<PAGE>
-------------------------------------------
OFFITBANK High Yield Fund
OFFITBANK Emerging Markets Fund
OFFITBANK Latin America Equity Fund
OFFITBANK New York Municipal Fund
OFFITBANK California Municipal Fund
OFFITBANK National Municipal Fund
OFFITBANK U.S. Government Securities Fund
OFFITBANK Mortgage Securities Fund
---------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1998
THE
[OFFITBANK LOGO]
INVESTMENT FUND, INC.
<PAGE>
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
Dear Shareholders:
We are very pleased to present you with the June 30, 1998 Semi-Annual Report for
The OFFITBANK Investment Fund, Inc. As of that date the Funds' investment
portfolios have assets in excess of $2 billion, an increase of almost $400
million since year-end.
The specific results of the respective Funds, along with an investment and
market commentary from each portfolio manager, are part of this Semi-Annual
Report. As always, we have tried to make each market commentary informative, and
I hope that you will find them helpful.
We greatly value your participation in our Funds. 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,
[LOGO]
Morris W. Offit
July 17, 1998
<PAGE>
OFFITBANK
HIGH YIELD FUND
- --------------------------------------------------------------------------------
The Fund's net investment return for the first half of 1998 after all fees and
expenses was 4.48%. The June 30, 1998 NAV price of $10.37 compares favorably to
the $10.34 price at December 31, 1997. As of June 30, 1998, the Fund had a 30
day SEC yield of 8.28%, average quality of B1/B+ and an effective duration of
4.3 years. The Fund continued to grow during the first half of 1998 as net
assets increased to $1,667 million as of June 30, 1998 from $1,347 million on
December 31, 1997.
Ten year Treasury yields fell approximately 30 basis points over the first half.
Japan's continuing problems threatened to exacerbate the downturn in Asia, which
in turn led to weakness in other emerging markets around the world. The
resultant flight to quality contributed to lower Treasury yields, with longer
term interest rates falling the most. Consistent with the Treasury market,
longer dated better quality high yield performed the best. Due to supply
pressures, high yield spreads to Treasuries widened nearly 40 basis points from
year end. Even with spread widening, high yield continued to add value to fixed
income portfolios.
The record pace of new issue supply finally overwhelmed demand during the
quarter. Year-to-date, over $100 billion in new high yield bonds have been
issued which is 85% greater than the first six months of 1997, a record year. To
attract buyers as the second quarter progressed, new issues were brought to
market at increasingly wider spreads. Existing issues in the secondary market
repriced as a result. At quarter end, high yield spreads of 350 basis points
were at their widest level of the past two years.
Aside from periodic supply imbalances, we do not expect spreads to widen
materially or on a sustained basis. For the market as a whole, positive events
continue to outpace negative events. Upgrades, premium tenders, and positive
merger activity are common occurrences in today's market. The overall quality of
high yield credits is superior to a decade ago. Moreover, the emergence of CBO's
serves as a cushion against high yield spread widening by creating demand when
spreads widen. Windows of opportunity to invest new funds at wide spreads have
compressed into shorter time frames.
The large number of recent positive credit events has started to change the
structure of the market in several ways. Upgrades, premium tenders, and bond
calls over the past year have removed many upper tier securities from the market
and, combined with the generally lower credit profile of new issues, lowered
overall market credit quality and the average rating of the market indices.
Double B's as a percentage of the Merrill Lynch High Yield Index have declined
to 43% at the end of the second quarter from 49% at the beginning of the year.
The large inflow of new issues has altered the industry weightings of the market
as well. Industries such as telecommunications, media, and healthcare have grown
their share of the high yield market dramatically. One possible effect of these
industry changes may be that the high yield sector is less economically
sensitive today than in the past.
The credit fundamentals of the high yield market are firm with generally little
spillover from Asia. However, several sectors, such as technology and steel,
will be affected. High yield market upgrades continue to exceed downgrades.
Default rates have remained very low, although indices that include non-U.S.
issuers have started to rise. The Moody's twelve month default rate has risen to
3.4% largely due to Asian defaults. By comparison, most purely domestic indices
have default rates of approximately 1%. We continue to expect domestic default
rates to rise, but to remain well below the historical averages.
The new issue calendar continues to be dominated by mid single B credits and
unseasoned telecommunication issues. However, the enormous breadth of today's
high yield market, with more than 2,000 issues outstanding, affords ample
opportunity to focus on better quality credits. We anticipate that a number of
the newer credits, which today do not meet our credit standards, will improve
and mature and over time become appropriate investment candidates.
Several noteworthy developments occurred during the first half of 1998 which
affected the portfolio. The Fund owned 23 issues that had ratings upgraded by
Moody's or Standard & Poor's and 15 that were downgraded. A large number of
holdings, including Vencor, Pricellular, Host Marriot Properties, Johns
Manville, Tenet Healthcare and Repap New Brunswick all tendered for their high
yield bonds at investment grade spreads. Stone Container Corp., the Fund's
largest holding, announced a credit enhancing merger with Jefferson Smurfit
Corp. During the first half of 1998, 28 issues totaling approximately $173
million were either called, tendered or defeased. Nearly 20% of average assets
over the past twelve months have been called or tendered.
2
<PAGE>
OFFITBANK
HIGH YIELD FUND
- --------------------------------------------------------------------------------
When replacing issues and investing new monies, we continue to focus on the
better quality segment of the high yield market. The composition of the Fund has
remained steady. Approximately 39% of the holdings in the Fund are rated either
Ba3 or better by Moody's or BB- or better by Standard & Poor's. Additionally,
64% of the holdings are rated at least B1 or B+. The Fund is very well
diversified with over 225 issues and no single credit larger than 1.5% of the
Fund's assets at June 30, 1998. We continue to believe that better quality high
yield credits will outperform fixed income alternatives over time.
Stephen T. Shapiro
July 17, 1998
3
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS (0.2%)
OIL/GAS (0.2%)
Reading & Bates Energy Co. Conv. Eurobonds, 8.00%, 12/31/98........................................ $ 1,871,000
TOTAL CONVERTIBLE BONDS (COST $2,900,029)..........................................................
CORPORATE BONDS (90.7%)
AEROSPACE/DEFENSE (0.6%)
Newport News Shipbuilding Inc. Sr Sub Notes, 9.25%, 12/01/06....................................... 3,750,000
Sequa Corp. Sr Notes, 8.75%, 12/15/01.............................................................. 5,600,000
AUTOMOTIVE (2.2%)
Delco Remy Intl Inc. Sr Sub Notes, 10.625%, 08/01/06............................................... 4,000,000
Exide Corp. Sr Notes, 10.00%, 04/15/05............................................................. 8,500,000
Exide Holding Europe SA, 9.125%, 04/15/04, (144A).................................................. 16,000,000 (a)(1)
Federal-Mogul Inc. Sr Notes, 7.875%, 07/01/10...................................................... 4,000,000
Hayes Wheels International Inc. Sr Sub Notes, 9.125%, 07/15/07..................................... 7,000,000
Walbro Corp. Sr Notes, 10.125%, 12/15/07........................................................... 3,500,000
BROADCAST/TELECOMMUNICATIONS (11.4%)
Arch Communications Inc. Sr Notes, 12.75%, 07/01/07, (144A)........................................ 2,500,000 (1)
CCPR Services Sr Sub Notes, 10.00%, 02/01/07....................................................... 4,875,000
Centennial Cellular Sr Notes, 8.875%, 11/01/01..................................................... 14,000,000
Comcast Cellular Holdings Sr Notes, 9.50%, 05/01/07................................................ 9,000,000
Echostar Communications Sr Disount Notes, 0/12.875%, 06/01/04...................................... 18,000,000 (2)
Fox Liberty Networks L.L.C. Sr Notes, 8.875%, 08/15/07............................................. 7,000,000
Globalstar Lp Capital Sr Notes, 11.50%, 06/01/05, (144A)........................................... 6,000,000 (1)
Granite Broadcasting Corp. Sr Sub Notes, 9.375%, 12/01/05.......................................... 6,000,000
Heritage Media Corporation Sr Sub Notes, 8.75%, 02/15/06........................................... 4,500,000
Intermedia Communications Fla Inc. Sr Discount Notes, 0/12.50%, 05/15/06........................... 9,000,000 (2)
Intermedia Communications Fla Inc. Sr Discount Notes, 0/11.25%, 07/15/07........................... 7,000,000 (2)
IXC Communications Inc. Sr Sub Notes, 9.00%, 04/15/08, (144A)...................................... 7,000,000 (1)
Metrocall Inc. Sr Sub Notes, 9.75%, 11/01/07....................................................... 5,000,000
Metronet Communications Corp. Sr Disc. Notes, 0/9.95%, 06/15/08, (144A)............................ 10,000,000 (1)(2)
Nextel Communications Sr Discount Notes, 0/10.65%, 09/15/07........................................ 12,500,000 (2)
Nextel Communications Sr Discount Notes, 0/9.95%, 02/15/08, (144A)................................. 10,000,000 (1)(2)
Paging Network Sr Sub Notes, 10.125%, 08/01/07..................................................... 12,500,000
Price Communications Sr Notes, 9.125%, 12/15/06, (144A)............................................ 12,000,000 (1)
Psinet Inc. Sr Notes, 10.00%, 02/15/05............................................................. 8,000,000
Rogers Cantel Sr Sub Notes, 8.80%, 10/01/07........................................................ 9,500,000
Satelites Mexicanos SA Sr Notes, 10.125%, 11/01/04, (144A)......................................... 4,500,000 (1)
Sinclair Broadcasting Group, 10.00%, 09/30/05...................................................... 4,000,000
Vanguard Cellular Systems Inc. Sr Debs, 9.375%, 04/15/06........................................... 9,000,000
Viacom Inc. Subordinate Notes, 8.00%, 07/07/06..................................................... 11,000,000
CABLE (8.5%)
Adelphia Communications Corp. Sr Notes, 9.50%, 02/15/04............................................ 7,150,781 (3)
Adelphia Communications Corp. Sr Notes, 9.875%, 03/01/07........................................... 6,000,000
Century Communications Corp. Sr Notes, 9.75%, 02/15/02............................................. 6,500,000
Century Communications Corp. Sr Notes, 8.875%, 01/15/07............................................ 5,500,000
Comcast Corportation Sr Sub Debs, 9.375%, 0515/05.................................................. 8,000,000
CSC Holdings Sr Sub Notes, 9.25%, 11/01/05......................................................... 7,500,000
Diamond Holdings PLC Sr Notes, 9.125%, 02/01/08.................................................... 5,000,000
Jones Intercable Inc. Sr Sub Debs, 10.50%, 03/0/08................................................. 7,500,000
Lenfest Communications Inc. Sr Notes, 8.375%, 11/01/05............................................. 12,500,000
Marcus Cable Company L.P. Sr Debs., 11.875%, 10/01/05.............................................. 6,000,000
Marcus Cable Operating L.P. Sr Sub Discount Notes, 0/13.50%, 08/01/04.............................. 11,500,000 (2)
Mediacom Llc Capital Sr Notes, 8.50%, 04/15/08, (144A)............................................. 8,000,000 (1)
NTL Inc. Sr Notes, 10.00%, 02/15/07................................................................ 4,500,000
<CAPTION>
MARKET
VALUE
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS (0.2%)
OIL/GAS (0.2%)
Reading & Bates Energy Co. Conv. Eurobonds, 8.00%, 12/31/98........................................ $ 3,040,375
-------------
TOTAL CONVERTIBLE BONDS (COST $2,900,029).......................................................... 3,040,375
-------------
CORPORATE BONDS (90.7%)
AEROSPACE/DEFENSE (0.6%)
Newport News Shipbuilding Inc. Sr Sub Notes, 9.25%, 12/01/06....................................... 3,989,063
Sequa Corp. Sr Notes, 8.75%, 12/15/01.............................................................. 5,684,000
-------------
9,673,063
-------------
AUTOMOTIVE (2.2%)
Delco Remy Intl Inc. Sr Sub Notes, 10.625%, 08/01/06............................................... 4,320,000
Exide Corp. Sr Notes, 10.00%, 04/15/05............................................................. 8,861,250
Exide Holding Europe SA, 9.125%, 04/15/04, (144A).................................................. 8,930,599
Federal-Mogul Inc. Sr Notes, 7.875%, 07/01/10...................................................... 4,010,000
Hayes Wheels International Inc. Sr Sub Notes, 9.125%, 07/15/07..................................... 7,315,000
Walbro Corp. Sr Notes, 10.125%, 12/15/07........................................................... 3,491,250
-------------
36,928,099
-------------
BROADCAST/TELECOMMUNICATIONS (11.4%)
Arch Communications Inc. Sr Notes, 12.75%, 07/01/07, (144A)........................................ 2,525,000
CCPR Services Sr Sub Notes, 10.00%, 02/01/07....................................................... 4,740,938
Centennial Cellular Sr Notes, 8.875%, 11/01/01..................................................... 14,595,000
Comcast Cellular Holdings Sr Notes, 9.50%, 05/01/07................................................ 9,405,000
Echostar Communications Sr Disount Notes, 0/12.875%, 06/01/04...................................... 17,527,500
Fox Liberty Networks L.L.C. Sr Notes, 8.875%, 08/15/07............................................. 7,122,500
Globalstar Lp Capital Sr Notes, 11.50%, 06/01/05, (144A)........................................... 5,827,500
Granite Broadcasting Corp. Sr Sub Notes, 9.375%, 12/01/05.......................................... 6,165,000
Heritage Media Corporation Sr Sub Notes, 8.75%, 02/15/06........................................... 4,725,000
Intermedia Communications Fla Inc. Sr Discount Notes, 0/12.50%, 05/15/06........................... 7,380,000
Intermedia Communications Fla Inc. Sr Discount Notes, 0/11.25%, 07/15/07........................... 5,110,000
IXC Communications Inc. Sr Sub Notes, 9.00%, 04/15/08, (144A)...................................... 7,017,500
Metrocall Inc. Sr Sub Notes, 9.75%, 11/01/07....................................................... 5,100,000
Metronet Communications Corp. Sr Disc. Notes, 0/9.95%, 06/15/08, (144A)............................ 6,187,500
Nextel Communications Sr Discount Notes, 0/10.65%, 09/15/07........................................ 8,468,750
Nextel Communications Sr Discount Notes, 0/9.95%, 02/15/08, (144A)................................. 6,437,500
Paging Network Sr Sub Notes, 10.125%, 08/01/07..................................................... 13,000,000
Price Communications Sr Notes, 9.125%, 12/15/06, (144A)............................................ 12,000,000
Psinet Inc. Sr Notes, 10.00%, 02/15/05............................................................. 8,180,000
Rogers Cantel Sr Sub Notes, 8.80%, 10/01/07........................................................ 9,416,875
Satelites Mexicanos SA Sr Notes, 10.125%, 11/01/04, (144A)......................................... 4,365,000
Sinclair Broadcasting Group, 10.00%, 09/30/05...................................................... 4,290,000
Vanguard Cellular Systems Inc. Sr Debs, 9.375%, 04/15/06........................................... 9,450,000
Viacom Inc. Subordinate Notes, 8.00%, 07/07/06..................................................... 11,343,750
-------------
190,380,313
-------------
CABLE (8.5%)
Adelphia Communications Corp. Sr Notes, 9.50%, 02/15/04............................................ 7,615,582
Adelphia Communications Corp. Sr Notes, 9.875%, 03/01/07........................................... 6,495,000
Century Communications Corp. Sr Notes, 9.75%, 02/15/02............................................. 6,955,000
Century Communications Corp. Sr Notes, 8.875%, 01/15/07............................................ 5,830,000
Comcast Corportation Sr Sub Debs, 9.375%, 0515/05.................................................. 8,540,000
CSC Holdings Sr Sub Notes, 9.25%, 11/01/05......................................................... 8,025,000
Diamond Holdings PLC Sr Notes, 9.125%, 02/01/08.................................................... 5,187,500
Jones Intercable Inc. Sr Sub Debs, 10.50%, 03/0/08................................................. 8,221,875
Lenfest Communications Inc. Sr Notes, 8.375%, 11/01/05............................................. 13,281,250
Marcus Cable Company L.P. Sr Debs., 11.875%, 10/01/05.............................................. 6,420,000
Marcus Cable Operating L.P. Sr Sub Discount Notes, 0/13.50%, 08/01/04.............................. 11,155,000
Mediacom Llc Capital Sr Notes, 8.50%, 04/15/08, (144A)............................................. 7,970,000
NTL Inc. Sr Notes, 10.00%, 02/15/07................................................................ 4,815,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
CABLE (CONTINUED)
NTL Inc. Sr Notes, 0/9.75%, 04/01/08, (144A)....................................................... $10,000,000 (1)(2)
Olympus Communcations L.P. Sr Notes, 10.625%, 11/15/06............................................. 10,000,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.625%, 08/01/02........................... 3,000,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 10.00%, 03/15/05........................... 3,000,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.65%, 01/15/14............................ 2,500,000 (b)
Rogers Communications Inc. Sr Notes, 9.125%, 01/15/06.............................................. 3,500,000
Telewest PLC Sr Discount Debs., 0/11.00%, 10/01/07................................................. 15,000,000 (2)
CHEMICAL (3.0%)
Borden Chemicals & Plastics Sr Notes, 9.50%, 05/01/05.............................................. 10,500,000
Harris Chemical North America Inc. Sr Secured Notes, 10.25%, 07/15/01.............................. 7,500,000
ISP Holdings Inc. Sr Notes, 9.00%, 10/15/03........................................................ 5,000,000
Marsulex Inc. Sr Sub Notes, 9.625%, 07/01/08, (144A)............................................... 4,000,000 (1)
Pioneer Americas Acquisition Sr Secured Notes, 9.25%, 06/15/07..................................... 6,000,000
Polymer Group Inc. Sr Sub Notes, 9.00%, 07/01/07................................................... 5,000,000
Sifto Canada Inc. Sr Notes, 8.50%, 07/15/00........................................................ 5,500,000
Terra Inds Inc Sr Notes, 10.50%, 06/15/05.......................................................... 6,000,000
CONSUMER GROUPS (7.6%)
Ameriserve Food Co. Sr Sub Notes, 8.875%, 10/15/06................................................. 7,500,000
Ameriserve Food Co. Sr Sub Notes, 10.125%, 07/15/07................................................ 5,000,000
Aurora Foods Inc. Sr Sub Notes, 8.75%, 07/01/08, (144A)............................................ 6,500,000 (1)
Chiquita Brands International Inc. Sr Notes, 9.625%, 01/15/04...................................... 4,000,000
Chiquita Brands International Inc. Sr Notes, 9.125%, 03/01/04...................................... 6,000,000
CHS Electronics Sr Notes, 9.875%, 04/15/05, (144A)................................................. 10,500,000 (1)
Cott Corportation Sr Notes, 8.50%, 05/01/07........................................................ 4,000,000
Fedders N.A. Sr Sub Notes, 9.375%, 08/15/07........................................................ 8,500,000
Fisher Scientific International Sr Sub Notes, 9.00%, 02/01/08...................................... 7,000,000
Fleming Companies Inc. Sr Sub Notes, 10.50%, 12/01/04.............................................. 3,000,000
Host Marriott Travel Plaza Sr Notes, 9.50%, 05/15/05............................................... 7,000,000
Imperial Holly Sr Sub Notes, 9.75%, 12/15/07....................................................... 7,500,000
Nash Finch Co. Sr Sub Notes, 8.50%, 05/01/08, (144A)............................................... 6,500,000 (1)
Revlon Consumer Products Sr Sub Notes, 8.625%, 02/01/08............................................ 12,000,000
Ryder Transportation Inc. Sr Sub Notes, 10.00%, 12/01/06........................................... 3,000,000
Samsonite Corp. Sr Sub Notes, 10.75%, 06/15/08, (144A)............................................. 7,500,000 (1)
The Krystal Company Sr Notes 10.25%, 10/01/07...................................................... 5,000,000
United Artists Theatre Pass Through Certificates, 9.30%, 07/01/15.................................. 10,611,581
United Auto Group Inc. Sr Sub Notes, 11.00%, 07/15/07.............................................. 4,000,000
FINANCIAL SERVICES/INSURANCE (1.6%)
Americo Life Inc. Sr Notes, 9.25%, 06/01/05........................................................ 3,000,000
Amresco Inc. Sr Sub Notes, 9.875%, 03/15/05........................................................ 10,000,000
Nationwide Credit Sr Notes, 10.25%, 01/15/08, (144A)............................................... 4,000,000 (1)
Presidential Life Corp. Sr Notes, 9.50%, 12/15/00.................................................. 3,500,000
Veritas Holdings Sr Notes, 9.625%, 12/15/03........................................................ 4,536,000
FOREST & PAPER PRODUCTS (5.1%)
Crown Paper Co. Sr Sub Notes, 11.00%, 09/01/05..................................................... 3,500,000
Doman Industries Ltd. Sr Notes, 8.75%, 03/15/04.................................................... 8,000,000
Fort Howard Corporation Pass Through Certificates, 11.00%, 01/02/02................................ 2,106,683
Maxxam Group Inc. Sr Notes, 0/12.25%, 08/01/03..................................................... 2,500,000 (2)
Maxxam Group Inc. Sr Secured Notes, 11.25%, 08/01/03............................................... 3,000,000
Millar Western Forest Sr Notes, 9.875%, 05/15/08, (144A)........................................... 3,500,000 (1)
Pacific Lumber Sr Notes, 10.50%, 03/01/03.......................................................... 10,500,000
Pindo Deli Finance Mauritius Gtd. Sr Notes, 10.75%, 10/01/07....................................... 6,400,000
<CAPTION>
MARKET
VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
CABLE (CONTINUED)
NTL Inc. Sr Notes, 0/9.75%, 04/01/08, (144A)....................................................... $ 6,500,000
Olympus Communcations L.P. Sr Notes, 10.625%, 11/15/06............................................. 11,050,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.625%, 08/01/02........................... 3,195,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 10.00%, 03/15/05........................... 3,330,000
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.65%, 01/15/14............................ 1,878,561
Rogers Communications Inc. Sr Notes, 9.125%, 01/15/06.............................................. 3,543,750
Telewest PLC Sr Discount Debs., 0/11.00%, 10/01/07................................................. 12,375,000
-------------
142,383,518
-------------
CHEMICAL (3.0%)
Borden Chemicals & Plastics Sr Notes, 9.50%, 05/01/05.............................................. 10,500,000
Harris Chemical North America Inc. Sr Secured Notes, 10.25%, 07/15/01.............................. 7,809,375
ISP Holdings Inc. Sr Notes, 9.00%, 10/15/03........................................................ 5,187,500
Marsulex Inc. Sr Sub Notes, 9.625%, 07/01/08, (144A)............................................... 4,040,000
Pioneer Americas Acquisition Sr Secured Notes, 9.25%, 06/15/07..................................... 5,940,000
Polymer Group Inc. Sr Sub Notes, 9.00%, 07/01/07................................................... 5,075,000
Sifto Canada Inc. Sr Notes, 8.50%, 07/15/00........................................................ 5,651,250
Terra Inds Inc Sr Notes, 10.50%, 06/15/05.......................................................... 6,495,000
-------------
50,698,125
-------------
CONSUMER GROUPS (7.6%)
Ameriserve Food Co. Sr Sub Notes, 8.875%, 10/15/06................................................. 7,537,500
Ameriserve Food Co. Sr Sub Notes, 10.125%, 07/15/07................................................ 5,143,750
Aurora Foods Inc. Sr Sub Notes, 8.75%, 07/01/08, (144A)............................................ 6,597,500
Chiquita Brands International Inc. Sr Notes, 9.625%, 01/15/04...................................... 4,180,000
Chiquita Brands International Inc. Sr Notes, 9.125%, 03/01/04...................................... 6,165,000
CHS Electronics Sr Notes, 9.875%, 04/15/05, (144A)................................................. 10,237,500
Cott Corportation Sr Notes, 8.50%, 05/01/07........................................................ 3,900,000
Fedders N.A. Sr Sub Notes, 9.375%, 08/15/07........................................................ 8,415,000
Fisher Scientific International Sr Sub Notes, 9.00%, 02/01/08...................................... 6,965,000
Fleming Companies Inc. Sr Sub Notes, 10.50%, 12/01/04.............................................. 3,097,500
Host Marriott Travel Plaza Sr Notes, 9.50%, 05/15/05............................................... 7,455,000
Imperial Holly Sr Sub Notes, 9.75%, 12/15/07....................................................... 7,537,500
Nash Finch Co. Sr Sub Notes, 8.50%, 05/01/08, (144A)............................................... 6,475,625
Revlon Consumer Products Sr Sub Notes, 8.625%, 02/01/08............................................ 12,000,000
Ryder Transportation Inc. Sr Sub Notes, 10.00%, 12/01/06........................................... 3,488,850
Samsonite Corp. Sr Sub Notes, 10.75%, 06/15/08, (144A)............................................. 7,481,250
The Krystal Company Sr Notes 10.25%, 10/01/07...................................................... 5,162,500
United Artists Theatre Pass Through Certificates, 9.30%, 07/01/15.................................. 10,770,755
United Auto Group Inc. Sr Sub Notes, 11.00%, 07/15/07.............................................. 3,860,000
-------------
126,470,230
-------------
FINANCIAL SERVICES/INSURANCE (1.6%)
Americo Life Inc. Sr Notes, 9.25%, 06/01/05........................................................ 3,097,500
Amresco Inc. Sr Sub Notes, 9.875%, 03/15/05........................................................ 10,200,000
Nationwide Credit Sr Notes, 10.25%, 01/15/08, (144A)............................................... 4,020,000
Presidential Life Corp. Sr Notes, 9.50%, 12/15/00.................................................. 3,605,000
Veritas Holdings Sr Notes, 9.625%, 12/15/03........................................................ 4,717,440
-------------
25,639,940
-------------
FOREST & PAPER PRODUCTS (5.1%)
Crown Paper Co. Sr Sub Notes, 11.00%, 09/01/05..................................................... 3,788,750
Doman Industries Ltd. Sr Notes, 8.75%, 03/15/04.................................................... 7,820,000
Fort Howard Corporation Pass Through Certificates, 11.00%, 01/02/02................................ 2,159,350
Maxxam Group Inc. Sr Notes, 0/12.25%, 08/01/03..................................................... 2,631,250
Maxxam Group Inc. Sr Secured Notes, 11.25%, 08/01/03............................................... 3,165,000
Millar Western Forest Sr Notes, 9.875%, 05/15/08, (144A)........................................... 3,430,000
Pacific Lumber Sr Notes, 10.50%, 03/01/03.......................................................... 10,815,000
Pindo Deli Finance Mauritius Gtd. Sr Notes, 10.75%, 10/01/07....................................... 4,480,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
FOREST & PAPER PRODUCTS (5.1%) (CONTINUED)
Repap New Brunswick Sr Notes, 9.00%, 06/01/04, (144A).............................................. $ 7,500,000 (1)
Stone Container Corp. 1st Mortgage Notes, 10.75%, 10/01/02......................................... 7,000,000
Stone Container Corp. Sr Sub Debs., 12.25%, 04/01/02............................................... 7,500,000
Stone Container Corp. Sr Sub Notes, 11.00%, 08/15/99............................................... 3,500,000
Stone Container Finance Corp. Sr Notes, 11.50%, 08/15/06, (144A)................................... 5,500,000 (1)
Tembec Finance Corp. Sr Notes, 9.875%, 09/30/05.................................................... 8,500,000
U.S. Timberlands Finance Corporation Sr Notes, 9.625%, 11/15/07.................................... 6,500,000
GENERAL INDUSTRIES/MANUFACTURING (7.4%)
Advanced Micro Devices Sr Notes, 11.00%, 08/01/03.................................................. 3,000,000
Allied Waste N.A. Sr Sub Notes, 10.25%, 12/01/06................................................... 4,500,000
American Business Information Sr Sub Notes, 9.50%, 06/15/08, (144A)................................ 2,500,000 (1)
Calmar Inc. Sr Sub Notes, 11.50%, 08/15/05......................................................... 2,500,000
Celestica International Sr Sub Notes, 10.50%, 12/31/06............................................. 5,000,000
CEX Holdings Inc. Sr Sub Notes, 9.625%, 06/01/08, (144A)........................................... 8,000,000 (1)
Columbus Mckinnon Corp. Sr Sub Notes, 8.50%, 04/01/08, (144A)...................................... 3,000,000 (1)
Envirosource Inc. Sr Notes, 9.75%, 06/15/03........................................................ 3,000,000
Envirosource Inc. Sr Notes B, 9.75%, 06/15/03...................................................... 1,500,000
Foamex L.P. Sr Sub Notes, 9.875%, 06/15/07......................................................... 2,500,000
Furon Co. Sr Sub Notes, 8.125%, 03/01/08, (144A)................................................... 5,000,000 (1)
General Binding Corp. Sr Sub Notes, 9.375%, 06/01/08, (144A)....................................... 3,500,000 (1)
Hadco Corp. Sr Sub Notes, 9.50%, 06/15/08, (144A).................................................. 5,000,000 (1)
Laidlaw Environmental Sr Sub Notes, 9.25%, 06/01/08, (144A)........................................ 8,000,000 (1)
Nortek Inc. Sr Notes, 9.125%, 09/01/07............................................................. 5,000,000
Nortek Inc. Sr Sub Notes, 9.875%, 03/01/04......................................................... 6,000,000
Park-Ohio Industries Sr Sub Notes, 9.25%, 12/01/07................................................. 3,000,000
Southdown Inc. Sr Sub Notes, 10.00%, 03/01/06...................................................... 5,500,000
Unisys Corp. Sr Notes, 10.625%, 10/01/99........................................................... 2,398,000
Unisys Corp. Sr Notes, 11.75%, 10/15/04............................................................ 5,700,000
Unisys Corp. Sr SF Debs., 9.75%, 09/15/16.......................................................... 9,000,000
United Rentals Inc. Sr Sub Notes, 9.50%, 06/01/08, (144A).......................................... 7,000,000 (1)
Wesco Distribution Inc. Sr Sub Notes, 9.125%, 06/01/08, (144A)..................................... 9,000,000 (1)
Williams Scotsman Inc. Sr Notes, 9.875%, 06/01/07.................................................. 8,000,000
HEALTHCARE (5.6%)
Columbia HCA Healthcare Sr Notes, 8.85%, 01/01/07.................................................. 7,500,000
Columbia HCA Healthcare Sr Notes, 7.00%, 07/01/07.................................................. 3,500,000
Columbia HCA Healthcare Sr Notes, 7.25%, 05/20/08.................................................. 5,000,000
Conmed Corp. Sr Sub Notes, 9.00%, 03/15/08......................................................... 6,000,000
Extendicare Health Sr Sub Notes, 9.35%, 12/15/07................................................... 7,000,000
Integrated Health Services Inc. Sr Sub Notes, 9.50%, 09/15/07...................................... 12,000,000
Magellan Health Services Sr Sub Notes, 9.00%, 02/15/08, (144A)..................................... 7,000,000 (1)
Medaphis Corporation Sr Notes, 9.50%, 02/15/05, (144A)............................................. 6,500,000 (1)
Mediq PRN Life Support Sr Sub Notes, 11.00%, 06/01/08, (144A)...................................... 3,000,000 (1)
Pharmerica Inc. Sr Sub Notes, 8.375%, 04/01/08, (144A)............................................. 4,000,000 (1)
Quest Diagnostic Inc. Sr Sub Notes, 10.75%, 12/15/06............................................... 3,000,000
Sun Healthcare Group Inc. Sr Sub Notes, 9.375%, 05/01/08, (144A)................................... 7,000,000 (1)
Tenet Healthcare Corp. Sr Sub Notes, 8.625%, 01/15/07.............................................. 4,500,000
Tenet Healthcare Corp. Sr Sub Notes, 8.125%, 12/01/08, (144A)...................................... 7,000,000 (1)
Vencor Incorporated Sr Sub Notes, 9.875%, 05/01/05, (144A)......................................... 8,500,000 (1)
HOTELS & GAMING (5.6%)
Alliance Gaming Corp. Sr Sub Notes, 10.00%, 08/01/07............................................... 5,000,000
Grand Casinos Inc. Sr Sub Notes, 10.125%, 12/01/03................................................. 4,000,000
Hollywood Park Inc., 9.50%, 08/01/07............................................................... 6,500,000
<CAPTION>
MARKET
VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
FOREST & PAPER PRODUCTS (5.1%) (CONTINUED)
Repap New Brunswick Sr Notes, 9.00%, 06/01/04, (144A).............................................. $ 7,575,000
Stone Container Corp. 1st Mortgage Notes, 10.75%, 10/01/02......................................... 7,428,750
Stone Container Corp. Sr Sub Debs., 12.25%, 04/01/02............................................... 7,696,875
Stone Container Corp. Sr Sub Notes, 11.00%, 08/15/99............................................... 3,578,750
Stone Container Finance Corp. Sr Notes, 11.50%, 08/15/06, (144A)................................... 6,201,250
Tembec Finance Corp. Sr Notes, 9.875%, 09/30/05.................................................... 9,010,000
U.S. Timberlands Finance Corporation Sr Notes, 9.625%, 11/15/07.................................... 6,597,500
-------------
86,377,475
-------------
GENERAL INDUSTRIES/MANUFACTURING (7.4%)
Advanced Micro Devices Sr Notes, 11.00%, 08/01/03.................................................. 3,180,000
Allied Waste N.A. Sr Sub Notes, 10.25%, 12/01/06................................................... 4,933,125
American Business Information Sr Sub Notes, 9.50%, 06/15/08, (144A)................................ 2,512,500
Calmar Inc. Sr Sub Notes, 11.50%, 08/15/05......................................................... 2,887,500
Celestica International Sr Sub Notes, 10.50%, 12/31/06............................................. 5,512,500
CEX Holdings Inc. Sr Sub Notes, 9.625%, 06/01/08, (144A)........................................... 8,110,000
Columbus Mckinnon Corp. Sr Sub Notes, 8.50%, 04/01/08, (144A)...................................... 2,962,500
Envirosource Inc. Sr Notes, 9.75%, 06/15/03........................................................ 2,985,000
Envirosource Inc. Sr Notes B, 9.75%, 06/15/03...................................................... 1,492,500
Foamex L.P. Sr Sub Notes, 9.875%, 06/15/07......................................................... 2,693,750
Furon Co. Sr Sub Notes, 8.125%, 03/01/08, (144A)................................................... 4,993,750
General Binding Corp. Sr Sub Notes, 9.375%, 06/01/08, (144A)....................................... 3,552,500
Hadco Corp. Sr Sub Notes, 9.50%, 06/15/08, (144A).................................................. 5,000,000
Laidlaw Environmental Sr Sub Notes, 9.25%, 06/01/08, (144A)........................................ 8,200,000
Nortek Inc. Sr Notes, 9.125%, 09/01/07............................................................. 5,112,500
Nortek Inc. Sr Sub Notes, 9.875%, 03/01/04......................................................... 6,150,000
Park-Ohio Industries Sr Sub Notes, 9.25%, 12/01/07................................................. 3,060,000
Southdown Inc. Sr Sub Notes, 10.00%, 03/01/06...................................................... 6,132,500
Unisys Corp. Sr Notes, 10.625%, 10/01/99........................................................... 2,424,978
Unisys Corp. Sr Notes, 11.75%, 10/15/04............................................................ 6,576,375
Unisys Corp. Sr SF Debs., 9.75%, 09/15/16.......................................................... 9,270,000
United Rentals Inc. Sr Sub Notes, 9.50%, 06/01/08, (144A).......................................... 7,280,000
Wesco Distribution Inc. Sr Sub Notes, 9.125%, 06/01/08, (144A)..................................... 8,910,000
Williams Scotsman Inc. Sr Notes, 9.875%, 06/01/07.................................................. 8,260,000
-------------
122,191,978
-------------
HEALTHCARE (5.6%)
Columbia HCA Healthcare Sr Notes, 8.85%, 01/01/07.................................................. 8,000,250
Columbia HCA Healthcare Sr Notes, 7.00%, 07/01/07.................................................. 3,344,775
Columbia HCA Healthcare Sr Notes, 7.25%, 05/20/08.................................................. 4,848,300
Conmed Corp. Sr Sub Notes, 9.00%, 03/15/08......................................................... 5,970,000
Extendicare Health Sr Sub Notes, 9.35%, 12/15/07................................................... 7,070,000
Integrated Health Services Inc. Sr Sub Notes, 9.50%, 09/15/07...................................... 12,570,000
Magellan Health Services Sr Sub Notes, 9.00%, 02/15/08, (144A)..................................... 6,930,000
Medaphis Corporation Sr Notes, 9.50%, 02/15/05, (144A)............................................. 6,337,500
Mediq PRN Life Support Sr Sub Notes, 11.00%, 06/01/08, (144A)...................................... 3,090,000
Pharmerica Inc. Sr Sub Notes, 8.375%, 04/01/08, (144A)............................................. 4,030,000
Quest Diagnostic Inc. Sr Sub Notes, 10.75%, 12/15/06............................................... 3,345,000
Sun Healthcare Group Inc. Sr Sub Notes, 9.375%, 05/01/08, (144A)................................... 7,070,000
Tenet Healthcare Corp. Sr Sub Notes, 8.625%, 01/15/07.............................................. 4,646,250
Tenet Healthcare Corp. Sr Sub Notes, 8.125%, 12/01/08, (144A)...................................... 7,035,000
Vencor Incorporated Sr Sub Notes, 9.875%, 05/01/05, (144A)......................................... 8,361,875
-------------
92,648,950
-------------
HOTELS & GAMING (5.6%)
Alliance Gaming Corp. Sr Sub Notes, 10.00%, 08/01/07............................................... 5,000,000
Grand Casinos Inc. Sr Sub Notes, 10.125%, 12/01/03................................................. 4,360,000
Hollywood Park Inc., 9.50%, 08/01/07............................................................... 6,695,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
HOTELS & GAMING (5.6%) (CONTINUED)
Host Marriot Properties Inc. Sr Secured Notes, 9.50%, 05/15/05..................................... $ 8,000,000
Host Marriot Properties Inc. Sr Notes, 8.875%, 07/15/07............................................ 3,500,000
John Q. Hammons Hotels L.P. 1st Mortgage Notes, 8.875%, 02/15/04................................... 8,000,000
John Q. Hammons Hotels L.P. 1st Mortgage Notes, 9.75%, 10/01/05.................................... 9,500,000
Prime Hospitality Corp. 1st Mortgage Notes, 9.25%, 01/15/06........................................ 8,000,000
Prime Hospitality Corp. Sr Sub Notes, 9.75%, 04/01/07.............................................. 6,000,000
Red Roof Inns Inc. Sr Sub Notes, 9.625%, 12/15/03.................................................. 6,000,000
Sun International Hotels Ltd. Sr Sub Notes, 9.00%, 03/15/07........................................ 7,000,000
Trump Atlantic City 1st Mortgage Notes, 11.25%, 05/01/06........................................... 8,500,000
Trump Atlantic City 1st Mortgage Notes II, 11.25%, 05/01/06........................................ 5,000,000
Venetian Casino Mtg. Notes, 12.25%, 11/15/04....................................................... 5,000,000
INDEPENDENT POWER (1.8%)
AES Corp. Sr Sub Notes, 8.50%, 11/01/07............................................................ 5,500,000
AES Corp. Sr Sub Notes, 8.375%, 08/15/07........................................................... 6,000,000
California Energy Co. Inc. Sr Notes, 10.25%, 01/15/04.............................................. 4,500,000
Calpine Corp. Sr Notes, 10.50%, 05/15/06........................................................... 5,500,000
Calpine Corp. Sr Notes, 8.75%, 07/15/07............................................................ 7,500,000
METALS & MINING (7.9%)
Ak Steel Corp. Sr Notes, 9.125%, 12/15/06, (144A).................................................. 9,000,000 (1)
Armco Inc. Sr Notes, 9.375%, 11/01/00.............................................................. 5,600,000
Armco Inc. Sr Notes, 9.00%, 09/15/07............................................................... 9,000,000
Centaur Mining Exploration Sr Secured Notes, 11.00%, 12/01/07, (144A).............................. 7,500,000 (1)
EES Coke Battery Co. Inc. Series B, Sr Secured Notes, 9.382%, 04/15/07, (144A)..................... 5,750,000 (1)
Freeport Mcmoran C&G Sr Deb., 7.20%, 11/15/26...................................................... 7,500,000
Glencore Nickel Pty Limited Sr Secured Bonds, 9.00%, 12/01/14...................................... 8,000,000
Great Central Mines Ltd. Sr Notes, 8.875%, 04/01/08, (144A)........................................ 5,000,000 (1)
Inland Steel Co. 1st Mtg., 7.90%, 01/15/07......................................................... 7,000,000
Kaiser Aluminum & Chemical Corp. Sr Notes, 9.875%, 02/15/02........................................ 4,500,000
Kaiser Aluminum & Chemical Corp. Sr Notes, 10.875%, 10/15/06....................................... 5,000,000
LTV Corp. Sr Notes, 8.20%, 09/15/07................................................................ 13,500,000
Murrin Murrin Sr Sub Notes, 9.375%, 08/31/07....................................................... 7,000,000
National Steel Corp. 1st Mtg., 8.375%, 08/01/06.................................................... 7,735,000
Oregon Steel Mills 1st Mtg. Notes, 11.00%, 06/15/03................................................ 5,000,000
P&L Coal Holdings Sr Sub Notes, 9.625%, 05/15/08, (144A)........................................... 8,000,000 (1)
Wheeling-Pittsburgh Corp. Sr Notes, 9.25%, 11/15/07................................................ 10,000,000
WHX Corporation Sr Notes, 10.50%, 04/15/05......................................................... 7,000,000
OIL/GAS (7.6%)
Clark R&M Inc. Sr Sub Notes, 8.875%, 11/15/07...................................................... 4,000,000
Crown Central Petroleum Corp. Sr Notes, 10.875%, 02/01/05.......................................... 2,400,000
Denbury Management Inc. Sr Sub Notes, 9.00%, 03/01/08.............................................. 3,000,000
Energy Corp of America Sr Sub Notes, 9.50%, 05/15/07............................................... 5,500,000
Ferrellgas Partner L.P. Sr Notes, 9.375%, 06/15/06................................................. 7,000,000
Giant Industries Services Sr Sub Notes, 9.00%, 09/01/07............................................ 10,000,000
Grey Wolf Inc. Sr Notes, 8.875%, 07/01/07.......................................................... 8,500,000
Grey Wolf Inc. Sr Notes, 8.875%, 07/01/07, (144A).................................................. 3,000,000 (1)
Gulf Canada Resources Ltd. Sr Sub Debs, 9.25%, 01/15/04............................................ 4,000,000
Houston Exploration Co. Sr Sub Notes, 8.625%, 01/01/08............................................. 6,000,000
J Ray Mc Dermott S.A. Sr Sub Notes, 9.375%, 07/15/06............................................... 7,500,000
KCS Energy Inc. Sr Notes, 11.00%, 01/15/03......................................................... 9,000,000
Newpark Resources Inc. Sr Sub Notes, 8.625%, 12/15/07.............................................. 7,000,000
Nuevo Energy Co. Sr Sub Notes, 9.50%, 04/15/06..................................................... 3,000,000
Octel Developments PLC Sr Notes, 10.00%, 05/01/06, (144A).......................................... 3,000,000 (1)
Parker Drilling Co. Sr Notes, 9.75%, 11/15/06...................................................... 8,000,000
<CAPTION>
MARKET
VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
HOTELS & GAMING (5.6%) (CONTINUED)
Host Marriot Properties Inc. Sr Secured Notes, 9.50%, 05/15/05..................................... $ 8,720,000
Host Marriot Properties Inc. Sr Notes, 8.875%, 07/15/07............................................ 3,941,875
John Q. Hammons Hotels L.P. 1st Mortgage Notes, 8.875%, 02/15/04................................... 8,050,000
John Q. Hammons Hotels L.P. 1st Mortgage Notes, 9.75%, 10/01/05.................................... 9,880,000
Prime Hospitality Corp. 1st Mortgage Notes, 9.25%, 01/15/06........................................ 8,480,000
Prime Hospitality Corp. Sr Sub Notes, 9.75%, 04/01/07.............................................. 6,382,500
Red Roof Inns Inc. Sr Sub Notes, 9.625%, 12/15/03.................................................. 6,090,000
Sun International Hotels Ltd. Sr Sub Notes, 9.00%, 03/15/07........................................ 7,350,000
Trump Atlantic City 1st Mortgage Notes, 11.25%, 05/01/06........................................... 8,287,500
Trump Atlantic City 1st Mortgage Notes II, 11.25%, 05/01/06........................................ 4,850,000
Venetian Casino Mtg. Notes, 12.25%, 11/15/04....................................................... 5,162,500
-------------
93,249,375
-------------
INDEPENDENT POWER (1.8%)
AES Corp. Sr Sub Notes, 8.50%, 11/01/07............................................................ 5,568,750
AES Corp. Sr Sub Notes, 8.375%, 08/15/07........................................................... 6,060,000
California Energy Co. Inc. Sr Notes, 10.25%, 01/15/04.............................................. 4,826,250
Calpine Corp. Sr Notes, 10.50%, 05/15/06........................................................... 6,063,750
Calpine Corp. Sr Notes, 8.75%, 07/15/07............................................................ 7,706,250
-------------
30,225,000
-------------
METALS & MINING (7.9%)
Ak Steel Corp. Sr Notes, 9.125%, 12/15/06, (144A).................................................. 9,427,500
Armco Inc. Sr Notes, 9.375%, 11/01/00.............................................................. 5,719,000
Armco Inc. Sr Notes, 9.00%, 09/15/07............................................................... 8,932,500
Centaur Mining Exploration Sr Secured Notes, 11.00%, 12/01/07, (144A).............................. 7,631,250
EES Coke Battery Co. Inc. Series B, Sr Secured Notes, 9.382%, 04/15/07, (144A)..................... 6,037,500
Freeport Mcmoran C&G Sr Deb., 7.20%, 11/15/26...................................................... 5,985,075
Glencore Nickel Pty Limited Sr Secured Bonds, 9.00%, 12/01/14...................................... 7,760,000
Great Central Mines Ltd. Sr Notes, 8.875%, 04/01/08, (144A)........................................ 4,900,000
Inland Steel Co. 1st Mtg., 7.90%, 01/15/07......................................................... 7,043,750
Kaiser Aluminum & Chemical Corp. Sr Notes, 9.875%, 02/15/02........................................ 4,635,000
Kaiser Aluminum & Chemical Corp. Sr Notes, 10.875%, 10/15/06....................................... 5,400,000
LTV Corp. Sr Notes, 8.20%, 09/15/07................................................................ 13,027,500
Murrin Murrin Sr Sub Notes, 9.375%, 08/31/07....................................................... 6,947,500
National Steel Corp. 1st Mtg., 8.375%, 08/01/06.................................................... 7,735,000
Oregon Steel Mills 1st Mtg. Notes, 11.00%, 06/15/03................................................ 5,400,000
P&L Coal Holdings Sr Sub Notes, 9.625%, 05/15/08, (144A)........................................... 8,230,000
Wheeling-Pittsburgh Corp. Sr Notes, 9.25%, 11/15/07................................................ 10,200,000
WHX Corporation Sr Notes, 10.50%, 04/15/05......................................................... 7,070,000
-------------
132,081,575
-------------
OIL/GAS (7.6%)
Clark R&M Inc. Sr Sub Notes, 8.875%, 11/15/07...................................................... 4,020,000
Crown Central Petroleum Corp. Sr Notes, 10.875%, 02/01/05.......................................... 2,508,000
Denbury Management Inc. Sr Sub Notes, 9.00%, 03/01/08.............................................. 2,880,000
Energy Corp of America Sr Sub Notes, 9.50%, 05/15/07............................................... 5,390,000
Ferrellgas Partner L.P. Sr Notes, 9.375%, 06/15/06................................................. 7,210,000
Giant Industries Services Sr Sub Notes, 9.00%, 09/01/07............................................ 10,337,500
Grey Wolf Inc. Sr Notes, 8.875%, 07/01/07.......................................................... 8,202,500
Grey Wolf Inc. Sr Notes, 8.875%, 07/01/07, (144A).................................................. 2,895,000
Gulf Canada Resources Ltd. Sr Sub Debs, 9.25%, 01/15/04............................................ 4,186,160
Houston Exploration Co. Sr Sub Notes, 8.625%, 01/01/08............................................. 5,970,000
J Ray Mc Dermott S.A. Sr Sub Notes, 9.375%, 07/15/06............................................... 8,062,500
KCS Energy Inc. Sr Notes, 11.00%, 01/15/03......................................................... 9,630,000
Newpark Resources Inc. Sr Sub Notes, 8.625%, 12/15/07.............................................. 7,000,000
Nuevo Energy Co. Sr Sub Notes, 9.50%, 04/15/06..................................................... 3,120,000
Octel Developments PLC Sr Notes, 10.00%, 05/01/06, (144A).......................................... 3,063,750
Parker Drilling Co. Sr Notes, 9.75%, 11/15/06...................................................... 8,180,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
OIL/GAS (7.6%) (CONTINUED)
Pride Petroleum Services Sr Notes, 9.375%, 05/01/07................................................ $ 3,000,000
Tesoro Petroleum Corp. Sr Sub Notes, 9.00%, 07/01/08, (144A)....................................... 9,000,000 (1)
Transamerican Energy Corp. Sr Secured Notes, 11.50%, 06/15/02...................................... 8,000,000
Trico Marine Services, 8.50%, 08/01/05............................................................. 6,000,000
Trico Marine Services, 8.50%, 08/01/05............................................................. 5,000,000
Wainoco Oil Corp. Sr Notes, 9.125%, 02/15/06....................................................... 3,500,000
PACKAGING/CONTAINERS (1.4%)
Container Corp. of America Sr Notes, 9.75%, 04/01/03............................................... 5,000,000
Container Corp. of America Sr Notes, 11.25%, 05/01/04.............................................. 3,500,000
Gaylord Container Corp. Sr Notes, 9.75%, 06/15/07.................................................. 11,000,000
Silgan Holding Sr Sub Debs., 9.00%, 06/01/09....................................................... 3,500,000
PUBLISHING/ADVERTISING (2.6%)
Big Flower Press Sr Sub Notes, 8.875%, 07/01/07.................................................... 8,500,000
Hollinger International Publishing Sr Sub Notes Gtd Notes, 9.25%, 03/15/07......................... 7,500,000
Lamar Advertising Co. Sr Sub Notes, 9.625%, 12/01/06............................................... 6,500,000
MDC Communications Corp. Sr Sub Notes, 10.50%, 12/01/06............................................ 4,750,000
Outdoor Systems Inc. Sr Sub Notes, 8.875%, 06/15/07................................................ 9,000,000
World Color Press Inc. Sr Sub Notes, 9.125%, 03/15/03.............................................. 5,400,000
REAL ESTATE (2.7%)
CB Richard Ellis Service Sr Sub Notes, 8.875%, 06/01/06............................................ 10,500,000
Forest City Enterprises Sr Notes, 8.50%, 03/15/08.................................................. 8,500,000
MDC Holdings Inc. Sr Notes, 8.375%, 02/01/08....................................................... 7,000,000
Rockefeller Center Property Trust, 0.00%, 12/31/00................................................. 20,000,000
Trizec Financial Ltd. Sr Notes, 10.875%, 10/15/05.................................................. 2,965,000
RETAIL (2.9%)
Advance Stores Co. Sr Sub Notes, 10.25%, 04/15/08, (144A).......................................... 6,000,000 (1)
Amazon.Com Inc. Sr Discount Notes, 0/10.00%, 05/01/08, (144A)...................................... 8,500,000 (1)(2)
Nine West Group Inc. Sr Notes, 8.375%, 08/15/05, (144A)............................................ 5,000,000 (1)
Nine West Group Inc. Sr Sub Notes, 9.00%, 08/15/07, (144A)......................................... 6,000,000 (1)
Pantry Inc. Sr Sub Notes, 10.25%, 10/15/07......................................................... 4,500,000
Petro Stopping Centers Sr Notes, 10.50%, 02/01/07.................................................. 6,000,000
Phillips Van-Heusen Sr Sub Notes, 9.50%, 05/01/08, (144A).......................................... 6,000,000 (1)
Travelcenters of America Sr Sub Notes, 10.25%, 04/01/07............................................ 6,000,000
Zale Corp. Sr Notes, 8.50%, 10/01/07............................................................... 3,000,000
TEXTILES (1.1%)
Delta Mills Inc. Sr Notes, 9.625%, 09/01/07........................................................ 7,000,000
Galey & Lord Inc. Sr Sub Notes, 9.125%, 03/01/08................................................... 8,500,000
Ing/Pt Polysindo 10.00%, 03/28/00, (144A).......................................................... 2,000,000 (1)
Pillowtex Corporation Sr Sub Notes, 10.00%, 11/15/06............................................... 2,500,000
TRANSPORTATION (3.2%)
Airtrans Airlines Sr Note, 10.50%, 04/15/01........................................................ 6,000,000
Canadian Airlines Corp. Sr Secured Notes, 10.00%, 05/01/05......................................... 6,500,000
Coach USA Inc. Sr Sub Notes, 9.375%, 07/01/07...................................................... 5,000,000
Eletson Holdings Inc. 1st Pfd. Mtg. Notes, 9.25%, 11/15/03......................................... 4,000,000
Navigator Gas Transport First Priority Ship Mtg. Notes, 10.50%, 06/30/07, (144A)................... 6,000,000 (1)
Piedmont Aviation Inc. Equipment Trust Certificates 1988 Series A, 9.80%, 01/15/00................. 942,000
<CAPTION>
MARKET
VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
OIL/GAS (7.6%) (CONTINUED)
Pride Petroleum Services Sr Notes, 9.375%, 05/01/07................................................ $ 3,157,500
Tesoro Petroleum Corp. Sr Sub Notes, 9.00%, 07/01/08, (144A)....................................... 9,000,000
Transamerican Energy Corp. Sr Secured Notes, 11.50%, 06/15/02...................................... 7,480,000
Trico Marine Services, 8.50%, 08/01/05............................................................. 5,850,000
Trico Marine Services, 8.50%, 08/01/05............................................................. 4,862,500
Wainoco Oil Corp. Sr Notes, 9.125%, 02/15/06....................................................... 3,526,250
-------------
126,531,660
-------------
PACKAGING/CONTAINERS (1.4%)
Container Corp. of America Sr Notes, 9.75%, 04/01/03............................................... 5,362,500
Container Corp. of America Sr Notes, 11.25%, 05/01/04.............................................. 3,780,000
Gaylord Container Corp. Sr Notes, 9.75%, 06/15/07.................................................. 10,780,000
Silgan Holding Sr Sub Debs., 9.00%, 06/01/09....................................................... 3,648,750
-------------
23,571,250
-------------
PUBLISHING/ADVERTISING (2.6%)
Big Flower Press Sr Sub Notes, 8.875%, 07/01/07.................................................... 8,627,500
Hollinger International Publishing Sr Sub Notes Gtd Notes, 9.25%, 03/15/07......................... 7,837,500
Lamar Advertising Co. Sr Sub Notes, 9.625%, 12/01/06............................................... 6,963,125
MDC Communications Corp. Sr Sub Notes, 10.50%, 12/01/06............................................ 4,963,750
Outdoor Systems Inc. Sr Sub Notes, 8.875%, 06/15/07................................................ 9,360,000
World Color Press Inc. Sr Sub Notes, 9.125%, 03/15/03.............................................. 5,535,000
-------------
43,286,875
-------------
REAL ESTATE (2.7%)
CB Richard Ellis Service Sr Sub Notes, 8.875%, 06/01/06............................................ 10,421,250
Forest City Enterprises Sr Notes, 8.50%, 03/15/08.................................................. 8,478,750
MDC Holdings Inc. Sr Notes, 8.375%, 02/01/08....................................................... 7,000,000
Rockefeller Center Property Trust, 0.00%, 12/31/00................................................. 15,650,000
Trizec Financial Ltd. Sr Notes, 10.875%, 10/15/05.................................................. 3,335,625
-------------
44,885,625
-------------
RETAIL (2.9%)
Advance Stores Co. Sr Sub Notes, 10.25%, 04/15/08, (144A).......................................... 6,240,000
Amazon.Com Inc. Sr Discount Notes, 0/10.00%, 05/01/08, (144A)...................................... 5,163,750
Nine West Group Inc. Sr Notes, 8.375%, 08/15/05, (144A)............................................ 4,900,000
Nine West Group Inc. Sr Sub Notes, 9.00%, 08/15/07, (144A)......................................... 5,820,000
Pantry Inc. Sr Sub Notes, 10.25%, 10/15/07......................................................... 4,635,000
Petro Stopping Centers Sr Notes, 10.50%, 02/01/07.................................................. 6,420,000
Phillips Van-Heusen Sr Sub Notes, 9.50%, 05/01/08, (144A).......................................... 5,970,000
Travelcenters of America Sr Sub Notes, 10.25%, 04/01/07............................................ 6,270,000
Zale Corp. Sr Notes, 8.50%, 10/01/07............................................................... 3,090,000
-------------
48,508,750
-------------
TEXTILES (1.1%)
Delta Mills Inc. Sr Notes, 9.625%, 09/01/07........................................................ 6,860,000
Galey & Lord Inc. Sr Sub Notes, 9.125%, 03/01/08................................................... 8,202,500
Ing/Pt Polysindo 10.00%, 03/28/00, (144A).......................................................... 500,000
Pillowtex Corporation Sr Sub Notes, 10.00%, 11/15/06............................................... 2,675,000
-------------
18,237,500
-------------
TRANSPORTATION (3.2%)
Airtrans Airlines Sr Note, 10.50%, 04/15/01........................................................ 6,060,000
Canadian Airlines Corp. Sr Secured Notes, 10.00%, 05/01/05......................................... 6,597,500
Coach USA Inc. Sr Sub Notes, 9.375%, 07/01/07...................................................... 5,250,000
Eletson Holdings Inc. 1st Pfd. Mtg. Notes, 9.25%, 11/15/03......................................... 4,090,000
Navigator Gas Transport First Priority Ship Mtg. Notes, 10.50%, 06/30/07, (144A)................... 6,255,000
Piedmont Aviation Inc. Equipment Trust Certificates 1988 Series A, 9.80%, 01/15/00................. 973,077
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
TRANSPORTATION (3.2%) (CONTINUED)
Piedmont Aviation Inc. Equipment Trust Certificates 1988 Series F, 10.15%, 03/28/08................ $ 1,000,000
Sea Containers Sr Note, 9.50%, 07/01/03............................................................ 3,000,000
Stena AB Sr Notes, 10.50%, 12/15/05................................................................ 5,000,000
Stena Line AB Sr Notes, 10.625%, 06/01/08.......................................................... 6,000,000
U.S. Air Inc. Pass Through Certificates 1990 Series A, 11.20%, 03/19/05............................ 3,442,224
U.S. Air Inc. Equipment Trust Certificates 1988 Series B, 10.00%, 01/15/02......................... 1,334,000
U.S. Air Inc. Equipment Trust Certificates 1990 Series B, 10.33%, 06/27/02......................... 803,000
U.S. Air Inc. Equipment Trust Certificates 1990 Series D, 10.28%, 06/27/01......................... 837,000
U.S. Air Inc. Equipment Trust Certificates 1990 Series D, 10.43%, 06/27/04......................... 1,014,000
U.S. Air Inc. Equipment Trust Certificates 1998 Series B, 9.80%, 01/15/00.......................... 654,000
UTILITIES (0.9%)
Cleveland Electric Illum 1st Mtg. Bonds, 9.50%, 05/15/05........................................... 4,000,000
Long Island Lighting Co. Debs., 7.125%, 06/01/05................................................... 4,000,000
Tucson Electric & Power, 10.21%, 01/01/09.......................................................... 5,526,015
TOTAL CORPORATE BONDS (COST $1,470,671,717)........................................................
FOREIGN GOVERNMENTS (1.0%)
SOVEREIGN DEBT (1.0%)
Brazil Brady Capitalization Step-Up Bonds, 3.00/8.00%, 04/15/14.................................... 9,861,785 (2)
Republic of Brazil IDU Floating Rate Note, 6.97%, 01/01/01......................................... 10,150,000 (4)
TOTAL FOREIGN GOVERNMENTS (COST $16,710,025).......................................................
MORTGAGE-BACKED SECURITIES (0.3%)
REAL ESTATE (0.2%)
Rtc Mtg. Tr. Series 1994-C1 Class F, 8.00%, 06/25/26............................................... 2,075,145
Rtc Mtg. Tr. Series 1994-C2 Class G, 8.00%, 04/25/25............................................... 1,440,976
RETAIL (0.1%)
National Convenience Realty, 9.50%, 06/30/03....................................................... 1,565,543
TOTAL MORTGAGE-BACKED SECURITIES (COST $4,101,554).................................................
PREFERRED STOCK (2.2%)
CABLE (0.4%)
CSC Holdings Series M, 11.25%...................................................................... 62,309 (3)
ENTERTAINMENT (0.7%)
Time Warner Inc. Series M, 10.25%.................................................................. 10,000 (3)
FINANCIAL SERVICES/INSURANCE (0.3%)
IBJ Preferred Cap Co. L.L.C. Series A, 8.79%, (144A)............................................... 6,000,000 (1)(4)
HEALTHCARE (0.6%)
Fresenius Medical Care, 9.00%...................................................................... 10,000,000
METALS & MINING (0.2%)
Freeport McMoran Corp. Series Gold................................................................. 120,000
TOTAL PREFERRED STOCK (COST $36,398,470)...........................................................
COMMERCIAL PAPER (0.0%)
TEXTILES
Ing/Pt Polysindo, 10.50%, 07/15/98................................................................. 616,747
TOTAL COMMERCIAL PAPER (COST $594,627).............................................................
<CAPTION>
MARKET
VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
CORPORATE BONDS (CONTINUED)
TRANSPORTATION (3.2%) (CONTINUED)
Piedmont Aviation Inc. Equipment Trust Certificates 1988 Series F, 10.15%, 03/28/08................ $ 1,088,360
Sea Containers Sr Note, 9.50%, 07/01/03............................................................ 3,105,000
Stena AB Sr Notes, 10.50%, 12/15/05................................................................ 5,437,500
Stena Line AB Sr Notes, 10.625%, 06/01/08.......................................................... 6,082,500
U.S. Air Inc. Pass Through Certificates 1990 Series A, 11.20%, 03/19/05............................ 3,752,024
U.S. Air Inc. Equipment Trust Certificates 1988 Series B, 10.00%, 01/15/02......................... 1,423,631
U.S. Air Inc. Equipment Trust Certificates 1990 Series B, 10.33%, 06/27/02......................... 871,897
U.S. Air Inc. Equipment Trust Certificates 1990 Series D, 10.28%, 06/27/01......................... 893,790
U.S. Air Inc. Equipment Trust Certificates 1990 Series D, 10.43%, 06/27/04......................... 1,134,858
U.S. Air Inc. Equipment Trust Certificates 1998 Series B, 9.80%, 01/15/00.......................... 675,575
-------------
53,690,712
-------------
UTILITIES (0.9%)
Cleveland Electric Illum 1st Mtg. Bonds, 9.50%, 05/15/05........................................... 4,382,000
Long Island Lighting Co. Debs., 7.125%, 06/01/05................................................... 4,237,000
Tucson Electric & Power, 10.21%, 01/01/09.......................................................... 5,885,206
-------------
14,504,206
-------------
TOTAL CORPORATE BONDS (COST $1,470,671,717)........................................................ 1,512,164,219
-------------
FOREIGN GOVERNMENTS (1.0%)
SOVEREIGN DEBT (1.0%)
Brazil Brady Capitalization Step-Up Bonds, 3.00/8.00%, 04/15/14.................................... 7,260,739
Republic of Brazil IDU Floating Rate Note, 6.97%, 01/01/01......................................... 9,642,500
-------------
TOTAL FOREIGN GOVERNMENTS (COST $16,710,025)....................................................... 16,903,239
-------------
MORTGAGE-BACKED SECURITIES (0.3%)
REAL ESTATE (0.2%)
Rtc Mtg. Tr. Series 1994-C1 Class F, 8.00%, 06/25/26............................................... 2,095,897
Rtc Mtg. Tr. Series 1994-C2 Class G, 8.00%, 04/25/25............................................... 1,455,386
-------------
3,551,283
-------------
RETAIL (0.1%)
National Convenience Realty, 9.50%, 06/30/03....................................................... 1,635,993
-------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $4,101,554)................................................. 5,187,276
-------------
PREFERRED STOCK (2.2%)
CABLE (0.4%)
CSC Holdings Series M, 11.25%...................................................................... 7,196,690
-------------
ENTERTAINMENT (0.7%)
Time Warner Inc. Series M, 10.25%.................................................................. 11,100,000
-------------
FINANCIAL SERVICES/INSURANCE (0.3%)
IBJ Preferred Cap Co. L.L.C. Series A, 8.79%, (144A)............................................... 5,430,000
HEALTHCARE (0.6%)
Fresenius Medical Care, 9.00%...................................................................... 10,400,000
-------------
METALS & MINING (0.2%)
Freeport McMoran Corp. Series Gold................................................................. 2,550,000
-------------
TOTAL PREFERRED STOCK (COST $36,398,470)........................................................... 36,676,690
-------------
COMMERCIAL PAPER (0.0%)
TEXTILES
Ing/Pt Polysindo, 10.50%, 07/15/98................................................................. 123,349
-------------
TOTAL COMMERCIAL PAPER (COST $594,627)............................................................. 123,349
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
OFFITBANK
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT (4.6%)
Bank of New York Repurchase Agreement 5.30%, 07/01/98 (dated 06/30/98; proceeds $77,144,256,
collateralized by $50,000,000 U.S. Treasury Notes, 5.875% due 11/15/05, valued at $51,372,090 and
$26,180,000 U.S Treasury Notes, 6.25%, due 02/15/03, valued at $26,132,900)....................... $77,132,900
TOTAL REPURCHASE AGREEMENTS (COST $77,132,900).....................................................
MONEY MARKET FUNDS (0.0%)
Bank of New York Cash Reserve MM Fund.............................................................. 36
TOTAL MONEY MARKET FUNDS (COST $36)................................................................
TOTAL INVESTMENTS (COST $1,608,509,358) (+) -- 99.0%...............................................
OTHER ASSETS IN EXCESS OF LIABILITIES 1.0%.........................................................
TOTAL NET ASSETS -- 100.0%.........................................................................
<CAPTION>
MARKET
VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT (4.6%)
Bank of New York Repurchase Agreement 5.30%, 07/01/98 (dated 06/30/98; proceeds $77,144,256,
collateralized by $50,000,000 U.S. Treasury Notes, 5.875% due 11/15/05, valued at $51,372,090 and
$26,180,000 U.S Treasury Notes, 6.25%, due 02/15/03, valued at $26,132,900)....................... $ 77,132,900
-------------
TOTAL REPURCHASE AGREEMENTS (COST $77,132,900)..................................................... 77,132,900
-------------
MONEY MARKET FUNDS (0.0%)
Bank of New York Cash Reserve MM Fund.............................................................. 36
-------------
TOTAL MONEY MARKET FUNDS (COST $36)................................................................ 36
-------------
TOTAL INVESTMENTS (COST $1,608,509,358) (+) -- 99.0%............................................... 1,651,228,084
OTHER ASSETS IN EXCESS OF LIABILITIES 1.0%......................................................... 16,234,304
-------------
TOTAL NET ASSETS -- 100.0%......................................................................... $1,667,462,388
-------------
-------------
</TABLE>
- ---------------
+ Represents cost for federal income tax purposes and differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................. $ 52,455,137
Unrealized depreciation.................. (9,736,411)
-------------
Net unrealized appreciation.............. $ 42,718,726
-------------
-------------
</TABLE>
Principal denominated in the following currencies:
(a) German Deutsche Mark (b) 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) Payment In Kind Security.
(4) Interest rate reflected is rate in effect at June 30, 1998.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
The OFFITBANK Emerging Markets Fund's investment return for the year-to-date
period ending June 30, 1998 was 1.49%. The net asset value per share as of June
30, 1998 was $10.13. For the same period, our Composite Benchmark(1) returned
0.21%.
The Fund's average annualized return since inception (March 8, 1994) was 12.77%.
As of June 30, 1998, the Fund had an average yield to maturity of 11.33%, an
average duration of 4.11 years and an average maturity of 7.76 years. The 30-day
SEC yield as of June 30 for the Fund was 10.68%.
As of June 30, the Fund was 61% invested in U.S. dollar-denominated Eurobonds,
26% in U.S. dollar-denominated Brady and pre-Brady sovereign debt, 9% in local
market instruments and 4% in cash and accrued interest.
We continue to focus on "International High Yield" debt securities as the
primary investment of the Fund. Strategically, we maintain our core emphasis on
Latin America, which represents over 90% of the Fund's investments. Our largest
sovereign allocations remain Brazil (32%), Argentina (26%) and Mexico (22%).
UNCERTAINTY IN THE EMERGING MARKETS
The Emerging Markets continued to come under pressure as Japan's weakening Yen
and political disarray and escalated Russian market turmoil furthered general
market uncertainty and volatility. As a result, fixed income spreads in general
have almost doubled from pre-crisis levels.
In the first half of this year, weakened market performance and increased asset
volatility across Emerging Markets reflected the markets' realization of what we
believe has been a fundamental re-pricing of risks associated with Southeast
Asia and Russia. Demand for a higher risk premium has also been driven by the
workout process lying ahead for Southeast Asia and Russia.
We believe the sell-off of Emerging Markets has wrongly penalized the major
Latin American countries. Investors will continue to be attracted by spreads
over U.S. Treasuries that have widened dramatically from pre-crisis levels of
330 basis points.
VALUE IN LATIN AMERICA
The indiscriminate sell-off in Emerging Markets assets during the first half of
this year has failed to recognize significant regional differences and has,
therefore, created investment opportunities--particularly in Latin America.
Latin American corporate issuers with strong underlying credit fundamentals and
bond yields averaging 11% represent both total return investment opportunities
in addition to attractive risk-adjusted yields.
We continue to focus our investment efforts on those corporate issuers in Latin
America that we believe will benefit directly from the fundamental reform
policies which the major Latin economies continue to pursue. In particular, we
see value in "International High Yield" companies that include industrials and
conglomerates, media companies and utilities. Investments held in each of these
sectors represent some of the larger regional and more globally competitive
`blue chip' issuers in their respective countries.
LATIN AMERICAN FUNDAMENTALS REMAIN ON TRACK
In the face of recent market turmoil, Latin American governments continued to
show discipline and commitment in their policy response to the Asian crisis.
Brazil almost doubled domestic interest rates post crisis. Argentina canceled a
US $10 billion (estimated) domestic road infrastructure investment plan. Mexico
has aggressively proposed a third budget expenditure reduction plan, although
this has been driven far more by the global deflationary drag that oil continues
to exert on budgeted revenue inflows for Mexico than as yet any direct economic
impact from Asia.
- ------------
(1) 50% JP Morgan's Emerging Markets Bond Index + and 50% JP Morgan's Latin
American Eurobond Index
11
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
Although Latin America's policy response to the Asian and commodity crises will
slow growth this year as well as put pressure on fiscal accounts, positive
trends still underpin these medium-term developments. Foreign direct investment
(FDI) and related privatization inflows continue to grow significantly in the
region. Brazil exemplifies the strength of FDI. This year it will attract an
estimated US $20 billion in FDI (in telecommunications, electric utilities,
banks, etc.) an increase from $17 billion last year.
While the initial crisis in Southeast Asia has largely passed, we believe that
these Asian countries are only at the beginning of a long road to recovery. Poor
liquidity and weak banking sectors continue to constrain these economies. In
contrast, the banking systems of the leading Latin American economies are
fundamentally sound and under-levered, particularly within Mercosur. In
Argentina and Brazil, active consolidation of banking and investment management
sectors has accelerated as foreign banks expand their local presence in Latin
America through acquisitions (foreign investors include JP Morgan, Citibank,
HSBC, Credit Suisse First Boston, Banco Santander and Banco Bilbao Vizcaya). The
involvement of these foreign banks in Latin America's financial sector only
further showcases the long-term capital investment being dedicated to
infrastructure and fundamental economic improvement via FDI inflows into Latin
America.
OUR FUND'S INVESTMENT STYLE AND APPROACH
Our investment approach remains dedicated to investing in high caliber
"International High Yield" bonds, whose credit fundamentals are sound and
improving. We believe the sell-off in Emerging Markets assets has penalized
issuers from the major Latin American countries undeservingly.
We see compelling value in bonds of top-tier Latin American issuers with strong
underlying credit fundamentals offering absolute yields-to-maturity of over 11%
in US dollars. We continue to target these types of issuers for investment as we
tactically increase our allocations to these U.S. dollar-denominated Eurobond
investments over time.
Richard M. Johnston Wallace Mathai-Davis
July 17, 1998
12
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT MARKET VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CORPORATE BONDS (54.2%)
BANKS (4.3%)
ARGENTINA (3.7%)
Banco de la Ciudad, 9.375%, 03/31/01....................................... $ 500,000 $ 491,250
Banco Hipotecario S.A., 10.00%, 04/17/08................................... 8,900,000 8,811,000
Banco Roberts, 11.75%, 11/16/00............................................ 300,000 322,125
------------
9,624,375
------------
BRAZIL (0.4%)
Banco Barclay, 8.00%, 10/15/05............................................. 500,000 478,750
Banco Credibanco S.A., 7.75%, 08/15/05..................................... 500,000 458,750
------------
937,500
------------
MEXICO (0.2%)
Grupo Financiero Banamex Convertible, 11.00%, 07/15/03, (144A)............. 400,000(1) 408,000
------------
10,969,875
------------
BUILDING MATERIALS (3.2%)
MEXICO (3.2%)
Cemex, 9.66%, 12/29/49..................................................... 1,750,000 1,688,750
Internacional De Ceramica, 9.75%, 08/01/02, (144A)......................... 7,150,000(1) 6,685,250
------------
8,374,000
------------
ELECTRONICS (2.5%)
KOREA (2.5%)
Samsung Electronics America, 9.75%, 05/01/03, (144A)....................... 7,000,000(1) 6,440,000
------------
FOOD (6.6%)
ARGENTINA (3.4%)
Mastellone Hermanos S.A., 11.75%, 04/01/08................................. 8,750,000 8,706,250
------------
BRAZIL (3.2%)
Arisco Prod Alimenticios, 10.75%, 05/22/05................................. 9,000,000 8,302,500
------------
17,008,750
------------
INDUSTRIAL (5.5%)
MEXICO (5.5%)
Sanluis Corp S.A., 8.875%, 03/18/08, (144A)................................ 6,450,000(1) 5,966,250
Vicap S.A., 11.375%, 05/15/07.............................................. 8,000,000 8,240,000
------------
14,206,250
------------
INFRASTRUCTURE (2.1%)
ARGENTINA (2.1%)
Cia Latino Americana, 11.625%, 06/01/04.................................... 5,550,000 5,550,000
------------
MEDIA (8.0%)
BRAZIL (4.5%)
Abril S.A., 12.00%, 10/25/03............................................... 2,750,000 2,732,813
Estado de Sao Paulo, 9.375%, 07/03/05...................................... 750,000 670,313
Globo Communicacoes Participacoes, 10.50%, 12/20/06........................ 3,250,000 2,900,625
Globo Communicacoes Participacoes, 10.625%, 12/05/08....................... 850,000 750,125
RBS Participacoes S.A., 11.00%, 04/01/07, (144A)........................... 2,000,000(1) 1,790,000
RBS Participacoes S.A., 14.00%, 12/15/03................................... 2,780,000 2,849,500
------------
11,693,376
------------
MEXICO (3.5%)
Grupo Televisa S.A. (Regular), 0/13.25%, 05/15/08.......................... 1,000,000(2) 822,500
Grupo Televisa S.A., 0/13.25%, 05/15/08, (144A)............................ 7,500,000(1)(2) 6,168,750
TV Azteca S.A. de C.V., 10.125%, 02/15/04.................................. 2,000,000 1,990,000
------------
8,981,250
------------
20,674,626
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
PAPER/PULP (2.3%)
MEXICO (2.3%)
Grupo Industrial Durango, 12.625%, 08/01/03................................ $ 5,550,000 $ 5,910,750
------------
PETROCHEMICALS (1.0%)
BRAZIL (1.0%)
OPP Petroquimica, 11.50%, 02/23/04......................................... 2,400,000 2,286,000
Trikem, 10.625%, 07/24/07.................................................. 500,000 430,000
------------
2,716,000
------------
RETAIL (1.3%)
ARGENTINA (1.3%)
Disco S.A., 9.125%, 05/15/03............................................... 1,200,000 1,155,000
Disco S.A., 9.875%, 05/15/08............................................... 2,400,000 2,268,000
------------
3,423,000
------------
STEEL (9.4%)
ARGENTINA (3.0%)
Acindar, 11.25%, 02/15/04.................................................. 7,500,000 7,659,375
------------
BRAZIL (4.1%)
CSN Iron S.A., 9.125%, 06/01/07............................................ 10,900,000 8,774,500
Metalurgica Gerdau, 11.125%, 05/24/04...................................... 1,750,000 1,741,250
------------
10,515,750
------------
MEXICO (2.4%)
Hylsa S.A. de C.V. Bonds, 9.25%, 09/15/07.................................. 6,600,000 6,187,500
------------
24,362,625
------------
TELECOMMUNICATIONS (4.8%)
ARGENTINA (3.2%)
Impsat Corp., 12.125%, 07/15/03............................................ 6,500,000 6,695,000
Telefonica de Argentina, 9.125%, 05/07/08.................................. 1,750,000 1,675,625
------------
8,370,625
------------
DOMINICAN REPUBLIC (0.4%)
Tricom S.A., 11.375%, 09/01/04, (144A)..................................... 1,000,000(1) 950,000
------------
MEXICO (1.2%)
Grupo Iusacell S.A. de C.V., 10.00%, 07/15/04.............................. 3,250,000 3,201,250
------------
12,521,875
------------
UTILITIES (3.2%)
ARGENTINA (0.9%)
Edenor, 9.75%, 12/04/01.................................................... 1,300,000 1,306,500
IEBA, 9.00%, 09/16/04...................................................... 1,000,000 952,500
------------
2,259,000
------------
BRAZIL (1.8%)
Compania Paranaense de Energia, 9.75%, 05/02/05............................ 750,000 701,250
Sabesp, 10.00%, 07/28/05................................................... 4,500,000 3,892,500
------------
4,593,750
------------
KOREA (0.5%)
Korea Electric Power, 7.00%, 10/01/02...................................... 1,500,000 1,260,000
------------
8,112,750
------------
TOTAL CORPORATE BONDS (COST $146,619,783).................................. 140,270,501
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENTS (42.4%)
SOVEREIGN DEBT (42.4%)
ARGENTINA (8.6%)
Argentina Bocon Pro 1 Floating Rate Bond, 0.00%, 04/01/07.................. $ 16,600,000(b)(3) $ 14,194,703
Republic of Argentina Brady Floating Rate Bond, 6.63%, 03/31/05............ 6,792,500(3) 5,997,778
Republic of Argentina Global Bond, 11.375%, 01/30/17....................... 2,000,000 2,129,000
------------
22,321,481
------------
BRAZIL (17.0%)
Brazil Brady Capitalization Step-Up Bond, 3.00/8.00%, 04/15/14............. 8,701,575(2) 6,406,535
Brazil Brady DCB Floating Rate Brady Bond, 6.69%, 04/15/12................. 12,250,000(3) 8,552,031
Brazil Brady Disc. Z Floating Rate, 6.625%, 04/15/24....................... 5,000,000(3) 3,859,350
Brazil Brady NMB, Floating Rate Brady, 6.69%, 04/15/09..................... 7,060,000(3) 5,365,600
Brazil Brady NMB, Floating Rate Brady, 6.688%, 04/15/09.................... 9,750,000(3) 7,410,000
Brazil-EI Floating Rate Note, 6.625%, 04/15/06............................. 13,483,000(3) 11,093,947
Republic of Brazil IDU, Floating Rate Note, 8.625%, 03/03/03............... 1,250,000(a)(3) 1,343,570
------------
44,031,033
------------
COLOMBIA (0.2%)
Colombian Treasury Bond, 25.50%, 08/19/98.................................. 750,000,000(c) 541,331
------------
ECUADOR (3.2%)
Republic of Ecuador, 11.25%, 04/25/02...................................... 8,200,000 8,394,750
------------
JAMAICA (1.2%)
Government of Jamaica, 10.875%, 06/10/05/, (144A).......................... 3,000,000(1) 3,015,000
------------
MEXICO (3.5%)
Mexican Cetes, 0.00%, 12/17/98............................................. 40,000,000(d) 3,993,559
Mexican Udibonos, UDI + 6.50%, 05/09/02.................................... 17,500,000(d)(4) 4,170,789
Mexican Udibonos, UDI + 6.25%, 08/01/02.................................... 4,000,000(d)(4) 964,358
------------
9,128,706
------------
MORROCO (3.1%)
Morroco Snap Notes, 11.50%, 01/29/09....................................... 6,875,003 3,999,242
Morocco Tranche A Loan, 6.563%, 01/01/09................................... 5,000,000(3) 4,262,500
------------
8,261,742
------------
VENEZUELA (5.5%)
Venezuela Brady DCB Floating Rate Bond, 6.625%, 12/18/07................... 2,714,285(3) 2,212,142
Venezuela Brady FLIRB Ser B, Floating Rate Brady Note, 6.625%, 03/31/07.... 214,285(3) 176,249
Venezuela Brady FLIRB, Floating Rate Bond, 6.625%, 03/31/07................ 3,428,560(3) 2,819,991
Venezuela Brady FLIRB, Floating Rate Bond, 6.625%, 03/31/07................ 11,142,820(3) 9,164,969
------------
14,373,351
------------
TOTAL FOREIGN GOVERNMENTS (COST $115,936,862)............................... 110,067,394
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
OFFITBANK
EMERGING MARKETS FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS (3.7%)
UNITED STATES (3.7%)
Chase Manhattan Bank Repurchase Agreement, 5.00%, 07/01/98 (dated 06/30/98;
proceeds $9,688,808, collateralized by $7,030,000 U.S. Treasury Bonds
8.875% due 02/15/19, valued at $9,701,400)................................ $ 9,686,118(3) $ 9,686,118
------------
TOTAL REPURCHASE AGREEMENTS (COST $9,686,118)............................... 9,686,118
------------
TOTAL INVESTMENTS (COST $272,242,763) (+) -- 100.3%......................... 260,024,013
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3%)................................ (834,913)
------------
TOTAL NET ASSETS -- 100%.................................................... $259,189,100
------------
------------
</TABLE>
- ---------------
+ Represents cost for federal income tax purposes and differs from value by net
unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................. $ 902,939
Unrealized depreciation.................. (13,121,689)
------------
Net unrealized depreciation.............. $(12,218,750)
------------
------------
</TABLE>
Principal denominated in the following currencies:
(a) Brazilian Real (b) Argentine Peso (c) Columbian Peso (d) Mexican
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) Interest rate reflected is rate in effect at June 30, 1998.
(4) Fair valued security.
UDI -- Unidades de Inversion.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
OFFITBANK
LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------
The OFFITBANK Latin America Equity Fund, for the period of March 31, 1998 to
June 30, 1998 produced a disappointing total return of negative 20.81%; the
total return year-to-date as of June 30, 1998 was negative 20.95%. The net asset
value per share as of June 30, 1998 was $10.94.
As of June 30, 1998, the Fund was fully invested and diversified across 5
countries with the highest weightings (over 80%) concentrated in the largest
economies: Brazil (55%), Mexico (28%), and Argentina (8%). The Fund held 57
separate assets at quarter end, and was diversified across 15 industries with
the largest positions in Telecommunications (25%), Electric Utilities (13%),
Beverages (11%), and Retail (10%).
The disappointing performance of the Fund is the result of the tremendous
pressure affecting all global Emerging Markets investments. Turmoil in Asia and
Russia has dramatically increased investors' perceptions of risk in the Emerging
Markets and as a result, Latin American equity prices have been beaten down
severely.
We believe that the massive sell-off of Latin American blue chip companies has
created significant value in companies whose fundamentals are minimally impacted
by these overseas events. Latin America's finest corporations still offer sound
balance sheets, strong operating cash flows, and realistic earnings growth
expectations in the high double digits at P/E's of 10x.
THE IMPACT OF INCREASED SOVEREIGN RISK PERCEPTION
The credit and currency crisis of Asia and Russia has significantly increased
the perceived sovereign risk premium for all Emerging Markets. Emerging Markets
sovereign risk has returned to levels prevailing at the beginning of 1997, when
the J. P. Morgan Emerging Markets Bond Index indicated spreads over U.S.
Treasuries at over 500 bps and U.S. dollar yields of over 11%. Higher sovereign
risk has ratcheted up the discount rate applied in valuing the underlying cash
flows of equities throughout these markets. This has forced down stock prices
from Hong Kong to Brazil.
We believe current equity prices have exaggerated the potential impact of
external events on bottom-line results, though earnings growth expectations
should be tempered in the near term, particularly due to weak commodity prices.
Latin America's blue chip companies have spent the last five years restructuring
their businesses so that top-line growth can deliver impressive bottom-line
results.
WHY WE SEE OPPORTUNITIES: FUNDAMENTALS
The global Emerging Markets risk revaluation fails to recognize that real
differences exist between regions. Among Latin America's big three (Argentina,
Brazil and Mexico), governments have accomplished tremendous fundamental
structural reform by correcting fiscal imbalances, privatizing key sectors of
the economy, and opening markets to global competition and investment.
These reforms have been accomplished within a democratic political context by
building public consensus for reform and progress. The entrenchment of
democratic principles in tandem with the consensus for reform ensures relatively
smooth transitions of power and policy continuity.
In keeping with political and economic reform, corporations are making great
leaps in productivity and efficiency through investment, corporate
restructuring, and newly found discipline. Managements throughout the region
have embraced the increasingly global marketplace and understand the necessity
to achieve world-class levels of competitiveness.
Furthermore, it has been OFFITBANK's experience that the management of Latin
America's blue chip companies are increasingly sensitive to minority
shareholder's interests. We have seen clear evidence of management's commitment
to providing attractive returns on invested capital, more focused businesses,
clear communication, and prompt delivery of complete and timely information.
WHY WE SEE OPPORTUNITIES: VALUATIONS
Corporate earnings throughout the region have continued to exceed expectations
in the last two quarters. Investments and productivity-enhancing programs
undertaken in recent years are beginning to show tangible results in the form of
increased profitability and cash flow.
17
<PAGE>
OFFITBANK
LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------
Valuations now stand well below 1997 peak levels as shown below for the 3
largest markets in the region while expected earnings growth remains strong.
<TABLE>
<CAPTION>
PEAK 1997 1998E 1999F EST.
COUNTRY P/E P/E P/E CAGR*
<S> <C> <C> <C> <C>
- -------------------------------------------------------------
Argentina 19x 10x 9x 13%
Brazil 15x 9x 7x 16%
Mexico 13x 11x 10x 14%
- -------------------------------------------------------------
</TABLE>
* CAGR = 2 year estimated compound annual US$earnings growth.
SOURCE: OFFITBANK RESEARCH; ECONOMATICA; I/B/E/S
Not only are valuations low versus historical norms, but Latin America
represents value versus other regions generally.
<TABLE>
<CAPTION>
1998E 1999F EST.
REGIONAL INDEX* P/E P/E CAGR**
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
Latin America 11x 9x 14%
Asia 17x 12x 11%
Emerging Europe & Middle East 15x 11x 12%
USA 25x 26x 7%
- -------------------------------------------------------------------------------
</TABLE>
* Regional Indices are the Morgan Stanley Emerging Markets equity
indices, I/B/E/S P/E and Earnings Growth estimates. The USA is
represented by the S&P 500 with valuation based on
I/B/E/S average estimates.
** CAGR = 2 year estimated compound annual US$earnings growth.
In our opinion, the market has exaggerated the risks associated with Latin
America's finest blue chip companies and growth expectations for these companies
have gone unrecognized. We therefore believe that both value and growth
potential make Latin American equities a compelling investment opportunity for
investors willing to adopt a twenty-four month investment horizon.
Richard M. Johnston
July 17, 1998
18
<PAGE>
OFFITBANK
LATIN AMERICA EQUITY FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
COMMON STOCKS (55.4%)
AUTO PARTS/RELATED (2.6%)
MEXICO (0.6%)
Corporacion Sanluis S.A. de C.V........................................... $ 57,500 $ 223,958
-----------
PERU (2.0%)
Ferreyros S.A............................................................. 535,371 721,227
-----------
945,185
-----------
BANKS (3.0%)
ARGENTINA (2.2%)
Banco de Galicia -- ADR*.................................................. 43,439 792,762
-----------
COLOMBIA (0.8%)
Banco de Bogota........................................................... 84,475 274,066
-----------
1,066,828
-----------
BEVERAGES (5.0%)
MEXICO (5.0%)
Coca-Cola Femsa -- ADR.................................................... 48,000 834,000
Grupo Continental S.A..................................................... 36,750 122,690
Panamerican Beverages Inc................................................. 27,000 848,813
-----------
1,805,503
-----------
BREWERY (4.0%)
COLOMBIA (1.6%)
Bavaria................................................................... 100,600 586,751
-----------
MEXICO (2.4%)
Grupo Modelo S.A.......................................................... 99,450 835,571
-----------
1,422,322
-----------
BUILDING MATERIALS (3.7%)
MEXICO (2.7%)
Cemex S.A. de C.V.*....................................................... 265,225 994,663
-----------
PERU (1.0%)
Cementos Lima, S.A........................................................ 19,004 354,927
-----------
1,349,590
-----------
FINANCIAL SERVICES/INSURANCE (1.1%)
COLOMBIA (1.1%)
Suramericana de Inversiones............................................... 123,600 387,483
-----------
FOOD (4.0%)
MEXICO (4.0%)
Grupo Industrial Bimbo.................................................... 452,222 915,914
Sigma Alimentos S.A....................................................... 219,236 528,204
-----------
1,444,118
-----------
INDUSTRIAL (1.8%)
MEXICO (1.8%)
Desc S.A. -- ADR.......................................................... 18,096 359,658
Grupo Alfa S.A. de C.V.................................................... 72,700 294,892
-----------
654,550
-----------
IRON & STEEL (8.3%)
ARGENTINA (1.5%)
Acindar Industria S.A.*................................................... 172,000 287,274
Siderar S.A. Class A...................................................... 63,700 242,089
-----------
529,363
-----------
BRAZIL (4.1%)
Companhia Siderurgica Nacional S.A........................................ 36,650 918,302
Usinas Siderurgicas de Minas Gerais S.A................................... 111,600 569,284
-----------
1,487,586
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
OFFITBANK
LATIN AMERICA EQUITY FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
MEXICO (2.7%)
Hylsamex S.A. de C.V...................................................... $ 116,530 $ 389,037
Industrias CH S.A.*....................................................... 138,550 448,674
Tubos de Acero de Mexico -- ADR........................................... 13,000 166,563
-----------
1,004,274
-----------
3,021,223
-----------
MEDIA (2.6%)
MEXICO (2.6%)
Grupo Radio Centro S.A. -- ADR............................................ 21,700 241,413
Grupo Televisa -- GDR*.................................................... 10,000 376,250
TV Azteca S.A. -- ADR..................................................... 30,310 327,727
-----------
945,390
-----------
OIL/GAS (1.4%)
ARGENTINA (1.4%)
Perez Companc S.A. -- ADR*................................................ 22,200 222,471
YPF S.A. -- ADR........................................................... 9,300 279,581
-----------
502,052
-----------
RETAIL (7.2%)
ARGENTINA (0.7%)
Importadora Y Exporadora de la Patagonia.................................. 16,254 241,401
-----------
MEXICO (6.5%)
Cifra S.A., De C.V. Series V.............................................. 409,357 610,434
Grupo Elektra S.A. -- GDR................................................. 95,400 930,150
Organizacion Soriana S.A. Class B......................................... 287,900 826,595
-----------
2,367,179
-----------
2,608,580
-----------
TELECOMMUNICATIONS (6.5%)
ARGENTINA (2.7%)
Telefonica de Argentina S.A -- ADR........................................ 15,620 506,674
Telecom Argentina S.A. -- ADR............................................. 15,300 456,131
-----------
962,805
-----------
BRAZIL (2.8%)
Telecomunicacoes Brasileiras S.A.......................................... 12,534 996,989
-----------
PERU (1.0%)
Telefonica del Peru S.A. -- ADR*.......................................... 16,800 343,350
-----------
2,303,144
-----------
UTILITIES (4.2%)
BRAZIL (4.2%)
Companhia Electric Estado Rio de Janiero.................................. 1,594,300 785,702
Companhia Energetica do Ceara............................................. 92,900 265,059
Light Servicos de Eletricidade S.A........................................ 1,500 460,397
-----------
1,511,158
-----------
TOTAL COMMON STOCK (COST $23,963,247)................................... 19,967,126
-----------
PREFERRED STOCK (43.7%)
BANKS (4.0%)
BRAZIL (4.0%)
Banco Bradesco S.A........................................................ 50,780 425,871
Banco Itau S.A............................................................ 933 532,401
Unibanco -- GDR........................................................... 16,040 473,180
-----------
1,431,452
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
OFFITBANK
LATIN AMERICA EQUITY FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK (CONTINUED)
BREWERY (1.9%)
BRAZIL (1.9%)
Companhia Cervejaria Brahma............................................... $ 380 $ 236,553
Companhia Cervejaria Brahma -- ADR........................................ 35,000 437,500
-----------
674,053
-----------
IRON & STEEL (2.0%)
BRAZIL (2.0%)
Gerdau S.A................................................................ 52,313 723,678
-----------
MANUFACTURING (0.4%)
BRAZIL (0.4%)
Ericsson Telecomunicacoes S.A.*........................................... 7,492 142,506
-----------
METALS & MINING (1.5%)
BRAZIL (1.5%)
Companhia Vale do Rio Doce S.A. -- Pfd. A................................. 26,500 526,971
-----------
OIL/GAS (3.7%)
BRAZIL (3.7%)
Petroleo Brasileiro....................................................... 7,190 1,336,535
-----------
RETAIL (3.2%)
BRAZIL (3.2%)
Companhia Brasiliera de Distribucao Pao de Acucar......................... 51,436 1,156,255
-----------
TELECOMMUNICATIONS (18.3%)
BRAZIL (18.3%)
Telebras -- ADR........................................................... 32,400 3,537,675
Telecomunicacoes do Rio de Janeiro........................................ 1 74
Telecomunicacoes do Sao Paulo............................................. 5,129 1,206,140
Telemig Celular S.A. -- Pfd. C............................................ 16,289 492,919
Telerj Celular S.A. -- Pfd. B............................................. 7,936 471,997
Telesp Celular S.A. -- Pfd. B............................................. 11,964 993,010
-----------
6,701,815
-----------
UTILITIES (8.7%)
BRAZIL (8.7%)
Centrais Electricas Brasileiras........................................... 23,750 714,588
Companhia Energetica de Minas Gerais...................................... 40,189 1,250,888
Electricidade de Sao Paulo Class B*....................................... 15,923 1,197,725
-----------
3,163,201
-----------
TOTAL PREFERRED STOCK (COST $16,712,814)................................ 15,856,466
-----------
RIGHTS (0.0%)
TELECOMMUNICATIONS (0.0%)
BRAZIL (0.0%)
Telecomunicacoes do Sao Paulo Rights...................................... 241 4,059
-----------
TOTAL RIGHTS (COST $0).................................................. 4,059
-----------
TOTAL INVESTMENTS (COST $40,676,061) (+) -- 99.1%....................... 35,827,651
OTHER ASSETS IN EXCESS OF LIABILITIES 0.9%.............................. 313,883
-----------
TOTAL NET ASSETS -- 100%................................................ $36,141,534
-----------
-----------
</TABLE>
- ---------------
+ Represents cost for federal income tax purposes and differs from value by net
unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................. $ 1,876,124
Unrealized depreciation.................. (6,720,774)
-----------
Net unrealized depreciation.............. ($4,844,650)
-----------
-----------
</TABLE>
* Denotes non-income producing security.
ADR -- American Depository Receipt.
GDR -- Global Depository Receipt.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- --------------------------------------------------------------------------------
The 1998 first half total return for the New York Municipal Fund was 2.37%. The
return for the past 12 months was 7.39%. For comparative purposes, the Lehman 5
Year Municipal Index returned 2.29% for the first half and 6.22% for the past 12
months. Since the Fund's inception on April 3, 1995, the annualized total return
was 6.81% versus the Index's 6.22% annualized return. The 30-day SEC yield for
the month ending June 30, 1998, was 4.02%.
The Fund's NAV of $10.72 at June 30th is slightly higher than the $10.69 NAV at
year end 1997. Net assets of the Fund continue to grow and at June 30th were
slightly above $56 million up from approximately $42 million at the end of the
year. During the market's modest increases and declines in the first half of
this calendar year, we were able to increase the portfolio's principal value and
earn the coupon. The portfolio continues to be high grade with an average rating
of AA.
In the first six months of 1998, high grade domestic interest rates remained in
a tight range as the markets vacillated from concerns about safety of assets and
global recession to fears about economic strength and inflationary pressures
which would require Federal Reserve Board tightening. The former has allowed
Treasuries to outperform all high grade fixed income sectors while the latter
has municipalities expeditiously completing financings before rates increase.
The result has been a municipal market that is more compelling than ever for
taxpayers--even those who must pay at the alternative minimum tax rate.
In these first six months, the municipal supply is up 51% over 1997 and is on
course to becoming the second largest year of issuance since 1993. This year's
supply is coming from many sources. Refundings account for approximately 25% of
issuance to date. The economy has played an important role as well in increasing
supply. Municipalities have benefited from higher consumer confidence as
taxpayers are more likely to approve new spending initiatives. Also, issuers
such as airports have the economic growth to support additional municipal debt
to enlarge and improve facilities. A final factor in the increase in supply has
been the deregulation of the power industry. Public power entities must insure
that rates and business positions are competitive with investor-owned utilities
(IOUs). Two major utilities have already refinanced their debt to compete with
the IOU's.
The New York municipal market has been particularly affected by the increased
supply. First, in preparation for deregulation, New York State Power issued $1.4
billion in the first half of 1998. Second, the Long Island Power Authority
(LIPA) issued $3.4 billion bonds to finance the takeover of Long Island Lighting
Company (LILCO). Finally, New York has a high volume of refundings which is not
surprising since New York has the largest amount of debt outstanding. As of June
30th, New York municipal entities issued $20.3 billion of the $146.3 billion of
municipal debt issued year-to-date.
The Fund has benefited from the abundant supply in several ways. Positions such
as New York State Power, New York City General Obligation, and New York City
Municipal Water issues have been refunded resulting in an automatic credit
upgrade. Secondly, the supply has allowed us to diversify the portfolio further
as new names have been available for purchase in the primary and secondary
markets.
There are two primary factors, other than higher interest rates, that will
eventually curtail supply. Public power tax exempt debt will eventually decline
as the refunded bonds mature and the power authorities replace their bonds with
taxable bonds. The rate sensitive financings will eventually be completed when
the demand for new funds has abated. When the supply wanes, we will have lower
yield ratios.
Carolyn N. Dolan
July 17, 1998
22
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
FLOATING RATE NOTES (2.8%)
TRANSPORTATION REVENUE (0.9%)
New York State Thruway Authority General Revenue Bonds Variable Rate Demand
Notes, 3.80%, 01/01/24*................................................... $ 100,000 $ 100,000
Port Authority of New York & New Jersey Bonds Series 86, 3.75%,
06/01/20*................................................................. 400,000 400,000
-------------
500,000
-------------
WATER/SEWER (1.9%)
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds Series A 1-Day Notes, 3.80%, 06/15/25*...................... 100,000 100,000
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds Series G 1-Day Notes, 3.75%, 06/15/25, (FGIC)*.............. 1,000,000 1,000,000
-------------
1,100,000
-------------
TOTAL FLOATING RATE NOTES (COST $1,600,000)............................. 1,600,000
-------------
MUNICIPAL BONDS (97.1%)
EDUCATION REVENUE (8.2%)
New York State Dormitory Authority Revenue Bonds, 5.70%, 05/15/04.......... 470,000 500,550
New York State Dormitory Authority Revenue Bonds , 5.00%, 05/15/03......... 1,000,000 1,028,750
New York State Dormitory Authority Revenue Bonds Columbia University,
5.25%, 07/01/06........................................................... 500,000 527,500
New York State Dormitory Authority Revenue Bonds Columbia University,
5.00%, 07/01/02........................................................... 500,000 514,375
New York State Dormitory Authority Revenue Bonds Cornell University, 4.80%,
07/01/03.................................................................. 250,000 256,250
New York State Dormitory Authority Revenue Bonds Cornell University, 5.25%,
07/01/07.................................................................. 350,000 371,437
New York State Dormitory Authority Revenue Bonds New York University,
5.50%, 07/01/04, (MBIA)................................................... 390,000 415,350
New York State Dormitory Authority Revenue Bonds Rockefeller University,
5.00%, 07/01/10........................................................... 500,000 521,550
New York State Dormitory Authority Revenue Bonds Vassar College, 5.00%,
07/01/09.................................................................. 500,000 517,500
-------------
4,653,262
-------------
GENERAL OBLIGATIONS (27.3%)
Albany County General Obligation Bonds Series B, 5.60%, 03/15/09, (FGIC)... 400,000 431,500
Albany County General Obligation Bonds Series B, 5.60%, 03/15/07, (FGIC)... 300,000 325,500
Dutchess County General Obligation Bonds, 4.90%, 08/01/04.................. 215,000 222,794
Hempstead General Obligation Bonds, 5.00%, 02/15/09, (AMBAC)............... 500,000 518,125
Hempstead General Obligation Bonds, 5.00%, 02/15/10, (AMBAC)............... 1,000,000 1,027,500
Hempstead General Obligation Bonds Series B, 5.63%, 02/01/01, (FGIC)....... 245,000 254,187
Hempstead General Obligation Bonds Series B, 5.63%, 02/01/04, (FGIC)....... 140,000 149,275
Islip General Obligation Bonds, 5.00%, 07/15/10, (FGIC).................... 1,000,000 1,023,750
Islip General Obligation Bondsm 6,00%, 11/01/05, (FGIC).................... 100,000 108,375
Monroe County General Obligation Bonds, 5.50%, 06/01/09.................... 300,000 320,250
New Castle General Obligation Bonds, 4.75%, 06/01/08....................... 210,000 212,887
New York City General Obligation Bonds Series A, 7.00%, 08/01/06........... 300,000 346,125
New York City General Obligation Bonds Series B, 5.375%, 08/15/04.......... 500,000 523,125
New York City General Obligation Bonds Series B, 6.10%, 10/01/00........... 235,000 244,987
New York City General Obligation Bonds Series B, 5.20%, 08/01/09........... 250,000 258,125
New York City General Obligation Bonds Series D, 5.75%, 08/01/07........... 325,000 350,188
New York City General Obligation Bonds Series G, 5.25%, 08/01/11........... 1,000,000 1,022,500
New York City General Obligation Bonds Series I, 6.00, 04/15/08............ 805,000 882,481
New York State Environmental Quality General Obligation Bonds, 5.50%,
11/15/01.................................................................. 200,000 209,000
New York State General Obligation Bonds, 6.75%, 08/15/03................... 500,000 553,750
New York State General Obligation Bonds, 5.70%, 03/15/10................... 400,000 428,000
Onondaga County General Obligation Bonds, 5.40%, 04/01/01.................. 150,000 155,438
Onondaga County General Obligation Bonds Series B, 5.85%, 02/15/00......... 390,000 401,700
Ontario County General Obligation Bonds, 5.00%, 08/15/02, (FGIC)........... 250,000 258,125
Orange County General Obligation Bonds, 6.00%, 11/15/08.................... 470,000 531,100
Orange County General Obligation Bonds, 5.00%, 09/01/01.................... 500,000 515,000
Oyster Bay General Obligation Bonds, 4.00%, 02/15/99....................... 400,000 401,276
Oyster Bay General Obligation Bonds, 5.70%, 02/15/07, (MBIA)............... 360,000 392,850
Putnam County General Obligation Bonds, 4.15%, 04/15/05.................... 695,000 689,787
Rochester General Obligation Bonds, 5.00%, 10/01/03, (FGIC)................ 450,000 467,437
Rochester General Obligation Bonds, 4.00%, 10/01/99........................ 1,150,000 1,152,875
Rochester General Obligation Bonds Series A, 4.25%, 09/15/01, (AMBAC)...... 500,000 503,125
Schenectady County General Obligation Bonds, 6.00%, 08/15/05............... 200,000 221,000
Westchester County General Obligation Bonds Series A, 5.85%, 11/15/04...... 250,000 272,500
-------------
15,374,637
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT MARKET VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
HEALTH CARE (1.2%)
New York Medical Care Facility Finance Authority, 6.20%, 08/15/14, (FHA)... $ 650,000 $ 704,438
-------------
HOUSING REVENUE (6.8%)
New York State Mortgage Agency Revenue Bonds Series 28, 6.45%, 10/01/20.... 270,000 282,488
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.95%,
04/01/07.................................................................. 100,000 108,875
New York State Mortgage Agency Revenue Bonds Series 37-A, 5.85%,
10/01/06.................................................................. 125,000 136,094
New York State Mortgage Agency Revenue Bonds Series 46, 5.75%, 04/01/04,
(AMT)..................................................................... 200,000 212,000
New York State Mortgage Agency Revenue Bonds Series 50, 5.80%, 10/01/06.... 200,000 216,250
New York State Mortgage Agency Revenue Bonds Series 53, 5.35%, 04/01/07.... 240,000 254,400
New York State Mortgage Agency Revenue Bonds Series 61, 5.60%, 10/01/11.... 650,000 684,937
New York State Mortgage Agency Revenue Bonds Series 67, 5.30%, 10/01/10,
(AMT)..................................................................... 585,000 601,819
New York State Mortgage Agency Revenue Bonds Series 67, 4.55%, 10/01/02,
(AMT)..................................................................... 325,000 327,844
New York State Mortgage Agency Revenue Bonds Series 69, 4.90%, 04/01/08.... 1,000,000 1,006,250
-------------
3,830,957
-------------
POWER AUTHORITY REVENUE (3.9%)
Long Island Power Authority Revenue Bonds Series A, 4.30%, 12/01/02........ 770,000 771,925
New York State Power Authority Revenue Bonds Series A, 5.00%, 02/15/04..... 1,050,000 1,088,063
New York State Power Authority Revenue Bonds Series CC, 4.90%, 01/01/06,
(MBIA).................................................................... 50,000 52,375
New York State Power Authority Revenue Bonds Series CC, 4.90%, 01/01/06,
(MBIA).................................................................... 150,000 157,125
New York State Power Authority Revenue Bonds Series Y, 6.25%, 01/01/05..... 100,000 107,000
-------------
2,176,488
-------------
PRE-REFUNDED (4.0%)
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 6.50%, 06/15/04............................................ 95,000 103,194
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 6.875%, 06/15/14........................................... 370,000 425,037
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 7.20%, 06/15/06............................................ 200,000 221,250
New York State Power Authority Revenue Bonds Series CC, 4.80%, 01/01/05.... 500,000 520,625
New York State Power Authority Revenue Bonds Series CC, 4.90%, 01/01/06.... 500,000 522,500
Niagara Falls Bridge Commission New York Revenue Bonds, 6.125%, 10/01/19,
(FGIC).................................................................... 415,000 454,944
-------------
2,247,550
-------------
SALES TAX REVENUE (15.8%)
Grand Central District Management Association Inc. New York Special
Assessment Bonds, 5.10%, 01/01/08......................................... 330,000 339,075
Grand Central District Management Association Inc. New York Special
Assessment Bonds, 6.20%, 01/01/00......................................... 120,000 123,450
Grand Central District Management Association Inc. New York Special
Assessment Bonds, 6.50%, 01/01/22......................................... 150,000 164,250
Municipal Assistance Corp. for City of New York Revenue Bonds Series D,
5.00%, 07/01/03, (AMBAC).................................................. 250,000 258,437
Municipal Assistance Corp. for City of New York Revenue Bonds Series E,
4.70%, 07/01/02, (AMBAC).................................................. 600,000 612,000
Municipal Assistance Corp. for City of New York Revenue Bonds Series I,
6.25%, 07/01/07, (AMBAC).................................................. 750,000 848,437
Municipal Assistance Corp. for City of New York Revenue Bonds Series M,
5.25%, 07/01/04........................................................... 500,000 524,375
New York City Transitional Finance Authority Revenue Bonds Series A, 4.50%,
08/15/06.................................................................. 500,000 501,250
New York City Transitional Finance Authority Revenue Bonds Series B, 4.00%,
11/15/01.................................................................. 1,725,000 1,716,375
New York State Local Government Assistance Corp. Revenue Bonds, 5.25%,
04/01/04, (MBIA).......................................................... 1,500,000 1,573,125
New York State Local Government Assistance Corp. Revenue Bonds Series A,
6.75%, 04/01/02........................................................... 315,000 340,987
New York State Local Government Assistance Corp. Revenue Bonds Series A,
5.00%, 04/01/06........................................................... 100,000 103,375
New York State Local Government Assistance Corp. Revenue Bonds Series A,
5.00%, 04/01/05........................................................... 500,000 519,375
New York State Local Government Assistance Corp. Revenue Bonds Series D,
4.75%, 04/01/04........................................................... 500,000 509,375
New York State Local Government Assistance Corp. Revenue Bonds Series D,
6.75%, 04/01/07........................................................... 250,000 277,188
United Nations Development Corp. Revenue Bonds, 4.20%, 07/01/99............ 500,000 501,340
-------------
8,912,414
-------------
TELECOMMUNICATION REVENUE (1.2%)
Puerto Rico Telephone Authority Revenue Bonds, 5.75%, 01/01/08............. 500,000 528,125
Puerto Rico Telephone Authority Revenue Bonds Series M, 5.05%, 01/01/04,
(AMBAC)................................................................... 150,000 156,938
-------------
685,063
-------------
TRANSPORTATION REVENUE (18.0%)
Metropolitan Transit Authority Revenue Bonds Series A, 5.25%, 04/01/09,
(MBIA).................................................................... 300,000 315,750
Metropolitan Transit Authority Revenue Bonds Series A, 5.00%, 07/01/09,
(MBIA).................................................................... 800,000 827,000
Metropolitan Transit Authority Revenue Bonds Series B-1, 5.00%, 07/01/10,
(AMBAC)................................................................... 500,000 512,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
OFFITBANK
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT MARKET VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
TRANSPORTATION REVENUE (18.0%) (CONTINUED)
Metropolitan Transit Authority Revenue Bonds Series C-1, 5.00%, 07/01/08,
(FGIC).................................................................... $ 1,000,000 $ 1,040,000
New York State Thruway Authority General Revenue Bonds Series E, 5.25%,
01/01/10.................................................................. 1,000,000 1,050,000
New York State Thruway Service Contract Revenue Bonds, 5.00%, 04/01/00..... 350,000 354,812
New York State Thruway, Highway & Bridge Authority Revenue Bonds, 5.20%,
04/01/09.................................................................. 1,180,000 1,215,400
New York State Thruway, Highway & Bridge Authority Revenue Bonds Series B,
5.00%, 04/01/04, (FSA).................................................... 500,000 520,625
New York State Thruway, Highway & Bridge Trust Fund Bonds Series A, 5.80%,
04/01/09.................................................................. 300,000 319,500
New York State Thruway, Highway & Bridge Trust Fund Bonds Series B, 6.40%,
04/01/04, (FGIC).......................................................... 200,000 222,250
New York State Thruway, Highway & Bridge Trust Fund Bonds Series B, 5.80%,
04/01/07, (FGIC).......................................................... 600,000 657,750
New York State Thruway, Highway & Bridge Trust Fund Bonds Series B, 5.75%,
01/01/09, (FGIC).......................................................... 500,000 548,125
New York State Thruway, Highway & Bridge Trust Fund Bonds Series B, 5.75%,
04/01/06, (MBIA).......................................................... 200,000 220,250
Port Authority of New York & New Jersey Bonds Series 112, 5.00%,
12/01/09.................................................................. 1,000,000 1,015,000
Port Authority of New York & New Jersey Bonds Series 79, 5.80%, 07/15/03... 200,000 214,250
Port Authority of New York & New Jersey Bonds Series 81, 5.70%, 08/01/07... 270,000 284,850
Port Authority of New York & New Jersey Bonds Series 86, 5.00%, 07/01/06... 250,000 258,750
Triborough Bridge & Tunnel Authority General Purpose Bonds Series A, 4.75%,
01/01/05.................................................................. 375,000 382,500
Triborough Bridge & Tunnel Authority General Purpose Bonds Series Y, 5.75%,
01/01/05.................................................................. 170,000 182,963
-------------
10,142,275
-------------
WATER/SEWER (10.7%)
Dutchess County Resource Recovery Agency Revenue Bonds Series A, 7.20%,
01/01/02.................................................................. 500,000 532,500
Erie County Water Authority Improvement Revenue Bonds, 5.75%, 12/01/08..... 650,000 697,125
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds, 4.75%, 06/15/01............................................ 650,000 659,750
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds, 5.35%, 06/15/09............................................ 225,000 236,813
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds, 5.20%, 06/15/05............................................ 500,000 521,250
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds Series A, 4.90%, 06/15/02................................... 200,000 204,250
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds Series D, 5.00%, 06/15/05................................... 1,805,000 1,861,406
New York City Municipal Water Financing Authority Water & Sewer System
Revenue Bonds Unrefunded Balance Series A, 7.00%, 06/15/07................ 105,000 113,531
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 7.20%, 06/15/06............................................ 50,000 54,937
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 6.50%, 06/15/04............................................ 55,000 59,605
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 6.40%, 06/15/03............................................ 15,000 16,219
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 5.40%, 05/15/06............................................ 250,000 268,125
New York State Environmental Facilities Corporation Pollution Control
Revenue Bonds, 6.875%, 06/15/14........................................... 130,000 147,713
Suffolk County Water Revenue Bonds, 5.10%, 06/01/05, (MBIA)................ 250,000 261,250
Suffolk County Water Revenue Bonds, 5.10%, 06/01/06, (MBIA)................ 400,000 419,000
-------------
6,053,474
-------------
TOTAL MUNICIPAL BONDS (COST $53,575,511)................................... 54,780,558
-------------
MONEY MARKET FUNDS (0.0%)
Dreyfus New York Municipal Money Market Fund............................... 10,732 10,732
-------------
TOTAL MONEY MARKET FUNDS (COST $10,732).................................... 10,732
-------------
TOTAL INVESTMENTS (COST $55,186,243) (+) -- 99.9%.......................... 56,391,290
ASSETS IN EXCESS OF OTHER LIABILITIES 0.1%................................. 57,739
-------------
TOTAL NET ASSETS -- 100%................................................... $ 56,449,029
-------------
-------------
</TABLE>
- ---------------
+ Represents cost for federal income tax purposes and differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................. $ 1,232,757
Unrealized depreciation.................. (27,710)
------------
Net unrealized appreciation.............. $ 1,205,047
------------
------------
</TABLE>
* Interest rate in effect at June 30, 1998
AMBAC -- AMBAC Indemnity Corporation.
AMT -- Interest on securities subject to Federal Alternative Minimum Tax.
FGIC -- Insured by Financial Guaranty Insurance Corp.
FHA -- Insured By Federal Housing Administration.
FSA -- Financial Security Assurance.
MBIA -- Municipal Bond Insurance Association.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
OFFITBANK
CALIFORNIA MUNICIPAL FUND
- ---------------------------------------------------------------
Total return for the Fund in the second quarter was .98% and 7.49% from
inception. Over those two periods, the Lehman Five-Year Municipal Index returned
1.12% and 7.02%, respectively. The Net Asset Value of $10.39 at June 30, 1998
was unchanged from the value at the beginning of the quarter and 3.90% above the
initial value. The 30 day SEC yield for the Fund was 4.04% for the month ending
June 30, 1998.
Interest rates trended higher early in the second quarter as investors saw
evidence that the U. S. economy continued to grow at a rate deemed excessive.
First quarter GDP, after three upward revisions, was reported to have increased
at a 5.4% rate as the initial effects of the Asian crisis were milder than
expected. However, the second leg of the Asian crisis struck in May as Japan
officially fell into a recession with no credible exit plan and as economic
problems in Russia and the Far East became worse and more enduring than
originally assumed. The Yen now trades at close to eight-year lows, even after
concerted intervention by both the Federal Reserve and the Bank of Japan.
Emerging market currencies have also come under extreme pressure.
Fears that the contagion would spread have caused unusually high volatility in
the currency markets and foreign capital markets. By comparison, domestic fixed
income markets have traded in a narrow range, providing stable income and
principal as intended. Seven year Treasury notes have traded between 5.37% and
5.87% since year-end. While market pundits have reacted to contradictory news by
alternately forecasting Fed tightening and easing, the Federal Funds rate has
remained between 5 1/4% - 5 3/4% since November 1995 and has not changed for
almost 18 months.
The most recent Asian fears have caused further declines in Treasury yields--a
flight to safety phenomenon--but other U. S. debt sectors have been slower to
respond. Municipal yields have changed very little since year-end and corporate
bond rates have also been very steady. Municipal rates have been supported by
new borrowing that exceeds 1997 levels by more than 50%. Also, municipals
obviously lack the support from foreign investors. The result is municipal
yields that are very attractive when compared to taxable alternatives.
The California economy continued a robust rebound from the recession of the
early 1990's as evidenced by job gains, increased home sales, and stronger
retail sales. Some slowdown is occurring in high technology due to weakened
Asian demand. Also, the volume of goods moving to Asia through California ports
has declined, although most of the loss has been balanced by growth in trade
with Mexico and Canada. The strong economy has contributed to a three-year trend
of healthy state finances. Local governments are generally stable but some
financial pressure continues to bear on counties. Also, we remain concerned
about public utilities which will have to adapt to new competitive pressures.
We expect solid returns from the municipal market in the third quarter as yield
spreads return to 1997 levels. Consequently, we have maintained a portfolio
duration near the longer end of our range. The average quality is AA1.
John H. Haldeman, Jr.
July 17, 1998
26
<PAGE>
OFFITBANK
CALIFORNIA MUNICIPAL BOND FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
MUNICIPAL BONDS (99.1%)
EDUCATION REVENUE (5.3%)
California Educational Facilities Authority Revenue Santa Clara University,
5.30%, 09/01/05........................................................... $ 175,000 $ 184,406
California Educational Facilities Authority Revenue Santa Clara University,
5.40%, 09/01/06........................................................... 75,000 79,219
California State Public Works Revenue BRD Lease Series A, 6.75%,
09/01/11.................................................................. 150,000 165,000
-------------
428,625
-------------
GENERAL OBLIGATIONS (31.9%)
Berkeley California General Obligation Series A, 5.55%, 09/01/07........... 50,000 54,313
California State General Obligation, 5.40%, 03/01/03....................... 50,000 52,687
California State General Obligation, 5.25%, 10/01/04....................... 250,000 263,125
California State General Obligation, 5.25%, 10/01/11, (FGIC)............... 125,000 130,781
Cotati-Rohnert Park Uniform School District Series B, 6.00%, 08/01/04,
(FSA)..................................................................... 100,000 108,000
Cupertino Uniform School District Series B, 6.125%, 08/01/03, (FGIC)....... 50,000 54,437
Fresno California Uniform School District Series D, 5.25%, 08/01/05,
(FSA)..................................................................... 300,000 316,875
Los Angeles Uniform School District Series A, 4.50%, 07/01/05, (FGIC)...... 200,000 202,250
Palo Alto Uniform School District Series B, 5.25%, 08/01/03................ 100,000 104,875
Pasadena California Uniform School District Series A, 5.00%, 05/01/05,
(FGIC).................................................................... 375,000 390,000
San Francisco California City & County Recreational Facilities
Improvements, 5.30%, 06/15/07, (FGIC)..................................... 250,000 263,125
San Francisco California City & County, 5.30%, 06/15/07, (MBIA)............ 175,000 182,000
Santa Monica - Malibu Uniform School District California, 5.00%,
08/01/08.................................................................. 150,000 156,375
Santa Monica - Malibu Uniform School District, 5.40%, 08/01/08............. 250,000 264,687
Santa Monica - Malibu Uniform School District, 5.40%, 08/01/10............. 50,000 52,500
-------------
2,596,030
-------------
HOUSING REVENUE (2.5%)
California Housing Finance Agency Issue B-2, 5.20%, 08/01/04, Municipal
Bond...................................................................... 125,000 129,375
California Housing Finance Agency Revenue Home Mortgage Series B, 5.15%,
08/01/05, (MBIA), (AMT)................................................... 75,000 77,344
-------------
206,719
-------------
POLLUTION CONTROL REVENUE (0.6%)
California Pollution Control Financing Authority Southern California Edison
Series C, 6.85%, 12/01/08................................................. 50,000 52,321
-------------
POWER AUTHORITY REVENUE (5.7%)
Los Angeles Department of Water & Electric Plant Revenue, 5.70%, 09/01/11,
(FGIC).................................................................... 50,000 53,250
Southern California Public Power Authority San Juan Series A, 5.375%,
01/01/11, (MBIA).......................................................... 300,000 310,875
Southern California Public Power Authority San Juan Unit 3 Series A,
5.125%, 01/01/05, (MBIA).................................................. 100,000 104,500
-------------
468,625
-------------
RECREATION FACILITIES (3.3%)
Los Angeles County California Public Works Financing Authority, 5.375%,
10/01/06.................................................................. 200,000 213,750
Los Angeles County Public Works Financing Authority Revenue Regional Park &
Open Space District A, 5.875%, 10/01/06................................... 50,000 55,313
-------------
269,063
-------------
TELECOMMUNICATION REVENUE (1.9%)
Puerto Rico Telephone Authority Revenue Bonds, 5.75%, 01/01/08............. 150,000 158,438
-------------
TRANSPORTATION REVENUE (27.8%)
Contra Costa Transportation Authority Sales Tax Revenue Series A, 5.50%,
03/01/08, (FGIC).......................................................... 50,000 52,937
Long Beach California Harbor Revenue, 4.60%, 05/15/03...................... 250,000 252,813
Long Beach California Harbor Revenue, 5.75%, 05/15/07, (MBIA).............. 100,000 108,625
Los Angeles California Department of Airports Refunding Revenue Series A,
5.375%, 05/15/07, (FGIC).................................................. 300,000 319,125
Los Angeles County Transportation Commission Sales Tax Revenue Series A,
6.90%, 07/01/21........................................................... 25,000 27,500
Orange County California Local Transportation Authority Sales Tax Revenue,
5.70%, 02/15/03........................................................... 350,000 371,437
Riverside County California Transportation Commission Sales Tax Revenue
Series A, 6.00%, 06/01/06, (FGIC)......................................... 90,000 99,675
San Diego California Open Space Parking Facilities District No. 1, 5.60%,
01/01/05.................................................................. 325,000 348,563
San Francisco California Bay Area Rapid Transit District Sales Tax Revenue,
6.40%, 07/01/01, (FGIC)................................................... 35,000 38,019
San Francisco California Bay Area Rapid Transit District Sales Tax Revenue,
5.50%, 07/01/05, (FGIC)................................................... 250,000 266,875
San Francisco California City & County Airport Commission International
Airport Revenue Series 6, 6.25%, 05/01/11................................. 200,000 221,000
San Francisco City & County International Airport Revenue Second Series
Issue 12-A, 5.625%, 05/01/11, (AMT)....................................... 50,000 52,875
San Francisco City & County International Airport Revenue Second Series
Issue 1, 6.30%, 05/01/11, (AMBAC)......................................... 100,000 109,000
-------------
2,268,444
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
OFFITBANK
CALIFORNIA MUNICIPAL BOND FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT MARKET VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
WATER/SEWER (20.1%)
California State Department of Water Resources Series S, 5.00%, 12/01/04... $ 300,000 $ 312,000
Contra Costa Water District Water Revenue Series G, 6.00%, 10/01/09,
(MBIA).................................................................... 50,000 54,875
Long Beach California Water Revenue Series A, 4.35%, 05/01/05.............. 200,000 200,250
Los Angeles County Sanitation District Financing Authority Revenue Capital
Projects Series A, 5.25%, 10/01/10........................................ 100,000 103,875
Los Angeles Department of Water & Power Revenue, 5.80%, 07/15/04........... 150,000 160,500
Los Angeles Wastewater System Revenue Series A, 6.125%, 12/01/05, (FGIC)... 50,000 53,813
Los Angeles Wastewater System Revenue, 5.375%, 11/01/06.................... 150,000 159,375
Los Angeles Wastewater System Revenue Series D, 5.375%, 11/01/07, (FGIC)... 200,000 211,750
Metropolitan Water District Southern California Water Works Revenue, 5.60%,
07/01/06.................................................................. 55,000 58,437
Metropolitan Water District Southern California Water Works Revenue, 5.40%,
07/01/08.................................................................. 250,000 267,187
Santa Clara Valley Water District Water Utility System Revenue Series A,
5.20%, 06/01/02........................................................... 50,000 51,875
-------------
1,633,937
-------------
TOTAL MUNICIPAL BONDS (COST $7,999,727).................................... 8,082,202
-------------
MONEY MARKET FUNDS (1.1%)
Federated California Municipal Fund........................................ 86,249 86,249
-------------
TOTAL MONEY MARKETS (COST $86,249)......................................... 86,249
-------------
TOTAL INVESTMENTS (COST $8,085,976) (+) -- 100.2%.......................... 8,168,451
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%)............................... (12,928)
-------------
TOTAL NET ASSETS -- 100%................................................... $ 8,155,523
-------------
-------------
</TABLE>
- ---------------
+ Represents cost for federal income tax purposes and differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................... $ 94,132
Unrealized depreciation................... (11,657)
---------
Net unrealized appreciation............... $ 82,475
---------
---------
</TABLE>
<TABLE>
<S> <C><C>
AMBAC -- AMBAC Indemnity Corporation.
AMT -- Interest on securities subject to Federal Alternative Minimum Tax.
FGIC -- Insured by Financial Guaranty Insurance Corp.
FSA -- Financial Security Assurance.
MBIA -- Municipal Bond Insurance Association.
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
OFFITBANK
NATIONAL MUNICIPAL FUND
- --------------------------------------------------------------------------------
The OFFITBANK National Municipal Fund's net asset value (NAV) as of June 30,
1998 is $10.28. The NAV is up approximately 1% over the December 31, 1997 NAV of
$10.19; year-to-date total return is 2.84%. For comparative purposes, the Lehman
Brothers Five-Year Municipal Bond Index returned 2.29% for the same time period.
Since the Fund's October 20, 1997 inception, the total return is 5.61%. This
compares favorably to the 4.05% return of the index during the same time period.
While municipal yields today are virtually unchanged from the beginning of the
year, a buying opportunity emerged in April. Market yields increased in
anticipation of the largest offering in municipal bond history, the $3.4 billion
Long Island Power Authority sale to finance its takeover of the Long Island
Lighting Company. The Fund used this market weakness as an opportunity to
upgrade credit quality and increase portfolio convexity at attractive prices.
On June 30th, the securities in the Fund's portfolio had an average credit
quality of AA. Municipal credit spreads remain remarkably tight. Therefore, we
do not feel adequately compensated purchasing lower-rated credits at this time.
The first six months of this year has brought an increase in municipal supply of
51% relative to 1997. A significant increase in the amount of new issues to
refund existing higher yielding debt has been the main factor in the substantial
increase in supply. Supply has also impacted yield ratios. Currently, municipal
yields relative to U.S. Treasury yields are close to the highest percentages of
the year. Taking advantage of this relative municipal pricing opportunity are
"crossover buyers," who are the traditional taxable, fixed-income investors who
do not benefit from the tax-exempt income generated by a municipal bond. At
present yields, an individual in the maximum Federal tax bracket can achieve
higher after-tax returns in municipals than in the high-grade taxable market.
Until the supply begins to level off, we expect municipals to remain cheap
relative to Treasurys. The abundant supply, however, has afforded us many
opportunities as we have been able to broadly diversify the Fund with infrequent
issuers in high tax states. Some examples would be bonds issued in Missouri,
Maryland and New Jersey. These states often experience severe shortages of
supply on a seasonal basis and offer the best performance opportunities when
in-state supply dissipates.
Moving forward, we believe that at current spreads, municipals are cheap to
Treasurys. In this environment, we expect to remain fully invested and maintain
a slightly longer maturity than our benchmark index.
Carolyn N. Dolan
July 17, 1998
29
<PAGE>
OFFITBANK
NATIONAL MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
FLOATING RATE NOTES (7.7%)
WATER/SEWER (7.7%)
NEW YORK (7.7%)
New York City Municipal Water Finance Authority Water & Sewer System
Revenue Bonds Series A, 3.80%, 06/15/25, (FGIC)*.......................... $ 200,000 $ 200,000
New York City Municipal Water Finance Authority Water & Sewer System
Revenue Bonds Series G, 3.75%, 06/15/24, (FGIC)*.......................... 500,000 500,000
-------------
TOTAL FLOATING RATE NOTES (COST $700,000).................................. 700,000
-------------
MUNICIPAL BONDS (83.1%)
EDUCATION REVENUE (4.0%)
MARYLAND (1.6%)
University of Maryland System Auxiliary Facility & Tuition Revenue Bonds
Series A, 5.00%, 04/01/07................................................. 140,000 145,425
-------------
NEW JERSEY (2.4%)
Rutgers State University of New Jersey Series R, 6.40%, 05/01/07........... 200,000 217,750
-------------
363,175
-------------
GENERAL OBLIGATIONS (44.5%)
ALABAMA (1.4%)
Huntsville, Alabama Series E, 5.85%, 08/01/05.............................. 115,000 123,625
-------------
ARIZONA (2.3%)
Phoenix, Arizona Series A, 5.20%, 07/01/05................................. 200,000 210,500
-------------
CALIFORNIA (3.7%)
California State, 6.00%, 10/01/04.......................................... 100,000 109,375
Los Angeles, California Uniform School District Series A, 6.00%, 07/01/08,
(FGIC).................................................................... 200,000 224,500
-------------
333,875
-------------
CONNECTICUT (0.9%)
Connecticut State Special Assessment Unemployment Compensation Series A,
5.50%, 05/15/00, (AMBAC).................................................. 80,000 82,200
-------------
ILLINOIS (3.5%)
Chicago, Illinois Project Series B, 6.00%, 01/01/03 (FGIC)................. 50,000 53,500
Illinois State, 5.50%, 08/01/03............................................ 250,000 264,688
-------------
318,188
-------------
MARYLAND (3.2%)
Carroll County, Maryland, 5.00%, 11/01/08.................................. 125,000 130,000
Maryland State First Series, 5.80%, 05/15/04............................... 150,000 158,813
-------------
288,813
-------------
MASSACHUSETTS (1.0%)
Worcester, Massachusetts, 5.75%, 08/01/07, (MBIA).......................... 80,000 87,700
-------------
NEVADA (2.2%)
Clark County, Nevada-Las Vegas Convention & Visitor, 4.80%, 07/01/01,
(MBIA).................................................................... 75,000 76,500
Clark County, Nevada-Las Vegas Convention & Visitor Series A, 5.00%,
07/01/08.................................................................. 120,000 124,800
-------------
201,300
-------------
NEW JERSEY (5.5%)
Ocean County, New Jersey General Improvement, 4.625%, 06/01/07............. 245,000 248,981
Ocean County, New Jersey General Improvement, 4.75%, 06/01/10.............. 250,000 253,438
-------------
502,419
-------------
NEW MEXICO (1.1%)
New Mexico State Capitalization Projects, 4.75%, 08/01/02.................. 100,000 101,537
-------------
NEW YORK (3.8%)
New York, New York Series G, 5.25%, 08/01/11............................... 230,000 235,175
New York, New York Series G, 5.25%, 10/15/10............................... 105,000 112,744
-------------
347,919
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
OFFITBANK
NATIONAL MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (4.2%)
Pennsylvania State First Series, 6.375%, 09/15/12.......................... $ 300,000 $ 324,375
Pennsylvania State First Series, 6.00%, 09/15/01........................... 50,000 52,937
West Chester, Pennsylvania Area School District, 5.30%, 01/15/07........... 150,000 155,250
-------------
532,562
-------------
TENNESSEE (1.1%)
Metropolitan Government of Nashville & Davidson County, Tennessee, 5.00%,
05/15/03.................................................................. 100,000 103,625
-------------
TEXAS (2.4%)
Austin, Texas Public Improvement, 7.25%, 09/01/03, (AMBAC)................. 200,000 222,500
-------------
VIRGINIA (2.9%)
Fairfax County, Virginia Series C, 5.25%, 05/01/07......................... 250,000 262,188
-------------
WASHINGTON (0.6%)
Washington State Series C, 5.35%, 07/01/06................................. 55,000 58,025
-------------
WISCONSIN (2.9%)
Wisconsin State Series B, 5.25%, 05/01/06.................................. 200,000 210,500
Wisconsin State Series C, 5.60%, 05/01/02.................................. 50,000 52,437
-------------
262,937
-------------
4,039,913
-------------
HOUSING REVENUE (2.8%)
MASSACHUSETTS (1.7%)
Massachusetts State Housing Finance Agency Series 57, 4.70%, 12/01/06,
(MBIA).................................................................... 150,000 152,062
-------------
PENNSYLVANIA (1.1%)
Pennsylvania Housing Finance Agency Single Family Mortgage Series 61A,
4.90%, 10/01/08........................................................... 100,000 102,125
-------------
254,187
-------------
POLLUTION CONTROL REVENUE (0.9%)
NEW YORK (0.9%)
New York State Environmental Facilities Pollution Corporation, 6.50%,
06/15/08.................................................................. 70,000 79,362
-------------
POWER AUTHORITY REVENUE (2.2%)
WASHINGTON (2.2%)
Washington State Public Power Supply Systems - Nuclear Project No. 3 Series
A, 5.00%, 07/01/01........................................................ 200,000 204,250
-------------
SALES TAX REVENUE (3.8%)
NEW MEXICO (2.7%)
New Mexico State Severance Tax Series B, 4.75%, 07/01/06................... 250,000 253,437
-------------
NEW YORK (1.1%)
Municipal Assistance Corporation for the City of New York, New York Series
64, 7.20%, 07/01/01....................................................... 100,000 102,000
-------------
355,437
-------------
SPECIAL ASSESSMENT (2.4%)
CALIFORNIA (2.4%)
Los Angeles County California Public Works Financing Authority, 5.50%,
10/01/09.................................................................. 200,000 215,250
-------------
TRANSPORTATION REVENUE (9.1%)
CALIFORNIA (2.3%)
Long Beach, California Harbor Revenue Bonds, 5.50%, 05/15/10, (MBIA)....... 200,000 211,250
-------------
CONNECTICUT (1.5%)
Connecticut State Special Tax Obligation, 5.25%, 09/01/07.................. 120,000 127,050
-------------
NEW YORK (4.0%)
Metropolitan Transportation Authority of New York Series A, 5.00%, 04/01/03
(FGIC).................................................................... 200,000 206,250
New York State Thruway, Highway & Bridge Trust Fund Series B, 5.00%,
04/01/02 (FSA)............................................................ 50,000 51,500
New York State Thruway, Highway & Bridge Trust Fund Series B, 5.50%,
04/01/09 (FSA)............................................................ 100,000 107,750
-------------
365,500
-------------
PENNSYLVANIA (1.3%)
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
OFFITBANK
NATIONAL MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
Pennsylvania State Turnpike Commission Turnpike Revenue Bonds Series O,
5.35%, 12/01/02, (FGIC)................................................... 115,000 120,463
-------------
824,263
-------------
WATER/SEWER (13.4%)
CALIFORNIA (1.1%)
Los Angeles, California Waste Water Systems Series A, 6.60%, 02/01/01...... $ 100,000 $ 103,632
-------------
MASSACHUSETTS (4.0%)
Massachusetts State Water Resource Authority Series C, 4.90%, 12/01/02..... 100,000 103,125
Massachusetts State Water Pollution Trust, 5.00%, 08/01/07................. 250,000 259,650
-------------
362,775
-------------
MISSOURI (2.6%)
Kansas City, Missouri Water Revenue Bonds Series B, 5.00%, 12/01/08........ 225,000 234,844
-------------
NEW YORK (1.1%)
New York City Municipal Water Finance Authority Water & Sewer System
Revenue Bonds Series B, 5.00%, 06/15/03................................... 100,000 103,000
-------------
TEXAS (4.6%)
Texas State Water Financial Assistance-A & C, 5.00%, 08/01/09.............. 250,000 258,750
Texas Water Development Board Revenue Bonds Senior Lien A, 5.00%,
07/15/07.................................................................. 105,000 109,462
Texas Water Development Board Revenue Bonds Senior Lien B, 4.20%,
07/15/02.................................................................. 50,000 50,125
-------------
418,337
-------------
1,222,588
-------------
TOTAL MUNICIPAL BONDS (COST $7,485,038).................................... 7,558,425
-------------
MONEY MARKET FUND (1.7%)
Dreyfus Tax Exempt Cash Management Money Market Fund....................... 77,097 77,097
J.P. Morgan Institutional Service Tax Exempt Fund.......................... 77,097 77,097
-------------
TOTAL MONEY MARKETS (COST $154,194)........................................ 154,194
-------------
TOTAL INVESTMENTS (COST $8,339,232) (+) -- 92.5%........................... 8,412,619
OTHER ASSETS IN EXCESS OF LIABILITIES 7.5%................................. 686,881
-------------
TOTAL NET ASSETS -- 100%................................................... $ 9,099,500
-------------
-------------
</TABLE>
- ---------------
+Represents cost for federal income tax purposes and differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................... $ 79,425
Unrealized depreciation................... (6,038)
---------
Net unrealized appreciation............... $ 73,387
---------
---------
</TABLE>
* Interest rate reflected is rate in effect at June 30, 1998.
<TABLE>
<S> <C><C>
AMBAC -- AMBAC Indemnity Corporation.
FGIC -- Insured by Financial Guaranty Insurance Corp.
FSA -- Financial Security Assurance.
MBIA -- Municipal Bond Insurance Association.
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
OFFITBANK
U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
The first six month's total return for 1998 for the U.S. Government Securities
Fund was 3.45%. This compares with a return of 3.41% for the benchmark Merrill
Lynch 5 Year Treasury Index.
The Fund's NAV of $10.26 at June 30 is higher than the $10.17 at year-end 1997.
Net assets of the Fund have grown to approximately $18 million versus some $4
million at year-end.
The investments of the Fund are in U.S. Treasurys. The average maturity of the
Fund is approximately 4.9 years and the duration 3.9 years. The investments are
structured with the greatest weights in 1- to 2-year maturities and 8- to
10-year maturities. This is based on the belief that the risk/return profile for
the 5-year Treasury sector of the curve is not currently attractive.
We believe that interest rates will remain in a relatively narrow range, as
Asian economic and financial uncertainties offset strength in the U.S. economy.
Moreover, U.S. growth should slow, at least temporarily, as excess inventories
are reduced and exports to Asia decline. However, unless the slowdown is greater
and more prolonged than expected, a significant decline in interest rates is
unlikely. Therefore, as the risks seem evenly balanced, we see no immediate
reason to take an aggressive posture in the market.
Jack D. Burks
July 17, 1998
33
<PAGE>
OFFITBANK
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------
U.S. TREASURY NOTES (98.4%)
Notes, 5.75%, 09/30/99........ $4,500,000 $4,512,375
Notes, 5.75%, 10/31/00........ 3,000,000 3,013,980
Notes, 5.75%, 10/31/02........ 3,200,000 3,224,480
Notes, 7.00%, 07/15/06........ 2,925,000 3,193,164
Notes, 6.25%, 02/15/07........ 3,100,000 3,244,925
Notes, 6.125%, 08/15/07....... 900,000 936,017
----------
TOTAL U.S. TREASURY NOTES
(COST $18,067,878)........... 18,124,941
----------
MONEY MARKET FUNDS (0.3%)
Bank of New York Cash Reserve
MM Fund...................... 56,440 56,440
----------
TOTAL MONEY MARKETS (COST
$56,440)..................... 56,440
----------
TOTAL INVESTMENTS (COST
$18,124,318) (+) -- 98.7%.... 18,181,381
OTHER ASSETS IN EXCESS OF
LIABILITIES 1.3%............. 241,411
----------
TOTAL NET ASSETS -- 100.0%.... $18,422,792
----------
----------
</TABLE>
- ---------------
+ Represents cost for federal income tax purposes and differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................... $ 68,975
Unrealized depreciation................... (11,913)
---------
Net unrealized appreciation............... $ 57,063
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
OFFITBANK
MORTGAGE SECURITIES FUND
- --------------------------------------------------------------------------------
The 1998 first six month's total return for the Mortgage Securities Fund was
3.53%. This compares with a return of 3.48% for the benchmark Merrill Lynch
Mortgage Master Index.
The Fund's NAV of $10.23 at June 30 is higher than the $10.17 at year-end 1997.
Net assets of the Fund have grown to approximately $38 million versus some $17
million at year-end. The NAV, daily change, and performance information are now
available daily in major financial publications.
The average maturity of the Fund is approximately 6.1 years. The investments are
currently in Pass-Thrus securities issued by the Federal National Mortgage
Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie
Mac), and the Government National Mortgage Association (Ginnie Mae).
The investments that have a premium price are weighted to Ginnie Mae issues, as
these securities tend to prepay more slowly than Fannie Mae and Freddie Mac
Pass-Thrus. In addition, investments that have a discount are weighted to Fannie
Mae and Freddie Mac because of their tendency to prepay more quickly. The
average weighted market price of the Fund is par (100.00).
Another feature of the Fund's investment structure is a larger than normal
allocation to 15 year Pass-Thrus. The reason for this is that these products
have a more stable average maturity profile than do 30 year issues while still
offering a compensatory yield.
Mortgage investments performed well during the first half of the year as
interest rates remained in a narrow range. In addition, as bond yields declined
modestly, the Fund's heavier exposure to discount issues improved its relative
performance.
We believe that interest rates will remain in a relatively narrow range, as
Asian economic and financial uncertainties offset strength in the U.S. economy.
Moreover, U.S. growth should slow, at least temporarily, as excess inventories
are reduced and exports to Asia decline. However, unless the slowdown is greater
and more prolonged than expected, a significant decline in interest rates is
unlikely. Therefore, as the risks seem evenly balanced, we see no immediate
reason to take an aggressive posture in the market.
Jack D. Burks
July 17, 1998
35
<PAGE>
OFFITBANK
MORTGAGE SECURITIES FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (38.6%)
Federal Home Loan Mortgage Corp., 5.60%, 07/01/98.......................... $ 3,000,000 $ 3,000,000
Federal Home Loan Mortgage Corp., 5.44%, 07/14/98.......................... 1,000,000 998,036
Federal Home Loan Mortgage Corp., 5.45%, 07/20/98.......................... 1,000,000 997,124
Federal Home Loan Mortgage Corp., 6.00%, 04/01/03, Gold Pool # M90534...... 998,146 998,770
Federal Home Loan Mortgage Corp., 7.00%, 07/01/12, Gold Pool # E00497...... 286,114 291,479
Federal Home Loan Mortgage Corp., 7.00%, 07/01/12, Gold Pool # G10697...... 487,616 496,759
Federal Home Loan Mortgage Corp., 7.00%, 08/01/12, Gold Pool # E67369...... 892,086 908,813
Federal Home Loan Mortgage Corp., 7.50%, 01/01/18, Gold Pool # C90203...... 252,913 259,157
Federal Home Loan Mortgage Corp., 6.00%, 02/01/24, Gold Pool # C80110...... 19,637 19,140
Federal Home Loan Mortgage Corp., 6.00%, 01/01/26, Gold Pool # D67671...... 524,650 511,370
Federal Home Loan Mortgage Corp., 6.00%, 02/01/26, Gold Pool # D68418...... 440,038 428,899
Federal Home Loan Mortgage Corp., 6.00%, 03/01/26, Gold Pool # D69408...... 472,600 460,638
Federal Home Loan Mortgage Corp., 6.00%, 03/01/26, Gold Pool # D69088...... 462,325 450,623
Federal Home Loan Mortgage Corp., 6.00%, 04/01/26, Gold Pool # C80395...... 445,713 434,431
Federal Home Loan Mortgage Corp., 6.00%, 05/01/26, Gold Pool # D71231...... 49,071 47,829
Federal Home Loan Mortgage Corp., 7.50%, 06/01/26, Gold Pool # D72344...... 461,839 473,240
Federal Home Loan Mortgage Corp., 7.50%, 05/01/27, Gold Pool # G00702...... 539,584 552,905
Federal Home Loan Mortgage Corp., 6.00%, 07/15/27, TBA..................... 1,000,000 975,000
Federal Home Loan Mortgage Corp., 6.00%, 10/01/27, Gold Pool # D82901...... 321,804 313,658
Federal Home Loan Mortgage Corp., 6.00%, 12/01/27, Gold Pool # C00583...... 679,928 662,717
Federal Home Loan Mortgage Corp., 7.50%, 04/01/28, Gold Pool # C00612...... 193,752 198,535
Federal Home Loan Mortgage Corp., 6.00%, 05/01/28, Gold Pool # C00614...... 522,253 509,034
Federal Home Loan Mortgage Corp., 6.00%, 05/01/28, Gold Pool # D89506...... 486,667 474,348
Federal Home Loan Mortgage Corp., 6.00%, 05/01/28, Gold Pool # D89955...... 504,579 491,806
-------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (COST $14,868,924)............ 14,954,311
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (27.0%)
Federal National Mortgage Assoc., 6.50%, 12/01/99, Pool # 303111........... 164,098 165,534
Federal National Mortgage Assoc., 6.50%, 11/01/03, Pool # 356437........... 121,689 122,754
Federal National Mortgage Assoc., 6.50%, 01/01/04, Pool # 359915........... 405,366 408,913
Federal National Mortgage Assoc., 6.50%, 09/01/04, Pool # 393759........... 300,050 302,675
Federal National Mortgage Assoc., 6.50%, 10/01/04, Pool # 398370........... 405,570 409,119
Federal National Mortgage Assoc., 6.00%, 08/01/12, TBA..................... 1,000,000 989,063
Federal National Mortgage Assoc., 6.00%, 03/01/13, Pool # 379876........... 884,828 875,427
Federal National Mortgage Assoc., 6.00%, 03/01/13, Pool # 419336........... 101,072 99,999
Federal National Mortgage Assoc., 6.00%, 04/01/13, Pool # 411502........... 980,442 970,025
Federal National Mortgage Assoc., 6.00%, 04/01/13, Pool # 425916........... 1,489,012 1,473,192
Federal National Mortgage Assoc., 6.00%, 05/01/13, Pool # 429019........... 1,006,393 995,386
Federal National Mortgage Assoc., 6.50%, 05/01/26, Pool # 345964........... 186,401 185,585
Federal National Mortgage Assoc., 6.50%, 08/01/27, Pool # 378287........... 500,007 497,820
Federal National Mortgage Assoc., 6.50%, 11/01/27, Pool # 397998........... 984,715 980,407
Federal National Mortgage Assoc., 6.50%, 04/01/28, Pool # 419955........... 24,952 24,842
Federal National Mortgage Assoc., 6.50%, 05/01/28, Pool # 425761........... 1,008,497 1,004,085
Federal National Mortgage Assoc., 6.50%, 05/01/28, Pool # 426090........... 24,979 24,869
Federal National Mortgage Assoc., 6.50%, 06/01/28, Pool # 251813........... 950,069 945,912
-------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION (COST $10,421,573)............. 10,475,607
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (37.9%)
Government National Mortgage Assoc., 7.00%, 10/15/07, Pool # 297658........ 76,652 78,545
Government National Mortgage Assoc., 7.00%, 07/15/08, Pool # 266910........ 36,646 37,551
Government National Mortgage Assoc., 6.00%, 02/15/09, Pool # 335278........ 108,559 107,881
Government National Mortgage Assoc., 7.00%, 09/15/09, Pool # 380616........ 252,052 258,275
Government National Mortgage Assoc., 7.00%, 07/15/10, Pool # 780193........ 876,702 899,715
Government National Mortgage Assoc., 7.00%, 10/15/10, Pool # 377618........ 369,094 378,206
Government National Mortgage Assoc., 7.00%, 02/15/11, Pool # 292339........ 498,024 510,320
Government National Mortgage Assoc., 6.00%, 05/15/11, Pool # 412601........ 49,573 49,263
Government National Mortgage Assoc., 7.00%, 06/15/11, Pool # 347186........ 366,198 375,239
Government National Mortgage Assoc., 6.00%, 06/15/11, Pool # 424501........ 197,533 196,298
Government National Mortgage Assoc., 6.00%, 01/15/13, Pool # 407233........ 855,975 850,625
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
OFFITBANK
MORTGAGE SECURITIES FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR MARKET
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
Government National Mortgage Assoc., 6.00%, 02/15/13, Pool # 460756........ $ 699,795 $ 695,421
Government National Mortgage Assoc., 6.00%, 01/15/24, Pool # 376364........ 475,157 464,169
Government National Mortgage Assoc., 6.00%, 01/15/24, Pool # 345932........ 168,932 165,025
Government National Mortgage Assoc., 6.00%, 05/15/24, Pool # 352981........ 205,840 201,080
Government National Mortgage Assoc., 6.00%, 01/15/26, Pool # 780312........ 584,151 571,373
Government National Mortgage Assoc., 7.00%, 02/15/26, Pool # 347156........ 49,909 50,704
Government National Mortgage Assoc., 8.00%, 06/15/26, Pool # 428867........ 470,291 487,339
Government National Mortgage Assoc., 8.00%, 07/15/26, Pool # 425444........ 450,643 466,978
Government National Mortgage Assoc., 8.00%, 07/15/26, Pool # 432905........ 106,003 109,845
Government National Mortgage Assoc., 8.00%, 08/15/26, Pool # 419634........ 70,198 72,742
Government National Mortgage Assoc., 8.00%, 08/15/26, Pool # 421763........ 330,999 342,997
Government National Mortgage Assoc., 8.00%, 09/15/26, Pool # 398884........ 860,107 891,286
Government National Mortgage Assoc., 8.00%, 11/15/26, Pool # 415657........ 285,907 296,271
Government National Mortgage Assoc., 8.00%, 12/15/26, Pool # 442190........ 93,881 97,284
Government National Mortgage Assoc., 8.00%, 07/15/27, Pool # 436800........ 566,798 587,345
Government National Mortgage Assoc., 7.00%, 12/15/27, Pool # 443779........ 39,276 39,902
Government National Mortgage Assoc., 7.00%, 12/15/27, Pool # 460653........ 594,999 604,482
Government National Mortgage Assoc., 7.00%, 01/15/28, Pool # 460690........ 502,895 510,910
Government National Mortgage Assoc., 7.00%, 01/15/28, Pool # 458763........ 441,638 448,676
Government National Mortgage Assoc., 7.00%, 01/15/28, Pool # 463365........ 360,072 365,810
Government National Mortgage Assoc., 7.00%, 02/15/28, Pool # 433595........ 543,708 552,373
Government National Mortgage Assoc., 6.00%, 04/15/28, Pool # 473500........ 360,305 351,973
Government National Mortgage Assoc., 6.00%, 04/15/28, Pool # 452780........ 249,430 243,662
Government National Mortgage Assoc., 6.00%, 04/15/28, Pool # 433722........ 397,978 388,775
Government National Mortgage Assoc., 7.00%, 05/15/28, Pool # 475480........ 969,628 985,081
Government National Mortgage Assoc., 6.00%, 05/15/28, Pool # 465359........ 456,689 446,128
Government National Mortgage Assoc., 6.00%, 06/15/28, Pool # 476330........ 38,311 37,425
Government National Mortgage Assoc., 6.00%, 06/15/28, Pool # 449548........ 495,000 483,553
-------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (COST $14,668,508).......... 14,700,527
-------------
MONEY MARKET FUNDS (0.4%)
Bank of New York Cash Reserve MM Fund...................................... 156,617 156,617
-------------
TOTAL MONEY MARKET FUNDS (COST $156,617)................................... 156,617
-------------
TOTAL INVESTMENTS (COST $40,115,622) (+) -- 103.9%......................... 40,287,062
LIABILITIES IN EXCESS OF OTHER ASSETS (3.9%)............................... (1,525,446)
-------------
TOTAL NET ASSETS -- 100.0%................................................. $ 38,761,616
-------------
-------------
</TABLE>
- ---------------
+ Represents cost for federal income tax purposes and differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................... $ 186,406
Unrealized depreciation................... (14,966)
---------
Net unrealized appreciation............... $ 171,440
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
HIGH YIELD FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at market value (cost $1,608,509,358)...... $ 1,651,228,084
Interest and dividends receivable....................... 35,579,544
Receivable for capital shares sold...................... 6,843,766
Prepaid expenses and other assets....................... 28,141
-----------------
Total Assets.......................................... $ 1,693,679,535
LIABILITIES:
Dividends payable....................................... 3,411,003
Payable for investment securities purchased............. 17,793,416
Payable for capital shares redeemed..................... 3,735,435
Investment advisory fees payable........................ 943,420
Administration fees payable............................. 118,947
Fund accounting fees payable............................ 1,492
Transfer agent fees payable............................. 11,226
Unrealized depreciation on open forward currency
contracts.............................................. 38,615
Other payables and accrued expenses..................... 163,593
-----------------
Total Liabilities..................................... 26,217,147
-----------------
NET ASSETS................................................ $ 1,667,462,388
-----------------
-----------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
160,781,146 issued and outstanding..................... $ 160,781
Additional paid-in capital.............................. 1,614,195,201
Accumulated distributions in excess of net investment
income................................................. (594,996)
Accumulated net realized gains on investments and
foreign currency transactions.......................... 11,024,771
Net unrealized appreciation of investments and foreign
currency transactions.................................. 42,676,631
-----------------
NET ASSETS................................................ $ 1,667,462,388
-----------------
-----------------
SELECT SHARES:
NET ASSETS.............................................. $ 1,667,431,640
-----------------
-----------------
SHARES OF CAPITAL STOCK OUTSTANDING..................... 160,778,181
-----------------
-----------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER
SHARE)................................................. $10.37
-----------------
-----------------
ADVISOR SHARES:
NET ASSETS.............................................. $30,748
-----------------
-----------------
SHARES OF CAPITAL STOCK OUTSTANDING..................... 2,965
-----------------
-----------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER
SHARE)................................................. $10.37
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at market value (cost $272,242,763).......... $ 260,024,013
Foreign currency (cost $12,074)........................... 10,439
Interest and dividends receivable......................... 5,702,569
Receivable for capital shares purchased................... 630
Prepaid expenses and other assets......................... 2,054
---------------
Total Assets............................................ $ 265,739,705
LIABILITIES:
Dividends payable......................................... 1,567,278
Payable for capital shares redeemed....................... 4,600,000
Investment advisory fees payable.......................... 190,939
Administration fees payable............................... 24,908
Fund accounting fees payable.............................. 1,492
Transfer agent fees payable............................... 5,578
Custody fees payable...................................... 85,660
Unrealized depreciation on open forward currency
contracts................................................ 15,855
Other payables and accrued expenses....................... 58,895
---------------
Total Liabilities....................................... 6,550,605
---------------
NET ASSETS.................................................. $ 259,189,100
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
25,582,122 issued and outstanding........................ $ 25,582
Additional paid-in capital................................ 272,774,567
Accumulated distributions in excess of net investment
income................................................... (1,322,901)
Accumulated distributions in excess of net realized gains
on investments and foreign currency transactions......... (47,684)
Net unrealized depreciation of investments and foreign
currency transactions.................................... (12,240,464)
---------------
NET ASSETS.................................................. $ 259,189,100
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $10.13
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
LATIN AMERICA EQUITY FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
ASSETS:
<S> <C> <C>
Investments, at market value (cost
$40,676,061)............................. $35,827,651
Foreign currency (cost $25,884)........... 24,662
Receivable for investment securities
sold..................................... 1,126,278
Interest and dividends receivable......... 344,402
Receivable for capital shares sold........ 156,185
Deferred organization expense............. 19,861
-----------
Total Assets............................ $37,499,039
LIABILITIES:
Due to custodian.......................... 794,443
Payable for investment securities
purchased................................ 255,686
Payable for capital shares redeemed....... 155,617
Investment advisory fees payable.......... 32,924
Administration fees payable............... 3,837
Fund accounting fees payable.............. 1,492
Transfer agency fees payable.............. 2,762
Custody fees payable...................... 85,349
Other payables and accrued expenses....... 25,395
-----------
Total Liabilities....................... 1,357,505
-----------
NET ASSETS.................................. $36,141,534
-----------
-----------
Net Assets consist of:
Shares of capital stock, $0.001 par value
per share, 3,302,244 issued and
outstanding.............................. $ 3,302
Additional paid-in capital................ 45,770,711
Accumulated distributions in excess of net
investment income........................ (68,499)
Accumulated net realized loss on
investment and foreign currency
transactions............................. (4,712,721)
Net unrealized depreciation of investments
and foreign currency transactions........ (4,851,259)
-----------
NET ASSETS.................................. $36,141,534
-----------
-----------
NET ASSET VALUE (OFFERING AND REDEMPTION
PRICE PER SHARE).......................... $10.94
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
NEW YORK MUNICIPAL FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
ASSETS:
<S> <C> <C>
Investments, at market value (cost
$55,186,243)............................. $56,391,290
Interest and dividends receivable......... 810,430
Deferred organization expense............. 11,538
Prepaid expenses and other assets......... 1,011
-----------
Total Assets............................ $57,214,269
LIABILITIES:
Dividends payable......................... 32,194
Payable for investment securities
purchased................................ 672,107
Investment advisory fee payable........... 11,569
Administration fee payable................ 5,172
Fund accounting fee payable............... 1,492
Transfer agent fees payable............... 1,163
Other payables and accrued expenses....... 41,543
-----------
Total Liabilities....................... 765,240
-----------
NET ASSETS.................................. $56,449,029
-----------
-----------
Net Assets consist of:
Shares of capital stock, $0.001 par value
per share, 5,266,540 issued and
outstanding.............................. $ 5,267
Additional paid-in capital................ 55,124,184
Accumulated net realized gains on
investment transactions.................. 114,531
Net unrealized appreciation of
investments.............................. 1,205,047
-----------
NET ASSETS.................................. $56,449,029
-----------
-----------
NET ASSET VALUE (OFFERING AND REDEMPTION
PRICE PER SHARE).......................... $10.72
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
CALIFORNIA MUNICIPAL FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $8,085,976)............ $ 8,168,451
Cash...................................................... 9,818
Interest and dividends receivable......................... 114,840
Deferred organization expense............................. 32,230
Other assets.............................................. 5,942
---------------
Total Assets............................................ $ 8,331,281
LIABILITIES:
Dividends payable......................................... 5,619
Payable for investment securities purchased............... 157,281
Transfer agent fees payable............................... 1,102
Other payables and accrued expenses....................... 11,756
---------------
Total Liabilities....................................... 175,758
---------------
NET ASSETS.................................................. $ 8,155,523
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
784,645 issued and outstanding........................... $ 785
Additional paid-in capital................................ 8,067,518
Accumulated undistributed net investment income........... 1,350
Accumulated net realized gains on investment
transactions............................................. 3,395
Net unrealized appreciation of investments................ 82,475
---------------
NET ASSETS.................................................. $ 8,155,523
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $10.39
---------------
---------------
</TABLE>
NATIONAL MUNICIPAL FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $8,339,232)............ $ 8,412,619
Cash...................................................... 16,803
Interest and dividends receivable......................... 102,733
Receivable for capital shares sold........................ 1,050,000
Prepaid organization expense.............................. 28,619
Other assets.............................................. 7,778
---------------
Total Assets............................................ $ 9,618,552
LIABILITIES:
Payable for investment securities purchased............... 506,373
Transfer agency fees payable.............................. 962
Other payables and accrued expenses....................... 11,717
---------------
Total Liabilities....................................... 519,052
---------------
NET ASSETS.................................................. $ 9,099,500
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
885,290 issued and outstanding........................... $ 885
Additional paid-in capital................................ 9,012,829
Accumulated undistributed net investment loss............. 0
Accumulated net realized gains on investment
transactions............................................. 12,399
Net unrealized appreciation of investments................ 73,387
---------------
NET ASSETS.................................................. $ 9,099,500
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $10.28
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $18,124,318)........... $ 18,181,381
Interest and dividends receivable......................... 313,224
Deferred organization expense............................. 17,228
Prepaid expenses and other assets......................... 7,103
---------------
Total Assets............................................ $ 18,518,936
LIABILITIES:
Dividends payable......................................... 837
Payable for capital shares redeemed....................... 80,000
Investment advisory fees payable.......................... 2,113
Transfer agent fees payable............................... 765
Other payables and accrued expenses....................... 12,429
---------------
Total Liabilities....................................... 96,144
---------------
NET ASSETS.................................................. $ 18,422,792
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
1,795,602 issued and outstanding......................... $ 1,796
Additional paid-in capital................................ 18,332,880
Accumulated net realized gains on investment
transactions............................................. 31,053
Net unrealized appreciation of investments................ 57,063
---------------
NET ASSETS.................................................. $ 18,422,792
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $10.26
---------------
---------------
</TABLE>
MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $40,115,622)........... $ 40,287,062
Interest and dividends receivable......................... 188,472
Receivable for capital shares sold........................ 270,000
Deferred organization expenses............................ 17,228
Prepaid expenses and other assets......................... 3,428
---------------
Total Assets............................................ $ 40,766,190
LIABILITIES:
Dividends payable......................................... 9,401
Payable for investment securities purchased............... 1,977,271
Investment advisory fees payable.......................... 4,116
Administration fees payalbe............................... 2,941
Fund accounting fees payable.............................. 1,250
Transfer agent fees payable............................... 1,316
Other payables and accrued expenses....................... 8,279
---------------
Total Liabilities....................................... 2,004,574
---------------
NET ASSETS.................................................. $ 38,761,616
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
3,790,058 issued and outstanding......................... $ 3,790
Additional paid-in capital................................ 38,484,727
Accumulated undistributed net investment income........... 19,449
Accumulated net realized gains on investment and foreign
currency transactions.................................... 82,210
Net unrealized appreciation of investments and foreign
currency transactions.................................... 171,440
---------------
NET ASSETS.................................................. $ 38,761,616
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $10.23
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
HIGH YIELD FUND
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 68,359,542
Dividends..................................................................... 424,850
----------------
Total Income................................................................ $ 68,784,392
EXPENSES:
Advisory...................................................................... 5,282,664
Administration................................................................ 1,004,403
Custody....................................................................... 131,631
Transfer agent and shareholder servicing fees................................. 56,105
Fund accounting............................................................... 30,278
Miscellaneous................................................................. 266,337
----------------
Total expenses before waivers/reimbursements................................ 6,771,418
Less expenses waived/reimbursed............................................. (442,728)
----------------
Net expenses................................................................ 6,328,690
----------------
NET INVESTMENT INCOME........................................................... 62,455,702
----------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:..........................
Net realized gains on investment transactions................................. 10,554,695
Net realized gains on foreign currency transactions........................... 470,076
Net change in unrealized depreciation of investments.......................... (8,257,451)
Net change in unrealized depreciation of foreign currency transactions........ (224,880)
----------------
Net realized and unrealized gains on investments................................ 2,542,440
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 64,998,142
----------------
----------------
</TABLE>
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 13,090,580
----------------
Total Income................................................................ $ 13,090,580
EXPENSES:
Advisory...................................................................... 1,087,083
Administration................................................................ 178,678
Custody....................................................................... 57,543
Registration and filing fees.................................................. 22,790
Transfer agent................................................................ 14,247
Fund accounting............................................................... 13,680
Miscellaneous................................................................. 45,326
----------------
Total expenses before waivers/reimbursements................................ 1,419,347
Less expenses waived/reimbursed............................................. (80,818)
----------------
Net expenses................................................................ 1,338,529
----------------
NET INVESTMENT INCOME........................................................... 11,752,051
----------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains on investment transactions................................. 2,149,050
Net realized loss on foreign currency transactions............................ 236,391
Net change in unrealized depreciation of investments.......................... (11,594,256)
Net change in unrealized depreciation of foreign currency transactions........ (319,518)
----------------
Net realized and unrealized gains (losses) on investments....................... (9,528,333)
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 2,223,718
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED) (CONTINUED)
LATIN AMERICA EQUITY FUND
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 1,260
Dividends..................................................................... 1,319,119
----------------
Total Income................................................................ $ 1,320,379
EXPENSES:
Advisory...................................................................... 249,373
Custody....................................................................... 163,070
Administration................................................................ 39,803
Fund accounting............................................................... 24,569
Registration and filing fees.................................................. 12,188
Transfer agent................................................................ 7,743
Amortization of organization expenses......................................... 2,896
Miscellaneous................................................................. 28,127
----------------
Total expenses before waivers/reimbursements................................ 527,769
Less expenses waived/reimbursed............................................. (21,186)
----------------
Net expenses................................................................ 506,583
----------------
NET INVESTMENT INCOME........................................................... 813,796
----------------
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS:
Net realized loss on investment transactions.................................. (2,410,303)
Net realized loss on foreign currency transactions............................ (49,141)
Net change in unrealized depreciation of investments.......................... (9,355,674)
Net change in unrealized depreciation of foreign currency transactions........ (3,116)
----------------
Net realized and unrealized losses on investments............................... (11,818,234)
----------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ ($ 11,004,438)
----------------
----------------
</TABLE>
NEW YORK MUNICIPAL FUND
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 1,171,352
Dividends..................................................................... 119
----------------
Total Income................................................................ $ 1,171,471
EXPENSES:
Advisory...................................................................... 88,446
Administration................................................................ 38,196
Fund accounting............................................................... 23,970
Transfer agent................................................................ 5,439
Audit......................................................................... 15,474
Amortization of organization expenses......................................... 3,262
Miscellaneous................................................................. 10,094
----------------
Total expenses before waivers/reimbursements................................ 184,881
Less expenses waived/reimbursed............................................. (64,280)
----------------
Net expenses................................................................ 120,601
----------------
NET INVESTMENT INCOME........................................................... 1,050,870
----------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions................................. 100,010
Net change in unrealized appreciation of investments.......................... 17,307
----------------
Net realized and unrealized gains on investments................................ 117,317
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 1,168,187
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED) (CONTINUED)
CALIFORNIA MUNICIPAL FUND
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 154,155
Dividend...................................................................... 4,689
--------
Total Income................................................................ $ 158,844
EXPENSES:
Advisory...................................................................... 12,548
Administration................................................................ 11,459
Fund accounting............................................................... 16,519
Transfer agent................................................................ 2,167
Audit......................................................................... 9,827
Amortization of organization expenses......................................... 4,163
Miscellaneous................................................................. 5,017
--------
Total expenses before waivers/reimbursements................................ 61,700
Less expenses waived/reimbursed............................................. (43,775)
--------
Net expenses................................................................ 17,925
--------
NET INVESTMENT INCOME........................................................... 140,919
--------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions................................. 3,431
Net change in unrealized appreciation of investments.......................... 6,845
--------
Net realized and unrealized gains on investments................................ 10,276
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 151,195
--------
--------
</TABLE>
NATIONAL MUNICIPAL
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 108,244
--------
Total Income................................................................ $ 108,244
EXPENSES:
Advisory...................................................................... 8,576
Administration................................................................ 9,895
Fund accounting............................................................... 15,395
Transfer agent................................................................ 1,865
Audit......................................................................... 9,745
Registration and filing....................................................... 8,847
Amortization of organization expenses......................................... 3,274
Miscellaneous................................................................. 4,163
--------
Total expenses before waivers/reimbursements................................ 61,760
Less expenses waived/reimbursed............................................. (49,509)
--------
Net expenses................................................................ 12,251
--------
NET INVESTMENT INCOME........................................................... 95,993
--------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions................................. 9,478
Net change in unrealized appreciation of investments.......................... 31,344
--------
Net realized and unrealized gains on investments................................ 40,822
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 136,815
--------
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED) (CONTINUED)
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 334,952
Dividend...................................................................... 195
--------
Total Income................................................................ $ 335,147
EXPENSES:
Advisory...................................................................... 20,896
Administration................................................................ 14,887
Fund accounting............................................................... 13,795
Transfer agent................................................................ 2,518
Audit......................................................................... 9,788
Registration and filing....................................................... 9,028
Amortization of organization expenses......................................... 2,172
Miscellaneous................................................................. 4,142
--------
Total expenses before waivers/reimbursements................................ 77,226
Less expenses waived/reimbursed............................................. (47,375)
--------
Net expenses................................................................ 29,851
--------
NET INVESTMENT INCOME........................................................... 305,296
--------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions................................. 26,198
Net change in unrealized appreciation of investments.......................... 26,570
--------
Net realized and unrealized gains on investments................................ 52,768
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 358,064
--------
--------
</TABLE>
MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 782,841
--------
Total Income................................................................ $ 782,841
EXPENSES:
Advisory...................................................................... 43,154
Administration................................................................ 20,936
Fund accounting............................................................... 15,833
Transfer agent................................................................ 3,251
Audit......................................................................... 10,585
Registration and filing....................................................... 12,773
Custodian..................................................................... 5,161
Amortization of organization expenses......................................... 2,172
Miscellaneous................................................................. 4,578
--------
Total expenses before waivers/reimbursements................................ 118,443
Less expenses waived/reimbursed............................................. (55,895)
--------
Net expenses................................................................ 62,548
--------
NET INVESTMENT INCOME........................................................... 720,293
--------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains on investment and foreign currency transactions............ 54,254
Net change in unrealized appreciation of investments.......................... 92,743
Net change in unrealized depreciation of foreign currency transactions........ (3,428)
--------
Net realized and unrealized gains on investments................................ 143,569
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 863,862
--------
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
HIGH YIELD FUND
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
JUNE 30, 1998 FOR THE YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income..................................... $ 62,455,702 $ 91,532,933
Net realized gains on investment and foreign currency
transactions............................................. 11,024,771 14,548,678
Net change in unrealized appreciation (depreciation) of
investments and foreign currency transactions............ (8,482,331) 17,401,256
------------------ ------------------
Net increase in net assets resulting from operations...... 64,998,142 123,482,867
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (62,455,702) (91,532,933)
Excess of net investment income........................... 0 (317,636)
Net realized gains........................................ 0 (14,175,584)
Excess of net realized gains.............................. 0 (555,849)
------------------ ------------------
Total dividends and distributions to shareholders......... (62,455,702) (106,582,002)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 464,129,918 607,587,659
Dividends reinvested...................................... 43,512,196 68,319,193
Cost of shares redeemed................................... (189,290,140) (197,959,947)
------------------ ------------------
Net increase in net assets from capital share
transactions............................................. 318,351,974 477,946,905
------------------ ------------------
Total increase in net assets.............................. 320,894,414 494,847,770
NET ASSETS:
Beginning of period....................................... 1,346,567,974 851,720,204
------------------ ------------------
End of period............................................. $ 1,667,462,388 $ 1,346,567,974
------------------ ------------------
------------------ ------------------
</TABLE>
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
JUNE 30, 1998 FOR THE YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income..................................... $ 11,752,051 $ 16,156,332
Net realized gains on investment and foreign currency
transactions............................................. 2,385,441 7,559,229
Net change in unrealized (depreciation) of investments and
foreign currency transactions............................ (11,913,774) (8,927,144)
------------------ ------------------
Net increase in net assets resulting from operations...... 2,223,718 14,788,417
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (11,752,051) (16,156,332)
Excess of net investment income........................... 0 (987,668)
Net realized gains........................................ 0 (7,559,229)
Excess of net realized gains.............................. 0 (3,624,156)
------------------ ------------------
Total dividends and distributions to shareholders......... (11,752,051) (28,327,385)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 73,323,314 121,772,445
Dividends reinvested...................................... 8,570,418 16,925,719
Cost of shares redeemed................................... (23,952,892) (30,526,769)
------------------ ------------------
Net increase in net assets from capital share
transactions............................................. 57,940,840 108,171,395
------------------ ------------------
Total increase in net assets.............................. 48,412,507 94,632,427
NET ASSETS:
Beginning of period....................................... 210,776,593 116,144,166
------------------ ------------------
End of period............................................. $ 259,189,100 $ 210,776,593
------------------ ------------------
------------------ ------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
LATIN AMERICA EQUITY FUND
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 1998 ENDED
(UNAUDITED) DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................. $ 813,796 $ 150,445
Net realized losses on investment and foreign currency
transactions.......................................... (2,459,444) (1,070,055)
Net change in unrealized appreciation (depreciation) of
investments and foreign currency transactions......... (9,358,790) 3,460,249
----------------------- -----------------
Net increase (decrease) in net assets resulting from
operations............................................ (11,004,438) 2,540,639
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (813,796) (150,445)
Excess of net investment income........................ 0 (222,445)
Net realized gains..................................... 0 (952,958)
----------------------- -----------------
Total dividends and distribution to shareholders....... (813,796) (1,325,848)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................ 3,240,797 68,585,066
Dividends reinvested................................... 445,995 1,094,992
Cost of shares redeemed................................ (10,779,242) (29,150,348)
----------------------- -----------------
Net increase (decrease) in net assets from capital
share transactions.................................... (7,092,450) 40,529,710
----------------------- -----------------
Total increase (decrease) in net assets................ (18,910,684) 41,744,501
NET ASSETS:
Beginning of period.................................... 55,052,218 13,307,717
----------------------- -----------------
End of period.......................................... $36,141,534 $55,052,218
----------------------- -----------------
----------------------- -----------------
</TABLE>
NEW YORK MUNICIPAL FUND
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 1998 ENDED
(UNAUDITED) DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income.................................. $ 1,050,870 $ 1,295,724
Net realized gains on investments...................... 100,010 201,875
Net change in unrealized appreciation of investments... 17,307 898,649
----------------------- -----------------
Net increase in net assets resulting from operations... 1,168,187 2,396,248
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDER FROM:
Net investment income.................................. (1,050,870) (1,295,724)
Excess of net investement income....................... 0 (3,541)
Net realized gains..................................... 0 (192,144)
----------------------- -----------------
Total dividends and distributions to shareholders...... (1,050,870) (1,491,409)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................ 28,331,312 29,031,529
Dividends reinvested................................... 880,590 1,189,875
Cost of shares redeemed................................ (14,925,876) (9,238,189)
----------------------- -----------------
Net increase in net assets from capital share
transactions.......................................... 14,286,026 20,983,215
----------------------- -----------------
Total increase in net assets........................... 14,403,343 21,888,054
NET ASSETS:
Beginning of period.................................... 42,045,686 20,157,632
----------------------- -----------------
End of period.......................................... $56,449,029 $42,045,686
----------------------- -----------------
----------------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD FROM
MONTHS APRIL 2,
ENDED 1997*
JUNE 30, THROUGH
1998 DECEMBER
(UNAUDITED) 31, 1997
- -------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income............ $ 140,919 $ 93,881
Net realized gains on investment
transactions.................... 3,431 3,306
Net change in unrealized
appreciation of investments..... 6,845 75,630
----------- -----------
Net increase in net assets
resulting from operations....... 151,195 172,817
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income............ (140,919) (93,881)
Excess of net investment
income.......................... 0 (695)
Net realized gains............... 0 (3,342)
----------- -----------
Total dividends and distributions
to shareholders................. (140,919) (97,918)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued...... 3,355,872 4,636,788
Dividends reinvested............. 117,300 80,338
Cost of shares redeemed.......... (120,000) 0
----------- -----------
Net increase in net assets from
capital share transactions...... 3,353,172 4,717,126
----------- -----------
Total increase in net assets..... 3,363,448 4,792,025
NET ASSETS:
Beginning of period.............. 4,792,075 50
----------- -----------
End of period.................... $ 8,155,523 $ 4,792,075
----------- -----------
----------- -----------
</TABLE>
NATIONAL MUNICIPAL
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD FROM
MONTHS OCTOBER 20,
ENDED 1997*
JUNE 30, THROUGH
1998 DECEMBER
(UNAUDITED) 31, 1997
- -------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income............ $ 95,993 $ 18,697
Net realized gains on
investments..................... 9,478 2,921
Net change in unrealized
appreciation of investments..... 31,344 42,043
----------- -----------
Change in net assets resulting
from operations................. 136,815 63,661
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............ (95,993) (18,697)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued...... 6,258,425 2,750,010
Dividends reinvested............. 95,866 10,113
Cost of shares redeemed.......... (100,700) 0
----------- -----------
Change in net assets from capital
share transactions.............. 6,253,591 2,760,123
----------- -----------
Total increase in net assets..... 6,294,413 2,805,087
NET ASSETS:
Beginning of period.............. 2,805,087 0
----------- -----------
End of period.................... $ 9,099,500 $ 2,805,087
----------- -----------
----------- -----------
</TABLE>
- ---------------
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE SIX JULY 1,
MONTHS 1997*
ENDED JUNE THROUGH
30, 1998 DECEMBER
(UNAUDITED) 31, 1997
- --------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income......................... $ 305,296 $ 55,516
Net realized gains on investment
transactions................................. 26,198 13,802
Net change in unrealized appreciation of
investments.................................. 26,570 30,493
----------- -----------
Net increase in net assets resulting from
operations................................... 358,064 99,811
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income......................... (305,296) (55,516)
Excess of net investment income............... 0 (3,940)
Net realized gains............................ 0 (5,280)
----------- -----------
Total dividends and distributions to
shareholders................................. (305,296) (64,736)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................... 14,571,450 3,943,065
Dividends reinvested.......................... 299,898 45,655
Cost of shares redeemed....................... (456,000) (69,119)
----------- -----------
Net increase in net assets from capital share
transactions................................. 14,415,348 3,919,601
----------- -----------
Total increase in net assets.................. 14,468,116 3,954,676
NET ASSETS:
Beginning of period........................... 3,954,676 0
----------- -----------
End of period................................. $18,422,792 $ 3,954,676
----------- -----------
----------- -----------
</TABLE>
MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD FROM
MONTHS JULY 1,
ENDED 1997*
JUNE 30, THROUGH
1998 DECEMBER
(UNAUDITED) 31, 1997
- --------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income......................... $ 720,293 $ 335,822
Net realized gains on investment and foreign
currency transactions........................ 54,254 117,606
Net change in unrealized appreciation of
investment and foreign currency
transactions................................. 89,315 82,125
----------- -----------
Net increase in net assets resulting from
operations................................... 863,862 535,553
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................... (720,293) (335,822)
Excess of net investment income............... 0 (13,631)
Realized gains................................ 0 (58,364)
----------- -----------
Net decrease in net assets from shareholder
distributions................................ (720,293) (407,817)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................... 22,645,012 16,626,836
Dividends reinvested.......................... 535,646 307,847
Cost of shares redeemed....................... (1,600,030) (25,000)
----------- -----------
Net increase in net assets from capital share
transactions................................. 21,580,628 16,909,683
----------- -----------
Total increase in net assets.................. 21,724,197 17,037,419
NET ASSETS:
Beginning of period........................... 17,037,419 0
----------- -----------
End of period................................. $38,761,616 $17,037,419
----------- -----------
----------- -----------
</TABLE>
- ---------------
* Commencement of operations
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND
<TABLE>
<CAPTION>
SELECT SHARES
---------------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE SIX FROM MARCH 2,
MONTHS ENDED FOR THE YEAR FOR THE YEAR FOR THE YEAR 1994* THROUGH
JUNE 30, 1998 ENDED DECEMBER ENDED DECEMBER ENDED DECEMBER DECEMBER 31,
(UNAUDITED) 31, 1997 31, 1996 31, 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.34 $ 10.15 $ 9.92 $ 9.25 $10.00
--------------- ----------------- -------- -------- ---------------
Net investment
income................ 0.43 0.87 0.89 0.90 0.72
Net realized and
unrealized gain
(loss)................ 0.03 0.31 0.29 0.67 (0.75)
--------------- ----------------- -------- -------- ---------------
Total income from
investment
operations............ 0.46 1.18 1.18 1.57 (0.03)
--------------- ----------------- -------- -------- ---------------
LESS DIVIDENDS AND
DISTRIBUTION FROM:
Net investment
income................ (0.43) (0.87) (0.89) (0.89) (0.72)
Net realized gains..... 0.00 (0.12) (0.06) (0.01) --
--------------- ----------------- -------- -------- ---------------
Total dividends and
distributions.......... (0.43) (0.99) (0.95) (0.90) (0.72)
--------------- ----------------- -------- -------- ---------------
Net change in net asset
value per share....... 0.03 0.19 0.23 0.67 (0.75)
--------------- ----------------- -------- -------- ---------------
NET ASSET VALUE, END OF
PERIOD................. $ 10.37 $ 10.34 $ 10.15 $ 9.92 $ 9.25
--------------- ----------------- -------- -------- ---------------
--------------- ----------------- -------- -------- ---------------
TOTAL RETURN(a).......... 4.48%(b) 12.09% 12.46% 17.72% (0.27%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in
thousands)............ $1,667,432 1,346,553 $851,720 $479,090 2$22,317
Ratios to average net
assets:
Expenses**............. 0.84%(c) 0.87% 0.98% 1.05% 1.14%(c)
Net investment
income................ 8.30%(c) 8.46% 8.86% 9.38% 8.97%(c)
PORTFOLIO TURNOVER
RATE................... 11% 47% 41% 34% 42%
<CAPTION>
ADVISOR SHARES
FOR THE
SIX
MONTHS FOR THE
ENDED PERIOD*** ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
- -------------------------
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.34 $10.37
------ ------
Net investment
income................ 0.15 0.32
Net realized and
unrealized gain
(loss)................ 0.03 0.09
------ ------
Total income from
investment
operations............ 0.18 0.41
------ ------
LESS DIVIDENDS AND
DISTRIBUTION FROM:
Net investment
income................ (0.15) (0.32)
Net realized gains..... -- (0.12)
------ ------
Total dividends and
distributions.......... (0.15) (0.44)
------ ------
Net change in net asset
value per share....... 0.03 (0.03)
------ ------
NET ASSET VALUE, END OF
PERIOD................. $10.37 $10.34
------ ------
------ ------
TOTAL RETURN(a).......... 0.66%(b) 3.93%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in
thousands)............ $ 31 $ 15
Ratios to average net
assets:
Expenses**............. 0.93%(c) 1.03%(c)
Net investment
income................ 8.73%(c) 7.87%(c)
PORTFOLIO TURNOVER
RATE................... 11% 47%
</TABLE>
- ---------------
* Commencement of operations.
**During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratio would have been higher.
***
Sales of Advisor Shares began on August 14, 1997.
(a)Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b)Not annualized.
(c)Annualized.
52
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
-----------------------------------------------------------------------------------------
FOR SIX MONTHS
ENDED JUNE 30, FOR THE YEAR
1998 ENDED DECEMBER FOR THE YEAR ENDED FOR THE YEAR ENDED
(UNAUDITED) 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF
PERIOD............... $ 10.46 $ 11.03 $ 9.91 $ 8.84
--------------- --------------- -------- -------
Net investment
income................ 0.50 1.15 1.00 0.90
Net realized and
unrealized gain
(loss)................ (0.33) -- 1.55 1.07
--------------- --------------- -------- -------
Total income from
investment
operations............ 0.17 1.15 2.55 1.97
--------------- --------------- -------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income................ (0.50) (1.15) (1.00) (0.60)
Excess of net
investment income..... -- (0.04) -- --
Net realized gains..... -- (0.53) (0.43) --
Return of capital...... -- -- -- (0.30)
--------------- --------------- -------- -------
Total dividends and
distributions........ (0.50) (1.72) (1.43) (0.90)
--------------- --------------- -------- -------
Net change in net asset
value per share....... (0.33) (0.57) 1.12 1.07
--------------- --------------- -------- -------
NET ASSET VALUE, END OF
PERIOD............... $ 10.13 $ 10.46 $ 11.03 $ 9.91
--------------- --------------- -------- -------
--------------- --------------- -------- -------
TOTAL RETURN(a).......... 1.49%(b) 10.67% 26.56% 23.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (in
thousands)............ $259,189 $210,777 $116,144 $ 49,250
Ratios to average net
assets:
Expenses**............. 1.09%(c) 1.29% 1.16% 1.50%
Net investment
income................ 9.56%(c) 9.49% 9.62% 9.97%
PORTFOLIO TURNOVER
RATE................. 36% 179% 136% 60%
<CAPTION>
FOR THE PERIOD FROM MARCH
8, 1994* THROUGH DECEMBER
31, 1994
- ------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF
PERIOD............... $ 10.00
-------
Net investment
income................ 0.81
Net realized and
unrealized gain
(loss)................ (1.16)
-------
Total income from
investment
operations............ (0.35)
-------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income................ (0.81)
Excess of net
investment income..... --
Net realized gains..... --
Return of capital...... --
-------
Total dividends and
distributions........ (0.81)
-------
Net change in net asset
value per share....... (1.16)
-------
NET ASSET VALUE, END OF
PERIOD............... $ 8.84
-------
-------
TOTAL RETURN(a).......... (3.82%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (in
thousands)............ $ 28,117
Ratios to average net
assets:
Expenses**............. 1.50%(c)
Net investment
income................ 10.39%(c)
PORTFOLIO TURNOVER
RATE................. 47%
</TABLE>
- ---------------
* Commencement of operations.
**During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been higher.
(a)Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b)Not annualized.
(c)Annualized.
(d)As of June 30, 1998 there were no Advisor Shares outstanding.
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
LATIN AMERICA EQUITY FUND
<TABLE>
<CAPTION>
SELECT SHARES
----------------------------------------------------------------- ADVISOR SHARES (D)
FOR THE SIX MONTHS FOR THE PERIOD FROM -----------------
ENDED FOR THE YEAR FEBRUARY 13, 1996* FOR THE PERIOD ***
JUNE 30, 1998 ENDED THROUGH DECEMBER 31, ENDED
(UNAUDITED) DECEMBER 31, 1997 1996 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 14.13 $ 11.66 $ 10.00 $ 15.11
------- ------- ------- --------
Net investment income
(loss)..................... 0.24 0.09 0.20 (0.21)
Net realized and unrealized
gain (loss)................ (3.19) 2.74 2.11 (0.50)
------- ------- ------- --------
Total income (loss) from
investment operations...... (2.95) 2.83 2.31 (0.71)
------- ------- ------- --------
LESS DIVIDENDS AND
DISTRIBUTION FROM:
Net investment income....... (0.24) (0.09) (0.20) (0.01)
Excess of net investment
income..................... -- (0.02) -- --
Net realized gains.......... -- (0.25) (0.45) (0.25)
------- ------- ------- --------
Total dividends and
distributions............... (0.24) (0.36) (0.65) (0.26)
------- ------- ------- --------
Net change in net asset
value per share (3.19) 2.47 1.66 (0.97)
------- ------- ------- --------
NET ASSET VALUE, END OF
PERIOD...................... $ 10.94 $ 14.13 $ 11.66 $ 14.14
------- ------- ------- --------
------- ------- ------- --------
TOTAL RETURN (a).............. (20.95%)(b) 24.22% 23.36%(b) (4.64%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands)............. $ 36,142 $ 55,034 $ 13,308 $ 18
Ratios to average net assets
Expenses**.................. 2.00%(c) 1.60% 2.00%(c) 1.73%(c)
Net Investment Income
(loss)..................... 3.27%(c) 0.26% 1.97%(c) (0.73%)(c)
PORTFOLIO TURNOVER RATE....... % 35 98% 133% 98%
</TABLE>
- ---------------
* Commencement of operations.
**During the period, certain fees were voluntarily reduced and/ or
reimbursed. If such voluntary fee reductions and/ or reimbursements had not
occurred, the ratio would have been higher.
***
Sales of Advisor Shares began on June 23, 1997.
(a)Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b)Not annualized.
(c)Annualized.
(d)As of June 30, 1998 there were no Advisor Shares outstanding.
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
NEW YORK MUNICIPAL FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
-----------------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD FROM
MONTHS ENDED FOR THE YEAR FOR THE YEAR APRIL 3, 1995*
JUNE 30, 1998 ENDED ENDED THROUGH DECEMBER 31,
(UNAUDITED) DECEMBER 31, 1997 DECEMBER 31, 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 10.69 $ 10.40 $ 10.47 $ 10.00
------- ------- ------- -------
Net investment income....... 0.22 0.46 0.44 0.33
Net realized and unrealized
gain (loss)................ 0.03 0.34 (0.06) 0.47
------- ------- ------- -------
Total income from investment
operations................. 0.25 0.80 0.38 0.80
------- ------- ------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income....... (0.22) (0.46) (0.44) (0.32)
Net realized gains.......... 0.00 (0.05) (0.01) (0.01)
------- ------- ------- -------
Total dividends and
distributions............... (0.22) (0.51) (0.45) (0.33)
------- ------- ------- -------
Net change in net asset value
per share................... 0.03 0.29 (0.07) 0.47
------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD...................... $ 10.72 $ 10.69 $ 10.40 $ 10.47
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN(a)............... 2.37%(b) 7.84% 3.72% 8.13%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands)............. $ 56,449 $ 42,046 $ 20,158 $ 12,516
Ratios to average net assets:
Expenses**.................. 0.50%(c) 0.50% 0.55% 0.54%(c)
Net investment income....... 4.15%(c) 4.22% 4.28% 4.20%(c)
PORTFOLIO TURNOVER RATE....... 36% 144% 33% 35%
</TABLE>
- ---------------
* Commencement of operations.
**During the period, certain fees were voluntarily reduced and/ or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratio would have been higher.
(a)Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b)Not annualized.
(c)Annualized.
(d)As of June 30, 1998 there were no Advisor Shares outstanding.
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
-----------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE PERIOD FROM
JUNE 30, 1998 APRIL 2, 1997* THROUGH
(UNAUDITED) DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................................. $ 10.37 $ 10.00(e)
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................... 0.20 0.33
Net realized and unrealized gains................................... 0.02 0.38
------ ------
Total income from investment operations............................. 0.22 0.71
------ ------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income............................................... (0.20) (0.33)
Net realized gains.................................................. 0.00 (0.01)
------ ------
Total dividends and distributions................................... (0.20) (0.34)
------ ------
Net change in net asset value per share............................... 0.02 0.37
------ ------
NET ASSET VALUE, END OF PERIOD........................................ $ 10.39 $ 10.37
------ ------
------ ------
TOTAL RETURNa......................................................... 2.16%(b) 7.14%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands).......................... 8,156 $ 4,792
Ratios to average net assets:
Expenses**.......................................................... 0.50%(c) 0.50%(c)
Net investment income............................................... 3.92%(c) 4.15%(c)
PORTFOLIO TURNOVER RATE............................................... 8% 41%
</TABLE>
NATIONAL MUNICIPAL
<TABLE>
<CAPTION>
SELECT SHARES(d)
--------------------------------------------------------
---------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE PERIOD FROM
JUNE 30, 1998 OCTOBER 20, 1997* THROUGH
(UNAUDITED) DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................... $ 10.19 $ 10.00(e)
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................ 0.20 0.08
Net realized and unrealized gains................................ 0.09 0.19
------ ------
Total income from investment operations.......................... 0.29 0.27
------ ------
LESS DIVIDENDS FROM:
Net investment income............................................ (0.20) (0.08)
Distributions to shareholders from net realized gains on
investment transactions......................................... 0.00 0.00
------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS:................................. (0.20) (0.08)
------ ------
Net change in net asset value per share.......................... 0.09 0.19
------ ------
NET ASSET VALUE, END OF PERIOD..................................... $ 10.28 $ 10.19
------ ------
------ ------
TOTAL RETURNa...................................................... 2.84%(b) 2.70%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)....................... $ 9,099 $ 2,805
Ratios to average net assets
Expenses**....................................................... 0.50%(c) 0.50%(c)
Net Investment Income............................................ 3.90%(c) 3.95%(c)
PORTFOLIO TURNOVER RATE............................................ 27% 46%
</TABLE>
- ------------------------------
*Commencement of operations.
**During the period, certain fees were voluntarily reduced and/ or
reimbursed. If such voluntary fee reductions and/ or reimbursements had not
occurred, the ratio would have been higher.
(a)Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b)Not annualized.
(c)Annualized.
(d)As of June 30, 1998 there were no Advisor Shares outstanding.
(e)Initial offering price.
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
----------------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE PERIOD FROM
JUNE 30, 1998 JULY 1, 1997* THROUGH
(UNAUDITED) DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 10.17 $ 10.00(e)
------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.26 0.27
Net realized and unrealized gains......... 0.09 0.19
------- ------
Total income from investment operations... 0.35 0.46
------- ------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income..................... (0.26) (0.27)
Excess of net investment income........... -- (0.01)
Net realized gains........................ -- (0.01)
------- ------
Total dividends and distributions........... (0.26) (0.29)
------- ------
Net change in net asset value per share..... 0.09 0.17
------- ------
NET ASSET VALUE, END OF PERIOD.............. $ 10.26 $ 10.17
------- ------
------- ------
TOTAL RETURNa............................... 3.45%(b) 4.71%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands)............................... $ 18,423 $ 3,955
Ratios to average net assets:
Expenses**................................ 0.50%(c) 0.50%(c)
Net investment income..................... 5.09%(c) 5.32%(c)
PORTFOLIO TURNOVER RATE..................... 186% 153%
</TABLE>
MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
-----------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE PERIOD FROM
JUNE 30, 1998 JULY 1, 1997* THROUGH
(UNAUDITED) DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 10.17 $ 10.00(e)
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.30 0.29
Net realized and unrealized gains......... 0.06 0.22
------- -------
Total income from investment operations... 0.36 0.51
------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income..................... (0.30) (0.29)
Excess of net investment income........... -- (0.01)
Net realized gains........................ -- (0.04)
------- -------
Total dividends and distributions........... (0.30) (0.34)
------- -------
Net change in net asset value per share..... 0.06 0.17
------- -------
NET ASSET VALUE, END OF PERIOD.............. $ 10.23 $ 10.17
------- -------
------- -------
TOTAL RETURNa............................... 3.53%(b) 5.10%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands)............................... $ 38,762 $ 17,037
Ratios to average net assets:
Expenses**................................ 0.50%(c) 0.50%(c)
Net investment income..................... 5.82%(c) 5.77%(c)
PORTFOLIO TURNOVER RATE..................... 77% 81%
</TABLE>
- ---------------
* Commencement of operations.
**During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratio would have been higher.
(a)Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b)Not annualized.
(c)Annualized.
(d)As of June 30, 1998 there were no Advisor Shares outstanding.
(e)Initial offering price.
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -----------------------------------------------------------------------------
1. ORGANIZATION 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) and operates as
a non-diversified, no-load and open-end management investment company. The
Company consists of eleven separately managed funds, of which eight, OFFITBANK
High Yield Fund, OFFITBANK Emerging Markets Fund, OFFITBANK Latin America Equity
Fund (formerly "OFFITBANK Latin America Total Return Fund"), OFFITBANK New York
Municipal Fund, OFFITBANK California Municipal Fund, OFFITBANK U.S. Government
Securities Fund, OFFITBANK Mortgage Securities Fund, and OFFITBANK National
Municipal Fund (individually, a "Fund", and collectively, the "Funds") have
commenced operations. The Funds have the following inception dates:
<TABLE>
<S> <C>
High Yield Fund......................... March 2, 1994
Emerging Markets Fund................... March 8, 1994
Latin America Equity Fund............... February 13, 1996
New York Municipal Fund................. April 3, 1995
California Municipal Fund............... April 2, 1997
U.S. Government Securities Fund......... July 1, 1997
Mortgage Securities Fund................ July 1, 1997
National Municipal Fund................. October 20, 1997
</TABLE>
Effective May 1, 1996, all of the outstanding shares of each of the Funds then
in existence were reclassified as "Select Shares" and each Fund began offering a
new class of shares, designated as "Advisor Shares." Each class of shares
outstanding bears the same voting, dividend, liquidation and other rights and
conditions, except that the Advisor shares are expected to bear additional
shareholder servicing expenses.
The High Yield Fund's primary investment objective is high current income with
capital appreciation as a secondary objective. The Emerging Markets Fund seeks
to provide investors with a competitive total return by focusing on current
yield and opportunities for capital appreciation. The Latin America Equity
Fund's primary investment objective is capital appreciation with current income
as a secondary objective. The New York Municipal Fund seeks to maximize total
after-tax return for New York residents, consistent with a prudent level of
credit risk. The California Municipal Fund seeks to maximize total after-tax
return for California residents, consistent with a prudent level of credit risk.
The U.S. Government Securities Fund seeks to provide shareholders with current
income. The Mortgage Securities Fund's investment objective is to maximize total
return from a combination of investment income and capital appreciation. The
National Municipal Fund seeks to maximize total after-tax return, consistent
with a prudent level of credit risk.
OFFITBANK (the "Adviser") serves as the Funds' investment adviser. Effective
June 1, 1998, PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC
Bank Corp., began providing administrative and fund accounting services for the
Funds. OFFIT Funds Distributor, Inc. (the "Distributor"), serves as the
distributor of the Funds' shares. PFPC also provides transfer and dividend
disbursing agent services for the Funds. Prior to June 1, 1998, BISYS Fund
Services, Limited Partnership, and BISYS Fund Services, Inc. provided the
aformentioned services.
2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant
accounting policies followed by the Funds in the preparation of their financial
statements. The policies are in conformity with generally accepted accounting
principles. The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
PORTFOLIO VALUATIONS:
Equity securities held by a Fund are valued at the last reported sales price on
the securities 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. Debt 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
valued at amortized cost, which approximates market value, 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
may be valued by independent pricing services, approved by the Company's Board
of Directors, which use prices provided by market-makers or estimates of market
value obtained from yield data relating to instruments or securities with
similar characteristics.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Fund records securities transactions on a trade date basis. Interest income,
including accretion of discount and amortization of premium is accrued daily.
Dividend income is recognized on the ex-dividend date. Realized gains and losses
from securities transactions are recorded on the identified cost basis.
EXPENSES:
The company accounts separately for the assets, liabilities and operations of
each Fund. Direct expenses of a Fund are charged to that Fund, while general
Company expenses are allocated among the Company's respective portfolios based
on relative net assets.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized
58
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- -----------------------------------------------------------------------------
gains and losses on investments of a fund are allocated to each class of shares
based upon their relative net asset value on the date income is earned or
expenses are realized and unrealized gains and losses are incurred.
ORGANIZATION COSTS:
Costs incurred in connection with the organization and initial registration of
the Funds have been deferred and are being amortized over a sixty-month period,
beginning with each Fund's commencement of operations.
OFFITBANK assumed the organizational expenses for the High Yield and the
Emerging Markets Funds.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from the High Yield, the New York Municipal, the California Municipal,
the U.S. Government Securities, the Mortgage Securities, and the National
Municipal Funds' net investment income, if any, are declared daily and paid
monthly. Dividends from the Emerging Markets Fund's net investment income, if
any, are declared daily and paid quarterly. Dividends from the Latin America
Equity Fund's net investment income, if any, are declared and paid quarterly.
Net realized gains on portfolio securities, if any, are distributed at least
annually by the Funds. However, to the extent net realized gains can be offset
by capital loss carryovers, such gains will not be distributed. Dividends and
distributions are recorded by the Funds on the ex-dividend date.
The amount of dividends from net investment income and distributions from net
realized gains are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the composition of net assets based on their federal tax-basis treatment;
temporary differences do not require a reclassification. Distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as distributions in
excess of net investment income or net realized gains. To the extent they exceed
net investment income and net realized capital gains for tax purposes, they are
reported as distributions of capital.
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute timely, all
of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
Capital and currency losses incurred within the Funds' fiscal year, but after
October 31, are deemed to arise on the first business day of the following
fiscal year for tax purposes. The following Funds have incurred and will elect
to defer capital and currency losses as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS CURRENCY LOSS
DEFERRED DEFERRED
------------ -------------
<S> <C> <C>
Emerging Markets Fund.......... $3,025,289 $ 184,458
California Municipal Fund...... 36 --
</TABLE>
FOREIGN CURRENCY TRANSLATION:
The accounting records of the Funds are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars at the current rate of
exchange to determine the value of investments, assets and liabilities.
Purchases and sales of securities, and income and expenses are translated at the
prevailing rate of exchange on the respective dates of such transactions. The
Funds do not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gains or losses from investments. However,
the Funds do isolate the effect of fluctuations in foreign exchange rates when
determining the gain or loss upon the sale or maturity of foreign currency
denominated debt obligations pursuant to U.S. federal income tax regulations.
Such amount is categorized as foreign exchange gain or loss for both financial
reporting and income tax reporting purposes.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities and forward currency contracts, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest and foreign withholding amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes in
the value of assets and liabilities, other than investments in securities,
resulting from changes in the exchange rate.
REPURCHASE AGREEMENTS:
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 Funds to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
59
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- -----------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS:
Each Fund (other than the Municipal 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 exposures to changes in foreign currency
exchange rates on their portfolio holdings.
Each of the Funds (other than the Municipal 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 Equity Fund are included in realized gains and losses
on foreign currency transactions.
The Municipal Funds may, in order to further their investment objectives,
purchase or sell futures contracts on (a) U.S. Government Securities and (b)
municipal bond indices. Such Funds reserve the right to conduct futures
transactions based on an index which may be developed in the future to correlate
with price movements in municipal obligations.
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 June 30,
1998, are recorded for financial reporting purposes as unrealized gains and
losses by the Funds.
The table below indicates the High Yield and Emerging Markets Funds' outstanding
forward currency contract positions at June 30, 1998:
HIGH YIELD FUND
<TABLE>
<CAPTION>
VALUE ON VALUE AT UNREALIZED
CONTRACT MATURITY ORIGINATION JUNE 30, APPRECIATION
CURRENCY AMOUNTS DATE DATE 1998 (DEPRECIATION)
----------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Sell CAD (2,860,000) 11/24/98 ($1,972,413) $(1,951,339) $ 21,074
Sell DEM (5,252,000) 7/10/98 (2,934,078) (2,913,246) 20,832
Sell DEM (1,050,000) 7/10/98 (586,592) (582,427) 4,165
Sell DEM (10,500,000) 7/10/98 (5,739,587) (5,824,273) (84,686)
-------------
Net unrealized depreciation on forward positions........................... ($ 38,615)
-------------
-------------
</TABLE>
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE ON VALUE AT UNREALIZED
CONTRACT MATURITY ORIGINATION JUNE 30, APPRECIATION
CURRENCY AMOUNTS DATE DATE 1998 (DEPRECIATION)
----------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Buy DEM 20,240,000 7/21/98 1$1,355,603 $11,234,520 $(121,083)
Buy DEM 5,859,000 7/21/98 3,316,446 3,252,127 (64,319)
Sell DEM (33,936,000) 7/21/98 (8,996,865) (18,836,694) 160,171
Sell ECU (1,278,607) 9/2/98 (1,416,697) (1,407,321) 9,376
-------------
Net unrealized depreciation on forward positions........................... ($ 15,855)
-------------
-------------
</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.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES. The Company has entered
into investment advisory agreements (the "Investment Advisory Agreements") with
the Adviser. Pursuant to the terms of the Investment Advisory Agreements the
Adviser is entitled to a fee that is calculated daily and paid monthly based on
the average daily net assets of each Fund, at the annual rate of: 0.85% for the
first $200,000,000 of assets, 0.75% for the next $400,000,000, and 0.65% for
amounts in excess of $600,000,000 in the case of the High Yield Fund; 0.90% for
the first $200,000,000 of assets and 0.80% for amounts in excess thereof in the
case of the Emerging Markets Fund; 1.00% for the Latin America Equity Fund;
0.35% in the case of the New York Municipal Fund, the California Municipal Fund,
the U.S. Government Securities Fund, the Mortgage Securities Fund, and the
National Municipal Fund. For the six months ended June 30, 1998, the Adviser
earned fees of $5,282,644, $1,087,083, and $249,373 for the High Yield Fund,
Emerging Markets Fund, and Latin America Equity Fund, respectively. The Adviser
earned fees of $88,446, $43,154, and $20,896, and waived fees of $45,232,
$36,880, and $18,783 for the New York Municipal Fund,
60
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- -----------------------------------------------------------------------------
the Mortgage Securities Fund, and the U.S. Government Securities Fund,
respectively. The Adviser earned and waived fees of $12,548 and $8,576, for the
California Municipal Fund and National Municipal Fund, respectively.
PFPC provides the Company with administrative services pursuant to an
administration agreement (the "Administration Agreement"). The services under
the Administration Agreement are subject to the supervision of the Company's
Board of Directors and officers and include the day-to-day administration of
matters related to the corporate existence of the Company, maintenance of its
records, preparation of reports, supervision of the Company's arrangements with
its custodian and assistance in the preparation of the Company's registration
statements under federal and state laws. Pursuant to the Administration
Agreement, the Company pays PFPC a monthly fee for its services at an annual
rate of 0.125% of each Portfolio's first $300 million in average daily net
assets; 0.11% of each Portfolio's next $300 million in average daily net assets;
0.08% of each Portfolio's next $300 million in average daily net assets; 0.05%
of each Portfolio's next $300 million in average daily net assets; and 0.0275 %
of each Portfolio's average daily net assets in excess of $1.2 billion. From
time to time, PFPC may waive all or a portion of its fees. For the period from
June 1, 1998 through June 30, 1998, PFPC was entitled to fees of $118,947,
$32,774, $8,454, $8,454, $7,083, $8,454, $7,083, and $7,083 for the High Yield
Fund, Emerging Markets Fund, Latin America Equity Fund, New York Municipal Fund,
California Municipal Fund, U.S. Government Securities Fund, Mortgage Securities
Fund and the National Municipal Fund, respectively. PFPC waived fees of $7,866,
$4,617, $3,282, $7,083, $8,454, $4,142, and $7,083 for the Emerging Markets
Fund, Latin America Equity Fund, New York Municipal Fund, California Municipal
Fund, U.S. Government Fund, Mortgage Securities Fund and the National Municipal
Fund, respectively. For the period prior to June 1, 1998, BISYS Fund Services,
Inc., the previous administrator was entitled to fees of $885,456, $145,904,
$31,349, $29,742, $4,376, $6,433, $13,853 and $2,812, for the High Yield Fund,
Emerging Markets Fund, Latin America Equity Fund, New York Municipal Fund,
California Municipal Fund, U.S. Government Securities Fund, Mortgage Securities
Fund, and the National Municipal Fund, respectively. BISYS waived fees of
$442,728, $72,952, $15,674, $14,871, $4,376, $6,433, $11,945, and $2,812, for
the High Yield Fund, Emerging Markets Fund, Latin America Equity Fund, New York
Municipal Fund, California Municipal Fund, U.S. Government Securities Fund,
Mortgage Securities Fund, and the National Municipal Fund, respectively.
PFPC provides the Funds with fund accounting and related services pursuant to a
fund accounting agreement with the Company. For these services PFPC is entitled
a fee of $1,250 per month per Fund plus out of pocket expenses. From time to
time, PFPC may waive all or a portion of its fees. For the period from June 1,
1998 through June 30, 1998, PFPC waived fees of $1,492 for the U.S. Government
Securities Fund and $1,250 for the California Municipal Fund and National
Municipal Fund, respectively. For the period prior to June 1, 1998, BISYS Fund
Services, Inc., the previous Fund accounting agent, earned fees, including
reimbursement of out of pocket expenses, of $28,786, $12,188, $23,077, $22,478,
$15,269, $12,303, $14,583, and $14,145 for the High Yield Fund, Emerging Markets
Fund, Latin America Equity Fund, New York Municipal Fund, California Municipal
Fund, U.S. Government Securities Fund, Mortgage Securities Fund, and the
National Municipal Fund, respectively.
PFPC also serves as transfer agent for the Funds and receives reimbursement of
certain expenses plus a fee for related services pursuant to a transfer agency
agreement with the Company. From time to time, PFPC may waive all or a portion
of these fees. For the period from June 1, 1998 through June 30, 1998, PFPC
earned fees of $3,396, $2,168, $1,938, $1,938, $1,591, $1,938, $2,222 and $1,591
for the High Yield Fund, Emerging Markets Fund, Latin America Equity Fund, New
York Municipal Fund, California Municipal Fund, U.S. Government Fund, Mortgage
Securities Fund and National Municipal Fund, respectively. PFPC waived fees of
$895, $895, $750, $895, $750 and $750, for the Latin America Equity Fund, New
York Municipal Fund, California Municipal Fund, U.S. Government Securities Fund,
Mortgage Securities Fund and National Municipal Fund, respectively. For the
period prior to June 1, 1998, BISYS Fund Services, Inc., the previous transfer
agent earned fees, including reimbursement of out of pocket expenses, of
$52,709, $12,079, $5,805, $3,501, $576, $580, $1,029, and $274, for the High
Yield Fund, Emerging Markets Fund, Latin America Equity Fund, New York Municipal
Fund, California Municipal Fund, U.S. Government Securities Fund, Mortgage
Securities Fund, and the National Municipal Fund, respectively.
Shares in each Fund are sold on a continuous basis by the Distributor. Solely
for the purpose of reimbursing the Distributor for activities primarily intended
to result in the sale of its shares, each Fund is authorized to spend up to
0.25% of its net assets annually with respect to each class of shares of the
Fund in accordance with a Plan of Distribution (the "Plan") pursuant to Rule
12b-1 promulgated under the 1940 Act. Activities for which the Distributor may
be reimbursed include (but are not limited to) the development and
implementation of direct mail promotions and advertising for the Funds and the
preparation, printing and distribution of prospectuses
61
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- -----------------------------------------------------------------------------
for the Funds to recipients other than existing shareholders. For the six months
ended June 30, 1998, no distribution costs were incurred.
Pursuant to a Shareholder Servicing Plan adopted by the Board of Directors of
the Company, the Company may enter into Shareholder Servicing Agreements with
financial institutions ("Shareholder Servicing Agents") with respect to Advisor
Shares. Shareholder administrative support services will be performed by
Shareholder Servicing Agents for their customers who beneficially own Advisor
Shares. For the services provided, the Company's Shareholder Servicing Plan
permits each Fund to pay fees to Shareholder Servicing Agents at an annual rate
of up to 0.25% of the average daily net asset value of Advisor Shares of the
Fund for which such Shareholder Servicing Agents provide services for the
benefit of customers. Shareholder Servicing Agents will provide their customers
with a schedule of any credits, fees or of the terms or conditions that may be
applicable to the investments of customers assets in each Fund's Advisor Shares.
For the six months ended June 30, 1998, no shareholder servicing fees were
incurred.
OFFITBANK has voluntarily agreed to limit the expenses ratios for the California
Municipal Fund, U.S. Government Securities Fund, Mortgage Securities Fund, and
National Municipal Fund at 0.50%. In order to maintain this ratio, the Adviser
has waived its advisory fee and has also agreed to reimburse the Funds $17,768,
$11,318, $2,178, and $29,037 respectively.
4. SECURITIES TRANSACTIONS. For the six months ended June 30, 1998, the cost of
purchases and the proceeds from sales of the Funds' portfolio securities
(excluding short-term investments), were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
High Yield Fund................................... $230,482,895 $160,649,862
Emerging Markets Fund............................. 138,594,090 85,129,617
Latin America Equity Fund......................... 17,499,784 20,883,181
New York Municipal Fund........................... 27,895,039 17,438,392
California Municipal Fund......................... 3,859,865 531,463
U.S. Government Securities Fund................... 34,477,371 19,831,524
Mortgage Securities Fund.......................... 43,189,125 18,399,874
National Municipal Fund........................... 5,772,154 1,276,863
</TABLE>
5. 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 six months ended June 30, 1998, and the period
ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
HIGH YIELD FUND SELECT SHARES
------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares issued....... 44,509,388 $ 464,098,918 58,935,603 $ 607,572,659
Shares reinvested... 4,174,697 43,512,196 6,635,971 68,319,193
Shares redeemed..... (18,145,430) (189,275,111) (19,219,765) (197,959,947)
----------- ------------- ----------- -------------
Net increase........ 30,538,655 $ 318,336,003 46,351,809 $ 477,931,905
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND ADVISOR SHARES
------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares issued....... 2,965 $ 31,000 1,446$ 15,000
Shares reinvested... 0 0 0 0
Shares redeemed..... (1,446) (15,029) 0 0
----------- ------------- ----------- -------------
Net increase........ 1,519 $ 15,971 1,446 $ 15,000
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS FUND SELECT SHARES
------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares issued....... 6,932,104 $ 73,323,314 10,783,609 $ 121,597,415
Shares reinvested... 821,956 8,570,418 1,550,297 16,925,719
Shares redeemed..... (2,318,086) (23,952,892) (2,718,271) (30,354,173)
----------- ------------- ----------- -------------
Net increase........ 5,435,974 $ 57,940,840 9,615,635 $ 108,168,961
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS FUND
ADVISOR SHARES
--------------------------
PERIOD ENDED
DECEMBER 31, 1997
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C> <C> <C>
Shares issued....... 15,214 $ 175,030
Shares redeemed..... (15,214) (172,596)
----------- -------------
Net increase........ 0 $ 2,434
----------- -------------
----------- -------------
</TABLE>
<TABLE>
<CAPTION>
LATIN AMERICA EQUITY FUND SELECT SHARES
--------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued........... 247,914 $ 3,240,797 4,783,824 $ 67,593,866
Shares reinvested....... 39,390 445,995 78,005 1,094,992
Shares redeemed......... (878,688) (10,761,303) (2,109,165) (28,221,087)
---------- ------------ ---------- ------------
Net increase
(decrease)............. (591,384) (7,074,511) 2,752,664 $ 40,467,771
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
LATIN AMERICA EQUITY FUND ADVISOR SHARES
--------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued........... 0 0 60,128 $ 991,200
Shares redeemed......... (1,277) (17,939) (28,851) (929,261)
---------- ------------ ---------- ------------
Net increase
(decrease)............. (1,277) (17,939) 1,277 $ 61,939
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MUNICIPAL FUND SELECT SHARES
-----------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued.............. 2,645,068 $28,331,312 2,757,463 $29,031,529
Shares reinvested.......... 82,260 880,590 112,876 1,189,875
Shares redeemed............ (1,393,504) (14,925,876) (875,489) (9,238,189)
---------- ----------- --------- -----------
Net increase............... 1,333,824 $14,286,026 1,994,850 $20,983,215
---------- ----------- --------- -----------
---------- ----------- --------- -----------
</TABLE>
62
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL FUND SELECT SHARES
----------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued............... 322,570 $ 3,355,872 454,503 $ 4,636,788
Shares reinvested........... 11,288 117,300 7,824 80,388
Shares redeemed............. (11,545) (120,000) 0 0
--------- ----------- --------- -----------
Net increase................ 322,313 $ 3,353,172 462,327 $ 4,717,126
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND SELECT SHARES
----------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued............... 1,421,862 $14,571,450 391,245 $ 3,943,065
Shares reinvested........... 29,306 299,898 4,514 45,655
Shares redeemed............. (44,498) (456,000) (6,827) (69,119)
--------- ----------- --------- -----------
Net increase................ 1,406,670 $14,415,348 388,932 $ 3,919,601
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
63
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MORTGAGE SECURITIES FUND SELECT SHARES
----------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued.............. 2,204,152 $22,645,012 1,647,704 $16,626,836
Shares reinvested.......... 66,820 535,646 30,335 307,847
Shares redeemed............ (156,495) (1,600,030) (2,458) (25,000)
--------- ----------- --------- -----------
Net increase............... 2,114,477 $21,580,628 1,675,581 $16,909,683
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL FUND SELECT SHARES
----------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued.............. 610,581 $ 6,258,425 274,236 $ 2,750,010
Shares reinvested.......... 9,353 95,866 1,002 10,113
Shares redeemed............ (9,882) (100,700) 0 0
--------- ----------- --------- -----------
Net increase............... 610,052 $ 6,253,591 275,238 $ 2,760,123
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
6. OTHER MATTERS. The High Yield Fund, the Emerging Markets Fund and the Latin
America Equity Fund invest in obligations of foreign entities and securities
denominated in foreign currencies. Such investments involve risk not typically
involved in domestic investments. Such risks include fluctuations in foreign
exchange rates, inability to convert proceeds into U.S. dollars, application of
foreign tax laws, foreign investment restrictions, 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.
The New York Municipal and California Municipal Funds invest primarily in
municipal obligations issued by the States of New York and California,
respectively, and their agencies, instrumentalities and various political
subdivisions. The Funds are more susceptible to factors adversely affecting
issuers of such obligations than comparable municipal securities funds that are
not so concentrated. If either New York or California or any of their local
governmental entities are unable to meet their financial obligations, the income
derived by the Funds and their ability to preserve capital and liquidity could
be adversely affected.
64
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
- -----------------------------------------------------------------------------
DIRECTORS AND OFFICERS
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
David C. Lebisky
ASSISTANT SECRETARY
Gary M. Gardner
ASSISTANT SECRETARY
Stephen Brent Wells
ASSISTANT TREASURER
Vincent M. Rella
ASSISTANT TREASURER
David D. Marky
ASSISTANT TREASURER
Stephen M. Wynne
ASSISTANT TREASURER
INVESTMENT ADVISER
OFFITBANK
520 Madison Avenue
New York, New York 10022-4213
DISTRIBUTOR
OFFIT Funds Distributor, Inc.
Four Falls Corporate Center, 6th Floor
West Conshohocken, Pennsylvania 19428-2961
CUSTODIANS
The Chase Manhattan Bank
4 MetroTech Center, 18th Floor
Brooklyn, New York 11245
(OFFITBANK EMERGING MARKETS FUND AND
OFFITBANK LATIN AMERICA EQUITY FUND)
The Bank of New York
48 Wall Street
New York, New York 10286
(ALL OTHER OFFITBANK FUNDS)
ADMINISTRATOR; TRANSFER AND
DIVIDEND DISBURSING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
LEGAL COUNSEL
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
<PAGE>
This report is submitted for the information of the shareholders of The
OFFITBANK Investment Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless preceded or accompanied by an effective
prospectus which includes information regarding the Fund's objectives and
policies, record, management and other data.
The OFFITBANK Investment Fund, Inc.
400 Bellevue Parkway, Suite 108, Wilmington DE 19809
(212) 758 9600
OFFIT Funds Distributor, Inc. is the distributor of the Funds' shares.
