto Project (A) (B)
3.650%, 08/01/97 ...................... 2,550 2,550
State Health and Educational Facilities
Authority Revenue Bond, Sisters of
Mercy Health System Project,
Ser B (A) (B) (C)
3.600%, 08/01/97 ...................... 2,000 2,000
State Health and Educational Facilities
Authority Revenue Bond, Washington
University Project, Ser A (A) (B) (C)
3.700%, 08/01/97 ...................... 1,200 1,200
-------
Total Missouri .................... 5,750
-------
MONTANA -- 2.5%
Forsyth Pollution Control Revenue Bond,
Portland General Electric Project,
Ser C (A) (B) (C)
3.650%, 08/01/97 ...................... 1,400 1,400
-------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (continued) THE ARBOR FUND
July 31, 1997 (Unaudited)
Face
INSTITUTIONAL TAX FREE Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
NEW MEXICO -- 1.9%
Hurley Pollution Control Authority,
Revenue Bond (A) (B)
3.700%, 08/01/97 ...................... $1,100 $ 1,100
-------
NEW YORK -- 0.2%
State Thruway Authority Revenue
Bond (A) (B) (C)
3.750%, 08/01/97 ...................... 100 100
-------
NORTH CAROLINA -- 5.0%
State Hospital Revenue Bond,
Moses H. Cone Memorial Hospital
Project (A) (B) (C)
3.650%, 08/01/97 ...................... 2,200 2,200
Wake County, Industrial Facilities Finance
Authority, Revenue Bond, Power and
Light Project, Ser B (A) (B) (C)
3.800%, 08/06/97 ...................... 600 600
-------
Total North Carolina .............. 2,800
-------
NORTH DAKOTA -- 1.8%
Fargo Industrial Development Revenue
Bond, Owen Industries
Project (A) (B) (C)
3.850%, 08/01/97 ...................... 1,000 1,000
-------
OHIO -- 7.2%
Clermont County Hospital Facility
Revenue Bond, Mercy Health
System Project, Ser B (A) (B)
3.600%, 08/01/97 ...................... 2,100 2,100
Youngstown Industrial Development
Revenue Bond, Portage Transformer
Project (A) (B) (C)
3.800%, 08/01/97 ...................... 2,000 2,000
-------
Total Ohio ........................ 4,100
-------
OKLAHOMA -- 2.1%
Muskogee Gas and Electric Pollution
Control, Revenue Bond (A) (B)
3.650%, 08/06/97 ...................... 1,200 1,200
-------
Face
INSTITUTIONAL TAX FREE Amount Value
PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
PENNSYLVANIA -- 1.4%
Beaver County, Industrial Development
Authority, Revenue Bond, Atlantic
Richfield Project (A) (B)
3.700%, 08/01/97 ...................... $ 800 $ 800
------
SOUTH DAKOTA -- 4.8%
Lawrence County Pollution Control
Revenue Bond, Homestake Mining
Project, Ser 83 (A) (B) (C)
3.750%, 08/01/97 ...................... 2,700 2,700
------
TENNESSEE -- 1.8%
Montgomery County, Public Building
Authority, Revenue Bond (A) (B) (C)
3.700%,08/01/97 ....................... 1,000 1,000
------
TEXAS -- 9.0%
Brazos River Pollution Control Authority,
Electric Project, AMT, Ser B (A) (B) (C)
3.750%, 08/01/97 ...................... 1,000 1,000
Port Arthur Navigation District Revenue
Bond, Texaco Project (A) (B)
3.750%, 08/01/97 ...................... 1,100 1,100
State TRAN
4.750%, 08/29/97 ...................... 3,000 3,002
------
Total Texas ....................... 5,102
------
VIRGINIA -- 4.2%
Fairfax County, Industrial Development
Authority Revenue Bond, Fairfax
Hospital System Project,
Ser C (A) (B) (C)
3.650%, 08/06/97 ...................... 2,400 2,400
------
WASHINGTON -- 4.4%
State Public Power Supply System
Revenue Bond, Nuclear Project,
Ser 3A-2 (A) (B) (C)
3.650%, 08/01/97 ...................... 2,500 2,500
------
WISCONSIN -- 3.4%
Oak Creek, Industrial Development
Authority, Revenue Bond, Electric
Power Project, Ser 83A (A) (B) (C)
3.650%, 08/01/97 ...................... 1,900 1,900
------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS (concluded) THE ARBOR FUND
July 31, 1997 (Unaudited)
INSTITUTIONAL TAX FREE Value
PORTFOLIO (concluded) (000)
- --------------------------------------------------------------------------------
Total Municipal Bonds
(Cost $56,492) ................. $56,492
-------
Total Investments-- 99.7%
(Cost $56,492) ................. 56,492
-------
OTHER ASSETS AND LIABILITIES -- 0.3%
Other Assets and Liabilities, Net ......... 174
-------
NET ASSETS:
Portfolio Shares (unlimited authorization -- no
par value) based on 56,698,497 outstanding
shares of beneficial interest ......... 56,698
Accumulated Net Realized Loss
on Investments ........................ (32)
-------
Total Net Assets -- 100.0% ................ $56,666
=======
Net Asset Value, Offering and Redemption
Price Per Share ....................... $1.00
=======
(A) Variable Rate Security -- The rate reported in the Statement of Net Assets
is the rate in effect on July 31, 1997.
(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 date, demand date or maturity date.
(C) Security is held in connection with a guarantee, guaranteed investment
contract, letter of credit or standby bond purchase agreement issued by a
major commercial bank or other financial institution.
AMT -- Alternative Minimum Tax
Ser -- Series
TECP -- Tax Exempt Commercial Paper
TRAN -- Tax and Revenue Anticipation Note
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS (000) THE ARBOR FUND
For the Six Month Period Ended July 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
CALIFORNIA INSTITUTIONAL
TAX EXEMPT TAX FREE
PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Interest Income....................................... $8,470 $1,126
- ----------------------------------------------------------------------------------------
Total Investment Income............................ 8,470 1,126
- ----------------------------------------------------------------------------------------
Expenses:
Administration Fees................................... 553 108
Less: Waiver of Administration Fees................... (90) (95)
Investment Advisory Fees.............................. 228 29
Custodian Fees........................................ 19 --
Transfer Agent Fees................................... 24 13
Professional Fees..................................... 27 1
Registration Fees..................................... 2 1
Trustee Fees.......................................... 4 --
Printing Expenses..................................... 21 4
Other Expenses........................................ 4 --
- ----------------------------------------------------------------------------------------
Total Expenses..................................... 792 61
- ----------------------------------------------------------------------------------------
Net Investment Income................................. 7,678 1,065
- ----------------------------------------------------------------------------------------
Net Realized Loss on Investments...................... (23) --
- ----------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations...... $7,655 $1,065
========================================================================================
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (000) THE ARBOR FUND
For the Six Month Period Ended July 31, 1997 (Unaudited) and the Year Ended January 31, 1997
CALIFORNIA INSTITUTIONAL
TAX EXEMPT TAX FREE
PORTFOLIO PORTFOLIO
--------------------- --------------------
2/1/97 TO 2/1/96 TO 2/1/97 TO 2/1/96 TO
7/31/97 1/31/97 7/31/97 1/31/97
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Operations:
Net Investment Income ....................................... $ 7,678 $ 13,739 $ 1,065 $ 2,362
Net Realized Loss on Securities Sold ......................... (23) (2) -- (9)
- --------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Investment Operations .... 7,655 13,737 1,065 2,353
- --------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ....................................... (7,672) (13,745) (1,065) (2,362)
Net Realized Gains on Securities Sold ....................... -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Total Distributions ...................................... (7,672) (13,745) (1,065) (2,362)
- --------------------------------------------------------------------------------------------------------------
Capital Share Transactions (at $1.00 per share):
Proceeds from Shares Issued ................................. 832,932 1,827,668 126,592 366,265
Cost of Shares Redeemed ..................................... (925,988) (1,730,604) (127,500) (425,418)
- --------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Capital Share
Transactions .......................................... (93,056) 97,064 (908) (59,153)
- --------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets .................. (93,073) 97,056 (908) (59,162)
- --------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ......................................... 488,738 391,682 57,574 116,736
- --------------------------------------------------------------------------------------------------------------
End of Period ............................................... $395,665 $ 488,738 $ 56,666 $ 57,574
==============================================================================================================
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS THE ARBOR FUND
For a Share Outstanding Throughout the Period
For the Six Month Period Ended July 31, 1997 (Unaudited) and the Periods Ended January 31,
REALIZED NET
NET ASSET AND DISTRIBUTIONS ASSET
VALUE NET UNREALIZED FROM NET VALUE NET ASSETS
BEGINNING INVESTMENT LOSSES ON INVESTMENT CONTRIBUTION END OF TOTAL END OF
OF PERIOD INCOME SECURITIES INCOME OF CAPITAL PERIOD RETURN PERIOD (000)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA TAX EXEMPT PORTFOLIO
1997**... $1.00 0.016 -- (0.016) -- $1.00 3.23%* $395,665
1997..... 1.00 0.030 -- (0.030) -- 1.00 3.09 488,738
1996..... 1.00 0.034 -- (0.034) -- 1.00 3.42++ 391,682
1995..... 1.00 0.027 (.008) (0.027) .008 1.00 2.79+ 396,004
1994(1).. 1.00 0.007 -- (0.007) -- 1.00 2.17* 402,814
INSTITUTIONAL TAX FREE PORTFOLIO
1997**... $1.00 0.017 -- (0.017) -- $1.00 3.51%* $56,666
1997..... 1.00 0.033 -- (0.033) -- 1.00 3.37 57,574
1996..... 1.00 0.036 -- (0.036) -- 1.00 3.69 116,736
1995..... 1.00 0.028 -- (0.028) -- 1.00 2.80 113,724
1994(1).. 1.00 0.007 -- (0.007) -- 1.00 2.20* 130,768
============================================================================================================
RATIO OF RATIO OF
EXPENSES NET
RATIO OF RATIO OF TO INCOME TO
EXPENSES NET AVERAGE AVERAGE
TO INCOME TO NET NET
AVERAGE AVERAGE ASSETS ASSETS
NET NET (EXCLUDING (EXCLUDING
ASSETS ASSETS WAIVERS) WAIVERS)
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA TAX EXEMPT PORTFOLIO
1997**... 0.33%* 3.20%* 0.37%* 3.16%*
1997..... 0.33 3.04 0.38 2.99
1996..... 0.42 3.36 0.42 3.36
1995..... 0.28 2.72 0.34 2.66
1994(1).. 0.28* 2.14* 0.34* 2.08*
INSTITUTIONAL TAX FREE PORTFOLIO
1997**... 0.20%* 3.49%* 0.51%* 3.18%*
1997..... 0.22 3.29 0.48 3.03
1996..... 0.30 3.60 0.48 3.42
1995..... 0.30 2.73 0.46 2.57
1994(1).. 0.30* 2.17* 0.47* 2.00*
=============================================================
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
* Annualized
** For the six month period ended July 31, 1997 (Unaudited).
+ 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%.
++ 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.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE ARBOR FUND
July 31, 1997 (Unaudited)
1. Organization:
THE CALIFORNIA TAX EXEMPT AND INSTITUTIONAL TAX FREE PORTFOLIOS are separate
investment portfolios of The Arbor Fund (the "Trust"). The Trust was organized
as a Massachusetts business trust under a Declaration of Trust dated July 24,
1992 and had no operations through February 1, 1993 other than those related to
organizational matters and the sale of initial shares to SEI Fund Resources (the
"Administrator") on October 9, 1992. SEI Investments 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, as an open-end management company.
These financial statements relate to the Trust's California Tax Exempt Portfolio
and Institutional Tax Free Portfolio (the "Portfolios"). The Portfolios'
prospectus provides a description of each Portfolio's investment objectives,
policies and strategies. The assets of each portfolio are segregated, and a
shareholder's interest is limited to the Portfolio in which shares are held.
The Portfolios commenced operations on October 6, 1993 ("commencement of
operations"). Subsequent to July 31, 1997, on August 25, 1997, the California
Tax Exempt Portfolio ceased operations when all of the outstanding shares of the
Portfolio were redeemed. SEI Investments Management Corporation voluntarily
agreed to bear the costs associated with the liquidation of the Portfolio which
approximated $92,000.
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). Interest income
is accrued as earned. Costs used in determining realized gains and losses on the
sale of investment securities are those of the specific securities sold.
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 voluntarily waive a
portion of its fee in order to limit annual operating expenses to .33% of the
California Tax Exempt Portfolio's average daily net assets and .20% of the
average daily net assets of the Institutional Tax Free Portfolio effective March
15, 1996. Fee waivers by the Administrator are voluntary
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) THE ARBOR FUND
July 31, 1997 (Unaudited)
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 Investments Distribution Co. (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 services under the Distribution Agreement.
4. Investment Advisory Agreement:
The Trust has entered into an investment advisory agreement (the "Advisory
Agreement") with PNC Institutional Management Corporation (the "Adviser"), a
wholly-owned subsidiary of PNC Bank, N.A., dated December 1, 1995. Under the
terms of the Advisory Agreement, the Adviser is entitled to a fee, that is
calculated daily and paid monthly, at an annual rate of .095% of the average
daily net assets of each of the California Tax Exempt and Institutional Tax Free
Portfolios.
5. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Trust and are being amortized
over sixty months beginning with the commencement of operations. In the event
any of the initial shares of the Trust are redeemed by any holder thereof during
the period that the Trust is amortizing its organizational costs, the redemption
proceeds payable to the holder thereof by the Trust will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption.
Certain officers 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.
On December 15, 1994, Prudential Securities Group, Inc. ("PSG"), an affiliate
of the former adviser to the Portfolio, granted to the California Tax Exempt
Portfolio (the "California Portfolio") the right to require PSG to purchase
from the California Portfolio sufficient amounts of two bonds, at amortized
cost plus accrued interest, in order to maintain the California Portfolio's
marked-to-market net asset value per share at no less than $.9971 (the
"Agreement"). The California Portfolio's rights under the Agreement provided
for immediate exercise upon the occurrence of certain conditions, including
reaching the date of July 19, 1995.
The securities subject to the Agreement were:
PAR
(000) DESCRIPTION
- -------- --------------------------------------
$ 5,000 Orange County TRAN, 4.5%, 7/19/95
$20,000 Orange County Teeter Note, 4.2%, 6/30/95
TRAN--Tax and Revenue Anticipation Note
On the date of the Agreement, the California Portfolio recorded an unrealized
loss of $3,012,750 for the difference between the market value of the bonds and
their amortized cost and a contribution to capital in the same amount.
On March 13, 1995, PSG extended the date of the Agreement until the maturity
date for each security subject to the Agreement. In connection with this
extension, the California Portfolio recorded an unrealized loss of $29,557 and a
contribution to capital in the same amount.
On June 30, 1995, the Orange County Teeter Note matured and the California
Portfolio received the full face amount of the note plus accrued interest. On
July 19, 1995, the California Portfolio exercised its right under the Agreement
and put the Orange County TRAN to PSG for an amount equivalent to the full face
amount plus accrued interest.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ARBOR FUND
July 31, 1997 (Unaudited)
The California Portfolio then recognized a realized loss of $3,042,307 and a
corresponding reduction in unrealized depreciation in the Statement of
Operations. The realized loss was then reclassified from the California
Portfolio's accumulated net realized losses to paid-in-capital. The
reclassification had no effect on the California Portfolio's net asset value
per share.
6. Concentration of Credit Risk:
The Portfolios invest primarily in municipal money market instruments maturing
in 397 days 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>
NOTES
<PAGE>
<PAGE>
INVESTMENT ADVISER
PNC Institutional Management Corporation
DISTRIBUTOR
SEI Investments Distribution Co.
Oaks, PA 19456
FOR MORE INFORMATION CALL:
1-800-545-6331
