OFFITBANK INVESTMENT FUND INC, N-30D, 1997-03-03

OFFITBANK INVESTMENT FUND INC
N-30D, 1997-03-03

Previous: ROYCE OTC MICRO CAP FUND INC, PRE 14A, 1997-03-03

Next: INVESTORS PORTFOLIO, N-30D, 1997-03-03

<PAGE>
-------------------------------------------

OFFITBANK High Yield Fund

OFFITBANK Emerging Markets Fund

OFFITBANK New York Municipal Fund

OFFITBANK Latin America Total Return Fund

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

ANNUAL REPORT

DECEMBER 31, 1996

THE

[OFFITBANK LOGO]

INVESTMENT FUND, INC.
<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 year ended December 31, 1996. This year we added a
new portfolio, the Latin America Total Return Fund to our three existing
portfolios: the High Yield Fund, the New York Municipal Fund and the Emerging
Markets Fund. The flow of new monies into the Funds continues to be very
gratifying.

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

1997 is going to be a busy year for The OFFITBANK Investment Fund. We believe
that there are significant opportunities in equity investing in Latin America.
Accordingly, we intend to ask our Latin America Total Return Fund shareholders
to approve changing the Fund's investment objective to capital appreciation and
changing its name to the Latin America Equity Fund. We are also going to be
launching new Funds in response to client demand for additional investment
alternatives in a mutual fund format. In the first quarter we will introduce the
California Municipal Fund for our California clients.

We greatly value your participation in the Fund. Let us know of your interests
and concerns as we continue to try to serve you better. If you have any
questions, please do not hesitate to call.

Sincerely,

[SIGNATURE]
Morris W. Offit

February 9, 1997
<PAGE>
OFFITBANK
HIGH YIELD FUND

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

The second half and full year 1996 SEC total returns for the OFFITBANK High
Yield Fund were 8.8% and 12.5%, respectively. The 1996 year end NAV price of
$10.15 compares favorably to the $9.92 NAV at year end 1995. The $10.15 NAV is
after the $0.06 capital gain distribution paid at year end. The Fund continued
to grow as net assets increased to $852 million as of December 31, 1996 from
$623 million on June 30, 1996 and $479 million on December 31, 1995.

During 1996, the high yield market largely ignored the volatility of the
Treasury market. Credit spreads to the Treasury market and within the high yield
market narrowed throughout the year and closed near their historic lows. The
contraction of credit spreads resulted in dramatic outperformance of the high
yield market relative to investment grade. For the calendar year 1996, the ten
year Treasury had a near break-even total return as yields rose 85 basis points.
Double-B high yield issues basically earned their coupon for a total return of
8%. And lower rated single-B high yield issues were the big winner as spreads
narrowed 160 basis points and produced a total return of 13.7%. The credit
spread between double-B's and single-B's narrowed approximately 80 basis points
for the year.

The large compression of quality spreads in 1996 was the result of a high yield
environment that we believe can only be described as superb. The strong equity
market, readily available financing, and a high level of merger and acquisition
activity all contributed to the positive performance. Defaults and credit losses
for the market declined year over year from already low levels. The technical
condition of the market grew stronger as the year progressed. High yield mutual
fund inflows were strong all year and other institutional investors added funds
to the market. A number of large pension funds made their initial allocation to
the high yield sector during 1996. The demand allowed a record volume of new
issue high yield securities to be brought to market.

By many measures, the quality of the new issue supply began to slip during 1996.
A greater volume of lower rated single-B issues were brought to market in 1996
than the previous year. A large number of the new issues were for development
stage telecommunications companies that have limited revenues and cash flow. For
the overall market, the ratings mix declined modestly with slightly more
single-B's than double-B's. Although credit losses are expected to increase from
the low levels of the last few years, they should remain well below their
historic averages. With credit spreads within the high yield market historically
tight, we do not believe that this is the time to be aggressive and downgrade
credit. However, we continue to believe that better quality high yield credits
will outperform fixed income alternatives over time.

Although the portfolio has increased considerably in size, the composition of
the Fund has remained steady. We continue to focus on the better quality segment
of the high yield market. At year end approximately 43% of the corporate
holdings in the Fund are rated either Ba3 or better by Moody's or BB- or better
by Standard & Poor's. 78% of the holdings are rated at least B1 or B+. The
inflows of new monies into the Fund will allow us to take advantage of new
purchase opportunities that we expect to develop as the new issue calendar
builds during the first quarter of 1997.

Stephen T. Shapiro

January 15, 1997

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 (including its predecessor partnership as
discussed below) at January 1, 1987 and held through December 31, 1996 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>
MERRILL LYNCH ALL HIGH YIELD BOND
OFFITBANK HIGH YIELD FUND INDEX
<S> <C> <C> <C>
1/1/87 $250,000 $250,000
12/31/87 $256,750 $261,675
12/31/88 $307,741 $296,923
12/31/89 $315,588 $309,482
12/31/90 $311,548 $296,020
12/31/91 $414,796 $398,384
12/31/92 $504,433 $470,730
12/31/93 $610,969 $551,602
12/31/94 $626,671 $545,148
12/31/95 $737,842 $653,632
12/31/96 $829,778 $725,924
Average Annual Total Return One Year Five Years
OFFITBANK High Yield Fund 12.46% 14.87% Ten Years
Merrill Lynch All High Yield Bond
Index 11.06% 12.74% 12.74%
11.24%
</TABLE>

The performance information for the period January 1, 1987 through March 1, 1994
reflects the performance of The Senior Securities Fund, L.P. (the
"Partnership"), the predecessor limited partnership to the Fund. As a registered
investment company, the Fund is subject to certain restrictions under the
Investment Company Act and the Internal Revenue Code to which the Partnership
was not subject. Had the Partnership been registered under the Act and subject
to the Code, its performance may have been adversely affected.

3
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE (2.50%)
CORPORATE BONDS
Moog Inc. Sr Sub Notes, 10.00%, 05/01/06................................... $ 2,000,000 $ 2,075,406
Newport News Shipbuilding Sr Sub Notes, 9.25%, 12/01/06 (144A)............. 3,750,000(1) 3,867,188
Sequa Corp. Sr Notes, 8.75%, 12/15/01...................................... 5,600,000 5,656,000
Sequa Corp. Sr Sub Notes, 9.375%, 12/15/03................................. 1,000,000 1,010,000
Tracor, Inc. Sr Sub Notes, 10.875%, 08/15/01............................... 2,000,000 2,125,000
UNC, Inc. Sr Notes, 9.125%, 07/15/03....................................... 6,500,000 6,573,125
-------------
21,306,719
-------------
BROADCAST/TELECOMMUNICATIONS (8.29%)
CORPORATE BONDS
All American Communications Inc. Sr Sub Notes, 10.875%, 10/15/01........... 2,000,000 2,030,000
Centennial Cellular Corp. Sr Notes, 8.875%, 11/01/01....................... 8,500,000 8,287,500
Granite Broadcasting Corp. Sr Sub Notes, 9.375%, 12/01/05.................. 5,000,000 4,837,500
Jacor Communications Co. Sr Sub, 9.75%, 12/15/06........................... 1,000,000 1,020,000
MFS Communications Co. Sr Discount Notes, 0/9.375%, 01/15/04............... 12,000,000(2) 10,440,000
Paging Network Inc. Sr Sub Notes, 10.125%, 08/01/07........................ 8,500,000 8,701,875
PanAmSat L.P. Corp. Sr Sub Discount Notes, 0/11.375%, 08/01/03............. 3,500,000(2) 3,246,250
PriCellular Wireless Sr Notes, 10.75%, 11/01/04 (144A)..................... 3,000,000(1) 3,112,500
SCI Television Inc. 1st Secured Loan Fac., 8.50/9.50%, 06/30/98............ 3,087,800(2) 3,087,800
Sinclair Broadcast Group Inc. Sr Sub Notes, 10.00%, 09/30/05............... 4,000,000 4,075,000
Teleport Communications Group Inc. Sr Discount Notes, 0/11.125%,
07/01/07.................................................................. 10,000,000(2) 6,850,000
Teleport Communications Group Inc. Sr Notes, 9.875%, 07/01/06.............. 3,000,000 3,210,000
Vanguard Cellular Systems, Inc. Sr Debs., 9.375%, 04/15/06................. 5,000,000 5,050,000
Viacom Inc. Sr Sub Notes, 8.00%, 07/07/06.................................. 7,000,000 6,697,761
-------------
70,646,186
-------------
CABLE (10.86%)
CORPORATE BONDS
Adelphia Communications Corp. Sr Notes, 9.50%, 02/15/04.................... 6,516,966(4) 5,637,176
Cablevision Systems Corp. Sr Sub Notes, 9.25%, 11/01/05.................... 7,500,000 7,425,000
Cablevision Systems Corp. Sr Sub Notes, 10.75%, 04/01/04................... 3,600,000 3,735,000
Century Communications Corp. Sr Notes, 9.75%, 02/15/02..................... 6,500,000 6,695,000
Comcast Corp. Sr Sub Debs., 9.375%, 05/15/05............................... 8,000,000 8,300,000
Fundy Cable Ltd. Sr Notes, 11.00%, 11/15/05................................ 3,000,000 3,180,000
Le Groupe Videotron Ltee. Sr Notes, 10.625%, 02/15/05...................... 1,000,000 1,102,500
Jones Intercable Inc. Sr Sub Debs., 10.50%, 03/01/08....................... 5,000,000 5,387,500
Lenfest Communications, Inc. Sr Notes, 8.375%, 11/01/05.................... 11,500,000 11,111,875
Olympus Communications L.P. Sr Notes, 10.625%, 11/15/06 (144A)............. 10,000,000(1) 10,237,500
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.625%, 08/01/02... 3,000,000 3,135,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.65%, 01/15/14.... 2,500,000(a) 1,811,131
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 10.00%, 03/15/05... 3,000,000 3,202,500
Rogers Communications Inc. Sr Notes, 9.125%, 01/15/06...................... 2,500,000 2,475,000
Storer Communications Inc. Sub Debs., 10.00%, 05/15/03..................... 3,000,000 3,037,500
TeleWest Plc Sr Discount Debs., 0/11.00%, 10/01/07......................... 10,000,000(2) 6,950,000
Videotron Holdings PLC Sr Discount Debs, 0/11.125%, 07/01/04............... 5,000,000(2) 4,387,500
Videotron Ltee Sr Sub Notes, 10.25%, 10/15/02.............................. 2,500,000 2,656,250
PREFERRED STOCKS
Cablevision Systems Corp. Pfd., 11.125% Series M........................... 22,500(4) 2,025,000
-------------
92,491,432
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
4
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CHEMICALS (3.13%)
CORPORATE BONDS
Borden Chemicals & Plastics Sr Notes, 9.50%, 05/01/05...................... $ 5,000,000 $ 5,137,500
Freeport-McMoran Resource Partners, L.P. Sr Sub Notes, 8.75%, 02/15/04..... 2,000,000 2,078,050
Harris Chemical North America, Inc. Sr Secured Notes, 10.25%, 07/15/01..... 6,500,000 6,784,375
ISP Holdings Inc. Sr Notes, 9.00%, 10/15/03 (144A)......................... 2,500,000(1) 2,537,500
Sifto Canada Inc. Sr Notes, 8.50%, 07/15/00................................ 4,000,000 4,015,000
Terra Industries Inc. Sr. Notes, 10.50%, 06/15/05.......................... 3,000,000 3,270,000
Uniroyal Chemical Co., Inc. Sr Notes, 9.00%, 09/01/00...................... 2,750,000 2,866,875
-------------
26,689,300
-------------
CONSUMER GROUPS (5.48%)
CORPORATE BONDS
Chiquita Brands International Inc. Sr Notes, 9.625%, 01/15/04.............. 2,000,000 2,070,000
Chiquita Brands International Inc. Sr Notes, 9.125%, 03/01/04.............. 5,000,000 5,037,500
Fleming Companies Inc Floating Rate Sr Notes, 7.78516% 12/15/01............ 5,000,000(5) 4,412,500
Host Marriott Travel Plaza Sr Notes, 9.50%, 05/15/05....................... 7,000,000 7,306,250
Pillowtex Corp. Sr Sub Notes, 10.00%, 11/15/06 (144A)...................... 2,500,000(1) 2,606,250
Revlon Consumer Products Sr Notes, 9.375%, 04/01/01........................ 6,500,000 6,646,250
Revlon Inc. Sr Debs., 10.875%, 07/15/10.................................... 4,500,000 4,595,625
Ryder Transportation Inc. Sr Sub Notes, 10.00%, 12/01/06 (144A)............ 3,000,000(1) 3,112,500
Samsonite Corp. Sr Notes, 11.125%, 07/15/05................................ 1,500,000 1,650,000
Sealy Corp. Sr Sub Notes, 9.50%, 05/01/03.................................. 3,000,000 3,037,500
Tultex Corp. Sr Notes, 10.625%, 03/15/05................................... 1,400,000 1,515,500
Westpoint Stevens, Inc. Sr Notes, 9.375%, 12/15/05......................... 3,500,000 3,605,000
PREFERRED STOCKS
Pantry Pride Inc. Pfd., $14.875 Series B................................... 11,000 1,100,000
-------------
46,694,875
-------------
FINANCIAL SERVICES/INSURANCE (2.96%)
CORPORATE BONDS
Americo Life Inc. Sr Notes, 9.25%, 06/01/05................................ 3,000,000 2,985,000
Navistar Financial Corp. Sr Sub Notes, 8.875%, 11/15/98.................... 4,500,000 4,540,604
Presidential Life Corp. Sr Notes, 9.50%, 12/15/00.......................... 3,500,000 3,675,000
Reliance Group Holdings, Inc. Sr Sub Notes, 9.75%, 11/15/03................ 10,500,000 10,972,500
Veritas Holdings Sr Notes, 9.625%, 12/15/03 (144A)......................... 3,000,000(1) 3,045,000
-------------
25,218,104
-------------
FOREST & PAPER PRODUCTS (8.07%)
CORPORATE BONDS
Crown Paper Co. Sr Sub Notes, 11.00%, 09/01/05............................. 3,500,000 3,294,375
Doman Industries Ltd. Sr Notes, 8.75%, 03/15/04............................ 2,500,000 2,331,250
Fort Howard Corp. Pass Thru Cert., 11.00%, 01/02/02........................ 2,266,241 2,379,554
Fort Howard Corp. Sr Notes, 9.25%, 03/15/01................................ 2,500,000 2,593,750
Fort Howard Corp. Sr Sub Notes, 9.00%, 02/01/06............................ 6,000,000 6,082,500
Fort Howard Corp. Variable Rate Term Loan, 8.13%, 12/31/02................. 3,606,060(3)(5) 3,624,091
Maxxam Group Inc. Sr Notes, 0/12.25%, 08/01/03............................. 2,500,000(2) 2,112,500
Maxxam Group Inc. Sr Secured Notes, 11.25%, 08/01/03....................... 3,000,000 3,075,000
Rainy River Forest Products Sr Notes, 10.75%, 10/15/01..................... 2,000,000 2,165,000
Repap New Brunswick 1st Priority Floating Rate Sr Secured Notes, 8.875%,
07/15/00.................................................................. 6,000,000(5) 6,000,000
Repap New Brunswick 1st Priority Sr Secured Notes, 9.875%, 07/15/00........ 3,000,000 3,075,000
Repap New Brunswick 2nd Priority Sr Secured Notes, 10.625%, 04/15/05....... 3,000,000 3,135,000
Repap Wisconsin Inc. 1st Priority Sr Secured Notes, 9.25%, 02/01/02........ 8,000,000 8,100,000
Stone-Consolidated Corp. Sr Secured Notes, 10.25%, 12/15/00................ 5,500,000 5,830,000
Stone Container Corp. Sr Secured Notes, 10.75%, 10/01/02................... 5,000,000 5,262,500
Stone Container Corp. Sr Sub Notes, 11.00%, 08/15/99....................... 3,500,000 3,644,375
Stone Container Finance Co. Sr Notes, 11.50%, 08/15/06 (144A).............. 4,000,000(1) 4,110,000
Tembec Finance Corp. Sr Notes, 9.875%, 09/30/05............................ 2,000,000 1,885,000
-------------
68,699,895
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
5
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GENERAL INDUSTRIES/MANUFACTURING (11.71%)
CORPORATE BONDS
Advanced Micro Devices Sr Notes, 11.00%, 08/01/03.......................... $ 3,000,000 $ 3,255,000
Allied Waste N.A. Sr Sub Notes, 10.25%, 12/01/06 (144A).................... 4,500,000(1) 4,719,375
American Standard Companies Inc. Sr Sub Discount Debs, 0/10.50%,
06/01/05.................................................................. 8,000,000(2) 7,500,000
Calmar Inc. Sr Sub Notes, 11.50%, 08/15/05................................. 2,500,000 2,581,250
Celestica International Sr Sub Notes, 10.50%, 12/31/06 (144A).............. 5,000,000(1) 5,250,000
Clark Materials Handling Corp. Sr Notes, 10.75%, 11/15/06 (144A)........... 3,500,000(1) 3,640,000
Communication and Power Industries, Inc. Sr Sub Notes, 12.00%, 08/01/05.... 2,500,000 2,781,250
Computervision Industries Sr Sub Notes, 11.375%, 08/15/99.................. 1,000,000 1,045,000
Delco Remy International Inc. Sr Sub Notes, 10.625%, 08/01/06 (144A)....... 4,000,000(1) 4,220,000
Dominion Textile (USA) Inc. Guaranteed Sr Notes, 9.25%, 04/01/06........... 8,500,000 8,670,000
Emcor Group Inc. Notes, 11.00%, 12/15/01................................... 3,500,000 3,526,250
Envirosource Inc. Sr Notes, 9.75%, 06/15/03................................ 3,000,000 2,820,000
Essex Group Inc. Sr Notes, 10.00%, 05/01/03................................ 4,000,000 4,150,000
Exide Corp. Sr Notes, 10.00%, 04/15/05..................................... 6,000,000 6,240,000
Intertek Finance Plc Sr Sub Notes, 10.25%, 11/01/06 (144A)................. 2,000,000(1) 2,080,000
Lone Star Industries, Inc. Sr Notes, 10.00%, 07/31/03...................... 3,000,000 3,030,000
MDC Communications Corp Sr Sub Notes, 10.50%, 12/01/06..................... 4,750,000 4,898,438
Nortek Inc. Sr Sub Notes, 9.875%, 03/01/04................................. 2,500,000 2,518,750
Scotsman Group Inc. Sr Notes, 9.50%, 12/15/00.............................. 4,500,000 4,646,250
Southdown Inc. Sr Sub Notes, 10.00%, 03/01/06.............................. 5,500,000 5,816,250
Talley Manufacturing & Technology Inc. Sr Notes, 10.75%, 10/15/03.......... 2,500,000 2,606,250
Unisys Corp. Sr Notes, 15.00%, 07/01/97.................................... 2,200,000 2,310,000
Unisys Corp. Sr Notes, 10.625%, 10/01/99................................... 5,500,000 5,692,500
Unisys Corp. Sr Notes, 11.75% 10/15/04..................................... 1,500,000 1,599,375
US Can Corp. Sr Sub Notes, 10.125%, 10/15/06 (144A)........................ 2,000,000(1) 2,100,000
Walbro Corp. Sr Notes, 9.875%, 07/15/05.................................... 2,000,000 2,040,000
-------------
99,735,938
-------------
HEALTH CARE (1.93%)
CORPORATE BONDS
Beverly Enterprises Inc. Sr Notes, 9.00%, 02/15/06......................... 7,000,000 7,008,750
Quest Diagnostic Inc. Sr Sub Notes, 10.75%, 12/15/06....................... 3,000,000 3,150,000
Regency Health Services, Inc. Sr Sub Notes, 9.875%, 10/15/02............... 2,200,000 2,222,000
PREFERRED STOCKS
Fresenious Medical Care Pfd., 9.00%........................................ 40,000 4,070,000
-------------
16,450,750
-------------
HOTELS & GAMING (5.53%)
CORPORATE BONDS
Alliance Gaming Corp. Sr Secured Notes, 12.875%, 06/30/03.................. 2,000,000 2,120,000
Four Seasons Hotels Inc. Sr Notes, 9.125%, 07/01/00 (144A)................. 3,000,000(1) 3,082,500
Grand Casinos Inc. First Mortgage Notes, 10.125%, 12/01/03................. 4,000,000 4,040,000
Host Marriott Properties Inc. Sr Notes, 9.50%, 05/15/05.................... 8,000,000 8,350,000
John Q Hammons Hotels L.P. 1st Mtg. Notes, 9.75%, 10/01/05................. 6,000,000 6,150,000
Prime Hospitality Corp. First Mortgage Notes, 9.25%, 01/15/06.............. 7,000,000 7,105,000
Prime Hospitality Corp. Sr Secured Notes, 10.00%, 07/31/99................. 1,788,008 1,810,358
Red Roof Inns Inc. Sr Notes, 9.625%, 12/15/03.............................. 4,500,000 4,545,000
Station Casinos Sr Sub Notes, 9.625%, 06/01/03............................. 2,500,000 2,475,000
Trump Atlantic City 1st Mtg. Notes, 11.25%, 05/01/06....................... 7,500,000 7,425,000
-------------
47,102,858
-------------
INDEPENDENT POWER (1.46%)
CORPORATE BONDS
California Energy Sr Discount Notes, 0/10.25%, 01/15/04.................... 4,500,000(2) 4,758,750
California Energy Co. Inc. Sr Notes, 9.50%, 09/15/06....................... 1,500,000 1,552,500
California Energy Co. Inc. Ltd. Recourse Sr Secured Notes, 9.875%,
06/30/03.................................................................. 1,800,000 1,899,000
Calpine Corp. Sr Notes, 10.50%, 05/15/06................................... 4,000,000 4,235,000
-------------
12,445,250
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
6
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
METALS/MINING/IRON/STEEL (3.71%)
CORPORATE BONDS
AK Steel Corp. Sr Notes, 9.125%, 12/15/06 (144A)........................... $ 2,200,000(1) $ 2,260,500
Armco Inc. Sr Notes, 9.375%, 11/01/00...................................... 5,600,000 5,684,000
Jorgensen Earle M. Co. Sr Notes, 10.75%, 03/01/00.......................... 3,100,000 3,162,000
Kaiser Aluminum & Chemical Corp. Sr Notes, 9.875%, 02/15/02................ 4,500,000 4,578,750
Kaiser Aluminum & Chemical Corp. Sr Notes, 10.875%, 10/15/06 (144A)........ 3,000,000(1) 3,180,000
Northwestern Steel & Wire Co. Sr Notes, 9.50%, 06/15/01.................... 2,500,000 2,475,000
Oregon Steel Mills 1st Mtg. Notes, 11.00%, 06/15/03........................ 5,000,000 5,312,500
Wheeling-Pittsburgh Corp. Sr Notes, 9.375%, 11/15/03....................... 5,000,000 4,925,000
-------------
31,577,750
-------------
OIL/GAS (7.00%)
CORPORATE BONDS
Clark Refining & Marketing Holdings Sr Secured Notes, 0.00%, 02/15/00...... 12,500,000 8,968,750
Cliffs Drilling Co. Sr Notes, 10.25%, 05/15/03............................. 2,000,000 2,120,000
Crown Central Petroleum Corp. Sr Notes, 10.875%, 02/01/05.................. 2,400,000 2,454,000
Ferrellgas Partner L.P. Sr Notes, 9.375%, 06/15/06......................... 6,000,000 6,082,500
Giant Industries Inc. Sr Sub Notes, 9.75%, 11/15/03........................ 1,800,000 1,872,000
Gulf Canada Resources, Ltd. Sr Sub Debs., 9.25%, 01/15/04.................. 4,000,000 4,240,000
J Ray McDermott S.A. Sr Sub Notes, 9.375%, 07/15/06........................ 5,500,000 5,761,250
Maxus Energy Corp. Medium Term Notes, 11.02%, 05/16/01..................... 1,000,000 1,047,500
Maxus Energy Corp. Sr Notes, 9.875%, 10/15/02.............................. 1,000,000 1,027,500
Nuevo Energy Co. Sr Sub Notes, 9.50%, 04/15/06............................. 3,000,000 3,180,000
Parker Drilling Co. Sr Notes, 9.75%, 11/15/06 (144A)....................... 8,000,000(1) 8,420,000
TransTexas Gas Corp. Sr Secured Notes, 11.50%, 06/15/02.................... 4,500,000 4,865,625
Triton Energy Corp. Sr Sub Discount Notes, 9.75%, 12/15/00................. 4,000,000 4,180,000
Wainoco Oil Corp. Sr Notes, 12.00%, 08/01/02............................... 2,500,000 2,593,750
CONV. EURODOLLAR BONDS
Reading & Bates Energy Co. Conv. Eurobonds, 8.00%, 12/31/98................ 1,871,000 2,787,790
-------------
59,600,665
-------------
PACKAGING/CONTAINERS (3.51%)
CORPORATE BONDS
Container Corp. of America Sr Notes, 9.75%, 04/01/03....................... 5,000,000 5,262,500
Container Corp. Of America Sr Notes, 11.25%, 05/01/04...................... 3,500,000 3,788,750
Gaylord Container Corp. Sr Notes, 11.50%, 05/15/01......................... 6,500,000 6,914,375
Owens-Illinois Corp. Sr Sub Notes, 10.00%, 08/01/02........................ 4,000,000 4,180,000
Owens-Illinois Corp. Sr Sub Notes, 10.50%, 06/15/02........................ 6,500,000 6,833,125
Riverwood International Corp. Sr Notes, 10.25%, 04/01/06................... 3,000,000 2,955,000
-------------
29,933,750
-------------
PUBLISHING/ADVERTISING (3.00%)
CORPORATE BONDS
K-III Communication Corp. Sr Notes, 8.50%, 02/01/06........................ 2,000,000 1,965,000
K-III Communication Corp. Sr Notes, 10.625%, 05/01/02...................... 3,000,000 3,157,500
Lamar Advertising Co. Sr Sub Notes, 9.625%, 12/01/06....................... 3,500,000 3,622,500
Outdoor Systems Inc. Sr Sub Notes, 9.375%, 10/15/06........................ 3,500,000 3,596,250
Petersen Publishing Sr Sub Notes, 11.125%, 11/15/06 (144A)................. 3,000,000(1) 3,135,000
Universal Outdoor Inc. Sr Sub Notes, 9.75%, 10/15/06....................... 4,500,000 4,635,000
World Color Press, Inc. Sr Sub Notes, 9.125%, 03/15/03..................... 5,400,000 5,400,000
-------------
25,511,250
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
7
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE (2.12%)
CORPORATE BONDS
Granite Development Partners L.P. Sr Notes, 10.83%, 11/15/03............... $ 1,000,000 $ 940,000
Rockefeller Center Properties Sr Notes, 0.00%, 12/31/00.................... 10,500,000 6,483,750
Trizec Finance Ltd. Sr Notes, 10.875%, 10/15/05............................ 4,500,000 4,966,875
MORTGAGE BACKED SECURITY
RTC Mtg. Tr. Series 1994-N2 CL 4 Mtg. Ln. Bkd. Bonds, 10.00%, 12/15/04
(144A).................................................................... 2,000,000(1) 2,005,000
RTC Mtg. Tr. Series 1994-C1 CL F Mtg. Ln. Bkd. Bonds, 8.00%, 06/25/26...... 2,382,282 2,144,054
RTC Mtg. Tr. Series 1994-C2 CL G Mtg. Ln. Bkd. Bonds, 8.00%, 04/25/25...... 1,631,458 1,484,625
-------------
18,024,304
-------------
RETAIL (2.17%)
CORPORATE BONDS
National Convenience Realty Co. Secured Notes, 9.50%, 06/30/03............. 1,844,149 1,927,136
Pathmark Stores Inc. Sr Sub Notes, 9.625%, 05/01/03........................ 7,000,000 6,702,500
Penn Traffic Co. Sr Notes, 10.25%, 02/15/02................................ 4,000,000 3,440,000
Ralphs Grocery Co. Sr Notes, 10.45%, 06/15/04.............................. 2,500,000 2,656,250
TLC Beatrice International Holdings Inc. Sr Notes, 11.50%, 10/01/05........ 3,500,000 3,718,750
-------------
18,444,636
-------------
TRANSPORTATION (3.33%)
CORPORATE BONDS
Eletson Holdings Inc. 1st Pfd. Mtg. Notes, 9.25%, 11/15/03................. 3,000,000 3,041,250
GPA Delaware Inc. Guaranteed Notes, 8.75%, 12/15/98........................ 4,000,000 4,070,000
Sea Containers Ltd. Sr Notes, 9.50%, 07/01/03.............................. 3,000,000 3,022,500
Stena AB Sr Notes, 10.50%, 12/15/05........................................ 5,000,000 5,400,000
Viking Star Shipping 1st Pfd. Mtg. Notes, 9.625%, 07/15/03................. 2,000,000 2,090,000
TRUST CERTIFICATES
Piedmont Aviation Inc. Equipment Trust Certificates 1988 Series A, 9.80%,
01/15/00.................................................................. 942,000 937,290
Piedmont Aviation Inc. Equipment Trust Certificates 1988 Series F, 10.15%,
03/28/03.................................................................. 1,000,000 1,000,000
U.S. Air Inc. Equipment Trust Certificates 1988 Series B, 9.80%,
01/15/00.................................................................. 654,000 650,730
U.S. Air Inc. Equipment Trust Certificates 1988 Series B, 10.00%,
01/15/02.................................................................. 1,334,000 1,330,665
U.S. Air Inc. Equipment Trust Certificates 1990 Series A, 11.20%,
03/19/05.................................................................. 4,009,098 4,189,507
U.S. Air Inc. Equipment Trust Certificates 1990 Series B, 10.33%,
06/27/02.................................................................. 803,000 807,015
U.S. Air Inc. Equipment Trust Certificates 1990 Series D, 10.28%,
06/27/01.................................................................. 837,000 841,185
U.S. Air Inc. Equipment Trust Certificates 1990 Series D, 10.43%,
06/27/04.................................................................. 1,014,000 1,021,605
-------------
28,401,747
-------------
UTILITIES -- ELECTRIC (2.81%)
CORPORATE BONDS
Beaver Valley Funding Corp. Debs., 8.625%, 06/01/07........................ 1,550,000 1,507,375
Cleveland Electric Illum Medium Term Notes, 8.16%, 11/30/98................ 3,500,000 3,561,250
Cleveland Electric Illum Medium Term Notes, 9.25%, 07/29/99................ 1,000,000 1,045,000
Cleveland Electric Illum Medium Term Notes, 9.50%, 05/15/05................ 4,000,000 4,300,000
CTC Mansfield Funding Corp. Secured Lease Obligation Bonds, 10.25%,
03/30/03.................................................................. 4,237,000 4,342,925
Long Island Lighting Co. Debs., 7.125%, 06/01/05........................... 4,000,000 3,846,164
Tucson Electric Power Company, Springerville Unit 1 Series B-6, 10.21%,
01/01/09.................................................................. 2,548,534 2,472,078
Tucson Electric Power Company, Springerville Unit 1 Series B-5, 10.21%,
01/01/09.................................................................. 1,128,441 1,094,588
Tucson Electric Power Company, Springerville Unit 1 Series B-7, 10.21%,
01/01/09.................................................................. 698,465 677,511
Tucson Electric Power Company, Springerville Unit 1 Series B-4, 10.21%,
01/01/09.................................................................. 533,836 517,821
Tucson Electric Power Company, Springerville Unit 1 Series B-2, 10.21%,
01/01/09.................................................................. 370,554 359,437
Tucson Electric Power Company, Springerville Unit 1 Series B-1, 10.21%,
01/01/09.................................................................. 246,185 238,799
-------------
23,962,948
-------------
SOVEREIGN DEBT (0.48%)
Brazil MYDFA Trust Floating Rate Certificates, 6.6875%, 09/15/07 (144A).... 4,750,000(1)(5) 4,073,125
-------------
GOVERNMENT AGENCY (4.69%)
Federal Home Loan Bank Discount Notes, due 01/13/97........................ 20,000,000 19,965,643
Federal Home Loan Bank Discount Notes, due 01/17/97........................ 20,000,000 19,952,988
-------------
39,918,631
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
8
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS (3.07%)
Bank of New York Repurchase Agreement, 5.75%, 01/02/97 (dated 12/31/96;
proceeds $26,125,443, collateralized by $26,215,000 U.S. Treasury Notes,
6.50%, due 05/15/05, valued at $26,640,994)............................... $ 26,117,100 $ 26,117,100
-------------
TOTAL INVESTMENTS (COST $799,338,168) (97.81%)............................. 833,047,213
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (2.19%)..................... 18,672,991
-------------
TOTAL NET ASSETS (100.00%)................................................. $ 851,720,204
-------------
-------------
</TABLE>

- ---------------
(a) Canadian Dollar

(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) Step-Up bond.

(3) Illiquid Security.

(4) Payment In Kind Security.

(5) Interest rate reflected is rate in effect at December 31, 1996.

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

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

At December 31, 1996, the net asset value per share of the OFFITBANK Emerging
Markets Fund was $11.03. In 1996 the SEC total return of the Emerging Markets
Fund, net of all fees and expenses, was 26.56%. The annualized total return for
the Fund since its inception on March 8, 1994 through December 31, 1996 was
15.44%.

Our strategy relies on investing where we believe there is fundamental value,
and where investors are provided attractive risk-adjusted total returns. Because
we view investment opportunities as being more attractive on a risk-adjusted
basis in Latin America, the Fund continues to emphasize that region compared to
the way relevant benchmarks are allocated globally (e.g., the J.P. Morgan
Emerging Markets Bond Index).

Global investors are clearly regaining confidence in the Latin American region
in response to a marked improvement in economic developments and the successfull
financial rescue effort of Mexico undertaken in March of 1995. Latin American
governments have accelerated and broadened their economic reforms, while their
corporate counterparts have reorganized and retooled to become globally
competitive. The market appears healthier from a technical standpoint than in
early 1994, as a much larger and better informed investor base is now actively
involved in this market.

One of the distinguishing characteristics of the OFFITBANK Emerging Markets Fund
is its emphasis on dollar-denominated Eurobonds VIS-A-VIS Pre-Bradys, Bradys,
and foreign currency instruments. Our intention is to continue to gear the Fund
towards corporate credits, or "INTERNATIONAL HIGH YIELD", where credit analysis
and credit fundamentals are the principal determinants of return. In our
opinion, upper-tier, quality issuers in Latin America offer investors
compensatory returns with yields of between 300 and 500 basis points in excess
of their equivalent duration U.S. Treasury Securities.

Over 80% of the Fund is invested in dollar-denominated fixed income instruments
or foreign-denominated securities hedged back into dollars. At year end,
approximately 42% of the Fund was invested in U.S. dollar-denominated Eurobonds,
19% in locally issued and traded fixed income instruments, and 36% in sovereign
Brady bonds and Pre-Brady loans. The Fund's principal country allocations
continued to be weighted 25% in Brazil, 20% in Mexico and 19% in Argentina. The
securities in the Fund's portfolio had an average duration of 4.25 years, an SEC
30-day yield of 9.73%, and an approximate average yield-to-maturity of 11.75%

We expect to continue our strategy of not reaching for yield, but rather
moderating risk within the asset class, as evidenced historically by the Fund's
low volatility of returns relative to the asset class.

Richard M. Johnston Wallace Mathai-Davis

January 15, 1997

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 at the trading commencement date of
March 8, 1994 and held through December 31, 1996 as well as the performance of
the J.P. Morgan Emerging Markets Bond Index, the J.P. Morgan Latin America
Eurobond Index and the J.P. Morgan Emerging Markets Bond Index+ over the same
period. In addition, to provide a comparison to the overall performance of the
various asset classes in which the Fund invests, the graph below includes a
composite of the return of the J.P. Morgan Emerging Markets Bond Index+ and the
J.P. Morgan Latin America Eurobond Index. Past performance is not predictive of
future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
OFFITBANK EMERGING COMPOSITE J.P. MORGAN EMERGING
<S> <C> <C> <C>
Markets Fund Index Markets Bond Index
3/8/94 $250,000 $250,000 $250,000
3/31/94 $247,800 $229,750 $223,525
6/30/94 $251,046 $227,544 $219,814
9/30/94 $260,360 $246,476 $243,686
12/31/94 $240,078 $223,776 $223,265
3/31/95 $237,269 $199,339 $198,550
6/30/95 $259,833 $243,892 $243,879
9/30/95 $278,645 $262,647 $258,414
12/31/95 $296,256 $281,873 $284,772
3/31/96 $309,291 $292,387 $295,480
6/30/96 $330,725 $314,374 $322,900
9/30/96 $352,916 $342,133 $356,385
12/31/96 $374,868 $364,167 $381,510
Since Inception
Average Annual Total Return One Year (March 8, 1994)
OFFITBANK Emerging Markets Fund 26.56% 15.44%
Composite Index; 50% J.P. Morgan Emerging Markets Bond Index+
and 50% J.P. Morgan Latin America Eurobond Index 29.20% 14.27%
J.P. Morgan Emerging Markets Bond Index 33.97% 16.18%
J.P. Morgan Latin America Eurobond Index 19.52% 10.78%
J.P. Morgan Emerging Markets Bond Index+ 39.31% 17.54%

<CAPTION>
J.P. MORGAN LATIN J.P. MORGAN EMERGING
<S> <C> <C>
America Eurobond Index Markets Bond Index
3/8/94 $250,000 $250,000
3/31/94 $242,500 $217,000
6/30/94 $237,771 $217,087
9/30/94 $244,881 $246,741
12/31/94 $223,135 $223,226
3/31/95 $199,126 $198,493
6/30/95 $242,336 $244,146
9/30/95 $264,268 $259,601
12/31/95 $279,146 $282,991
3/31/96 $288,860 $294,254
6/30/96 $300,386 $326,769
9/30/96 $315,345 $368,171
12/31/96 $333,635 $394,237
Average Annual Total Return
OFFITBANK Emerging Markets Fund
Composite Index; 50% J.P. Morgan Emerging Markets Bond Index+
and 50% J.P. Morgan Latin America Eurobond Index
J.P. Morgan Emerging Markets Bond Index
J.P. Morgan Latin America Eurobond Index
J.P. Morgan Emerging Markets Bond Index+
</TABLE>

*The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. In such
instances, and without waiver of fees, total return would have been lower.

In prior years, the Fund's performance was compared only to the J.P. Morgan
Emerging Markets Bond Index. Since that index is composed primarily of Brady
Bonds, secondarily of sovereign bonds, with only a minor allocation to corporate
Eurobonds, the Fund does not anticipate presenting the performance of that index
in future years.

11
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
SOVEREIGN DEBT
ARGENTINA (13.72%)
Argentina Bocon Pre-1 Floating Rate Bonds, 3.576%, 04/01/01................ $ 2,700,000(d)(4) $ 3,202,200
Argentina U.S. $ Bocon Pre-4 Floating Rate Bonds, 5.375%, 09/01/02......... 2,250,000(4) 2,417,625
Argentina Brady Floating Rate Bonds, 6.625%, 03/31/05...................... 7,056,000(4) 6,138,720
Republic of Argentina Bonds, 10.50%, 11/14/02.............................. 2,200,000(c) 1,564,794
Republic of Argentina Global Bonds, 11.00%, 10/09/06....................... 2,500,000 2,612,500
------------
15,935,839
------------
BRAZIL (14.01%)
Brazil Brady Capitalization Step-Up Bonds, 4.00/8.00%, 04/15/14............ 6,277,821(3) 4,622,046
Brazil Brady DCB Floating Rate Bonds, 6.5625%, 04/15/12.................... 4,000,000(4) 3,035,000
Brazil Discount Z Floating Rate Bonds, 6.50%, 04/15/24..................... 3,000,000(4) 2,310,000
Brazilian LTN Notes, 03/01/97.............................................. 61(a) 56,391
Brazilian NTN-D Dollar Indexed, 03/01/97................................... 539,000(a) 549,541
Brazilian NTN-D Dollar Indexed, 03/17/97................................... 1,600,000(a) 1,605,443
Brazilian NTN-D Dollar Indexed, 07/01/97................................... 2,617,000(a) 2,602,189
Chase CC5 LTN Notes, 20.00%, 05/02/97...................................... 1,558,050(a) 1,490,957
------------
16,271,567
------------
DOMINICAN REPUBLIC (1.78%)
Dominican Republic Brady PDI Floating Rate Bonds, 6.5625%, 08/30/09........ 2,500,000(4) 2,065,625
------------
ECUADOR (5.21%)
Ecuador Brady Discount Floating Rate Bonds, 6.50%, 02/28/25................ 6,000,000(4) 4,125,000
Ecuador Brady Par Step-Up Bonds, 3.25%, 02/28/25........................... 1,000,000(3)(4) 465,000
Ecuador Brady PDI Floating Rate Bonds, 6.50%, 02/27/15..................... 2,379,128(4) 1,460,189
------------
6,050,189
------------
MEXICO (3.82%)
Mexican Cetes, 02/06/97.................................................... 1,750,000(f) 2,159,910
Mexican Cetes, 03/06/97.................................................... 500,000(f) 605,317
Mexican Cetes, 03/26/97.................................................... 225,520(f) 269,259
United Mexican States Bonds, 10.375%, 01/29/03............................. 2,000,000(c) 1,396,557
------------
4,431,043
------------
MOROCCO (0.85%)
Morocco Snap Notes, 11.50%, 01/29/09....................................... 1,500,000(c) 984,086
------------
PANAMA (2.66%)
Panama Brady IRB Floating Rate Bonds, 3.50%, 07/07/14...................... 1,575,000(4) 1,086,750
Panama Brady PDI Floating Rate Bonds, 6.75%, 07/17/16...................... 2,574,000(4) 2,007,720
------------
3,094,470
------------
PERU (3.47%)
Peru IRB (When And If Issued).............................................. 1,000,000(5) 551,250
Peru PDI (When And If Issued).............................................. 500,000(5) 293,750
Peru Citi-Loan............................................................. 2,750,000(2) 3,190,000
------------
4,035,000
------------
VENEZUELA (8.89%)
Venezuela Brady FLIRB, Floating Rate Bonds, 6.625%, 03/31/07............... 7,000,000(4) 6,247,500
Venezuela Deutschemark Linked Notes, 10.00%, 11/24/03...................... 5,750,000(c) 4,078,223
------------
10,325,723
------------
AUTO PARTS (1.98%)
BRAZIL
Iochpe Maxion S.A. 12.375%, 11/08/02....................................... 2,330,000 2,295,050
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
12
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKS (11.32%)
ARGENTINA
Banco de Galicia Callable Convertible Notes, 7.00%, 08/01/02............... $ 2,000,000 $ 2,350,000
Banco Republica S.A. 12.125%, 12/22/97..................................... 250,000 250,937
Banco Roberts, 11.75%, 11/16/00............................................ 300,000 315,000
------------
2,915,937
------------
CZECH REPUBLIC
International Bank of Reconciliation & Development, 11.00%, 05/29/97....... 64,150,000(e) 2,334,647
------------
CHILE
Citibank Chilean Peso-Linked Time Deposit, UF+5.35%, 05/19/97.............. 324,992,184(b)(2) 796,228
Citibank Chilean Peso-Linked Time Deposit, UF+5.35%, 05/19/97.............. 320,145,598(b)(2) 783,973
Citibank Chilean Peso-Linked Time Deposit, UF+5.10%, 01/16/97.............. 532,223,778(b)(2) 1,329,961
Citibank Chilean Peso-Linked Time Deposit, UF+5.35%, 10/30/97.............. 540,767,641(b)(2) 1,298,711
------------
4,208,873
------------
MEXICO
Grupo Financiero Banamex Convertible, 11.00%, 07/15/03 (144A).............. 400,000(1) 407,000
------------
MOROCCO
Morocco Tranche A Loan, 6.4375%, 01/01/09.................................. 4,000,000(2) 3,285,000
------------
BUILDING MATERIALS (2.60%)
MEXICO
Cemex, 12.75%, 07/15/06.................................................... 450,000 502,875
Cemex, 12.75%, 07/15/06 (144A)............................................. 2,250,000(1) 2,514,375
------------
3,017,250
------------
CONSTRUCTION (3.42%)
MEXICO
Bufete Industrial, 11.375%, 07/15/99 (144A)................................ 1,500,000(1) 1,578,750
Empresas ICA Sociedad, 11.875%, 05/30/01 (144A)............................ 2,000,000(1) 2,130,000
Empresas ICA Sociedad, 11.875%, 05/30/01................................... 250,000 266,250
------------
3,975,000
------------
INDUSTRIAL (5.86%)
BRAZIL
Elevadores Atlas Step-Up Bonds, 11.00/11.50%, 07/11/04 (144A).............. 1,500,000(1)(3) 1,541,250
Globo Communicacoes, 10.50%, 12/20/06 (144A)............................... 2,500,000(1) 2,512,500
------------
4,053,750
------------
MEXICO
Alfa Convertible Callable Notes, 8.00%, 09/15/00 (144A).................... 1,300,000(1) 1,430,000
Alfa Convertible Callable Notes, 8.00%, 09/15/00........................... 1,200,000 1,320,000
------------
2,750,000
------------
IRON/STEEL (0.97%)
MEXICO
Tubos de Acero de Mexico, Putable 13.75%, 12/08/99......................... 1,000,000 1,130,000
------------
MEDIA (7.09%)
BRAZIL
RBS Participacoes S.A., Putable 14.00%, 12/15/03........................... 1,780,000 1,949,100
RBS Participacoes S.A., Putable 14.00%, 12/15/03 (144A).................... 500,000(1) 547,500
Tevecap S.A., 12.625%, 11/26/04 (144A)..................................... 1,250,000(1) 1,275,000
------------
3,771,600
------------
MEXICO
Grupo Televisa S.A. 11.875%, 05/15/06 (144A)............................... 1,050,000(1) 1,160,250
Grupo Televisa S.A. Step-Up Callable Bonds, 13.25%, 05/15/08 (Reg)......... 1,000,000(3) 660,000
Grupo Televisa S.A. Step-Up Callable Bonds, 13.25%, 05/15/08............... 2,150,000(3) 1,419,000
Grupo Televisa S.A. Step-Up Callable Bonds, 13.25%, 05/15/08 (144A)........ 1,850,000(1)(3) 1,221,000
------------
4,460,250
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
13
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PAPER/PULP (2.34%)
MEXICO
Grupo Industrial Durango, 12.625%, 08/01/03................................ $ 2,500,000 $ 2,712,500
------------
PETROCHEMICALS (1.77%)
BRAZIL
Opp Petroquimica, Putable 11.50%, 02/23/04 (144A).......................... 2,000,000(1) 2,055,000
------------
TELECOMMUNICATIONS (1.91%)
ARGENTINA
Telecom Argentina, Putable 12.00%, 11/15/02................................ 1,000,000 1,113,750
Telefonica de Argentina, 11.875%, 11/01/04................................. 1,000,000 1,110,000
------------
2,223,750
------------
TEXTILES (0.65%)
VENEZUELA
Sudamtex de Venezuela Convertible Callable Bonds, 11.00%, 03/19/01
(144A).................................................................... 750,000(1) 750,000
------------
UTILITIES (2.01%)
CZECH REPUBLIC
Cez A.S., 10.90%, 06/27/01................................................. 65,000,000(e) 2,334,677
------------
OPTIONS (0.09%)
Brazilian Real Put Option, 05/02/97........................................ 10,000,000 105,000
------------
TOTAL INVESTMENTS (COST $103,603,318) (96.42%).............................. 111,978,826
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (3.58%)...................... 4,165,340
------------
TOTAL NET ASSETS (100.00%).................................................. $116,144,166
------------
------------
</TABLE>

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

(a) Brazilian Real (b) Chilean Peso (c) German
Deutschemark (d) Argentine Peso (e) Czech Koruna (f) Mexican Peso

(2) Illiquid Security.

(3) Step-Up bond.

(4) Interest rate reflected is the rate in effect at December 31, 1996.

(5) When Issued Security.

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

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

The 1996 calendar year and inception to date total returns for the New York
Municipal Fund were 3.72% and 12.14%, respectively. The 1996 year end Net Asset
Value (NAV) of $10.40 was 4% higher than the inception price of $10.00 and a few
cents below the year end 1995 price of $10.47. The net assets of the Fund
continued to grow finishing the year at slightly above $20 million, up from $12
million at December 31, 1995. The 30-day SEC yield for the month ending December
31, 1996 was 4.32%.

For the high grade fixed income markets, 1996 was a challenging year as
continued growth, low inflation and a stable Fed provided a market in which
interest rates moved up and down within a relatively narrow range. This range
approximated 130 basis points for Treasurys and 50 basis points for high grade
municipals. Municipals were able to outperform Treasurys partially because they
began the year extremely cheap relative to Treasurys, and because of the
disappearance of major tax reform proposals in April 1996. Although new issue
municipal debt totaling approximately $180 billion was 14% greater than 1995
levels, it was absorbed by additional buyers, principally the casualty companies
who needed tax exempt income and were enticed by the year's attractive
municipal/Treasury yield ratios.

Although 1996 was not as stellar as 1995 for fixed income, the Fund's
intermediate investments outperformed both the very short (money market
instruments) and long ends of the municipal market. In the near term, we believe
the markets will continue to trade within the ranges established last year and
intend to maintain the Fund's concentration in the intermediate area of the
yield curve. The yield increase beyond the longer intermediate (11-15)
maturities is minimal, and we are presently closer to the lower end of the
trading range.

Apart from interest rate changes, the performance of the municipal market is
affected by tax law changes, the technicals of supply and demand and credit.
Minor changes to the tax code may replace major tax reform proposals, but we do
not expect municipal market dislocation in 1997. Any discussion of removing the
exemption of municipal interest may provide a buying opportunity. Also expected
to be relatively benign are the technicals, particularly in the high grade
credits that we purchase. Credit selection, however, is likely to be extremely
important in many states, and particularly in New York. In addition to being a
slower growing state, New York and its counties must begin to plan for changes
in the administration of Federal Welfare Reform. The Fund is presently heavily
weighted in essential purpose (water, sewer, electric, etc.) revenue bonds which
as of year end accounted for 68% of the portfolio. Most of the remaining
investments are in high grade general obligations of the state's most
creditworthy cities and counties.

We believe that New York municipals are fairly valued today and our transactions
continue to be directed by the yield ratio of municipals to Treasurys. We begin
1997 with yield ratios of 75-80%, which are approximately five percentage points
lower than last year's levels. Even at these lower ratios, an individual in the
maximum Federal tax bracket achieves an after tax return in municipals that we
believe is far superior to that achieved in high grade taxable investments.
Furthermore, some of the factors that had cheapened municipals in years past are
behind us. Factors that could continue to strengthen the municipal market, such
as individual investors rebalancing their equity exposure and the ever
approaching baby boom population, are ahead of us.

Carolyn N. Dolan
January 15, 1997

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 at the trading commencement date
of April 3, 1995 and held through December 31, 1996 as well as the performance
of the Lehman Brothers 5 Year Municipal 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>
OFFITBANK NEW YORK MUNICIPAL FUND LEHMAN BROTHERS 5 YEAR MUNICIPAL BOND INDEX
<S> <C> <C>
04/03/1995 $250,000 $250,000
06/30/1995 $256,150 $256,700
09/30/1995 $262,912 $262,835
12/31/1995 $270,274 $268,223
03/31/1996 $268,679 $268,250
06/30/1996 $269,969 $269,699
09/30/1996 $273,991 $274,149
12/31/1996 $280,375 $279,577
Since Inception
Average Annual Total Return One Year (April 3, 1995)
OFFITBANK New York Municipal Fund* 3.72% 6.78%
Lehman Brothers 5 Year Municipal Bond Index 4.23% 6.61%
</TABLE>

* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. In such
instances, and without waiver of fees, total return would have been lower.

16
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996

<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS (98.25%)
EDUCATION REVENUE (5.16%)
New York State Dormitory Authority Revenue Bonds Columbia University Series
A, (MBIA), 4.60%, 07/01/06................................................ $ 100,000(4) $ 98,000
New York State Dormitory Authority Revenue Bonds Cornell University Series
A, (MBIA), 4.80%, 07/01/03................................................ 250,000(4) 254,062
New York State Dormitory Authority Revenue Bonds Cornell University Series
A, (MBIA), 5.25%, 07/01/07................................................ 350,000(4) 360,063
New York State Dormitory Authority Revenue Bonds New York University Series
A, (MBIA), 5.50%, 07/01/04................................................ 315,000(4) 327,600
-------------
1,039,725
-------------
GENERAL OBLIGATIONS (28.39%)
Albany County General Obligation Bonds Series B, 5.60%, 03/15/07........... 300,000 311,250
Albany County General Obligation Bonds Series B, (FGIC), 5.60%, 03/15/09... 400,000(2) 410,000
Dutchess County General Obligation Bonds, 4.90%, 08/01/04.................. 215,000 217,687
Hempstead General Obligation Bonds Series B, (FGIC), 5.625%, 02/01/01...... 245,000(2) 255,719
Hempstead General Obligation Bonds Series B, (FGIC), 5.625%, 02/01/04...... 140,000(2) 147,700
Islip General Obligation Bonds, (FGIC), 6.00%, 11/01/05.................... 100,000(2) 107,375
Monroe County General Obligation Bonds, 6.00%, 03/01/98.................... 55,000 56,306
Monroe County General Obligation Bonds, 6.00%, 03/01/98.................... 350,000 357,437
New Castle General Obligation Bonds, 4.75%, 06/01/08....................... 210,000 203,175
New York State General Obligation Bonds, 5.50%, 11/15/01................... 200,000 208,750
New York State General Obligation Bonds, 5.60%, 08/15/07................... 350,000 364,000
New York State General Obligation Bonds, 5.75%, 09/15/02................... 425,000 449,438
Onondaga County General Obligation Bonds, 5.40%, 04/01/01.................. 150,000 155,812
Onondaga County General Obligation Bonds, 5.00%, 05/01/08.................. 260,000 259,025
Onondaga County General Obligation Bonds Series B, 5.85%, 02/15/00......... 500,000 523,750
Ontario County General Obligation Bonds, (FGIC), 5.00%, 08/15/02........... 250,000(2) 255,938
Orange County N.Y. General Obligation Bonds, 5.20%, 11/01/10............... 300,000 296,625
Schenectady County (N.Y.) General Obligation Bonds, (MBIA), 6.00%,
08/15/05.................................................................. 200,000(4) 217,750
Syracuse General Obligation Bonds (MBIA), 6.00%, 12/01/04.................. 250,000(4) 270,625
Syracuse General Obligation Bonds (MBIA), 5.75%, 06/15/09.................. 200,000(4) 206,500
Syracuse General Obligation Bonds Series A, 5.00%, 02/15/06................ 175,000 176,750
Westchester County General Obligation Bonds Series A, 5.80%, 11/15/04...... 250,000 271,563
-------------
5,723,175
-------------
HEALTH CARE (0.78%)
New York Medical Care Facility Finance Authority, (FHA), 6.20%, 08/15/14... 150,000(3) 156,562
-------------
HOUSING (4.44%)
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.80%,
10/01/06.................................................................. 200,000 207,250
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.85%,
10/01/06.................................................................. 125,000 132,344
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.35%,
04/01/07.................................................................. 240,000 243,600
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.95%,
04/01/07.................................................................. 100,000 105,875
New York State Mortgage Agency Revenue Bonds Series 46, 5.75%, 04/01/04.... 200,000 205,250
-------------
894,319
-------------
PREREFUNDED/ESCROWED TO MATURITY (5.35%)
Erie County Water Authority Improvement Revenue Bonds, 5.75%, 12/01/08..... 450,000 459,000
Grand Central District Management Association Inc. New York Special
Assessment Bonds, 6.50%, 01/01/22......................................... 150,000 165,375
Niagara Falls Bridge Commission New York Revenue Bonds, (FGIC), 6.125%,
10/01/19.................................................................. 415,000(2) 453,906
-------------
1,078,281
-------------
PUBLIC POWER (4.38%)
New York State Power Authority Revenue Bonds Series BB, 6.30%, 01/01/07.... 375,000 400,312
New York State Power Authority Revenue Bonds Series CC, 4.80%, 01/01/05.... 180,000 178,650
New York State Power Authority Revenue Bonds Series CC, (MBIA), 4.90%,
01/01/06.................................................................. 200,000(4) 198,250
New York State Power Authority Revenue Bonds Series Y, 6.25%, 01/01/05..... 100,000 106,375
-------------
883,587
-------------
RESOURCE RECOVERY (1.35%)
Dutchess County Resource Recovery Agency Solid Waste Management Revenue
Bonds Series A, (FGIC), 7.20%, 01/01/02................................... 250,000(2) 272,813
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
17
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL OBLIGATIONS (CONTINUED)
SALES TAX REVENUE (14.07%)
Grand Central District Management Association Inc. New York Special
Assessment Bonds, 6.20%, 01/01/00......................................... $ 120,000 $ 126,150
Grand Central District Management Association Inc. New York Special
Assessment Bonds, 5.10%, 01/01/08......................................... 330,000 319,688
Municipal Assistance Corp. for City of New York Revenue Bonds Series E,
5.20%, 07/01/08........................................................... 375,000 375,937
Municipal Assistance Corp. for City of New York Revenue Bonds Series D,
(AMBAC), 5.00%, 07/01/03.................................................. 250,000(1) 255,313
Municipal Assistance Corp. for City of New York Revenue Bonds Series D,
(AMBAC), 5.20%, 07/01/07.................................................. 400,000(1) 405,500
New York State Local Government Assistance Corp. Revenue Bonds Series D,
6.375%, 04/01/00.......................................................... 100,000 105,750
New York State Local Government Assistance Corp. Revenue Bonds Series D,
4.50%, 04/01/02........................................................... 250,000 249,062
New York State Local Government Assistance Corp. Revenue Bonds Series A,
6.75%, 04/01/02........................................................... 315,000 346,894
New York State Local Government Assistance Corp. Revenue Bonds Series D,
4.75%, 04/01/04........................................................... 100,000 99,875
New York State Local Government Assistance Corp. Revenue Bonds Series E,
4.80%, 04/01/05........................................................... 180,000 179,100
New York State Local Government Assistance Corp. Revenue Bonds Series A,
5.00%, 04/01/06........................................................... 100,000 99,875
New York State Local Government Assistance Corp. Revenue Bonds Series D,
6.75%, 04/01/07........................................................... 250,000 273,438
-------------
2,836,582
-------------
TELECOMMUNICATIONS (0.76%)
Puerto Rico Telephone Authority Revenue Bonds Series M, (AMBAC), 5.05%,
01/01/04.................................................................. 150,000(1) 152,438
-------------
TRANSPORTATION REVENUE (19.39%)
Metropolitan Transit Authority Bonds Series A, (MBIA), 5.25%, 04/01/09..... 300,000(4) 298,500
New York State Bridge Authority Bonds, 7.00%, 01/01/00..................... 250,000 258,020
New York State Thruway, Highway & Bridge Trust Fund Bonds Series B, (FGIC),
6.40%, 04/01/04........................................................... 200,000(2) 220,500
New York State Thruway, Highway & Bridge Trust Fund Bonds Series A, (FGIC),
5.80%, 04/01/09........................................................... 300,000(2) 309,000
New York State Thruway Highway & Bridge Trust Fund Bonds Series B, (MBIA),
5.75%, 04/01/06........................................................... 200,000(4) 211,500
New York State Thruway Highway & Bridge Trust Fund Bonds Series B, 5.80%,
04/01/07.................................................................. 600,000 631,500
New York State Thruway Highway & Bridge Trust Fund Bonds Series A, 6.00%,
04/01/99.................................................................. 300,000 311,250
Port Authority of New York & New Jersey Bonds Series 86, 5.80%, 07/15/03... 200,000 214,250
Port Authority of New York & New Jersey Bonds Series 86, 5.00%, 07/01/06... 250,000 253,437
Port Authority of New York & New Jersey Bonds Series 86, 5.70%, 08/01/07... 270,000 282,825
Triborough Bridge & Tunnel Authority General Purpose Bonds Series A, 4.70%,
01/01/07.................................................................. 500,000 487,500
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 5.75%,
01/01/05.................................................................. 170,000 181,475
-------------
3,909,445
-------------
WATER/SEWER (14.18%)
New York City Municipal Water Financing Authority Water & Sewer Unref
System Revenue Bonds, 7.00%, 06/15/07..................................... 105,000 116,156
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds Series B, 5.375%, 06/15/07.................................. 350,000 356,562
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds, 5.35%, 06/15/09............................................ 225,000 224,719
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds, 5.20%, 06/15/05............................................ 500,000 510,625
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 6.40%, 06/15/03............................................ 200,000 217,000
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 6.50%, 06/15/04............................................ 150,000 163,125
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds Series E, 6.60%, 06/15/05................................... 250,000 272,812
New York State Environmental Facilities Corporation Pollution Control
System Revenue Bonds, 7.20%, 06/15/06..................................... 250,000 278,125
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 5.40%, 05/15/06............................................ 250,000 259,688
New York State Municipal Water Finance Authority Series A, 4.90%,
06/15/02.................................................................. 200,000 203,000
Suffolk County Water Revenue Bonds, (MBIA), 5.10%, 06/01/05................ 250,000(4) 255,625
-------------
2,857,437
-------------
TOTAL INVESTMENTS (COST $19,515,273) (98.25%)....................... 19,804,364
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (1.75%).............. 353,268
-------------
TOTAL NET ASSETS (100.00%).......................................... $ 20,157,632
-------------
-------------
</TABLE>

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

(1) Insured as to principal and interest by the American Municipal Bond
Assurance Corporation.
(2) Insured as to principal and interest by the Finance Guarantee Insurance
Corporation.
(3) Insured by the Federal Housing Administration.
(4) Insured as to principal and interest by the Municipal Bond Insurance
Association.

The accompanying notes are an integral part of the financial statements.
18
<PAGE>
OFFITBANK
LATIN AMERICA TOTAL RETURN FUND

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

At December 31, 1996, the net asset value per share of the OFFITBANK Latin
America Total Return Fund was $11.66. The SEC 1996 total return since inception
February 13, 1996, net of all fees and expenses, was 23.36%.

At year-end December 31, 1996, the Fund's asset allocation was 78% equity, 20%
fixed income and 2% cash. The Fund was diversified across 7 countries with
weightings (combining the debt and equity components) concentrated in the
largest economies of Latin America: Brazil 41%; Mexico 29%; and Argentina 16%.
These weightings reflect our view of the best opportunities in the region. The
Fund held over 60 separate securities, diversified across 21 industries with its
largest positions in Telecommunications (18%), Utilities (12%) and Building
Materials (8%).

The Fund's equity component was diversified across 6 countries with its heaviest
weightings in Brazil 47%, Mexico 30% and Argentina 16%. The equity component
continues to focus on companies with superior earnings growth potential and
ongoing privatizations.

The Fund's fixed income positions were diversified across 5 countries: Mexico
31%, Brazil 21%, Argentina 19%, Venezuela 16% and Ecuador 13%. The entire fixed
income portion of the portfolio is dollar denominated. Consistent with our
strategy, fixed income investments serve two purposes: dampening volatility by
adding high yielding bonds; and gaining broad country exposure to improving
macro-economic environments where equity markets present limited opportunities,
such as Ecuador and Peru.

For the full year of 1996, Latin American equities underperformed Latin American
fixed income. We believe, however, that the implied decline in perceived
sovereign risk in Latin America reflects the region-wide economic reform based
on reaffirmation of free market policies and fiscal responsibility which has not
yet been translated fully into equity prices. Going forward, we believe that
1996's improved macro-economic environment throughout the region has set the
stage for significant economic growth and increased corporate profitability in
1997 which we expect will translate into higher equity prices. Consequently, we
intend to be fully invested up to the current limit of 80% in equities, while
maintaining the remaining 20% fully invested in fixed income investments in
markets where it remains difficult to participate through their equity markets
in the improving countries' macro-economic environment.

Richard M. Johnston

January 15, 1997

19
<PAGE>
OFFITBANK
LATIN AMERICA TOTAL RETURN FUND

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

The following graph represents the total return based on a $250,000 investment
made in the OFFITBANK Latin America Total Return Fund at the trading
commencement date of February 13, 1996 and held through December 31, 1996 as
well as the performance of the ING Barings Emerging Markets--Latin America
Equity Index and the J.P. Morgan Latin America Eurobond Index over the same
period. In addition, to provide a comparison to the overall performance of the
various asset classes in which the Fund invests, the graph below includes a
composite of the return of the ING Barings Emerging Markets--Latin America
Equity Index and the J.P. Morgan Latin America Eurobond Index. Past performance
is not predictive of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
OFFITBANK LATIN AMERICA COMPOSITE INDEX; 75%
<S> <C> <C>
Total Return Fund ING Barings Emerging Markets
2/13/96 $250,000 $250,000
3/31/96 $242,450 $240,175
6/30/96 $271,689 $259,845
9/30/96 $287,230 $262,781
12/31/96 $308,399 $271,742
Since Inception
Total Return (February 13, 1996)
OFFITBANK Latin America Total Return Fund 23.36%
Composite Index; 75% ING Barings Emerging Markets-Latin America
Equity Index and 25% J.P. Morgan Latin America
Eurobond Index 8.70%
ING Barings Emerging Markets-Latin America Equity Index 6.94%
J.P. Morgan Latin America Eurobond Index 13.83%

<CAPTION>
ING BARINGS EMERGING MARKETS - J.P. MORGAN LATIN AMERICA
<S> <C> <C>
Latin America Equity Index Eurobond Index
2/13/96 $250,000 $250,000
3/31/96 $238,100 $246,375
6/30/96 $260,934 $256,205
9/30/96 $260,542 $268,964
12/31/96 $267,343 $284,564
Total Return
OFFITBANK Latin America Total Return Fund
Composite Index; 75% ING Barings Emerging Markets-Latin America
Equity Index and 25% J.P. Morgan Latin America
Eurobond Index
ING Barings Emerging Markets-Latin America Equity Index
J.P. Morgan Latin America Eurobond Index
</TABLE>

20
<PAGE>
OFFITBANK
LATIN AMERICA TOTAL RETURN FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------

EQUITY SECURITIES (78.35%)
AUTO PARTS/RELATED (1.19%)
MEXICO
Corporacion Sanluis S.A. de C.V. -- Common Stock.......................... 26,000(a) $ 158,275
-----------
BANKS (4.52%)
ARGENTINA
Banco Frances del Rio de la Plata S.A. -- ADR............................. 6,440(3) 177,100
Banco de Galicia -- ADR................................................... 6,200(3) 150,350
-----------
327,450
-----------
BRAZIL
Banco Bradesco S.A. -- Preferred Stock.................................... 10,000(b) 72,508
Banco Itau S.A. -- Preferred Stock........................................ 150(b) 64,998
-----------
137,506
-----------
MEXICO
Grupo Financiero Banorte -- Class B Common Stock.......................... 135,000(a) 136,284
-----------
BEVERAGES (1.08%)
MEXICO
Coca-Cola Femsa -- ADR.................................................... 5,000(3) 144,375
-----------
BREWERY (1.60%)
BRAZIL
Companhia Cervejaria Brahma -- Preferred Stock............................ 390(b) 213,308
-----------
BUILDING MATERIALS (5.55%)
BRAZIL
Companhia Cimento Portland Itau -- Preferred Stock........................ 700(b) 246,008
-----------
MEXICO
Cementos Apasco S.A. de C.V. -- Common Stock.............................. 30,000(a) 205,073
Cementos Mexicanos S.A. de C.V. -- Common Stock........................... 80,000(a) 288,142
-----------
493,215
-----------
CHEMICALS (0.26%)
CHILE
Sociedad Quimica y Minera de Chile S.A. -- ADR............................ 650(3) 35,181
-----------
CONSTRUCTION (3.63%)
MEXICO
Bufete Industrial -- ADR.................................................. 10,900(3) 231,625
Empresas ICA Sociedad S.A. de C.V. -- ADR................................. 17,200(3) 251,550
-----------
483,175
-----------
FOOD PROCESSING (3.90%)
MEXICO
Gruma S.A. -- Class B ADR (144A).......................................... 11,000(1)(3) 267,630
Grupo Industrial Maseca -- Class B Common Stock........................... 94,000(a) 118,737
-----------
386,367
-----------
VENEZUELA
Mavesa S.A. -- ADR........................................................ 20,000(3) 132,600
-----------
INDUSTRIAL (4.67%)
MEXICO
Desc S.A. -- ADR.......................................................... 11,900(3) 261,800
Grupo Alfa S.A. -- Class A Common Stock................................... 21,114(a) 97,337
Grupo Carso S.A. -- Class A Common Stock.................................. 50,000(a) 262,524
-----------
621,661
-----------
IRON/STEEL (5.34%)
ARGENTINA
Siderar S.A. -- Common Stock 94,000(c) 270,720
Siderca S.A. -- Common Stock 100,000(c) 182,500
-----------
453,220
-----------
MEXICO
Tubos de Acero de Mexico -- ADR........................................... 16,200(3) 257,175
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.
21
<PAGE>
OFFITBANK
LATIN AMERICA TOTAL RETURN FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES (CONTINUED)
MANUFACTURING (2.42%)
BRAZIL
Brasmotor S.A. -- Preferred Stock......................................... 550(b) $ 152,792
Ericsson Telecomunicacoes S.A. -- Preferred Stock......................... 11,000(b) 169,581
-----------
322,373
-----------
MEDIA (2.38%)
BRAZIL
Multicanal Participacoes -- ADR........................................... 18,300(3) 234,469
-----------
MEXICO
Radio Central S.A. -- ADR................................................. 12,000(3) 82,500
-----------
OIL/GAS (5.35%)
ARGENTINA
Perez Companc S.A. -- ADR................................................. 19,800(3) 278,388
YPF Sociedad Anonima S.A. -- ADR.......................................... 8,000(3) 202,000
-----------
480,388
-----------
BRAZIL
Petroleo Brasileiro -- Preferred Stock.................................... 1,450(b) 231,078
-----------
REAL ESTATE (0.15%)
ARGENTINA
IRSA Inversiones y Representaciones S.A. -- GDS........................... 600(4) 19,050
-----------
RETAIL (6.01%)
ARGENTINA
Importadora Y Exportadora de la Patagonia -- Common Stock................. 25,472(c) 239,437
-----------
BRAZIL
Globex Utilidades S.A. -- Preferred Stock................................. 6,000(b) 97,641
Lojas Arapua S.A. -- Preferred Stock...................................... 7,000(b) 129,417
-----------
227,058
-----------
MEXICO
Cifra S.A. -- Class B Common Stock........................................ 100,000(a) 122,511
Controladora Commercial Mexicana -- GDS................................... 6,000(4) 107,250
Grupo Elektra S.A. -- GDS................................................. 6,600(4) 103,950
-----------
333,711
-----------
TELECOMMUNICATIONS (18.40%)
ARGENTINA
Telefonica de Argentina S.A. -- ADR....................................... 5,700(3) 147,487
-----------
BRAZIL
Telecomunicacoes Brasileiras S.A. -- ADR.................................. 6,600(3) 504,900
Telecomunicacoes Brasileiras S.A. -- ON................................... 8,200(b) 588,252
Telecomunicacoes de Minas Gerais S.A. -- Preferred Stock.................. 810(b) 100,226
Telecomunicacoes do Rio de Janeiro -- Preferred Stock..................... 2,350(b) 297,546
Telecomunicacoes do Sao Paulo -- Preferred Stock.......................... 1,300(b) 281,656
-----------
1,772,580
-----------
CHILE
Cia de Telecomunicaciones de Chile S.A. -- ADR............................ 2,100(3) 212,362
-----------
PERU
CPT Telefonica del Peru -- ADR............................................ 3,300(3) 62,287
-----------
VENEZUELA
Compania Anonima Telefonos de Venezuela -- ADR............................ 9,000(3) 253,125
-----------
UTILITIES (11.90%)
BRAZIL
Cemig S.A. -- Preferred Stock............................................. 5,500 187,386
Centrais Electricas Brasileiras -- ADR.................................... 10,000(3) 185,703
Companhia Paulista de Forca e Luz -- Common Stock......................... 2,000(b) 236,880
Electricidades Sao Paolo -- Class B Preferred Stock....................... 2,210(b) 326,659
Light Participacoes S.A. -- Common Stock.................................. 1,500(b) 363,986
Paranaense de Energia -- Common Stock..................................... 17,000(b) 180,067
-----------
1,480,681
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.
22
<PAGE>
OFFITBANK
LATIN AMERICA TOTAL RETURN FUND
- -------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
PRINCIPAL/SHARE MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES (CONTINUED)
UTILITIES (CONTINUED)
PERU
Luz del Sur S.A. -- ADR................................................... 5,622(3) $ 102,264
-----------
TOTAL EQUITY SECURITIES................................................. 10,426,650
-----------
DEBT SECURITIES (20.32%)
AUTO PARTS (2.22%)
BRAZIL
Iochpe Maxion S.A., 12.375%, 11/08/02..................................... $ 300,000 295,500
-----------
BUILDING MATERIALS (2.60%)
MEXICO
Cemex, 12.75%, 07/15/06 (144A)............................................ 310,000(1) 346,425
-----------
FOOD PROCESSING (1.43%)
MEXICO
Grupo Industrial Durango, 12.625%, 08/01/03............................... 175,000 189,875
-----------
MEDIA (4.29%)
BRAZIL
RBS Participacos S.A., 14.00%, 12/15/03................................... 250,000 273,750
-----------
MEXICO
Grupo Televisa Step-Up Bonds, 0/13.25%, 05/15/08.......................... 250,000(2) 165,000
Grupo Televisa Step-Up Bonds, 0/13.25%, 05/15/08 (144A)................... 200,000(1)(2) 132,000
-----------
297,000
-----------
SOVEREIGN DEBT (9.78%)
ARGENTINA
Argentine Brady Floating Rate Bonds, 6.625%, 03/31/05..................... 588,000(5) 511,560
-----------
ECUADOR
Ecuador Brady Discount Floating Rate Bonds, 6.50%, 02/28/25............... 500,000(5) 343,750
-----------
VENEZUELA
Venezuela Brady Floating Rate Bonds, 6.625%, 03/31/07..................... 500,000(5) 446,250
-----------
TOTAL DEBT SECURITIES................................................... 2,704,110
-----------
TOTAL INVESTMENTS (COST $12,083,478) (98.67%)....................... 13,130,760
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (1.33%).............. 176,957
-----------
TOTAL NET ASSETS (100.00%).......................................... $13,307,717
-----------
-----------
</TABLE>

- ---------------
Principal denominated in the following currencies.
(a) Mexican Peso (b) Brazilian Real (c) Argentine Peso
(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) Step-Up bond.
(3) American Depository Receipts.
(4) Global Depository Shares.
(5) Interest rate reflected is the rate in effect at December 31, 1996.

The accompanying notes are an integral part of the financial statements.
23
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
HIGH YIELD FUND

<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (Cost -- $799,338,168) (Note
1a)...................................................... $ 833,047,213
Cash...................................................... 4,424,998
Interest receivable....................................... 15,158,741
Receivable for fund shares sold........................... 3,710,978
Dividends receivable...................................... 40,906
Unrealized appreciation on forward currency contracts
(Note 5)................................................. 49,297
---------------
Total Assets............................................ $ 856,432,133
LIABILITIES:
Payable for investments purchased......................... 1,509,758
Payable for fund shares repurchased....................... 260,000
Income and capital gain distribution payable.............. 2,048,179
Investment advisory fee payable (Note 2).................. 526,253
Administrative services fee payable (Note 2).............. 52,882
Other payables and accrued expenses....................... 314,857
---------------
Total Liabilities....................................... 4,711,929
---------------
NET ASSETS.................................................. $ 851,720,204
---------------
---------------
Net assets consist of:
Shares of capital stock, $0.001 par value per share;
83,887,717 issued and outstanding (Note 4)............... $ 83,888
Additional paid-in-capital................................ 817,973,255
Accumulated distributions in excess of net investment
income................................................... (107,856)
Accumulated net realized gain on investments and foreign
currency transactions.................................... 13,211
Net unrealized appreciation on investments and foreign
currency transactions.................................... 33,757,706
---------------
NET ASSETS.................................................. $ 851,720,204
---------------
---------------
NET ASSET VALUE PER SHARE................................... $10.15
---------------
---------------
</TABLE>

EMERGING MARKETS FUND

<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (Cost -- $103,603,318) (Note
1a)...................................................... $ 111,978,826
Cash...................................................... 381,164
Receivable for fund shares sold........................... 2,510,000
Interest receivable....................................... 2,184,434
Receivable for investments sold........................... 474,756
Unrealized appreciation on forward currency contracts
(Note 5)................................................. 230,534
---------------
Total Assets............................................ $ 117,759,714
LIABILITIES:
Payable for investments purchased......................... 671,563
Income distribution payable............................... 802,539
Investment advisory fee payable (Note 2).................. 86,663
Administrative services fee payable (Note 2).............. 7,222
Other payables and accrued expenses....................... 47,561
---------------
Total Liabilities....................................... 1,615,548
---------------
NET ASSETS.................................................. $ 116,144,166
---------------
---------------
Net assets consist of:
Shares of capital stock, $0.001 par value per share;
10,530,513 issued and outstanding (Note 4)............... $ 10,531
Additional paid-in-capital................................ 106,704,537
Accumulated distributions in excess of net investment
income................................................... (230,534)
Accumulated net realized gain on investments and foreign
currency transactions.................................... 1,059,178
Net unrealized appreciation on investments and foreign
currency transactions.................................... 8,600,454
---------------
NET ASSETS.................................................. $ 116,144,166
---------------
---------------
NET ASSET VALUE PER SHARE................................... $11.03
---------------
---------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
24
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996

NEW YORK MUNICIPAL FUND

<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (Cost -- $19,515,273) (Note
1a)...................................................... $ 19,804,364
Cash...................................................... 17,275
Interest receivable....................................... 323,660
Receivable for fund shares sold........................... 40,566
Receivable from Advisor (Note 2).......................... 17,554
Deferred organization expense............................. 17,903
----------------
Total Assets............................................ $ 20,221,322
LIABILITIES:
Payable for fund shares repurchased....................... 1,500
Income and capital gain distribution payable.............. 15,990
Other payables and accrued expenses....................... 46,200
----------------
Total Liabilities....................................... 63,690
----------------
NET ASSETS.................................................. $ 20,157,632
----------------
----------------
Net assets consist of:
Shares of capital stock, $0.001 par value per share;
1,937,866 issued and outstanding (Note 4)................ $ 1,938
Additional paid-in-capital................................ 19,858,427
Accumulated net realized gain on investments.............. 8,176
Net unrealized appreciation on investments................ 289,091
----------------
NET ASSETS.................................................. $ 20,157,632
----------------
----------------
NET ASSET VALUE PER SHARE................................... $10.40
----------------
----------------
</TABLE>

LATIN AMERICA TOTAL RETURN FUND

<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (Cost -- $12,083,478) (Note
1a)...................................................... $ 13,130,760
Cash...................................................... 281,942
Receivable for investments sold........................... 140,172
Interest receivable....................................... 64,072
Receivable for fund shares sold........................... 17,000
Dividends receivable...................................... 4,507
Deferred organization expense............................. 21,910
-------------
Total Assets............................................ $ 13,660,363
LIABILITIES:
Payable for investments purchased......................... 285,957
Income distribution payable............................... 11,958
Other payables and accrued expenses....................... 54,731
-------------
Total Liabilities....................................... 352,646
-------------
NET ASSETS.................................................. $ 13,307,717
-------------
-------------
Net assets consist of:
Shares of capital stock, $0.001 par value per share;
1,140,964 issued and outstanding (Note 4) $ 1,141
Additional paid-in-capital................................ 12,357,101
Accumulated distributions in excess of net investment
income................................................... (59,985)
Distributions in excess of net realized capital gains..... (37,822)
Net unrealized appreciation on investments and foreign
currency transactions.................................... 1,047,282
-------------
NET ASSETS.................................................. $ 13,307,717
-------------
-------------
NET ASSET VALUE PER SHARE................................... $11.66
-------------
-------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
25
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
HIGH YIELD FUND

<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign tax withholding of $66,613).......................... $ 62,687,912
Dividend...................................................................... 849,144
----------------
Total income................................................................ $ 63,537,056
EXPENSES:
Advisory fee (Note 2)......................................................... 4,989,174
Administrative services (Note 2).............................................. 971,474
Custodian fees and expenses................................................... 269,550
Professional.................................................................. 162,179
Registration fees............................................................. 119,681
Printing...................................................................... 62,468
Transfer and shareholder servicing agent fees (Note 2)........................ 42,449
Insurance..................................................................... 38,799
Fund accounting fee and expenses (Note 2)..................................... 38,248
Directors' fees............................................................... 23,958
Miscellaneous................................................................. 77,874
----------------
Total expenses/fees before waivers.......................................... 6,795,854
Less: expenses/fees waived (Note 2)......................................... (485,738)
----------------
Net expenses................................................................ 6,310,116
----------------

NET INVESTMENT INCOME........................................................... 57,226,940
----------------
Net realized and unrealized gain (loss):
Net realized gain on investments.............................................. 5,178,461
Net realized loss on foreign currency transactions............................ (141,528)
Net change in unrealized appreciation on investments.......................... 17,919,808
Net change in unrealized appreciation on foreign currency transactions........ 13,374
----------------
Net realized and unrealized gain on investments and foreign currency
transactions.................................................................. 22,970,115
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 80,197,055
----------------
----------------
</TABLE>

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign tax withholding of $64,850).......................... $ 9,092,132
----------------
Total income................................................................ $ 9,092,132
EXPENSES:
Advisory fee (Note 2)......................................................... 759,339
Administrative services (Note 2).............................................. 126,556
Custodian fees and expenses................................................... 55,092
Professional.................................................................. 31,305
Fund accounting fee and expenses (Note 2)..................................... 30,000
Registration fees............................................................. 10,624
Printing...................................................................... 7,844
Transfer and shareholder servicing agent fees (Note 2)........................ 6,003
Directors' fees............................................................... 4,808
Insurance..................................................................... 3,858
Miscellaneous................................................................. 3,283
----------------
Total expenses/fees before waivers.......................................... 1,038,712
Less: expenses/fees waived (Note 2)......................................... (63,278)
----------------
Net expenses................................................................ 975,434
----------------

NET INVESTMENT INCOME........................................................... 8,116,698
----------------
Net realized and unrealized gain (loss):
Net realized gain on investments.............................................. 6,009,812
Net realized loss on foreign currency transactions............................ (359,181)
Net change in unrealized appreciation on investments.......................... 5,682,695
Net change in unrealized appreciation on foreign currency transactions........ 185,249
----------------
Net realized and unrealized gain on investments and foreign currency
transactions.................................................................. 11,518,575
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 19,635,273
----------------
----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

26
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (CONTINUED)

NEW YORK MUNICIPAL FUND

<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 847,048
---------
Total income................................................................ $ 847,048
EXPENSES:
Advisory fee (Note 2)......................................................... 69,937
Fund accounting fee and expenses (Note 2)..................................... 42,421
Professional.................................................................. 30,385
Administrative services (Note 2).............................................. 26,227
Custodian fees and expenses................................................... 6,998
Amortization of organization expenses......................................... 5,516
Printing...................................................................... 3,835
Registration fees............................................................. 3,460
Transfer and shareholder servicing agent fees (Note 2)........................ 3,397
Directors' fees............................................................... 2,808
Insurance..................................................................... 1,093
Miscellaneous................................................................. 14,011
---------
Total expenses/fees before waivers/reimbursements........................... 210,088
Less: expenses/fees waived/reimbursed (Note 2).............................. (113,718)
---------
Net expenses................................................................ 96,370
---------
NET INVESTMENT INCOME........................................................... 750,678
---------
Net realized and unrealized gain (loss):
Net realized gain on investments.............................................. 13,921
Net change in unrealized depreciation on investments.......................... (10,829)
---------
Net realized and unrealized gain on investments................................. 3,092
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 753,770
---------
---------
</TABLE>

LATIN AMERICA TOTAL RETURN FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 13, 1996*
THROUGH DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 160,484
Dividend (net of foreign tax withholding of $2,232)........................... 52,699
---------
Total income................................................................ $ 213,183
EXPENSES:
Advisory fee (Note 2)......................................................... 53,176
Professional.................................................................. 40,122
Fund accounting fee and expenses (Note 2)..................................... 27,500
Custodian fees and expenses................................................... 23,505
Administrative services (Note 2).............................................. 8,039
Registration fees............................................................. 4,052
Printing...................................................................... 3,403
Amortization of organization expenses......................................... 2,251
Directors' fees............................................................... 1,925
Transfer and shareholder servicing agent fees (Note 2)........................ 1,375
Miscellaneous................................................................. 3,125
---------
Total expenses/fees before waivers.......................................... 168,473
Less: expenses/fees waived (Note 2)......................................... (61,215)
---------
Net expenses................................................................ 107,258
---------
NET INVESTMENT INCOME........................................................... 105,925
---------
Net realized and unrealized gain (loss):
Net realized gain on investments.............................................. 460,611
Net realized loss on foreign currency transactions............................ (62,197)
Net unrealized appreciation on investments.................................... 1,047,282
---------
Net realized and unrealized gain on investments and foreign currency
transactions.................................................................. 1,445,696
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $1,551,621
---------
---------
</TABLE>

* Commencement of operations.

The accompanying notes are an integral part of the financial statements.

27
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
HIGH YIELD FUND

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income........................................ $ 57,226,940 $ 33,584,415
Net realized gain on investments and foreign currency
transactions................................................ 5,036,933 528,822
Net change in unrealized appreciation on investments and
foreign currency transactions............................... 17,933,182 22,091,958
----------------- -----------------
Net increase in net assets resulting from operations......... 80,197,055 56,205,195
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................ (57,640,317) (33,572,903)
Realized gains............................................... (4,650,440) (316,224)
----------------- -----------------
Total dividends and distributions to shareholders............ (62,290,757) (33,889,127)
CAPITAL STOCK TRANSACTIONS (NOTE 4):
Net increase in net assets from capital share transactions... 354,723,525 234,457,225
----------------- -----------------
Total increase in net assets................................. 372,629,823 256,773,293
NET ASSETS:
Beginning of year............................................ 479,090,381 222,317,088
----------------- -----------------
End of year.................................................. $851,720,204 $479,090,381
----------------- -----------------
----------------- -----------------
</TABLE>

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income........................................ $ 8,116,698 $ 3,457,366
Net realized gain on investments and foreign currency
transactions................................................ 5,650,631 227,117
Net change in unrealized appreciation on investments and
foreign currency transactions............................... 5,867,944 4,073,099
----------------- -----------------
Net increase in net assets resulting from operations......... 19,635,273 7,757,582
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................ (8,116,698) (2,305,453)
Realized gains............................................... (4,209,138) 0
Return of capital............................................ 0 (1,151,913)
----------------- -----------------
Total dividends and distributions to shareholders............ (12,325,836) (3,457,366)
CAPITAL STOCK TRANSACTIONS (NOTE 4):
Net increase in net assets from capital share transactions... 59,584,284 16,833,223
----------------- -----------------
Total increase in net assets................................. 66,893,721 21,133,439
NET ASSETS:
Beginning of year............................................ 49,250,445 28,117,006
----------------- -----------------
End of year.................................................. $116,144,166 $49,250,445
----------------- -----------------
----------------- -----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

28
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
NEW YORK MUNICIPAL FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE YEAR ENDED APRIL 3, 1995*
DECEMBER 31, 1996 THROUGH DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 750,678 $ 247,371
Net realized gain on investments..................... 13,921 11,983
Net change in unrealized appreciation (depreciation)
on investments...................................... (10,829) 299,919
------------------
Net increase in net assets resulting from
operations.......................................... 753,770 559,273
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:......
Net investment income................................ (750,678) (250,088)
Realized gains....................................... (11,455) (3,555)
------------------
Total dividends and distributions to shareholders.... (762,133) (253,643)
CAPITAL STOCK TRANSACTIONS (NOTE 4):
Net increase in net assets from capital share
transactions........................................ 7,650,088 12,210,237
------------------ -------------------------
Total increase in net assets......................... 7,641,725 12,515,867
NET ASSETS:
Beginning of period.................................. 12,515,907 40
------------------ -------------------------
End of period........................................ $20,157,632 $12,515,907
------------------ -------------------------
------------------ -------------------------
</TABLE>

- ---------------
* Commencement of operations.

LATIN AMERICA TOTAL RETURN FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 13, 1996*
THROUGH DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 105,925
Net realized gain on investments and foreign currency
transactions........................................ 398,414
Net unrealized appreciation on investments........... 1,047,282
-------------------------
Net increase in net assets resulting from
operations.......................................... 1,551,621
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:......
Net investment income................................ (105,925)
Realized gains....................................... (496,221)
-------------------------
Total dividends and distributions to shareholders.... (602,146)
CAPITAL STOCK TRANSACTIONS (NOTE 4):
Net increase in net assets from capital share
transactions........................................ 12,358,222
-------------------------
Total increase in net assets......................... 13,307,697

NET ASSETS:
Beginning of period.................................. 20
-------------------------
End of period........................................ $13,307,717
-------------------------
-------------------------
</TABLE>

- ---------------
* Commencement of operations.

The accompanying notes are an integral part of the financial statements.

29
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND

<TABLE>
<CAPTION>
SELECTED RATIOS AND DATA FOR A SHARE OF FOR THE PERIOD FROM
CAPITAL STOCK FOR THE YEAR ENDED FOR THE YEAR ENDED MARCH 2, 1994*
OUTSTANDING THROUGH THE PERIOD: DECEMBER 31, 1996 DECEMBER 31, 1995 THROUGH DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 9.92 $ 9.25 $ 10.00
-------- -------- --------
Net investment income..................... 0.89 0.90 0.72
Net realized and unrealized gain (loss)... 0.29 0.67 (0.75)
-------- -------- --------
Total from investment operations.......... 1.18 1.57 (0.03)
-------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income..................... (0.89) (0.89) (0.72)
Realized gains............................ (0.06) (0.01) 0
-------- -------- --------
Total dividends and distributions........... (0.95) (0.90) (0.72)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD.............. $ 10.15 $ 9.92 $ 9.25
-------- -------- --------
-------- -------- --------
TOTAL INVESTMENT RETURN**:.................. 12.46% 17.72% (0.27%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................... $851,720 $479,090 $222,317
Ratios to average net assets:
Expenses.................................. 0.98%(2) 1.05%(2) 1.14%(1)(2)
Net investment income..................... 8.86% 9.38% 8.97%(1)
PORTFOLIO TURNOVER RATE..................... 41% 34% 42%
</TABLE>

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
SELECTED RATIOS AND DATA FOR A SHARE OF FOR THE PERIOD FROM
CAPITAL STOCK FOR THE YEAR ENDED FOR THE YEAR ENDED MARCH 8, 1994*
OUTSTANDING THROUGH THE PERIOD: DECEMBER 31, 1996 DECEMBER 31, 1995 THROUGH DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 9.91 $ 8.84 $ 10.00
-------- ------- -------
Net investment income..................... 1.00 0.90 0.81
Net realized and unrealized gain (loss)... 1.55 1.07 (1.16)
-------- ------- -------
Total from investment operations.......... 2.55 1.97 (0.35)
-------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income..................... (1.00) (0.60) (0.81)
Realized gains............................ (0.43) 0 0
Return of capital......................... 0 (0.30) 0
-------- ------- -------
Total dividends and distributions........... (1.43) (0.90) (0.81)
-------- ------- -------
NET ASSET VALUE, END OF PERIOD.............. $ 11.03 $ 9.91 $ 8.84
-------- ------- -------
-------- ------- -------
TOTAL INVESTMENT RETURN**:.................. 26.56% 23.38% (3.82%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................... $116,144 $ 49,250 $ 28,117
Ratios to average net assets:
Expenses.................................. 1.16%(2) 1.50%(2) 1.50%(1)(2)
Net investment income..................... 9.62% 9.97% 10.39%(1)
PORTFOLIO TURNOVER RATE..................... 136% 60% 47%
</TABLE>

The accompanying notes are an integral part of the financial statements.
30
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)

NEW YORK MUNICIPAL FUND

<TABLE>
<CAPTION>
SELECTED RATIOS AND DATA FOR A SHARE OF FOR THE PERIOD FROM
CAPITAL STOCK FOR THE YEAR APRIL 3, 1995*
OUTSTANDING THROUGH THE PERIOD: ENDED DECEMBER 31, 1996 THROUGH DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 10.47 $ 10.00
------- -------
Net investment income..................... 0.44 0.33
Net realized and unrealized gain (loss)... (0.06) 0.47
------- -------
Total from investment operations.......... 0.38 0.80
------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income..................... (0.44) (0.32)
Realized gains............................ (0.01) (0.01)
------- -------
Total dividends and distributions......... (0.45) (0.33)
------- -------
NET ASSET VALUE, END OF PERIOD.............. $ 10.40 $ 10.47
------- -------
------- -------
TOTAL INVESTMENT RETURN**:.................. 3.72% 8.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................... $ 20,158 $ 12,516
Ratios to average net assets:
Expenses.................................. 0.55%(2) 0.54%(1)(2)
Net investment income..................... 4.28% 4.20%(1)
PORTFOLIO TURNOVER RATE..................... 33% 35%
</TABLE>

LATIN AMERICA TOTAL RETURN FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SELECTED RATIOS AND DATA FOR A SHARE OF FEBRUARY 13, 1996*
CAPITAL STOCK THROUGH DECEMBER 31,
OUTSTANDING THROUGH THE PERIOD: 1996
- ---------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 10.00
-------
Net investment income..................... 0.20
Net realized and unrealized gain.......... 2.11
-------
Total from investment operations.......... 2.31
-------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income..................... (0.20)
Realized gains............................ (0.45)
-------
Total dividends and distributions......... (0.65)
-------
NET ASSET VALUE, END OF PERIOD.............. $ 11.66
-------
-------
TOTAL INVESTMENT RETURN**:.................. 23.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................... $ 13,308
Ratios to average net assets:
Expenses.................................. 2.00%(1)(2)
Net investment income..................... 1.97%(1)
PORTFOLIO TURNOVER RATE..................... 133%
AVERAGE COMMISSION RATE+.................... $ 0.026
</TABLE>

- ---------------
* Commencement of operations.
**Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(1)Annualized.
(2)If the Fund had borne all expenses that were assumed or waived by the
Advisor and Administrator, the above expense ratio would have been 3.14%
annualized for the period ended December 31, 1996.
+ For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission rate structures may
differ.

The accompanying notes are an integral part of the financial statements.
31
<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"). The Company consists of eight separately managed funds, of which four,
OFFITBANK High Yield Fund, OFFITBANK Emerging Markets Fund, OFFITBANK New York
Municipal Fund, and OFFITBANK Latin America Total Return Fund have commenced
operations. Each Fund operates as a non-diversified, open-end management
investment company.

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 Funds 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 foreign 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 and Latin America Total
Return Funds have been deferred and are being amortized on a straight-line basis
over sixty months beginning with each Fund's commencement of operations.

OFFITBANK assumed the organizational expenses for the High Yield and Emerging
Markets Funds.

d. ALLOCATION OF EXPENSES. Expenses directly attributed 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 cases of the Emerging
Markets and Latin America Total Return Funds and monthly for the High Yield and
New York Municipal Funds. Distributions of net realized capital gains are
normally declared and paid at least annually by each Fund. The Funds record
dividends and distributions to shareholders on the ex-dividend date.

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, and to
the extent such differences are permanent in nature, these amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require a re-classification. 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.

g. USE OF ESTIMATES. Estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from operations when
financial statements are prepared in accordance with generally accepted
accounting principles. Actual results could differ from these.

h. 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.

32
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------

2. INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION AGREEMENTS. The Company
has entered into investment advisory agreements (the "Investment Advisory
Agreements") with OFFITBANK (the "Advisor"). The Investment Advisory Agreements
provide that each Fund pays the Advisor an investment advisory fee that is
calculated and paid monthly on the average daily net assets of each Fund, at the
annual rates of 0.85% on the first $200,000,000 of net assets, 0.75% on amounts
in excess thereof up to $600,000,000 and 0.65% on amounts over $600,000,000 in
the case of the High Yield Fund, 0.90% on the first $200,000,000 and 0.80% on
amounts in excess thereof in the case of the Emerging Markets Fund, 0.40% of net
assets for the New York Municipal Fund, and 1.00% of net assets for the Latin
America Total Return Fund. The Advisor provides portfolio management and certain
administrative, clerical and bookkeeping services for the Company. For the year
ended December 31, 1996, the Advisor was entitled to fees of $4,989,174 for the
High Yield Fund, $759,339 for the Emerging Markets Fund, $69,937 for the New
York Municipal Fund and $53,176 for the Latin America Total Return Fund. The
Advisor waived fees of $69,937 for the New York Municipal Fund and $53,176 for
the Latin America Total Return Fund.

During 1996, Furman Selz LLC ("Furman Selz") provided 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 included 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 custodians and assistance in the preparation of the
Company's registration statements under federal and state laws. Pursuant to the
Administration Agreement, Furman Selz was entitled to receive a monthly fee for
its services on an annualized basis up to 0.15% of the average daily net assets
of the Company. The fees have been allocated among the Funds on the basis of
their relative net assets. For the year ended December 31, 1996, Furman Selz was
entitled to fees of $971,474 for the High Yield Fund, $126,556 for the Emerging
Markets Fund, $26,227 for the New York Municipal Fund and $8,039 for the Latin
America Total Return Fund. Furman Selz waived fees of $485,738 for the High
Yield Fund, $63,278 for the Emerging Markets Fund, $26,227 for the New York
Municipal Fund and $8,039 for the Latin America Total Return Fund.

As Administrator, Furman Selz provided the Funds with fund accounting related
services. For these services Furman Selz was entitled to receive a fee of $2,500
per month per Fund. For the year ended December 31, 1996, Furman Selz earned
fees of $30,000, $30,000, $30,000 and $27,500 for the High Yield Fund, the
Emerging Markets Fund, the New York Municipal Fund and the Latin America Total
Return Fund, respectively.
During 1996, Furman Selz acted as Transfer Agent for the Funds and received
reimbursement of certain expenses plus a per account fee of $15.00 per year. For
the year ended December 31, 1996, Furman Selz was entitled to fees of $42,449
for the High Yield Fund, $6,003 for the Emerging Markets Fund, $3,397 for the
New York Municipal Fund and $1,375 for the Latin America Total Return 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 Advisor has agreed
to reimburse the Fund $17,554.

The Company has entered into a distribution agreement (the "Distribution
Agreement") with OFFIT Funds Distributor, Inc. Under the Distribution Agreement,
the Distributor, as agent of the Company, agrees to use its best effort 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, 1996, no distribution costs were incurred.

On October 1, 1996, the Company entered into agreements with BISYS Fund Services
("BISYS") pursuant to which BISYS will perform the administrative, accounting
and transfer agency services described above on substantially similiar terms.
BISYS also acquired from Furman Selz its interest in OFFIT Funds Distributor,
Inc. The agreements became effective on January 1, 1997.

3. INVESTMENTS. Purchases and sales of securities for the year ended December
31, 1996, other than short-term securities, aggregated $562,954,042 and
$247,968,948 for the High Yield Fund, $147,057,308 and $97,943,499 for the
Emerging Markets Fund, $13,029,097 and $5,390,246 for the New York Municipal
Fund, and $19,104,409 and $7,532,778 for the Latin America Total Return Fund.
The cost of securities is substantially the same for Federal income tax purposes
as it is for financial reporting purposes.

33
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
NEW YORK LATIN AMERICA
HIGH YIELD EMERGING MUNICIPAL TOTAL RETURN
FUND MARKETS FUND FUND FUND
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Aggregate Cost......... $ 799,338,168 $ 103,603,318 $ 19,515,273 $12,083,478
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
Gross unrealized
appreciation.......... $ 34,772,141 $ 8,719,324 $ 306,011 $ 1,207,042
Gross unrealized
depreciation.......... (1,063,096) (343,816) (16,920) (159,760)
-------------- -------------- ------------- -------------
Net unrealized
appreciation.......... $ 33,709,045 $ 8,375,508 $ 289,091 $ 1,047,282
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
</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.

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, 1996 and December 31,
1995, were as follows:

<TABLE>
<CAPTION>
HIGH YIELD FUND
---------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold........... 41,432,333 $412,849,673 26,556,487 $256,321,969
Shares issued in
reinvestment of
dividends and
distributions........ 4,197,280 41,938,736 2,237,907 21,843,278
Shares redeemed....... (10,052,610) (100,064,884) (4,512,995) (43,708,022)
----------- ------------ ---------- ------------
Net increase.......... 35,577,003 $354,723,525 24,281,399 $234,457,225
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------
</TABLE>

<TABLE>
<CAPTION>
EMERGING MARKETS FUND
-------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 6,960,725 $73,997,689 2,699,458 $ 25,099,840
Shares issued in
reinvestment of
dividends and
distributions........... 820,976 8,976,597 231,369 2,172,548
Shares redeemed.......... (2,220,079) (23,390,002) (1,142,233) (10,439,165)
---------- ----------- ---------- ------------
Net increase............. 5,561,622 $59,584,284 1,788,594 $ 16,833,223
---------- ----------- ---------- ------------
---------- ----------- ---------- ------------
</TABLE>

<TABLE>
<CAPTION>
NEW YORK MUNICIPAL FUND
---------------------------------------------
YEAR ENDED DECEMBER PERIOD ENDED DECEMBER
31, 1996 31, 1995
--------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold.................. 957,098 $9,898,661 1,507,243 $15,433,921
Shares issued in reinvestment
of dividends and
distributions............... 57,067 589,238 19,264 198,979
Shares redeemed.............. (272,129) (2,837,811) (330,681) (3,422,663)
--------- ---------- --------- -----------
Net increase................. 742,036 $7,650,088 1,195,826 $12,210,237
--------- ---------- --------- -----------
--------- ---------- --------- -----------
</TABLE>

<TABLE>
<CAPTION>
LATIN AMERICA
TOTAL RETURN FUND
----------------------
PERIOD ENDED DECEMBER
31, 1996
----------------------
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Shares sold........................................... 1,214,457 $13,192,197
Shares issued in reinvestment of dividends and
distributions........................................ 36,887 427,936
Shares redeemed....................................... (110,382) (1,261,911)
--------- -----------
Net increase.......................................... 1,140,962 $12,358,222
--------- -----------
--------- -----------
</TABLE>

5. DERIVATIVE INSTRUMENTS. The Funds may invest in various financial instruments
including positions in forward currency contracts, enter into currency swaps and
purchase foreign currency options. The Funds enter into such contracts for the
purposes 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 and the Latin America Total Return
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 currency transactions. Fluctuations in the value of
forward contracts held at December 31, 1996 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, 1996.

HIGH YIELD FUND

34
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------

EMERGING MARKETS FUND

<TABLE>
<CAPTION>
VALUE ON VALUE AT
CONTRACT MATURITY ORIGINATION DECEMBER 31, UNREALIZED
CURRENCY AMOUNTS DATE DATE 1996 APPRECIATION
----------- ---------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sell DEM (8,515,000) 1/22/97 ($5,684,853) $(5,536,283) $ 148,570
Sell DEM (5,845,000) 1/22/97 (3,863,313) (3,800,302) 63,011
Sell DEM (400,000) 1/22/97 (263,591) (260,072) 3,519
Sell DEM (2,620,000) 5/28/97 (1,733,263) (1,717,829) 15,434
------------
Net unrealized appreciation on forward positions........................... $ 230,534
------------
------------
</TABLE>

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 High Yield Fund, the Emerging Markets Fund and the Latin
America Total Return Fund invest in obligations of foreign entities 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, 1996, the
Emerging Markets Fund utilized its capital loss carryover of $170,976. The Latin
America Total Return Fund has incurred $38,047 and $59,985 of post-October net
capital and foreign currency losses during the year ended December 31, 1996.
These losses are deemed to arise on the first business day of the next taxable
year.

As of December 31, 1996, permanent book/tax differences were primarily
attributable to foreign currency gains and losses, reclassification or paydowns
and recharacterization of distributions. To reflect reclassifications arising
from permanent book/tax differences as of December 31, 1996, the Emerging
Markets Fund, High Yield Fund, Latin America Total Return Fund and New York
Municipal Fund reclassified $155,146, $368,010, $59,985, and $2,717,
respectively, between undistributed net investment income and accumulated
realized capital gains.

35
<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, 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,
OFFITBANK New York Municipal Fund and OFFITBANK Latin America Total Return Fund
(the "Funds," each constituting a portfolio of The OFFITBANK Investment Fund,
Inc.) at December 31, 1996, 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, 1996 by
correspondence with the custodians and brokers, provide a reasonable basis for
the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 14, 1997

36
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.

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

OFFICERS AND DIRECTORS
Morris W. Offit
CHAIRMAN OF THE BOARD, PRESIDENT AND
DIRECTOR

Edward J. Landau
DIRECTOR

The Very Reverend
James Parks Morton
DIRECTOR

Dr. Wallace Mathai-Davis
SECRETARY AND TREASURER

Alaina Metz
ASSISTANT SECRETARY

Bruce Treff
ASSISTANT SECRETARY

Carrie Zuckerman
ASSISTANT SECRETARY

Vincent M. Rella
ASSISTANT TREASURER

Stephen Brent Wells
ASSISTANT TREASURER

INVESTMENT ADVISOR
OFFITBANK
520 Madison Avenue
New York, New York 10022-4213

DISTRIBUTOR
OFFIT Funds Distributor, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-8012

CUSTODIAN -- High Yield Fund and
New York Municipal Fund
The Bank of New York
90 Washington Street, 11th Floor
New York, New York 10286

CUSTODIAN -- Emerging Markets Fund and
Latin America Total Return Fund
The Chase Manhattan Bank
3 MetroTech Center, 6th Floor
Brooklyn, New York 11245

LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3909

ADMINISTRATOR
BISYS Fund Services Limited Partnership
125 West 55th Street
New York, New York 10019

TRANSFER AND DIVIDEND DISBURSING AGENT
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-8012

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
<PAGE>
The OFFITBANK Investment Fund, Inc.
125 West 55th Street, New York, NY 10019
(212) 758 9600