OFFITBANK INVESTMENT FUND INC, N-30D, 1996-02-29

OFFITBANK INVESTMENT FUND INC
N-30D, 1996-02-29

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<PAGE>
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------

Dear Shareholders:

We are very pleased to present you with the annual report for The OFFITBANK
Investment Fund, Inc. for the period ended December 31, 1995. This year we added
a new portfolio, the New York Municipal Fund, to our two existing portfolios,
the High Yield Fund and the Emerging Markets Fund. All of the Funds continue to
increase their net assets. At year end the High Yield Fund had net assets of
$479.1 million, the Emerging Markets Fund had net assets of $49.3 million and
the New York Municipal Fund had net assets of $12.5 million.

A large part of the decline in global interest rates during 1995 was caused by a
reversal of expectations. As we moved from 1994 into 1995, the structure of
rates was based on expectations that economic growth in the G7 would continue to
be strong, inflation would accelerate, and interest rates would move higher. As
it became apparent that economic growth was slowing in the industrial economics
and inflation was declining, interest rates declined significantly -- first to
reverse the higher rate expectations and then to reflect the new perceptions.
The dramatic decline in yields is clearly shown in the following table:

<TABLE>
<CAPTION>
12/31/94 12/31/95
TREASURY ISSUE YIELD YIELD YIELD CHANGE
- ----------------------------------------------------- ------------- ------------- --------------------
<S> <C> <C> <C>
2 year Treasury...................................... 7.69% 5.15% -254 basis points
5 year Treasury...................................... 7.83 5.37 -246
10 year Treasury..................................... 7.83 5.57 -226
30 year Treasury..................................... 7.88 5.95 -193
10 year Germany...................................... 7.47% 5.94% -153
10 year Japan........................................ 4.53 3.05 -148
</TABLE>

The past being duly noted, the more important question is "where do we go now".
There are several factors that we believe will determine the direction of
interest rates in 1996.

- Monetary Policy
The Federal Reserve has shown a strong and preemptive anti-inflation
discipline. This "monetary drag" will take time to reverse until later in
the year at the earliest.

- Fiscal Policy
"Fiscal drag" has and will continue to restrict economic growth. It is also
important to remember that the current debate in Washington is how to
reduce the deficit -- not whether it should be reduced.

- Global Growth
The economies of the G7 can best be characterized as soft which means that
economic weakness in our major trading partners will hurt our exports and
therefore reduce U.S. growth.

- Consumer Spending
Slow wage growth has made necessary the increased use of credit to maintain
personal consumption which reduces inflationary pressures in the U.S.
economy which is 60% consumer-driven.

In summary, 1995 was an extraordinary year for the bond markets. Our outlook for
interest rates in the U.S. is that bond yields have essentially bottomed, and
the market is building in a relatively stable interest rate environment for the
near future.

The specific results of our Funds, along with an investment and market
commentary from each portfolio manager are part of this report. I believe that
each of these commentaries provides useful and informative insights into our
Funds, and I hope you find them helpful.

We greatly value your participation in the Fund. If you have any questions
regarding the portfolio structure or investment outlook, please do not hesitate
to call.

Sincerely,

[SIGNATURE]
Morris W. Offit

February 9, 1996
<PAGE>
OFFITBANK
HIGH YIELD FUND

- --------------------------------------------------------------------------------

The second half and full year 1995 total returns for the Fund were 6.7% and
17.7%, respectively. The 1995 year end NAV price of $9.92 is 7.2% higher than
the 1994 year end price of $9.25. The net assets of the Fund continued to grow,
finishing the year at approximately $479 million, up from $363 million at June
30, 1995 and $222 million at December 31, 1994. The 30-day SEC yield for the
month ending December 1995 was 9.14%. Average annual total return for the Fund
since inception on March 2, 1994 was 9.14%. Please note that performance data
represents past performance and that the investment return and principal value
of investments will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost.

In a complete reversal of the prior year, the fixed income markets in 1995
provided some of their best returns in modern history. The high yield market had
its third best year since the development of high yield market indices in the
early 1980's. Net cash flow into high yield funds exceeded $10 billion in 1995
with mutual fund assets now approaching $60 billion, representing approximately
20% of the overall high yield market. New issue high yield securities totaling
approximately $40 billion were readily absorbed as additional buyers came into
the market.

Despite the excellent year posted by the high yield market, longer dated high
grades performed even better due to their duration advantage in a falling
interest rate environment. As high yield securities lagged the move in interest
rates, spreads between high yield and high grade securities widened to their
highest level in over two years. Given today's wide yield spreads, we believe
that it will become increasingly difficult for high grades to outperform high
yield over any extended period of time, even with a cyclical increase in
defaults.

1995 defaults and credit losses increased toward a more normalized level from
the unusually low levels of the prior two years. The Fund experienced no
defaults, although we took a number of small losses during the year in credits
that began to falter. With fundamental credit risk increasing on a cyclical
basis, credit selectivity will become an even more important determinant of
future performance.

We believe that the current outlook for the high yield market is very favorable.
The technicals are strong with continued positive mutual fund cash flows, a
number of expected bond calls and little near term supply. Although the forward
calendar is building, the quality appears decent and the new supply of high
yield issues should be met with good demand. The quality of the high yield
market continued to improve last year as BB's increased to 46% of the overall
market, and for the first time, exceed single B's in value.

We remain steadfast in our focus on the better quality segment of the high yield
market. Approximately 47% of the corporate holdings in the Fund are rated BB and
68% are rated at least B1/B+. Many of the lower rated issues are either senior
in the issuer's capital structure or secured.

Stephen T. Shapiro

January 15, 1996

2
<PAGE>
OFFITBANK
HIGH YIELD FUND

- --------------------------------------------------------------------------------

The following graph represents the total return based on a $250,000 investment
made in the OFFITBANK High Yield Fund made at the trading commencement date of
March 2, 1994 and held through December 31, 1995 as well as the performance of
the Merrill Lynch All High Yield Bond Index over the same period. Past
performance is not predictive of future performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN ONE YEAR SINCE INCEPTION
<S> <C> <C> <C>
OFFITBANK High Yield Fund 17.72% 9.14%
Merrill Lynch All High Yield Bond
Index 19.91% 9.41%
Merrill Lynch All High Yield Bond
OFFITBANK High Yield Fund Index
3/2/94 $250,000 $250,000
3/31/94 $243,275 $243,815
6/30/94 $244,686 $240,987
9/30/94 $249,506 $244,264
12/31/94 $249,322 $245,485
3/31/95 $260,751 $260,288
6/30/95 $274,988 $276,791
9/30/95 $283,870 $284,873
12/31/95 $293,493 $294,331
</TABLE>

3
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE (2.34%)
CORPORATE BONDS
Fairchild Industries Inc. Sr Notes, 12.25%, 02/01/99....................... $ 1,250,000 $ 1,300,000
Sequa Corp. Sr Notes, 8.75%, 12/15/01...................................... 4,800,000 4,536,000
Sequa Corp. Sr Sub Notes, 9.375%, 12/15/03................................. 1,000,000 932,500
Tracor, Inc. Sr Sub Notes, 10.875%, 08/15/01............................... 2,000,000 2,055,000
UNC, Inc. Sr Notes, 9.125%, 07/15/03....................................... 2,450,000 2,376,500
-------------
11,200,000
-------------
BROADCAST/TELECOMMUNICATIONS (13.33%)
CORPORATE BONDS
Adelphia Communications Sr Notes, 9.50%, 02/15/04.......................... 2,095,000(5) 1,738,850
Cablevision Industries Corp. Sr Notes, 10.75%, 01/30/02.................... 2,000,000 2,180,000
Cablevision Systems Corp. Sr Sub Notes, 10.75%, 04/01/04................... 1,000,000 1,057,500
Cablevision Systems Corp. Sr Sub Notes, 9.25%, 11/01/05.................... 3,000,000 3,116,250
Centennial Cellular Corp. Sr Notes, 8.875%, 11/01/01....................... 5,500,000 5,403,750
Century Communications Corp. Sr Notes, 9.75%, 02/15/02..................... 4,500,000 4,680,000
Continental Cablevision, Inc. Sr Sub Notes, 10.625%, 06/15/02.............. 2,250,000 2,430,000
Fundy Cable Ltd. Sr Notes, 11.00%, 11/15/05................................ 2,000,000 2,090,000
Granite Broadcasting Corp. Sr Sub Notes, 10.375%, 05/15/05................. 2,000,000 2,050,000
Le Groupe Videotron Ltee. Sr Notes, 10.625%, 02/15/05...................... 1,000,000 1,066,250
MobileMedia Communications Sr Sub Notes, 9.375%, 11/01/07.................. 2,000,000 2,060,000
Paging Network Sr Sub Notes, 10.125%, 08/01/07............................. 5,000,000 5,443,750
Pan Am Sat, L.P. Sr Notes, 9.75%, 08/01/00................................. 2,000,000 2,115,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.625%, 08/01/02... 2,000,000 2,100,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.65%, 01/15/14.... 2,000,000(A) 1,282,521
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 10.00%, 03/15/05... 3,000,000 3,210,000
SCI Television Inc. 1st Secured Loan Fac., 7.50/9.50%, 06/30/98............ 3,087,800(3) 3,087,800
Sinclair Broadcast Group Sr Sub Notes, 10.00%, 09/30/05.................... 3,000,000 3,067,500
Storer Communications Inc. Sub Debs., 10.00%, 05/15/03..................... 3,000,000 3,003,750
Telemundo Group Sr Notes, 10.25%, 12/30/01................................. 2,000,000 1,980,000
TeleWest Plc Debs., 0/11.00%, 10/01/07..................................... 7,000,000(3) 4,208,750
Videotron Holdings Sr Discount Notes, 0/11.125%, 07/01/04.................. 2,500,000(3) 1,731,250
Videotron Ltee. Sr Sub Notes, 10.25%, 10/15/02............................. 2,500,000 2,637,500
PREFERRED STOCKS
Cablevision Systems Corp. Pfd., 11.75% Series G............................ 20,000 2,100,000
-------------
63,840,421
-------------
CHEMICALS (4.77%)
CORPORATE BONDS
Borden Chemicals & Plastics Sr Notes, 9.50%, 05/01/05...................... 1,500,000 1,546,875
Freeport-McMoran Resource Partners, L.P. Sr Sub Notes, 8.75%, 02/15/04..... 2,000,000 2,050,000
Harris Chemical North America, Inc. Sr Notes, 0/10.25%, 07/15/01........... 5,000,000(3) 4,800,000
Sherritt Gordon Ltd. Notes, 9.75%, 04/01/03................................ 2,500,000 2,643,750
Sherritt, Inc. Sr Notes, 11.00%, 03/31/04.................................. 3,000,000(A) 2,365,634
Sifto Canada Inc. Sr Notes, 8.50%, 07/15/00................................ 3,500,000 3,386,961
Terra Industries Inc. Sr Notes, 10.50%, 06/15/05........................... 3,000,000 3,307,500
Uniroyal Chemical Co., Inc. Sr Notes, 9.00%, 09/01/00...................... 2,750,000 2,750,000
-------------
22,850,720
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
4
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GROUPS (5.24%)
CORPORATE BONDS
Borg-Warner Security Corp. Sr Sub Notes, 9.125%, 05/01/03.................. $ 1,500,000 $ 1,365,000
Host Marriott Travel Plaza Sr Notes, 9.50%, 05/15/05....................... 6,500,000 6,426,875
Regency Health Services Sr Sub Notes, 9.875%, 10/15/02..................... 2,000,000 1,985,000
Revlon Inc. Sr Debs., 10.875%, 07/15/10.................................... 3,800,000 3,876,000
Samsonite Corp. Sr Notes, 11.125%, 07/15/05................................ 1,500,000 1,470,000
Sealy Corp Sr Sub Notes, 9.50%, 05/01/03................................... 2,200,000 2,233,000
Tultex Corp. Sr Notes, 10.625%, 03/15/05................................... 1,400,000 1,424,500
Westpoint Stevens, Inc. Sr Notes, 8.75%, 12/15/01.......................... 2,500,000 2,506,250
PREFERRED STOCKS
Foxmeyer Health Corp. Pfd. $4.20 Series A.................................. 75,558(5) 2,823,980
Pantry Pride Inc. Pfd. $14.875 Series B.................................... 10,000 1,025,000
-------------
25,135,605
-------------
FINANCIAL SERVICES/INSURANCE (6.27%)
CORPORATE BONDS
American Annuity Group Inc. Sr Sub Notes, 11.125%, 02/01/03................ 3,000,000 3,240,000
Americo Life Inc. Sr Notes, 9.25% 06/01/05................................. 2,500,000 2,375,000
First City Financial Sr Sub Notes, 9.00%, 09/30/97......................... 5,079,400 5,066,702
Keystone Group Inc. Sr Secured Notes, 9.75%, 09/01/03...................... 1,000,000 965,000
Navistar Financial Corp. Sr Sub Notes, 8.875%, 11/15/98.................... 2,500,000 2,525,000
Penn Central Corp. Sr Notes 10.625%, 04/15/00.............................. 3,500,000 3,783,381
Phoenix Re Corp. Sr Notes, 9.75%, 08/15/03................................. 1,000,000 1,067,500
Presidential Life Corp. Sr Notes, 9.50%, 12/15/00.......................... 2,500,000 2,600,000
Reliance Group Holdings, Inc. Sr Notes, 9.75%, 11/15/03.................... 5,000,000 5,150,000
Terra Nova Holdings Sr Notes, 10.75%, 07/01/05............................. 3,000,000 3,270,000
-------------
30,042,583
-------------
FOREST & PAPER PRODUCTS (9.15%)
CORPORATE BONDS
Crown Paper Co. Sr Sub Notes, 11.00%, 09/01/05............................. 3,000,000 2,625,000
Doman Industries Ltd. Sr Notes, 8.75%, 03/15/04............................ 2,000,000 1,920,000
Fort Howard Corp. Pass Thru Cert., 11.00%, 01/02/02........................ 2,341,543 2,438,132
Fort Howard Corp. Sr Sub Notes, 9.00%, 02/01/06............................ 3,000,000 2,947,500
Fort Howard Corp. Variable Term Loan, 8.82%, 12/31/02...................... 2,500,000(4)(6) 2,506,250
Fort Howard Corp. Variable Term Loan, 8.88%, 12/31/02...................... 2,500,000(4)(6) 2,506,250
Maxxam Group Inc. Sr Secured Notes, 11.25%, 08/01/03....................... 2,350,000 2,291,250
Rainy River Forest Products Sr Notes, 10.75%, 10/15/01..................... 2,000,000 2,195,000
Repap New Brunswick Sr Notes Floating Rate Bonds, 9.25%, 07/15/00.......... 2,000,000(6) 2,000,000
Repap Wisconsin Inc. 1st Priority Sr Secured Notes, 9.25%, 02/01/02........ 5,000,000 4,750,000
Stone-Consolidated Corp. Sr Secured Notes, 10.25%, 12/15/00................ 2,500,000 2,675,000
Stone Container Corp. Sr Notes, 9.875%, 02/01/01........................... 4,000,000 3,880,000
Stone Container Corp. Sr Secured Notes, 10.75%, 10/01/02................... 2,000,000 2,080,000
Stone Container Corp. Sr Sub Notes, 11.00%, 08/15/99....................... 3,500,000 3,447,500
Tembec Finance Corp. Sr Notes, 9.875%, 09/30/05............................ 2,000,000 1,970,000
CONV. CORPORATE BONDS
Repap Enterprise Conv. Debs., 9.00%, 06/30/98.............................. 5,000,000(A) 3,609,381
-------------
43,841,263
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
5
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GENERAL INDUSTRIES/MANUFACTURING (12.54%)
CORPORATE BONDS
American Standard Sr Sub Notes, 0/10.50%, 06/01/05......................... $ 6,000,000(3) $ 5,130,000
Calmar Inc. Sr Notes, 11.50%, 08/15/05 (144A).............................. 2,500,000(2) 2,537,500
CMI Industries Inc. Sr Sub Notes, 9.50%, 10/01/03.......................... 2,000,000 1,600,000
Communication and Power Industries Sr Sub Notes, 12.00%, 08/01/05.......... 2,500,000 2,568,750
Computervision Industries Sr Notes, 11.375%, 08/15/99...................... 975,000 1,028,625
Dal-Tile Sr Secured Notes, 0.00%, 07/15/98................................. 3,465,000 2,633,400
Dominion Textile (USA) Inc. Guaranteed Sr Notes, 8.875%, 11/01/03.......... 2,500,000 2,468,750
Envirosource Inc. Sr Notes, 9.75%, 06/15/03................................ 2,000,000 1,770,000
Envirotest System Corp. Sr Notes, 9.125%, 03/15/01......................... 1,500,000 1,245,000
Essex Group Sr Notes, 10.00%, 05/01/03..................................... 4,000,000 3,920,000
Harvard Industries Sr Notes, 11.125%, 08/01/05............................. 2,000,000 2,035,000
Howmet Corp. Sr Sub Notes, 10.00%, 12/01/03 (144A)......................... 1,000,000(2) 1,047,500
Lone Star Industries, Inc. Sr Notes, 10.00%, 07/31/03...................... 3,000,000 3,030,000
Norcal Waste Systems Sr Notes, 12.50%, 11/15/05............................ 3,000,000 3,030,000
Nortek Inc. Sr Sub Notes, 9.875%, 03/01/04................................. 1,500,000 1,395,000
NVR Inc. Sr Notes, 11.00%, 04/15/03........................................ 1,000,000 1,005,000
Schuller International Group Inc. Sr Notes, 10.875%, 12/15/04.............. 1,500,000 1,687,500
Scotsman Group Sr Notes, 9.50%, 12/15/00................................... 3,000,000 3,000,000
Talley Manufacturing & Technology Inc. Sr Notes, 10.75%, 10/15/03.......... 2,000,000 2,005,000
Unisys Corp. Sr Notes, 10.625%, 10/01/99................................... 3,000,000 2,655,000
U.S. Leather Inc. Sr Notes, 10.25%, 07/31/03............................... 1,000,000 740,000
Walbro Corp. Sr Notes, 9.875%, 07/15/05.................................... 2,000,000 1,980,000
Walter Industries Sr Notes, 12.19%, 03/15/00............................... 8,000,000 8,100,000
World Color Press, Inc. Sr Sub Notes, 9.125%, 03/15/03..................... 3,380,000 3,481,400
-------------
60,093,425
-------------
HOTELS & GAMING (4.55%)
CORPORATE BONDS
Bally Park Place Funding 1st Mtg. Notes, 9.25%, 03/15/04................... 5,000,000 5,050,000
Four Seasons Hotel Sr Notes, 9.125%, 07/01/00 (144A)....................... 3,000,000(2) 2,985,000
Grand Casino's 1st Mtg. Notes, 10.125%, 12/01/03........................... 1,000,000 1,042,500
Hollywood Casino Sr Notes, 12.75%, 11/01/03................................ 1,500,000 1,355,625
John Q Hammons Hotel 1st Mtg. Notes, 9.75%, 10/01/05 (144A)................ 5,000,000(2) 5,018,750
Mohegan Tribal Gaming Authority Sr Notes, 13.50%, 11/15/02 (144A).......... 2,000,000(2) 2,170,000
Prime Hospitality Corp. Sr Secured Notes, 10.00%, 07/31/99................. 4,211,333 4,190,276
-------------
21,812,151
-------------
METALS/MINING/IRON/STEEL (4.18%)
CORPORATE BONDS
AK Steel Corp. Sr Notes, 10.75%, 04/01/04.................................. 1,500,000 1,661,250
ARMCO Inc. Sr Notes, 7.875% 12/15/96....................................... 200,000 196,000
ARMCO Inc. Sr Notes, 9.375%, 11/01/00...................................... 5,000,000 4,950,000
Bethlehem Steel Corp. Sr Notes, 10.375%, 09/01/03.......................... 2,000,000 2,125,000
GS Technologies Corp. Sr Notes, 12.25%, 10/01/05........................... 2,000,000 1,992,500
Jorgensen Earle M. Co. Sr Notes, 10.75%, 03/01/00.......................... 1,600,000 1,472,000
Northwestern Steel & Wire Co. Sr Notes, 9.50%, 06/15/01.................... 3,000,000 2,947,500
Republic Engineered Steel 1st Mtg. Notes, 9.875%, 12/15/01................. 1,500,000 1,346,250
Wheeling-Pittsburgh Corp. Sr Notes, 9.375%, 11/15/03....................... 3,500,000 3,333,750
-------------
20,024,250
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
6
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OIL/GAS (6.87%)
CORPORATE BONDS
Clark R & M Holdings Sr Notes, 0.00%, 02/15/00............................. $ 7,000,000 $ 4,655,000
Columbia Gas Systems Inc. 6.39%, Series A 11/28/00......................... 267,000 271,457
Columbia Gas Systems Inc. 6.61%, Series B 11/28/02......................... 264,000 269,832
Columbia Gas Systems Inc. 6.80%, Series C 11/28/05......................... 264,000 271,439
Columbia Gas Systems Inc. 7.05%, Series D 11/28/07......................... 264,000 272,346
Columbia Gas Systems Inc. 7.32%, Series E 11/28/10......................... 264,000 272,454
Crown Central Petroleum Sr Notes, 10.875%, 02/01/05........................ 2,400,000 2,520,000
Giant Industries Inc. Guaranteed Sr Sub Notes, 9.75%, 11/15/03............. 1,800,000 1,818,000
Gulf Canada Resources, Ltd. Sr Sub Debs., 9.25%, 01/15/04.................. 1,500,000 1,553,484
Maxus Energy Medium Term Notes, 11.02%, 05/15/01........................... 1,000,000 1,010,000
Maxus Energy Sr Notes, 9.875%, 10/15/02.................................... 1,000,000 1,006,250
Presidio Oil Co. Sr Notes, 11.50%, 09/15/00................................ 1,000,000(1) 1,045,000
Presidio Oil Co. Gas Index Notes, 13.25%, 07/15/02......................... 1,000,000(1) 680,000
Rowan Sr Sub Notes, 11.875%, 12/01/01...................................... 2,500,000 2,693,750
TransTexas Gas Corp. Sr Notes, 11.50%, 06/15/02............................ 4,000,000 4,130,000
Triton Energy Corp. Sr Sub Disc. Notes, 0/9.75%, 12/15/00.................. 2,500,000(3) 2,331,250
Triton Energy Corp. Sr Sub Disc. Notes, 0.00%, 11/01/97.................... 1,500,000 1,293,750
Tuboscope Vetco Sr Sub Notes, 10.75%, 04/15/03............................. 1,000,000 992,500
Wainoco Oil Corp. Sr Notes, 12.00%, 08/01/07............................... 2,000,000 1,955,000
Wilrig As Sr Secured Notes, 11.25%, 03/15/04............................... 1,200,000 1,311,000
PREFERRED STOCKS
Columbia Gas Systems Inc. 5.22% Dividend Enhanced Conv. Stock.............. 4,535 179,133
CONV. PREFERRED STOCKS
Columbia Gas Systems Inc. 7.89% Pfd........................................ 7,405 177,720
CONV. EURODOLLAR BONDS
Reading & Bates Energy Co. Conv. Eurobonds, 8.00%, 12/31/98................ 1,765,500 2,180,393
-------------
32,889,758
-------------
PACKAGING/CONTAINERS (3.01%)
CORPORATE BONDS
Gaylord Container Sr Notes, 11.50%, 05/15/01............................... 5,000,000 5,150,000
Owens-Illinois Corp. Sr Sub Notes, 10.00%, 08/01/02........................ 2,000,000 2,092,500
Owens-Illinois Corp. Sr Sub Notes, 10.50%, 06/15/02........................ 4,500,000 4,815,000
Riverwood International Corp. Sr Notes Series II, 10.75%, 06/15/00......... 2,200,000 2,365,000
-------------
14,422,500
-------------
REAL ESTATE (5.18%)
CORPORATE BONDS
Granite Development Partners L.P. Sr Notes, 10.83%, 11/15/03............... 1,000,000 800,000
Host Marriott Properties Sr Notes, 9.50%, 05/15/05......................... 2,000,000 2,042,500
Mortgage & Realty Trust Sr Notes, 11.125%, 09/29/02........................ 500,000 505,000
Rockefeller Center Properties Sr Notes, 0.00%, 12/31/00.................... 9,500,000 5,355,625
Trizec Finance Sr Notes, 10.875%, 10/15/05................................. 4,000,000 4,125,000
MORTGAGE BACKED SECURITIES
RTC Mtg. Tr. Series 1993-N3 CL 4 Mtg. Ln. Bkd. Bonds, 10.50%, 10/15/03
(144A).................................................................... 5,000,000(2) 5,000,000
RTC Mtg. Tr. Series 1994-N1 CL 4 Mtg. Ln. Bkd. Bonds, 10.50%, 01/15/04
(144A).................................................................... 1,250,000(2) 1,253,125
RTC Mtg. Tr. Series 1994-N2 CL 4 Mtg. Ln. Bkd. Bonds, 10.00%, 12/15/04
(144A).................................................................... 2,000,000(2) 2,005,000
RTC Mtg. Tr. Series 1994-C1 CL F Mtg. Ln. Bkd. Bonds, 8.00%, 06/25/26...... 2,683,329 2,227,163
RTC Mtg. Tr. Series 1994-C2 CL G Mtg. Ln. Bkd. Bonds, 8.00%, 04/25/25...... 1,827,824 1,507,955
-------------
24,821,368
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
7
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RETAIL (3.93%)
CORPORATE BONDS
Grand Union Co. Sr Notes, 12.00%, 09/01/04................................. $ 1,500,000 $ 1,297,500
National Convenience Realty Co. Secured Notes, 9.50%, 04/30/03............. 2,398,698 2,494,646
Pathmark Stores Inc. Sr Sub Notes, 9.625%, 05/01/03........................ 5,000,000 4,812,500
Payless Cashways Inc. Sr Sub Notes, 9.125%, 04/15/03....................... 1,200,000 939,000
Penn Traffic Co. Sr Notes, 10.25%, 02/15/02................................ 4,000,000 3,810,000
Ralph's Grocery Sr Notes, 10.45%, 06/15/04................................. 2,500,000 2,531,250
TLC Beatrice Int'l Holdings Sr Notes, 11.50%, 10/01/05..................... 3,000,000 2,962,500
-------------
18,847,396
-------------
TRANSPORTATION (4.39%)
CORPORATE BONDS
Eletson Holdings Inc. 1st Pfd. Mtg. Notes, 9.25%, 11/15/03................. 2,000,000 1,967,500
GPA Delaware Inc. Guaranteed Notes, 8.75%, 12/15/98........................ 2,500,000 2,343,750
Moran Transportation Co. 1st Pfd. Mtg. Notes, 11.75%, 07/15/04............. 1,500,000 1,417,500
Sea Containers Ltd. Sr Notes, 9.50%, 07/01/03.............................. 2,600,000 2,600,000
Stena AB Sr Notes, 10.50%, 12/15/05........................................ 3,000,000 3,060,000
Viking Star Shipping 1st Pfd. Mtg. Notes, 9.625%, 07/15/03................. 2,000,000 2,070,000
TRUST CERTIFICATES
Piedmont Aviation Inc. Equipment Trust Certificates 1988 Series A, 9.80%,
01/15/00.................................................................. 942,000 884,303
Piedmont Aviation Inc. Equipment Trust Certificates 1988 Series F, 10.15%,
03/28/03.................................................................. 1,000,000 930,000
U.S. Air Inc. Equipment Trust Certificates 1990 Series A, 11.20%,
03/19/05.................................................................. 3,690,463 3,598,202
U.S. Air Inc. Equipment Trust Certificates 1990 Series B, 10.33%,
06/27/02.................................................................. 803,000 752,813
U.S. Air Inc. Equipment Trust Certificates 1990 Series D, 10.28%,
06/27/01.................................................................. 837,000 788,873
U.S. Air Inc. Equipment Trust Certificates 1988 Series B, 9.80%,
01/15/00.................................................................. 654,000 613,125
-------------
21,026,066
-------------
UTILITIES -- ELECTRIC (5.47%)
CORPORATE BONDS
Beaver Valley Funding Corp. Debs., 8.625%, 06/01/07........................ 1,797,000 1,612,865
California Energy Inc. Sr Notes, 9.875%, 06/30/03.......................... 1,800,000 1,872,000
Cleveland Electric Illum. Medium Term Notes, 9.25%, 07/29/99............... 1,000,000 1,033,750
Cleveland Electric Illum. Medium Term Notes, 8.16% 11/30/98................ 3,500,000 3,508,750
Cleveland Electric Illum. 1st Mortgage Bonds, 9.50% 05/15/05............... 1,600,000 1,666,170
CTC Mansfield Funding Corp. Secured Lease Obligation Bonds, 10.25%,
03/30/03.................................................................. 3,500,000 3,579,013
Long Island Lighting Co. Debs., 7.125%, 06/01/05........................... 4,000,000 3,849,252
Tucson Electric Power Company, Springerville Unit 1 Series B-1, 10.21%,
01/01/09.................................................................. 246,185 241,261
Tucson Electric Power Company, Springerville Unit 1 Series B-2, 10.21%,
01/01/09.................................................................. 370,554 363,143
Tucson Electric Power Company, Springerville Unit 1 Series B-4, 10.21%,
01/01/09.................................................................. 533,836 523,159
Tucson Electric Power Company, Springerville Unit 1 Series B-5, 10.21%,
01/01/09.................................................................. 1,128,441 1,105,872
Tucson Electric Power Company, Springerville Unit 1 Series B-6, 10.21%,
01/01/09.................................................................. 2,548,534 2,497,563
Tucson Electric Power Company, Springerville Unit 1 Series B-7, 10.21%,
01/01/09.................................................................. 698,465 684,496
PREFERRED STOCKS
Long Island Lighting Co. Pfd., 7.95%, 06/01/00 Series AA................... 90,000 2,193,750
Long Island Lighting Co. Pfd., 8.50%, Series R............................. 3,125 312,500
Public Service Co. of New Hampshire Pfd., 10.60%, 06/30/97 Series A........ 45,000 1,153,125
-------------
26,196,669
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
8
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

- ---------------
(A) Canadian Dollars

(1) Issuer in default.

(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.

(3) Step up bond.

(4) Illiquid security.

(5) Payment in kind security.

(6) Interest rate reflected is the rate in effect at December 31, 1995.

The accompanying notes are an integral part of the financial statements.
9
<PAGE>
OFFITBANK
EMERGING MARKETS FUND

- --------------------------------------------------------------------------------

At December 31, 1995, the net asset value per share of the OFFITBANK Emerging
Markets Fund was $9.91. The total return of the Emerging Markets Fund, net of
all fees and expenses, was 23.38% in 1995. Average annual total return for the
Fund since inception on March 8, 1994 was 9.84%. Please note that performance
data represents past performance and that the investment return and principal
value of investments will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than the original cost.

Our strategy going forward will continue to rely on investing where we believe
there is fundamental value, and where investors are provided attractive
risk-adjusted total returns.

During the first half of 1995, returns on emerging market financial assets were
significantly influenced by the abrupt slow down of inflows of foreign capital
in the aftermath of Mexico's maxi-devaluation in December, 1994 and its ensuing
financial crisis. Many of the emerging market countries spent 1995 implementing
significant policy shifts to stem current account and fiscal deficits and dampen
inflationary pressures.

With few exceptions, governments in the emerging market countries learned a
lesson from the Mexican debacle, and not only maintained orthodox,
market-oriented macroeconomic policies, but began accelerating their efforts to
broaden and deepen economic reforms during 1995. Governments throughout the
emerging markets have become increasingly aware that they must exert greater
discipline on their economic policies to maintain access to global capital, or
face swift retribution from the financial markets.

The Federal Reserve's move to ease monetary policy, beginning with the 25 basis
point rate cut in July, 1995 provided the financial markets with greater
liquidity and spurred investors to take a fresh look at the available investment
opportunities in emerging markets. The prospects for improving fundamentals in
many emerging market countries, coupled with the lower yield levels on U.S.
fixed income investments made absolute yield levels of 12 - 20% on emerging
market securities attractive and compelling for many investors.

With this in mind, we fully invested the Fund's assets during the second and
third quarters of 1995. At year end, the Fund was invested approximately 43% in
U.S. dollar-denominated emerging market corporate Eurobonds, 32% in sovereign
Brady Bonds and pre-Brady loans, and 23% in locally issued and traded fixed
income instruments. At year end, the Fund maintained only a net 6% of the
portfolio exposed to foreign exchange volatility. As of December 31, the
securities in the Fund's portfolio had an average duration of 3.3 years, an SEC
30-day yield of 10%, and an average yield to maturity of approximately 13.25%.

The Fund remains overweighted in Latin America compared to relevant benchmarks
(e.g. J.P Morgan Emerging Markets Bond Index, etc.), where we continue to view
investment opportunities as more attractive on a risk-adjusted basis. We believe
that our investment approach of balancing the portfolio with U.S.
dollar-denominated corporate Eurobonds, yielding between 12-18%, locally issued
and traded fixed income securities, and U.S dollar-denominated Brady Bonds
coupled with our active portfolio management should continue to provide our
investors with competitive returns at substantially less volatility than that of
our benchmarks.

Richard M. Johnston Wallace Mathai-Davis

January 15, 1996

10
<PAGE>
OFFITBANK
EMERGING MARKETS FUND

- --------------------------------------------------------------------------------

The following graph represents the total return based on a $250,000 investment
made in the OFFITBANK Emerging Markets Fund made at the trading commencment date
of March 8, 1994 and held through December 31, 1995 as well as the performance
of the J.P. Morgan Emerging Markets Bond Index over the same period. Past
performance is not predictive of future performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN ONE YEAR SINCE INCEPTION
<S> <C> <C>
OFFITBANK Emerging Markets Fund 23.38% 9.84%
J.P. Morgan Emerging Markets Bond Index 27.63% 7.28%
OFFITBANK Emerging Markets Fund J.P. Morgan Emerging Markets Bond Index
3/8/94 $250,000 $250,000
3/31/94 $247,800 $223,516
6/30/94 $251,294 $219,810
9/30/94 $260,718 $243,677
12/31/94 $240,447 $223,260
3/31/95 $237,658 $198,533
6/30/95 $260,259 $243,857
9/30/95 $279,049 $258,400
12/31/95 $296,685 $284,756
</TABLE>

11
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
SOVEREIGN DEBT
ARGENTINA (13.00%)
Argentina Bote X (10) Floating Rate Bonds, 5.6875%, 04/01/00............... $ 3,022,451(4) $ 2,696,691
Argentina Brady Floating Rate Bonds, 6.8125%, 03/31/05..................... 2,350,000(4) 1,668,500
Argentina Brady Par Step-up Bonds, 4.00%/6.00%, 03/31/23................... 1,750,000(3) 995,312
Argentina Global Bonds, 8.375%, 12/20/03................................... 1,250,000 1,043,750
-------------
6,404,253
-------------
BRAZIL (19.01%)
Brazil Brady Capitalization Step-up Bonds, 4.00%/8.00%, 04/15/14........... 2,387,720(3) 1,361,000
Brazil Brady DCB Floating Rate Bonds, 6.875%, 04/15/12..................... 2,250,000(4) 1,279,687
Brazil Brady EI Floating Rate Notes, 6.8125%, 04/15/06..................... 2,250,000(4) 1,544,062
Brazil Brady Par Z Step-Up Bonds, 4.00%/6.00%, 04/15/24.................... 2,850,000(3) 1,499,812
Brazil IDU Floating Rate Notes, 6.6875%, 01/01/01.......................... 475,000(4) 408,500
Brazilian LFT's, 06/01/96.................................................. 879,700(a) 1,138,121
Brazilian NTN-D 6.00%, Dollar Linked 03/15/96.............................. 1,517,886(a) 1,612,447
Brazilian NTN-D 6.00%, Dollar Linked 06/13/96.............................. 477,955(a) 519,625
-------------
9,363,254
-------------
CZECH REPUBLIC (2.88%)
Czechoslovakian Trade Obchodni Bank Sr Notes, 11.125%, 08/26/97............ 37,620,000(c) 1,417,417
-------------
ECUADOR (3.67%)
Ecuador Brady Discount Floating Rate Bonds, 6.8125%, 02/28/25.............. 250,000(4) 126,250
Ecuador Brady Par Step-Up Bonds, 3.00%/5.00%, 02/28/25..................... 3,000,000(3) 1,083,750
Ecuador Brady PDI Capitalization Bonds, 3.00%, 02/27/15.................... 1,787,438 598,791
-------------
1,808,791
-------------
MEXICO (2.99%)
UMS Cetes Linked Notes, 11/27/96........................................... 1,450,000 1,473,563
-------------
PANAMA (3.78%)
Panama Loan, 6.6875%, 1989................................................. 2,250,000(2) 1,859,625
-------------
PERU (1.45%)
Peru Citi-Loan............................................................. 1,000,000(2) 715,000
-------------
AUTOMOBILE PARTS
MEXICO (3.36%)
Corporacion Industrial Sanluis 9.125%, 11/16/98............................ 1,750,000 1,653,838
-------------
BANKS (8.29%)
ARGENTINA
Banco de Galicia 9.00%, 11/01/03........................................... 500,000 437,500
-------------
BRITISH VIRGIN ISLAND
Banco Fibra Participation 14.00%, 01/22/96................................. 250,000 250,000
-------------
CHILE
Citibank Chilean Peso-Linked Time Deposit, 12.00%, 01/18/96................ 201,656,721(b) 495,573
Citibank Chilean Peso-Linked Time Deposit, 12.00%, 01/18/96................ 99,748,716(b) 245,133
-------------
740,706
-------------
MOROCCO
Morocco Tranche A Loan, 6.594%, 01/01/09................................... 4,000,000(2) 2,655,000
-------------
INDUSTRIAL (10.87%)
ARGENTINA
Sociedad Comercial del Plata 8.75%, 12/14/98............................... 1,030,000 973,350
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
12
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL (CONTINUED)
MEXICO
Alfa Convertible Notes, 8.00%, 09/15/00 (144A)............................. $ 1,300,000(1) $ 1,274,000
DESC Sociedad de Fomento Bonds, 11.00%, 12/15/97 (144A).................... 1,000,000(1) 993,900
Grupo IRSA 8.375%, 07/15/98 (144A)......................................... 1,750,000(1) 1,610,000
Tubos De Acero De Mexico 13.75%, 12/08/99.................................. 500,000 502,355
-------------
4,380,255
-------------
LEASING (1.97%)
BRAZIL
Dibens Leasing TR (Referential Rate) + 19.30%, 07/01/97.................... 9,300(a) 969,798
-------------
MANUFACTURING (1.67%)
MEXICO
AXA 8.50%, 10/01/98........................................................ 1,000,000 825,000
-------------
MUNICIPAL (3.82%)
BRAZIL
State of Minas Gerais 7.875%, 02/10/99 (X-Warrants), (144A)................ 2,000,000(1) 1,676,200
State of Minas Gerais 8.25%, 02/10/00...................................... 250,000 205,125
-------------
1,881,325
-------------
PAPER/PULP (4.06%)
BRAZIL
Klabin Fabricadora de Papel 10.00%, 12/20/01 (144A)........................ 750,000(1) 728,168
-------------
MEXICO
Grupo Industrial Durango 12.00%, 07/15/01.................................. 1,450,000 1,270,577
-------------
RETAIL (1.79%)
MEXICO
Controladora Commercial Mexicana 8.75%, 04/21/98........................... 1,000,000 880,000
-------------
SECURITIES INDUSTRY (0.51%)
BRAZIL
Banco Bozano Simonsen 13.00%, 04/02/96..................................... 250,000 250,000
-------------
STEEL (5.78%)
MEXICO
Grupo IMSA 8.75%, 07/07/98 (144A).......................................... 1,000,000(1) 912,500
Grupo IMSA 10.00%, 10/13/99................................................ 500,000 456,250
Hylsa 11.00%, 02/23/98 (144A).............................................. 1,500,000(1) 1,478,460
-------------
2,847,210
-------------
TELECOMMUNICATIONS (4.76%)
ARGENTINA
Telecom Argentina 12.00%, 11/15/02......................................... 1,000,000 1,064,580
Telecom Argentina 8.375%, 10/18/00......................................... 250,000 237,363
Telefonica Argentina 11.875%, 11/01/04..................................... 1,000,000 1,043,250
-------------
2,345,193
-------------
TOBACCO (1.50%)
MEXICO
Empresas La Moderna 10.25%, 11/12/97 (144A)................................ 750,000(1) 736,943
-------------
TRANSPORTATION (0.45%)
MEXICO
Transport Maritima Mexico 8.50%, 10/15/00.................................. 250,000 221,138
-------------
UTILITY (ELECTRIC) (2.53%)
ARGENTINA
Central Termica Guemes 12.00%, 11/29/96.................................... 500,000 492,500
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
13
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITY (ELECTRIC) (CONTINUED)
BRAZIL
Eletrobras 10.00%, 10/30/98................................................ $ 750,000 $ 753,750
-------------
TOTAL INVESTMENTS (COST $45,641,341) (98.14%).......................... 48,334,154
-------------
OTHER ASSETS IN EXCESS OF LIABILITIES (1.86%).......................... 916,291
-------------
TOTAL NET ASSETS (100.00%)............................................. $ 49,250,445
-------------
-------------
</TABLE>

- ---------------
Principal denominated in the following currencies.

(a) Brazilian Real (b) Chilean Peso (c) Czech Koruna

(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.

(2) Illiquid security.

(3) Step up bond.

(4) Interest rate reflected is the rate in effect at December 31, 1995.

The accompanying notes are an integral part of the financial statements.
14
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND

- --------------------------------------------------------------------------------

The OFFITBANK New York Municipal Fund has performed quite well since its
inception. The total return of the Fund was 5.45% for the second half of 1995
and 8.13% since the Fund's inception on April 3, 1995. For comparative purposes,
the Lehman Brothers 5 Year Municipal General Obligation Index had returns of
4.61% and 7.23% for the same periods. The SEC 30-day yield is 4.47%.

The Net Asset Value (NAV) of $10.47 on December 31, 1995 was 4.7% above the
April 3, 1995 inception date price of $10.00 as the portfolio benefited from
1995's interest rate declines. As of year end, most of these gains were
unrealized. The portfolio's investments in market discount and non-callable
bonds were vital to 1995's capital appreciation and provided the core of growth
which offset above average cash equivalent positions that are unavoidable in a
new portfolio.

In 1995, the municipal bond market provided investors with the best return since
1986. This return is impressive given that tax reform proposals, which were
unveiled in the second quarter, became a major concern for the market. Municipal
yields, currently 80-90% of Treasury yields, continue to be attractive and
probably reflect much of the risk associated with radical tax reform.

Offsetting tax reform concerns was a continued reduction of outstanding
municipal debt. Approximately $150 billion of long term new issues were brought
to market, while redemptions and maturities totaled $190 billion. In 1996 we
expect the net supply of municipals will continue to contract modestly, thus
helping counter the volatility associated with tax reform discussions.

The securities in the Fund's portfolio had an average credit rating of AA and an
average maturity of slightly under seven years. By continuing to concentrate the
portfolio in the intermediate (3-10 year) maturities and emphasizing stronger
credits, we are able to benefit from attractive after-tax yields while avoiding
volatility associated with longer maturities and marginal credits.

An anchor to the portfolio as we begin 1996 is a heavier allocation to bonds
with a higher current yield. These include pre-refunded and housing bonds. The
portfolio continues to be concentrated in essential purpose revenue bonds for
which the stream of revenues is identifiable and independent of a municipal
entity's taxing authority.

Carolyn N. Dolan
January 15, 1996

15
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND

- --------------------------------------------------------------------------------

The following graph represents the total return based on a $250,000 investment
made in the OFFITBANK New York Municipal Fund made at the trading commencement
date of April 3, 1995 and held through December 31, 1995 as well as the
performance of the Lehman Brothers 5 Year Municipal General Obligation Index
over the same period. Past performance is not predictive of future performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
TOTAL RETURN+
<S> <C> <C>
OFFITBANK New York Municipal Fund 8.13%
Lehman Brothers 5 Year Municipal Fund
General Obligation Index 7.23%
OFFITBANK Municipal Fund Lehman Brothers 5 Year Municipal
General Obligation Index
4/3/95 250,000 250,000
4/30/95 250,375 250,575
5/31/95 256,109 256,063
6/30/95 256,237 256,267
7/31/95 258,645 259,855
8/31/95 261,827 262,480
9/30/95 263,005 263,267
10/31/95 265,541 264,373
11/30/95 268,158 266,620
12/31/95 270,330 268,086
+ Since inception.
</TABLE>

16
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS (95.70%)
EDUCATION REVENUE (2.50%)
New York State Dormitory Authority Revenue Bonds Columbia University Series
A, 4.60%, 07/01/06........................................................ $100,000 $ 97,500
New York State Dormitory Authority Revenue Bonds New York University Series
A MBIA, 5.50%, 07/01/04 (4)............................................... 205,000 215,763
-------------
313,263
-------------
GENERAL OBLIGATIONS (24.14%)
Dutchess County General Obligation Bonds 4.90%, 08/01/04................... 215,000 221,988
Hempstead General Obligation Bonds Series B FGIC, 5.625%, 02/01/01 (2)..... 245,000 260,313
Hempstead General Obligation Bonds Series B FGIC, 5.625%, 02/01/04 (2)..... 140,000 150,150
Islip General Obligation Bonds FGIC, 6.00%, 11/01/05 (2)................... 100,000 109,000
Monroe County General Obligation Bonds MBIA, 6.00%, 03/01/98 (4)........... 405,000 422,212
New Castle General Obligation Bonds, 4.60%, 06/01/07....................... 215,000 205,863
New Castle General Obligation Bonds, 4.75%, 06/01/08....................... 210,000 203,700
New York State General Obligation Bonds Series C, 5.00%, 10/01/05.......... 200,000 201,750
New York State General Obligation Bonds, 5.50%, 11/15/01................... 200,000 210,500
Ontario County General Obligation Bonds FGIC, 5.00%, 08/15/02 (2).......... 250,000 260,000
Saratoga Springs CSD General Obligation Bonds, 6.10%, 06/15/97............. 315,000 324,056
Syracuse General Obligation Bonds MBIA, 6.00%, 12/01/04.................... 250,000 274,687
Syracuse General Obligation Bonds Series A, 5.00%, 02/15/06................ 175,000 177,187
-------------
3,021,406
-------------
HEALTH CARE (1.25%)
New York Medical Care Facility Finance Authority FHA 6.20%, 08/15/14 (3)... 150,000 156,563
-------------
HOUSING (5.45%)
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.85%,
10/01/06.................................................................. 125,000 130,781
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.95%,
04/01/07.................................................................. 100,000 104,625
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.80%,
10/01/06.................................................................. 200,000 206,000
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.35%,
04/01/07.................................................................. 240,000 240,900
-------------
682,306
-------------
PREREFUNDED/ESCROWED TO MATURITY (9.84%)
Erie County Water Authority Improvement & Extension Revenue Bonds, 5.75%,
12/01/08.................................................................. 350,000 377,563
Grand Central District Management Association Inc. Special Assessment
Bonds, 6.50%, 01/01/22.................................................... 150,000 169,125
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds Series B, 6.375%, 06/15/22.................................. 100,000 111,750
New York City Municipal Water and Sewer System Prerefunded Bonds, 7.00%,
06/15/07.................................................................. 95,000 108,300
Niagara Falls Bridge Commission New York Revenue Bonds, 6.125%, 10/01/19... 415,000 463,763
-------------
1,230,501
-------------
PUBLIC POWER (5.44%)
New York State Power Authority Revenue Bonds Series Y, 6.25%, 01/01/05..... 100,000 108,500
New York State Power Authority Revenue Bonds Series BB, 6.30%, 01/01/07.... 175,000 190,750
New York State Power Authority Revenue Bonds Series CC, 4.80%, 01/01/05.... 180,000 180,900
New York State Power Authority Revenue Bonds Series CC-MBIA, 4.90%,
01/01/06.................................................................. 200,000 200,750
-------------
680,900
-------------
RESOURCE RECOVERY (0.90%)
Dutchess County Resource Recovery Agency Solid Waste Management Revenue
Bonds Series A FGIC, 7.20%,
01/01/02 (2)............................................................. 100,000 112,250
-------------
SALES TAX REVENUE (11.15%)
Municipal Assistance Corp. for City of New York Revenue Bonds Series 61,
5.75%, 07/01/08........................................................... 300,000 307,125
Municipal Assistance Corp. for City of New York Revenue Bonds Series D,
5.20%, 07/01/07........................................................... 250,000 253,750
New York State Local Government Assistance Corp. Revenue Bonds Series E,
5.00%, 04/01/06........................................................... 100,000 100,000
New York State Local Government Assistance Corp. Revenue Bonds Series D,
6.375%, 04/01/00.......................................................... 100,000 107,750
</TABLE>

17
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL OBLIGATIONS (CONTINUED)
SALES TAX REVENUE (CONTINUED)
New York State Local Government Assistance Corp. Revenue Bonds Series D,
4.75%, 04/01/04........................................................... $100,000 $ 99,625
New York State Local Government Assistance Corp. Revenue Bonds Series E,
4.80%, 04/01/05........................................................... 180,000 178,650
New York State Local Government Assistance Corp. Revenue Bonds Series A,
5.00%, 04/01/06........................................................... 100,000 100,000
New York State Local Government Assistance Corp. Revenue Bonds Series D,
4.50%, 04/01/02........................................................... 250,000 248,438
-------------
1,395,338
-------------
SPECIAL ASSESSMENT (2.60%)
Grand Central District Management Association Inc. Special Assessment
Bonds, 5.10%, 01/01/08.................................................... 200,000 196,500
Grand Central District Management Association Inc. Special Assessment
Bonds, 6.20%, 01/01/00.................................................... 120,000 128,700
-------------
325,200
-------------
TELECOMMUNICATIONS (1.24%)
Puerto Rico Telephone Authority Revenue Bonds Series M AMBAC, 5.05%,
01/01/04 (1).............................................................. 150,000 155,812
-------------
TRANSPORTATION REVENUE (20.55%)
New York State Bridge Authority Bonds 7.00%, 01/01/00...................... 250,000 261,675
New York State Thruway, Highway & Bridge Trust Fund Bonds Series B FGIC,
6.40%, 04/01/04 (2)....................................................... 200,000 224,000
New York State Thruway, Highway & Bridge Trust Fund Bonds Series B, 5.80%,
04/01/07.................................................................. 300,000 319,125
New York State Thruway, Highway & Bridge Trust Fund Bonds Series B, 5.75%
MBIA, 04/01/06 (4)........................................................ 200,000 213,750
Port Authority of New York & New Jersey Bonds Series 86, 5.80%, 07/15/03... 200,000 218,000
Port Authority of New York & New Jersey Bonds Series 86, 5.00%, 07/01/06... 250,000 257,187
Port Authority of New York & New Jersey Bonds Series 86, 5.125%,
07/01/08.................................................................. 200,000 205,000
Triborough Bridge & Tunnel Authority General Purpose Bonds Series A, 4.50%,
01/01/03.................................................................. 250,000 249,688
Triborough Bridge & Tunnel Authority General Purpose Bonds, 5.90%,
01/01/07.................................................................. 425,000 461,656
Triborough Bridge & Tunnel Authority General Purpose Bonds, 5.75%,
01/01/05.................................................................. 150,000 162,375
-------------
2,572,456
-------------
WATER/SEWER (10.64%)
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds, 7.00%, 06/15/07............................................ 105,000 118,256
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds, 5.20%, 06/15/05............................................ 350,000 359,187
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, Series E, 6.60%, 06/15/05.................................. 100,000 111,250
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 5.40%, 05/15/06............................................ 250,000 266,250
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 6.40%, 06/15/03............................................ 200,000 221,000
Suffolk County Water Revenue Bonds MBIA 5.10%, 06/01/05 (4)................ 250,000 256,250
-------------
1,332,193
-------------
TOTAL MUNICIPAL OBLIGATIONS (COST $11,678,269)......................... 11,978,188
-------------
</TABLE>

18
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM OBLIGATIONS (0.58%)
Vista New York Tax Free Money Market Fund.................................. $73,105 $ 73,105
-------------
TOTAL SHORT-TERM OBLIGATIONS (COST $73,105)............................ 73,105
-------------
GOVERNMENT AGENCIES (2.80%)
Federal Home Loan Bank Discount Notes, 01/02/96............................ 350,000 349,944
-------------
TOTAL GOVERNMENT AGENCIES ($349,944)................................... 349,944
-------------
TOTAL INVESTMENTS (COST $12,101,318) (99.08%).......................... 12,401,237
-------------
CASH AND OTHER ASSETS, NET OF LIABILITIES (0.92%)...................... 114,670
-------------
NET ASSETS (100.00%)................................................... $ 12,515,907
-------------
-------------
</TABLE>

- ---------------
(1) Insured as to principal and interest by the American Municipal Bond
Assurance Corporation.

(2) Insured as to principal and interest by the Financial Guarantee Insurance
Corporation.

(3) Insured by the Federal Housing Administration.

(4) Insured as to principal and interest by the Municipal Bond Insurance
Association.

19
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES--DECEMBER 31, 1995
HIGH YIELD FUND

<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (Cost -- $437,732,266) (Note 1a)................. $453,521,503
Cash.......................................................................... 18,611,594
Unrealized appreciation on forward currency contracts (Note 5)................ 37,240
Receivable for fund shares sold............................................... 1,122,500
Interest receivable........................................................... 9,813,954
Dividends receivable.......................................................... 125,750
Prepaid expenses.............................................................. 21,143
-------------
Total Assets................................................................ $483,253,684
LIABILITIES:
Payable for investments purchased............................................. 1,967,365
Payable for fund shares repurchased........................................... 178,000
Income distribution payable................................................... 1,521,120
Investment advisory fee payable (Note 2)...................................... 318,229
Other payables and accrued expenses........................................... 178,589
-------------
Total Liabilities........................................................... 4,163,303
-------------
NET ASSETS...................................................................... $479,090,381
-------------
-------------
Net assets consist of:
Shares of capital stock, $.001 par value per share; 48,310,714
issued and outstanding (Note 4).............................................. $ 48,311
Additional paid-in-capital.................................................... 463,285,307
Accumulated dividends in excess of net investment income...................... (62,489)
Accumulated net realized loss on investments and foreign currency
transactions................................................................. (5,272)
Net unrealized appreciation on investments and foreign currency
transactions................................................................. 15,824,524
-------------
NET ASSETS...................................................................... $479,090,381
-------------
-------------
NET ASSET VALUE PER SHARE....................................................... $9.92
-------------
-------------
</TABLE>

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (Cost -- $45,641,341) (Note 1a).................. $ 48,334,154
Cash (including foreign currency of $13,790).................................. 1,087,239
Interest receivable........................................................... 954,326
Prepaid expenses.............................................................. 2,965
Unrealized appreciation on forward currency contracts (Note 5)................ 40,019
------------
Total Assets................................................................ $ 50,418,703
LIABILITIES:
Payable for investments purchased............................................. 706,250
Income distribution payable................................................... 343,930
Investment advisory fee payable (Note 2)...................................... 35,872
Other payables and accrued expenses........................................... 82,206
------------
Total Liabilities........................................................... 1,168,258
------------
NET ASSETS $ 49,250,445
------------
------------
Net assets consist of:
Shares of capital stock, $.001 par value per share; 4,968,891
issued and outstanding (Note 4).............................................. $ 4,969
Additional paid-in-capital.................................................... 47,125,815
Accumulated dividends in excess of net investment income...................... (385,680)
Accumulated net realized loss on investments and foreign currency
transactions................................................................. (227,168)
Net unrealized appreciation on investments and foreign currency
transactions................................................................. 2,732,509
------------
NET ASSETS...................................................................... $ 49,250,445
------------
------------
NET ASSET VALUE PER SHARE....................................................... $9.91
------------
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
20
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES--DECEMBER 31, 1995

(CONTINUED)

NEW YORK MUNICIPAL FUND

<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $12,101,318) (Note 1a)......................... $ 12,401,237
Receivable for investments sold............................................... 102,884
Interest receivable........................................................... 195,490
Receivable from advisor....................................................... 58,913
Receivable for fund shares sold............................................... 8,101
Deferred organization expense................................................. 23,419
----------------
Total Assets................................................................ $ 12,790,044
LIABILITIES:
Payable for investments purchased............................................. 242,247
Income distribution payable................................................... 7,293
Accrued expenses.............................................................. 24,597
----------------
Total Liabilities........................................................... 274,137
----------------
NET ASSETS...................................................................... $ 12,515,907
----------------
----------------
Net assets consist of:
Shares of capital stock, $.001 par value per share; 1,195,830
issued and outstanding (Note 4).............................................. $ 1,195
Additional paid-in-capital.................................................... 12,209,082
Accumulated net realized gain on investments.................................. 5,711
Net unrealized appreciation on investments.................................... 299,919
----------------
NET ASSETS...................................................................... $ 12,515,907
----------------
----------------
NET ASSET VALUE PER SHARE....................................................... $10.47
----------------
----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
21
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
HIGH YIELD FUND

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31, 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest...................................................................... $ 36,647,565
Dividend...................................................................... 704,304
----------------
Total income................................................................ $ 37,351,869
EXPENSES:
Advisory fee (Note 2)......................................................... 2,884,016
Administrative services (Note 2).............................................. 536,814
Custodian fees and expenses................................................... 233,846
Registration fees............................................................. 123,260
Professional.................................................................. 77,847
Printing...................................................................... 45,851
Transfer and shareholder servicing agent fees (Note 2)........................ 21,360
Fund accounting fee and expenses (Note 2)..................................... 38,165
Insurance..................................................................... 25,076
Trustees' fees................................................................ 3,916
Miscellaneous................................................................. 45,710
----------------
Total expenses/fees before waivers.......................................... 4,035,861
Less: expenses/fees waived (Note 2)......................................... (268,407)
----------------
Net expenses................................................................ 3,767,454
----------------
NET INVESTMENT INCOME........................................................... 33,584,415
----------------
Net realized and unrealized gain (loss): (Note 5)
Net realized gain on investments.............................................. 285,277
Net realized gain on foreign currency transactions............................ 243,545
Net change in unrealized appreciation on investments.......................... 22,052,489
Net change in unrealized depreciation on foreign currency transactions........ 39,469
----------------
Net realized and unrealized gain on investments and foreign currency
transactions.................................................................. 22,620,780
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 56,205,195
----------------
----------------
</TABLE>

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31, 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest (net of foreign tax withholding of $61,856) (Note 3)................. $ 3,977,593
----------------
Total income................................................................ $ 3,977,593
EXPENSES:
Advisory fee (Note 2)......................................................... 312,096
Professional.................................................................. 45,517
Administrative services (Note 2).............................................. 52,016
Custodian fees and expenses................................................... 43,367
Registration fees............................................................. 47,212
Fund accounting fee and expenses (Note 2)..................................... 30,000
Printing...................................................................... 8,992
Trustees' fees................................................................ 3,917
Insurance..................................................................... 3,966
Transfer and shareholder servicing agent fees (Note 2)........................ 4,418
Miscellaneous................................................................. 46,889
----------------
Total expenses/fees before waivers.......................................... 598,390
Less: expenses/fees waived (Note 2)......................................... (78,163)
----------------
Net expenses................................................................ 520,227
----------------
NET INVESTMENT INCOME........................................................... 3,457,366
----------------
Net realized and unrealized gain (loss): (Note 5)
Net realized gain on investments.............................................. 347,716
Net realized loss on foreign currency transactions............................ (120,599)
Net change in unrealized appreciation on investments.......................... 4,032,637
Net change in unrealized gain on foreign currency transactions................ 40,462
----------------
Net realized and unrealized gain on investments and foreign currency
transactions.................................................................. 4,300,216
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 7,757,582
----------------
----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
22
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (CONTINUED)

NEW YORK MUNICIPAL FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
APRIL 3, 1995*
THROUGH DECEMBER 31, 1995
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income............................................................... $ 279,456
---------
Total income................................................................ $ 279,456
EXPENSES:
Fund accounting fee and expenses (Note 2)..................................... 27,192
Professional.................................................................. 31,869
Advisory fee (Note 2)......................................................... 23,448
Custodian fees and expenses................................................... 6,150
Administrative services (Note 2).............................................. 8,793
Registration.................................................................. 2,760
Trustees' fees................................................................ 2,667
Printing...................................................................... 7,930
Transfer and shareholder servicing agent fees (Note 2)........................ 1,662
Amortization of organization expenses......................................... 4,119
Miscellaneous................................................................. 6,481
---------
Total expenses/fees before waivers.......................................... 123,071
Less: expenses/fees waived (Note 2)......................................... (90,986)
---------
Net expenses................................................................ 32,085
---------
NET INVESTMENT INCOME........................................................... 247,371
---------
Net realized and unrealized gain (loss):
Net realized gain on investments.............................................. 11,983
Net unrealized appreciation on investments.................................... 299,919
---------
Net realized and unrealized gain on investments................................. 311,902
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 559,273
---------
---------
</TABLE>

* Commencement of operations

The accompanying notes are an integral part of the financial statements.
23
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
HIGH YIELD FUND

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD FROM
ENDED MARCH 2, 1994*
DECEMBER 31, 1995 THROUGH DECEMBER 31, 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income........................................ $33,584,415 $12,499,514
Net realized gain (loss) on investments and foreign currency
transactions................................................ 528,822 (118,093)
Net change in unrealized appreciation/(depreciation) on
investments and foreign currency transactions............... 22,091,958 (6,267,434)
----------------- -------------------------
Net increase in net assets resulting from operations......... 56,205,195 6,113,987
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:..............
Net investment income........................................ (33,572,903) (12,673,292)
Realized gains............................................... (316,224) 0
----------------- -------------------------
Total dividends and distributions to shareholders............ (33,889,127) (12,673,292)
CAPITAL STOCK TRANSACTIONS (NOTE 4):
Net increase in net assets from capital share transactions... 234,457,225 228,843,060
----------------- -------------------------
Total increase in net assets................................. 256,773,293 222,283,755
NET ASSETS:
Beginning of period.......................................... 222,317,088 33,333
----------------- -------------------------
End of period................................................ $479,090,381 $222,317,088
----------------- -------------------------
----------------- -------------------------
</TABLE>

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD FROM
ENDED MARCH 8, 1994*
DECEMBER 31, 1995 THROUGH DECEMBER 31, 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income........................................ $3,457,366 $2,164,046
Net realized gain/(loss) on investments and foreign currency
transactions................................................ 227,117 (1,991,878)
Net change in unrealized appreciation/(depreciation) on
investments and foreign currency transactions............... 4,073,099 (1,340,590)
----------------- -------------------------
Net increase (decrease) in net assets resulting from
operations.................................................. 7,757,582 (1,168,422)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................ (2,305,453) (2,164,046)
Return of capital............................................ (1,151,913) 0
----------------- -------------------------
Total dividends and distribution to shareholders............. (3,457,366) (2,164,046)
----------------- -------------------------
CAPITAL STOCK TRANSACTIONS (NOTE 4):
Net increase in net assets from capital share transactions... 16,833,223 31,416,141
----------------- -------------------------
Total increase in net assets................................. 21,133,439 28,083,673
NET ASSETS:
Beginning of period.......................................... 28,117,006 33,333
----------------- -------------------------
End of period................................................ $49,250,445 $28,117,006
----------------- -------------------------
----------------- -------------------------
</TABLE>

NEW YORK MUNICIPAL FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
APRIL 3, 1995*
THROUGH DECEMBER
31, 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------
OPERATIONS:
Net investment income....................................... $247,371
Net realized gain on investments............................ 11,983
Net unrealized appreciation on investments.................. 299,919
-------------------
Net increase in net assets resulting from operations........ 559,273
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:.............
Net investment income....................................... (250,088)
Realized gains.............................................. (3,555)
-------------------
Total dividends and distributions to shareholders........... (253,643)
CAPITAL STOCK TRANSACTIONS (NOTE 4):
Net increase in net assets from capital share
transactions............................................... 12,210,237
-------------------
Total increase in net assets................................ 12,515,867
NET ASSETS:
Beginning of period......................................... 40
-------------------
End of period............................................... $12,515,907
-------------------
-------------------
</TABLE>

* Commencement of operations

The accompanying notes are an integral part of the financial statements.
24
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM MARCH
SELECTED RATIOS AND DATA FOR A SHARE OF CAPITAL STOCK FOR THE YEAR 2, 1994*
OUTSTANDING THROUGH THE PERIOD: ENDED DECEMBER 31, 1995 THROUGH DECEMBER 31, 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.......................................... $ 9.25 $ 10.00
-------- --------
Net investment income....................................................... 0.90 0.72
Net realized and unrealized gain/(loss)..................................... 0.67 (0.75)
-------- --------
Total from investment operations............................................ 1.57 (0.03)
-------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................................... (0.89) (0.72)
Realized gains.............................................................. (0.01) 0
-------- --------
Total dividends and distributions............................................. (0.90) (0.72)
-------- --------
NET ASSET VALUE, END OF PERIOD................................................ $ 9.92 $ 9.25
-------- --------
-------- --------
TOTAL INVESTMENT RETURN+:..................................................... 17.72% -.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................................... $479,090 $222,317
Ratios to average net assets:
Expenses.................................................................... 1.05%(2) 1.14%(1)(2)
Net investment income....................................................... 9.38% 8.97%(1)
PORTFOLIO TURNOVER RATE....................................................... 34% 42%
</TABLE>

- ---------------
* Commencement of operations
(1) Annualized
(2) If the Fund had borne all expenses that were assumed or waived by the
Administrator, the above annualized expense ratio would have been 1.13% and
1.22% for the period ended December 31, 1995, and December 31, 1994,
respectively.
+Total return is based on the change in net asset value during the period and
assumes reinvestment of all dividends and distributions.

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SELECTED RATIOS AND DATA FOR A SHARE OF CAPITAL STOCK FOR THE YEAR MARCH 8, 1994*
OUTSTANDING THROUGH THE PERIOD: ENDED DECEMBER 31, 1995 THROUGH DECEMBER 31, 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.......................................... $ 8.84 $ 10.00
-------- --------
Net investment income....................................................... 0.90 0.81
Net realized and unrealized (loss).......................................... 1.07 (1.16)
-------- --------
Total from investment operations............................................ 1.97 (0.35)
-------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................................... (0.60) (0.81)
Return of Capital........................................................... (0.30) 0
-------- --------
Total dividends and distributions............................................. (0.90) (0.81)
-------- --------
NET ASSET VALUE, END OF PERIOD................................................ $ 9.91 $ 8.84
-------- --------
-------- --------
TOTAL INVESTMENT RETURN+:..................................................... 23.38% -3.82%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................................... $ 49,250 $ 28,117
Ratios to average net assets:
Expenses.................................................................... 1.50%(2) 1.50%(1)(2)
Net investment income....................................................... 9.97% 10.39%(1)
PORTFOLIO TURNOVER RATE....................................................... 60% 47%
</TABLE>

- ---------------
* Commencement of operations
(1) Annualized.
(2) If the Fund had borne all expenses that were assumed or waived by the
Advisor and Administrator, the above annualized expense ratio would have
been 1.73% and 1.80% for the period ended December 31, 1995 and December 31,
1994, respectively.
+Total return is based on the change in net asset value during the period and
assumes reinvestment of all dividends and distributions.

The accompanying notes are an integral part of the financial statements.
25
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)

NEW YORK MUNICIPAL FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SELECTED RATIOS AND DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGH THE APRIL 3, 1995*
PERIOD: THROUGH DECEMBER 31, 1995
<S> <C>
- ---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.......................................... $ 10.00
-------
Net investment income....................................................... 0.33
Net realized and unrealized gains on investments............................ 0.47
-------
Total from investment operations............................................ 0.80
-------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................................... (0.32)
Capital gains............................................................... (0.01)
-------
Total dividends and distributions............................................. (0.33)
-------
NET ASSET VALUE, END OF PERIOD................................................ $ 10.47
-------
-------
TOTAL INVESTMENT RETURN+:..................................................... 8.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................................... $ 12,516
Ratios to average net assets:
Expenses.................................................................... 0.54%(1)(2)
Net investment income....................................................... 4.20%(1)
PORTFOLIO TURNOVER RATE....................................................... 35%
</TABLE>

- ---------------
* Commencement of operations
(1) Annualized
(2) If the Fund had borne all expenses that were assumed or waived by the
Advisor and Administrator, the above annualized expense ratio would have
been 2.09%.
+Total return is based on the change in net asset value during the period and
assumes reinvestment of all dividends and distributions.

The accompanying notes are an integral part of the financial statements.
26
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES. The OFFITBANK Investment Fund, Inc. (the
"Company") was incorporated in Maryland on September 8, 1993. The Company is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). Each Fund operates as a non-diversified, open-end management investment
company. The Company consists of seven separately managed funds. OFFITBANK High
Yield Fund, OFFITBANK Investment Grade Global Debt Fund, OFFITBANK Emerging
Markets Fund, OFFITBANK National Municipal Fund, OFFITBANK California Municipal
Fund, OFFITBANK New York Municipal Fund and OFFITBANK Global Convertible Fund.
Of these, only the High Yield, Emerging Markets and New York Municipal Funds
have commenced operations on March 2, 1994, March 8, 1994 and April 3, 1995,
respectively. Prior to March 2, 1994, the Company had no operations other than
those relating to organizational matters and the issuance to Furman Selz
Incorporated at $10.00 per share of 3,333, 3,333 and 3,334 shares, respectively,
of OFFITBANK High Yield, OFFITBANK Investment Grade Global Debt and OFFITBANK
Emerging Markets Funds (collectively referred to as the "Funds"). On March 2,
1994 8,653,427 shares of OFFITBANK High Yield Fund were exchanged for portfolio
securities with an aggregate value of $86,534,272. This exchange represented a
transfer of assets from The Senior Securities Fund, L.P. (the "Partnership");
the Partnership's investment adviser was OFFITBANK (the "Adviser") and the
general partner was an affiliate of the Adviser.

The preparation of financial statements prepared in accordance with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates. The following are significant accounting
policies followed by the Company in the preparation of its financial statements:

a. VALUATION OF SECURITIES. Equity securities held by a Fund are valued at the
last sale price on the exchange or in the principal over-the-counter market in
which such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. Other securities held by a Fund generally are valued based on quoted bid
prices. Short-term debt investments having maturities of 60 days or less are
amortized to maturity based on their cost, and if applicable, adjusted for
foreign exchange translation. Securities for which market quotations are not
readily available are valued at fair value determined in good faith by or under
the direction of the Company's Board of Directors. Securities quoted in foreign
currencies initially are valued in the currency in which they are denominated
and then are translated into U.S. dollars at the prevailing foreign exchange
rate. Securities may be valued by independent pricing services which use prices
provided by market-makers or estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics.

b. FOREIGN EXCHANGE TRANSACTIONS. The books and records of the Fund are
maintained in U.S. dollars as follows:

i. market value of investment securities and other assets and liabilities at the
exchange rate on the valuation date.

ii. purchases and sales of investment securities, income and expenses at the
exchange rate prevailing on the respective date of such transactions.

The resultant exchange gains and losses are included in the Statement of
Operations.

c. ORGANIZATIONAL EXPENSES. Costs incurred in connection with the organization
and initial registration of the New York Municipal Fund have been deferred and
are being amortized on a straight-line basis over sixty months beginning with
the Fund's commencement of operations. OFFITBANK assumed the organizational
expenses for the High Yield and Emerging Markets Funds.

d. ALLOCATION OF EXPENSES. Expenses directly attributable to a Fund are charged
to that Fund. Other expenses are allocated proportionately among each Fund in
relation to the net assets of each Fund or on another reasonable basis.

e. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of premium and accretion of discount on investments, is
accrued daily.

f. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment
income are declared daily and paid quarterly in the case of the Emerging Markets
Fund and monthly for the High Yield and New York Municipal Funds. Distributions
of net realized gains are normally declared and paid at least annually by each
Fund.

The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require a reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in capital.

27
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------

g. FEDERAL INCOME TAXES. Each Fund intends to continue to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
and distribute all of its taxable income to its shareholders. Therefore, no
federal income tax provision is required.

2. INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION AGREEMENTS. The Company
has entered into an investment advisory agreement (the "Investment Advisory
Agreement") with the Adviser. The Investment Advisory Agreement provides that
each Fund pays the Adviser an investment advisory fee that is calculated and
paid monthly at the annual rates of .40% of net assets for the New York
Municipal Fund, .85% on the first $200,000,000 of net assets and .75% on amounts
in excess thereof in the case of the High Yield Fund, and .90% on the first
$200,000,000 and .80% on amounts in excess thereof in the case of the Emerging
Markets Fund, of each Fund's average daily net assets. The Adviser provides
portfolio management and certain administrative, clerical and bookkeeping
services for the Company. For the year ended December 31, 1995, the Adviser was
entitled to fees of $2,884,016 for the High Yield Fund, $312,096 for the
Emerging Markets Fund, and $23,448 for the New York Municipal Fund. The Adviser
waived fees of $52,155 for the Emerging Markets Fund and $23,280 for the New
York Municipal Fund.

Furman Selz LLC ("Furman Selz") provides the Company with administrative, fund
accounting, dividend disbursing and transfer agency services pursuant to an
administration agreement (the "Administration Agreement"). The services under
the Administration Agreement are subject to the supervision of the Company's
Board of Directors and officers and include day-to-day administration of matters
related to the corporate existence of the Company, maintenance of its records,
preparation of reports, supervision of the Company's arrangements with its
custodian and assistance in the preparation of the Company's registration
statements under federal and state laws. Pursuant to the Administration
Agreement, the Company pays Furman Selz a monthly fee for its services which on
an annualized basis will not exceed .15% of the average daily net assets of the
Company. The fees are allocated among the Funds on the basis of their relative
net assets. For the year ended December 31, 1995, Furman Selz was entitled to
fees of $536,814 for the High Yield Fund, $52,016 for the Emerging Markets Fund
and $8,793 for the New York Municipal Fund. Furman Selz waived fees of $268,407
for the High Yield Fund, $26,008 for the Emerging Markets Fund and $8,793 for
the New York Municipal Fund.

As Administrator, Furman Selz provides the Funds with fund accounting related
services. For these services Furman Selz is paid a fee of $2,500 per month per
Fund. For the year ended December 31, 1995, Furman Selz earned fees, including
reimbursement of out of pocket expenses, of $38,165, $30,000 and $27,192 for the
High Yield, Emerging Markets Fund and New York Municipal Fund, respectively.
Furman Selz acts as Transfer Agent for the Fund and receives reimbursement of
certain expenses plus a per account fee of $15.00 per year. For the year ended
December 31, 1995, Furman Selz was entitled to fees of $21,360 for the High
Yield Fund, $4,418 for the Emerging Markets Fund and $1,662 for the New York
Municipal Fund.

OFFITBANK has voluntarily agreed to cap the expense ratio for the New York
Municipal Fund at 0.55%. In order to maintain this ratio, the Adviser has agreed
to reimburse the Fund $58,913.

The Company has entered into a distribution agreement (the "Distribution
Agreement") with OFFIT Funds Distributor, Inc. an affiliate of Furman Selz.
Under the Distribution Agreement, the Distributor, as agent of the Company,
agrees to use its best efforts as sole distributor of the Company's shares.
Under the Plan of Distribution, each Fund is authorized to spend up to 0.25% of
its average daily net assets to compensate the Distributor for its services. The
Distribution Agreement provides that the Company will bear the costs of the
registration of its shares with the Commission and various states and the
printing of its prospectuses, statements of additional information and reports
to shareholders. For the year ended December 31, 1995, no distribution costs
were incurred.

3. INVESTMENTS. Purchases and sales of securities for the year ended December
31, 1995, other than short-term securities, aggregated $320,118,978 and
$112,261,736 for the High Yield Fund, $44,274,204 and $15,499,351 for the
Emerging Markets Fund and $23,235,759 and $11,541,800 for New York Municipal
Fund. The cost of securities is substantially the same for Federal income tax
purposes as it is for financial reporting purposes.

<TABLE>
<CAPTION>
EMERGING NEW YORK
HIGH YIELD MARKETS MUNICIPAL
----------- ---------- ----------
<S> <C> <C> <C>
Aggregate cost............ $437,732,266 $45,641,341 $12,101,318
----------- ---------- ----------
----------- ---------- ----------
Gross unrealized
appreciation............. $19,342,329 $2,766,290 $ 299,919
Gross unrealized
depreciation............. (3,553,092) (73,477) 0
----------- ---------- ----------
Net unrealized
appreciation............. $15,789,237 $2,692,813 $ 299,919
----------- ---------- ----------
----------- ---------- ----------
</TABLE>

The Funds may purchase instruments from financial institutions, such as banks
and broker-dealers, subject to the seller's agreement to repurchase them at an
agreed upon time and price ("repurchase agreements"). The seller under a
repurchase agreement is required to maintain the value of the securities subject
to the agreement at not less than the repurchase price. Default by the seller
would, however, expose the relevant Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.

A Fund's net investment income from foreign issuers may be subject to non-U.S.
withholding taxes, thereby reducing the Fund's net investment income.

28
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------

4. CAPITAL STOCK TRANSACTIONS. The Company's Articles of Incorporation, permit
the Company to issue ten billion shares (par value $0.001). Transactions in
shares of common stock for the years ended December 31, 1995 and December 31,
1994, were as follows:

<TABLE>
<CAPTION>
HIGH YIELD FUND
--------------------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Beginning balance...... 24,029,315 $233,612,861 3,334 $ 33,333
---------- ------------ ---------- ------------
Shares sold............ 26,556,487 256,321,969 25,384,239 246,382,259
Shares issued in
reinvestment of
dividends and
distributions......... 2,237,907 21,843,278 942,483 8,874,728
Shares redeemed........ (4,512,995) (43,708,022) (2,300,741) (21,677,459)
---------- ------------ ---------- ------------
Net increase........... 24,281,399 234,457,225 24,025,981 233,579,528
---------- ------------ ---------- ------------
Ending balance......... 48,310,714 $468,070,086 24,029,315 $233,612,861
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>

<TABLE>
<CAPTION>
EMERGING MARKETS FUND
-----------------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Beginning balance.......... 3,180,297 $31,449,474 3,334 $ 33,333
---------- ----------- --------- -----------
Shares sold................ 2,699,458 25,099,840 3,093,896 30,656,902
Shares issued in
reinvestment of dividends
and distributions......... 231,369 2,172,548 155,505 1,471,277
Shares redeemed............ (1,142,233) (10,439,165) (72,438) (712,038)
---------- ----------- --------- -----------
Net increase............... 1,788,594 16,833,223 3,176,963 31,416,141
---------- ----------- --------- -----------
Ending balance............. 4,968,891 $48,282,697 3,180,297 $31,449,474
---------- ----------- --------- -----------
---------- ----------- --------- -----------
</TABLE>

<TABLE>
<CAPTION>
NEW YORK MUNICIPAL FUND
-----------------------
PERIOD ENDED
DECEMBER 31, 1995
-----------------------
SHARES AMOUNT
---------- -----------
<S> <C> <C> <C> <C>
Beginning balance........ 4 $ 40
---------- -----------
Shares sold.............. 1,507,243 15,433,921
Shares issued in
reinvestment of
dividends and
distributions........... 19,264 198,979
Shares redeemed.......... (330,681) (3,422,663)
---------- -----------
Net increase............. 1,195,826 12,210,237
---------- -----------
Ending balance........... 1,195,830 $12,210,277
---------- -----------
---------- -----------
</TABLE>

In connection with the transfer of assets of the High Yield Fund described in
Note 1, $4,736,468 was credited to unrealized appreciation, representing
unrealized appreciation on the portfolio securities received from the
partnership on the transfer date.

5. DERIVATIVE INSTRUMENTS. The Funds may invest in various financial instruments
including positions in forward currency contracts, currency swaps and purchased
foreign currency options. The Funds enter into such contracts for the purpose of
hedging exposure to changes in foreign currency exchange rates on their
portfolio holdings.

Each of the Funds is also permitted to enter into swap agreements to manage
interest rate or currency exposure. Swap agreements involve the commitment to
exchange with another party cash flows which are based upon the application of
interest rates, currency movements or other financial indices to a notional
principal amount. Gains and losses associated with currency swap transactions
entered into by the Emerging Markets Fund are included in realized gains and
losses on foreign currency transactions.
A forward foreign exchange contract is a commitment to sell or buy a foreign
currency at a future date at a negotiated exchange rate. The Fund bears the
market risk which arises from possible changes in foreign exchange values. Risks
may arise from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of the foreign
currency relative to the U.S. dollar. Forward foreign exchange contracts may
involve market or credit risk in excess of the amounts reflected on the Fund's
statement of assets and liabilities.

The gain or loss from the difference between the cost of original contracts and
the amount realized upon the closing of such contracts is included in net
realized gain on foreign exchange. Fluctuations in the value of forward
contracts held at December 31, 1995 are recorded for financial reporting
purposes as unrealized gains and losses by the Funds.

The tables below indicate the High Yield Fund's and Emerging Markets Fund's
outstanding forward currency contract positions at December 31, 1995.

HIGH YIELD FUND

<TABLE>
<CAPTION>
VALUE ON UNREALIZED
ORIGI- VALUE AT APPRECIATION
CONTRACT MATURITY NATION DECEMBER 31, (DEPREC-
CURRENCY AMOUNTS DATE DATE 1995 IATION)
----------- ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Buy CHF $ 527,500 1-8-96 $ 377,865 $ 457,712 $ 79,847
Sell CHF (527,500) 1-8-96 (366,065) (457,712) (91,647)
Buy CHF 1,582,500 1-8-96 1,133,596 1,373,135 239,539
Sell CHF (1,582,500) 1-8-96 (1,141,775) (1,373,135) (231,360)
Sell CAD (5,000,000) 2-14-96 (3,695,901) (3,662,000) 33,901
Buy CHF 434,600 3-11-96 294,444 379,580 85,136
Sell CHF (434,600) 3-11-96 (303,492) (379,580) (76,088)
Buy CHF 1,575,000 3-18-96 1,092,233 1,376,708 284,475
Sell CHF (1,575,000) 3-18-96 (1,112,288) (1,376,708) (264,420)
Buy CHF 308,750 5-30-96 270,833 271,885 1,052
Sell CHF (308,750) 5-30-96 (248,690) (271,885) (23,195)
------------
Net unrealized depreciation on forward positions............................ $ 37,240
------------
------------
</TABLE>

EMERGING MARKETS FUND

A purchased option contract gives the Fund the right to sell (puts) or purchase
(calls) a specified amount of foreign currency at a fixed price. The maximum
exposure to loss for any purchased option is limited to the premium initially
paid for the option. Such options are reflected at value in the Fund's portfolio
of investments.

The Emerging Markets Fund also is invested in indexed securities whose value is
linked directly to changes in foreign currencies, interest rates and other
financial indices. Indexed securities may be more volatile than the underlying
instrument but the risk of loss is limited to the amount of the original
investment.

6. OTHER MATTERS. The Emerging Markets Fund and the High Yield Fund invest in
obligations of foreign entities

29
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
and securities denominated in foreign currencies that involve risk not typically
involved in domestic investments. Such risks include fluctuations in foreign
exchange rates, ability to convert proceeds into U.S. dollars, less publicly
available information about foreign financial instruments, less liquidity
resulting from substantially less trading volume, more volatile prices and
generally less government supervision of foreign securities markets and issuers.

7. FEDERAL INCOME TAX STATUS. During the year ended December 31, 1995, the
Emerging Markets Fund and High Yield Fund utilized their capital loss carryovers
of $81,854 and $133,424 respectively. At December 31, 1995, the Emerging Markets
Fund had available net capital loss carryovers of $170,976, which will be
available through December 31, 2002 to offset future capital gains, to the
extent provided by regulations.

The Emerging Markets Fund has incurred $29,039 and $1,731 of post-October net
capital and foreign currency losses during the year ended December 31, 1995.
These losses are deemed to arise on the first business day of the next taxable
year.

As of December 31, 1995, the Emerging Markets and High Yield Funds had permanent
book/tax differences primarily attributable to foreign currency gains and
losses. To reflect reclassifications arising from permanent book/tax differences
as of December 31, 1995, the Emerging Markets Fund charged paid in capital
$1,151,913, accumulated dividends in excess of net investment income was charged
$385,680 and accumulated net realized loss was credited $1,537,593. The High
Yield Fund reclassified $99,777 between net investment income and realized
capital gains; paid in capital was not affected.

30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------------------------------------

To the Board of Directors
and Shareholders of The
OFFITBANK Investment Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments appearing on pages 4 through 9, 12 through 14, and
17 through 19, 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 OFFITBANK High Yield Fund, OFFITBANK Emerging Markets
Fund and OFFITBANK New York Municipal Fund (the "Funds," each constituting a
portfolio of The OFFITBANK Investment Fund, Inc.) at December 31, 1995, the
results of each of their operations for the year then ended, and the changes in
each of their net assets and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' 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
December 31, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
New York, New York
February 15, 1996