<PAGE>
-------------------------------------------
OFFIT High Yield Fund
OFFIT Emerging Markets Bond Fund
OFFIT Latin America Equity Fund
OFFIT New York Municipal Fund
OFFIT California Municipal Fund
OFFIT National Municipal Fund
OFFIT U.S. Government Securities Fund
OFFIT Mortgage Securities Fund
OFFIT Total Return Fund
---------------------------
SEMI-ANNUAL REPORT
JUNE 30, 2000
THE
OFFIT
INVESTMENT FUND, INC.
<PAGE>
PRESIDENT'S LETTER
--------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to present you with the June 30, 2000 Semi-Annual Report for The
OFFIT Investment Fund, Inc. As of that date the Fund's investment portfolios
have assets in excess of $1.65 billion.
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.
Recently, we opened the Total Return Fund which seeks to maximize total
investment return through sector allocation among diverse fixed income asset
classes. The Fund will utilize direct investments as well as other OFFIT sector
funds. A description of the new Total Return Fund may be found in the prospectus
material.
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,
/s/ Wallace Mathai-Davis
Wallace Mathai-Davis
July 25, 2000
<PAGE>
OFFIT
HIGH YIELD FUND
--------------------------------------------------------------------------------
The high yield market continued to face a challenging environment throughout the
first half of the year 2000. The Fund's net investment return for the six months
ending June 30, 2000 after all fees and expenses was -1.0%. The June 30, 2000
net asset value of $8.61 was 5.5% lower than the $9.11 NAV at the end of 1999.
The net assets of the Fund at June 30, 2000 were $1,256.3 million. Reflective of
the higher market yields and lower prices, the 30-day SEC yield increased to
10.78% from 10.24% at year-end.
Conditions in the high yield market remain far from ideal, yet there are signs
of life that may well lead to a more balanced high yield environment. Over the
past 24 months, the high yield market has suffered from rising interest rates,
higher defaults, and outflows from mutual funds that have pressured prices.
Currently, double-B high yield bonds are trading at spreads of 350 to 450 basis
points over comparable Treasurys for absolute yields of 10 - 11%. General market
spreads are now approximately 600 basis points. These spreads and yields are the
highest seen over the past nine years.
High yield issuers have been in an environment of tighter credit for nearly two
years. The new issue market is effectively closed to all but the largest and
strongest companies. Structural changes in the bank loan market have pressured
weaker credits. Defaults of high yield issues are running slightly higher than
the 4% rate of 1999. Although difficult credit conditions may continue for some
time, we do not expect defaults to rise much above the 5% to 6% level before
declining on a cyclical basis.
Today's yields and spreads reflect the expectation that the default rate will
stay above the historic averages. Expectations of future problems are built into
current market prices. Excluding securities that have already defaulted, over
19% of the high yield market is now quoted at spreads of 1,000 basis points or
more to Treasurys, 14% is quoted at yields greater than 20%, and 11% of the
market is priced at fifty cents or less on the dollar.
The high yield market has absorbed a tremendous amount of both fundamental and
technical pressure over the last two years. Although the present state of the
market may continue for a while, high yield has recently begun to show signs of
improvement. After a sustained period of continuous mutual fund outflows, June
posted the first positive monthly inflow since November 1999. Fund managers
appear to have built cash reserves to meet potential outflows and a recent
pick-up in CBO issuance is adding money to the market. With little visible
supply and a limited secondary market, prices have begun to stabilize and move
upward from their recent lows. Demand should continue to fill-in in an
environment of stable or declining interest rates.
The Fund is well positioned to benefit as the high yield market strengthens. We
continued to consolidate the number of issues in the portfolio, achieving a net
reduction of 30 issues since the end of 1999. Smaller less liquid positions were
sold when the market allowed at favorable prices. Several issues trading at
investment grade spreads were also sold, including Metronet Communications,
Nine-West Group and Cablevision Systems. We also added to some of our core
higher quality holdings at lower prices. New positions were added including
Crown Castle, United Pan-European Communications and Sinclair Broadcasting.
Several noteworthy developments occurred during the first half of the year which
affected the portfolio. The paging sector, which had been long out of favor with
investors, rebounded on news of strategic investments, favorable merger activity
and renewed optimism on future wireless product growth. We took this opportunity
to sell the Paging Network position. Oil refining credits, including Clark
Refining and Frontier Oil, were boosted by stronger margins amid solid gasoline
demand. On the negative credit side, the steel industry suffered from concerns
of over-supply brought on by steel imports and the auto parts sector was hurt by
slower after market sales.
Our focus remains on the better quality sectors of the high yield market and we
have made a conscious effort to maintain portfolio quality. Approximately 41% of
the holdings in the Fund are rated either Ba3 or better by Moody's or BB- or
better by Standard & Poor's. Additionally, 63% of the holdings are rated at
least B1 or B+. Many of the lower rated or unrated holdings are senior in their
capital structure, including our largest holding, Eurotunnel bank debt. The Fund
remains very well diversified with over 180 issues.
We continue to believe that better quality high yield credits will outperform
fixed income alternatives over time. The bonds of fundamentally sound credits
have turned around after every cyclical decline in the high yield market. There
is every reason to believe that they will do so again.
Stephen T. Shapiro
July 25, 2000
2
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<PAGE>
OFFIT
HIGH YIELD FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------------------
CORPORATE BONDS (88.6%)
AUTOMOTIVE (3.5%)
Exide Corp. Sr Notes, 10.00%, 04/15/05.................. $ 8,000,000 $ 7,160,000
Federal-Mogul Corp. Notes, 7.375%, 01/15/06............. 5,000,000 3,600,000
Federal-Mogul Corp. Notes, 7.875%, 07/01/10............. 12,000,000 7,980,000
Hayes Lemmerz International Inc. Sr Sub Notes, 9.125%,
07/15/07............................................... 9,000,000 8,055,000
Lear Corp. Sr Notes, 8.11%, 05/15/09.................... 11,500,000 10,473,510
Sonic Automotive Inc. Sr Sub Notes, 11.00%, 08/01/08.... 2,000,000 1,800,000
Tenneco Inc. Sr Sub Notes, 11.625%, 10/15/09............ 5,000,000 4,550,000
--------------
43,618,510
--------------
BROADCAST/MEDIA (2.1%)
Hollinger International Publishing Sr Sub Notes, 9.25%,
03/15/07............................................... 5,000,000 4,937,500
Lamar Media Corp. Sr Sub Notes, 9.625%, 12/01/06........ 4,000,000 4,010,000
MDC Communications Inc. Sr Sub Notes, 10.50%,
12/01/06............................................... 4,750,000 4,560,000
Sinclair Broadcast Group Inc. Sr Sub Notes, 10.00%,
09/30/05............................................... 6,500,000 6,231,875
World Color Press Sr Sub Notes, 8.375%, 11/15/08........ 7,000,000 6,683,740
--------------
26,423,115
--------------
CABLE (7.4%)
Adelphia Communications Corp. Sr Notes, 9.375%,
11/15/09............................................... 10,000,000 9,200,000
Adelphia Communications Corp. Sr Notes, 9.50%,
02/15/04............................................... 1,252,911 1,209,059
Adelphia Communications Corp. Sr Notes, 9.875%,
03/01/07............................................... 7,500,000 7,181,250
Century Communications Corp. Sr Notes, 9.75%,
02/15/02............................................... 6,500,000 6,467,500
Charter Communications Holdings LLC Sr Notes, 8.625%,
04/01/09............................................... 10,000,000 8,825,000
Diamond Cable Communications PLC Sr Discount Notes
0/11.75%, 12/15/05..................................... 7,500,000(2) 7,125,000
Mediacom LLC/Capital Sr Notes, 8.50%, 04/15/08.......... 8,000,000 7,400,000
NTL Inc. Sr Notes, 0/9.75%, 04/01/08.................... 16,000,000(2) 10,000,000
Telewest Communications PLC Sr Discount Debs., 0/11.00%,
10/01/07............................................... 22,000,000(2) 21,037,500
Telewest Communications PLC Sr Discount Notes, 0/9.875%,
04/15/09............................................... 8,000,000(d)(2) 6,479,492
United Pan-Europe Communicatons Sr Notes, 10.875%,
08/01/09............................................... 9,000,000 7,920,000
--------------
92,844,801
--------------
CHEMICAL (2.1%)
Borden Chemicals & Plastics Sr Notes, 9.50%, 05/01/05... 7,500,000 6,750,000
Lyondell Chemical Co. Sr Secured Notes, 9.875%,
05/01/07............................................... 12,000,000 11,880,000
Terra Industries Inc. Sr Notes, 10.50%, 06/15/05........ 11,000,000 7,040,000
--------------
25,670,000
--------------
CONSUMER GROUPS (4.8%)
Ameriserve Finance Trust Sr Secured Notes, 12.00%,
09/15/06 (144A)........................................ 5,000,000(1)(5) 900,000
Canandaigua Brands Inc. Sr Sub Notes, 8.50%, 03/01/09... 7,500,000 6,862,500
Chiquita Brands International Inc. Sr Notes, 9.125%,
03/01/04............................................... 6,000,000 4,680,000
Chiquita Brands International Inc. Sr Notes, 10.00%,
06/15/09............................................... 6,000,000 4,590,000
Chiquita Brands International Inc. Sr Notes, 10.25%,
11/01/06............................................... 4,000,000 3,120,000
CHS Electronics Inc. Sr Notes, 9.875%, 04/15/05......... 4,500,000(5) 90,000
Fedders N.A. Sr Sub Notes, 9.375%, 08/15/07............. 7,500,000 7,087,500
Fisher Scientific International Inc. Sr Sub Notes,
9.00%, 02/01/08........................................ 7,000,000 6,492,500
Fruit of The Loom Sr Notes, 8.875%, 04/15/06............ 8,000,000(5) 520,000
Imperial Holly Sr Sub Notes, 9.75%, 12/15/07............ 7,500,000 1,500,000
Nash Finch Co. Sr Sub Notes, 8.50%, 05/01/08............ 6,500,000 4,290,000
Playtex Products Inc. Sr Notes, 8.875%, 07/15/04........ 7,500,000 7,275,000
Protection One Alarm Sr Notes, 7.375%, 08/15/05......... 6,000,000 4,530,000
Revlon Consumer Products Sr Sub Notes, 8.625%,
02/01/08............................................... 9,500,000 4,797,500
United Artists Theatre Pass Through Certificates, 9.30%,
07/01/15............................................... 4,703,924 2,963,472
--------------
59,698,472
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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<PAGE>
OFFIT
HIGH YIELD FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
FINANCIAL SERVICES/INSURANCE (2.0%)
Americo Life Inc. Sr Sub Notes, 9.25%, 06/01/05......... $ 3,000,000 $ 2,820,000
Amresco Inc. Sr Sub Notes, 9.875%, 03/15/05............. 10,000,000 4,900,000
Presidential Life Corp. Sr Notes, 7.875%, 02/15/09...... 7,250,000 6,735,975
Reliance Group Holdings Inc. Sr Sub Notes, 9.75%,
11/15/03............................................... 10,500,000 3,045,000
Willis Corroon Corp. Sr Sub Notes, 9.00%, 02/01/09...... 9,000,000 7,537,500
--------------
25,038,475
--------------
FOREST & PAPER PRODUCTS (5.0%)
Doman Industries Ltd. Sr Notes, 9.25%, 11/15/07......... 8,000,000 5,920,000
Maxxam Group Holdings Inc. Sr Notes, 12.00%, 08/01/03... 4,200,000 3,874,500
Pindo Deli Financial Mauritius Gtd., 10.75%, 10/01/07... 5,500,000 3,300,000
Repap New Brunswick First Priority Sr Secured Notes,
9.00%, 06/01/04........................................ 13,000,000 12,480,000
Repap New Brunswick Sr Notes, 10.601%, 06/01/04
(144A)................................................. 5,000,000(1)(3)(4) 4,900,000
Stone Container Corp. Sr Secured Notes, 10.75%,
10/01/02............................................... 5,500,000 5,582,500
Stone Container Corp. Sr Sub Debs., 12.25%, 04/01/02.... 7,500,000 7,593,750
Stone Container Finance Corp. Sr Notes, 11.50%, 08/15/06
(144A)................................................. 5,500,000(1) 5,720,000
Tembec Finance Corp. Sr Notes, 9.875%, 09/30/05......... 8,500,000 8,574,375
U.S. Timberlands Finance Corp. Sr Notes, 9.625%,
11/15/07............................................... 6,500,000 5,817,500
--------------
63,762,625
--------------
GENERAL INDUSTRIES/MANUFACTURING (5.0%)
Allied Waste North America Sr Notes, 7.625%, 01/01/06... 10,000,000 8,700,000
Allied Waste North America Sr Sub Notes, 10.00%,
08/01/09............................................... 5,000,000 4,175,000
Foamex L.P. Sr Sub Notes, 9.875%, 06/15/07.............. 2,500,000 1,875,000
Galey & Lord Inc. Sr Sub Notes, 9.125%, 03/01/08........ 7,500,000 3,337,500
Pillowtex Corp. Sr Sub Notes, 10.00%, 11/15/06.......... 8,000,000 2,880,000
Primark Corp. Sr Sub Notes, 9.25%, 12/15/08............. 4,000,000 4,040,000
Sequa Corp. Sr Notes, 9.00%, 08/01/09................... 11,000,000 10,560,000
United Rentals Inc. Sr Sub Notes, 9.50%, 06/01/08....... 8,500,000 7,798,750
Wesco Distribution Inc. Sr Sub Notes, 9.125%,
06/01/08............................................... 7,000,000 6,405,000
Westpoint Stevens Inc. Sr Notes, 7.875%, 06/15/08....... 7,500,000 5,962,500
Williams Scotsman Inc. Sr Notes, 9.875%, 06/01/07....... 8,000,000 7,200,000
--------------
62,933,750
--------------
HEALTH CARE (5.0%)
Columbia/HCA Healthcare Medium Term Notes, 8.85%,
01/01/07............................................... 7,500,000 7,388,850
Columbia/HCA Healthcare Notes, 7.00%, 07/01/07.......... 6,500,000 5,787,860
Columbia/HCA Healthcare Notes, 7.25%, 05/20/08.......... 9,000,000 8,027,460
Conmed Corp. Sr Sub Notes, 9.00%, 03/15/08.............. 8,500,000 7,777,500
Extendicare Health Services Sr Sub Notes, 9.35%,
12/15/07............................................... 3,000,000 1,260,000
Genesis Health Ventures Sr Sub Notes, 9.875%,
01/15/09............................................... 7,500,000(5) 900,000
Integrated Health Services Inc. Sr Sub Notes, 9.50%,
09/15/07............................................... 12,000,000(5) 150,000
Magellan Health Services Sr Sub Notes, 9.00%,
02/15/08............................................... 4,500,000 2,340,000
Medaphis Corp. Sr Notes, 9.50%, 02/15/05................ 6,500,000 4,875,000
Pharmerica Inc. Sr Sub Notes, 8.375%, 04/01/08.......... 7,000,000 3,850,000
Tenet Healthcare Corp. Sr Sub Notes, 8.125%, 12/01/08... 12,000,000 11,040,000
Tenet Healthcare Corp. Sr Sub Notes, 8.625%, 01/15/07... 10,000,000 9,575,000
--------------
62,971,670
--------------
HOTELS & GAMING (6.7%)
Felcor Suites L.P. Sr Notes, 7.625%, 10/01/07........... 10,000,000 8,700,000
Harrahs Operating Co. Inc. Sr Sub Notes, 7.875%,
12/15/05............................................... 10,000,000 9,400,000
HMH Properties Sr Notes, 7.875%, 08/01/08............... 12,500,000 11,234,375
International Game Technology Sr Notes, 8.375%,
05/15/09............................................... 6,500,000 6,223,750
John Q. Hammons Hotels L.P. First Mtg. Notes, 8.875%,
02/15/04............................................... 10,500,000 9,213,750
John Q. Hammons Hotels L.P. First Mtg. Notes, 9.75%,
10/01/05............................................... 7,000,000 6,125,000
Park Place Entertainment Sr Sub Notes, 7.875%,
12/15/05............................................... 11,000,000 10,381,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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<PAGE>
OFFIT
HIGH YIELD FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
HOTELS & GAMING (CONTINUED)
Prime Hospitality Corp. Sr Sub Notes, 9.75%, 04/01/07... $ 6,000,000 $ 5,820,000
Sun International Hotels Ltd. Sr Sub Notes, 9.00%,
03/15/07............................................... 8,500,000 7,862,500
Trump Atlantic City First Mtg. Notes, 11.25%,
05/01/06............................................... 8,500,000 6,035,000
Trump Atlantic City First Mtg. Notes II, 11.25%,
05/01/06............................................... 5,000,000 3,550,000
--------------
84,545,625
--------------
METALS & MINING (7.8%)
AK Steel Corp. Sr Notes, 9.125%, 12/15/06............... 11,000,000 10,560,000
Armco Inc. Sr Notes, 9.00%, 09/15/07.................... 8,000,000 7,440,000
Centaur Mining Exploration Sr Secured Notes, 11.00%,
12/01/07............................................... 7,500,000 6,000,000
EES Coke Battery Co. Inc. Series B Sr Secured Notes,
9.382%, 04/15/07 (144A)................................ 5,750,000(1) 5,290,000
Freeport McMoran C&G Debs., 7.20%, 11/15/26............. 8,500,000 5,865,000
Glencore Nickel Pty Ltd. Sr Secured Bonds, 9.00%,
12/01/14............................................... 16,000,000 13,280,000
Great Central Mines Ltd. Sr Notes, 8.875%, 04/01/08..... 9,000,000 7,740,000
Kaiser Aluminum & Chemical Corp. Sr Notes, 9.875%,
02/15/02............................................... 4,500,000 4,320,000
Kaiser Aluminum & Chemical Corp. Sr Notes, 10.875%,
10/15/06............................................... 6,000,000 5,745,000
LTV Corp. Sr Notes, 8.20%, 09/15/07..................... 11,000,000 8,140,000
LTV Corp. Sr Notes, 11.75%, 11/15/09.................... 4,000,000 3,360,000
National Steel Corp. First Mtg. Bonds, 8.375%,
08/01/06............................................... 9,235,000 7,942,100
Wheeling-Pittsburgh Corp. Sr Notes, 9.25%, 11/15/07..... 10,000,000 6,700,000
WHX Corporation Sr Notes, 10.50%, 04/15/05.............. 7,000,000 5,320,000
--------------
97,702,100
--------------
OIL/GAS (4.4%)
Clark R&M Inc. Sr Notes, 8.625%, 08/15/08............... 6,000,000 4,710,000
Clark R&M Inc. Sr Sub Notes, 8.875%, 11/15/07........... 6,000,000 3,720,000
Crown Central Petroleum Corp. Sr Notes, 10.875%,
02/01/05............................................... 2,400,000 2,016,000
Energy Corp of America Sr Sub Notes, 9.50%, 05/15/07.... 5,000,000 3,250,000
Frontier Oil Corp. Sr Notes, 11.75%, 11/15/09........... 4,000,000 4,000,000
Frontier Oil Corp. Sr Notes, 9.125%, 02/15/06........... 4,000,000 3,540,000
Giant Industries Services Inc. Sr Sub Notes, 9.00%,
09/01/07............................................... 10,000,000 9,175,000
Hvide Marine Term Loan A, 9.94%, 03/10/10............... 2,838,838(3)(4) 2,828,193
Hvide Marine Term Loan B, 10.44%, 03/10/10.............. 1,151,895(3)(4) 1,147,575
Hvide Marine Term Loan C, 10.94%, 03/10/10.............. 3,647,667(3)(4) 3,633,988
KCS Energy Inc. Sr Notes, 11.00%, 01/15/03.............. 11,000,000(5) 8,965,000
Newpark Resources Inc. Sr Sub Notes, 8.625%, 12/15/07... 10,000,000 8,650,000
--------------
55,635,756
--------------
REAL ESTATE (6.1%)
CB Richard Ellis Sr Sub Notes, 8.875%, 06/01/06......... 10,500,000 8,977,500
Forest City Enterprises Sr Notes, 8.50%, 03/15/08....... 7,500,000 6,787,500
La Quinta Inns Sr Notes, 7.25%, 03/15/04................ 3,250,000 2,421,250
Lennar Corp Sr Notes, 7.625%, 03/01/09.................. 5,000,000 4,375,000
LNR Property Corp. Sr Sub Notes, 10.50%, 01/15/09....... 7,500,000 6,900,000
MDC Holdings Inc. Sr Notes, 8.375%, 02/01/08............ 10,000,000 8,850,000
NVR Inc. Sr Notes, 8.00%, 06/01/05...................... 8,500,000 7,820,000
Rockefeller Center Properties Sr Notes, 0.00%,
12/31/00............................................... 24,000,000 20,760,000
Tanger Properties L.P. Sr Notes, 7.875%, 10/24/04....... 10,500,000 9,680,895
--------------
76,572,145
--------------
RETAIL (1.0%)
Finlay Fine Jewelry Corp. Sr Notes, 8.375%, 05/01/08.... 3,000,000 2,700,000
G&G Retail Inc. Sr Notes, 11.00%, 05/15/06.............. 2,500,000 1,300,000
Petro Stopping Centers Sr Notes, 10.50%, 02/01/07....... 4,500,000 3,982,500
Zale Corp. Sr Notes, 8.50%, 10/01/07.................... 5,000,000 4,700,000
--------------
12,682,500
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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<PAGE>
OFFIT
HIGH YIELD FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
TELECOMMUNICATIONS-WIRELESS (4.2%)
Arch Escrow Corp. Sr Notes, 13.75%, 04/15/08............ $ 8,000,000 $ 6,560,000
Crown Castle International Corp. Sr Discount Notes,
0/10.625%, 11/15/07.................................... 7,000,000(2) 5,197,500
Crown Castle International Sr Notes, 10.75%, 08/01/11... 4,500,000 4,567,500
Metrocall Inc. Sr Sub Notes, 11.00%, 09/15/08........... 4,000,000 2,780,000
Nextel Communications Sr Discount Notes, 0/10.65%,
09/15/07............................................... 24,000,000(2) 18,840,000
Rogers Cantel Inc. Sr Sub Notes, 8.80%, 10/01/07........ 10,500,000 10,447,500
Spectrasite Holdings Inc. Sr Discount Notes, 0/12.875%,
03/15/10............................................... 8,500,000(2) 4,675,000
--------------
53,067,500
--------------
TELECOMMUNICATIONS-WIRELINE (9.9%)
Alaska Communications Sr Sub Notes, 9.375%, 05/15/09.... 9,000,000 8,325,000
Call Net Enterprises Sr Discount Notes, 0/8.94%,
08/15/08............................................... 10,000,000(2) 3,891,700
Covad Communication Group Sr Notes, 12.00%, 02/15/10.... 6,000,000 5,010,000
E. Spire Communications Sr Discount Notes, 0/10.625%,
07/01/08............................................... 4,000,000(2) 1,280,000
Exodus Communication Inc. Sr Notes, 11.625%, 07/15/10
(144A)................................................. 6,000,000(1) 6,030,000
Flag Limited Sr Notes, 8.25%, 01/30/08.................. 12,000,000 10,680,000
Flag Telecom Holdings Ltd. Sr Notes, 11.625%, 03/30/10
(144A)................................................. 6,000,000(a)(1) 5,363,305
Global Crossing Holdings Ltd. Sr Notes, 9.125%,
11/15/06............................................... 10,000,000 9,625,000
Global Telesystems Europe Sr Notes, 11.00%, 12/01/09.... 9,000,000(b) 6,988,113
Intermedia Communications Sr Discount Notes, 0/11.25%,
07/15/07............................................... 24,000,000(2) 18,960,000
Level 3 Communications Sr Notes, 9.125%, 05/01/08....... 10,000,000 8,975,000
Metromedia Fiber Network Sr Notes, 10.00%, 12/15/09..... 8,000,000 7,840,000
Nextlink Communication Sr Notes, 10.75%, 11/15/08....... 9,000,000 8,887,500
Psinet Inc. Sr Notes, 10.00%, 02/15/05.................. 10,000,000 9,250,000
Time Warner Telecom LLC Sr Notes, 9.75%, 07/15/08....... 4,000,000 3,880,000
Williams Communications Group Inc. Sr Notes, 10.875%,
10/01/09............................................... 10,000,000 9,750,000
--------------
124,735,618
--------------
TRANSPORTATION (7.8%)
Eurotunnel Finance Tier 1, 5.28%, 01/15/12.............. 222,006,204(c)(4) 25,467,822
Eurotunnel Finance Tier 2, 5.28%, 12/31/18.............. 213,000,000(c)(4) 21,633,234
Eurotunnel Finance Tier 1, 7.03%, 01/15/12.............. 5,623,452(d)(4) 6,810,675
Eurotunnel Finance Tier 2, 7.03%, 12/31/18.............. 18,623,452(d)(4) 19,876,802
Piedmont Aviation Inc. Equipment Trust Certificates 1988
Series F, 10.15%, 03/28/03............................. 1,000,000 984,390
Sea Containers Ltd. Sr Notes, 7.875%, 02/15/08.......... 7,500,000 4,800,000
Sea Containers Ltd. Sr Notes, 9.50%, 07/01/03........... 3,000,000 2,437,500
Stena AB Sr Notes, 10.50%, 12/15/05..................... 5,000,000 4,900,000
Stena Line AB Sr Notes, 10.625%, 06/01/08............... 6,500,000 3,802,500
U.S. Air Inc. Equipment Trust Certificates 1988
Series B, 10.00%, 01/15/02............................. 1,334,000 1,325,102
U.S. Air Inc. Equipment Trust Certificates 1990
Series A, 11.20%, 03/19/05............................. 2,910,763 2,939,870
U.S. Air Inc. Equipment Trust Certificates 1990
Series B, 10.33%, 06/27/02............................. 803,000 799,130
U.S. Air Inc. Equipment Trust Certificates 1990
Series D, 10.28%, 06/27/01............................. 837,000 836,573
U.S. Air Inc. Equipment Trust Certificates 1990
Series D, 10.43%, 06/27/04............................. 1,014,000 1,002,562
--------------
97,616,160
--------------
UTILITIES (3.8%)
AES Corp. Sr Notes, 8.00%, 12/31/08..................... 4,000,000 3,440,000
AES Corp. Sr Sub Notes, 8.50%, 11/01/07................. 12,000,000 10,950,000
AES Eastern Energy Pass Through Certificates, 9.00%,
01/02/17 (144A)........................................ 8,000,000(1) 7,841,680
Caithness Coso Funding Corp. Sr Secured Notes, 9.05%,
12/15/09............................................... 8,000,000 7,800,000
Calpine Corp. Sr Notes, 8.75%, 07/15/07................. 6,000,000 5,970,000
Project Orange Funding Sr Secured Notes, 10.50%,
09/15/07 (144A)........................................ 5,805,000(1) 6,269,400
Tucson Electric Power Company, Springerville Unit 1,
10.211%, 01/01/09...................................... 5,482,297 5,591,943
--------------
47,863,023
--------------
TOTAL CORPORATE BONDS (COST $1,311,539,174)............. 1,113,381,845
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
-------------
<PAGE>
OFFIT
HIGH YIELD FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES (1.5%)
REAL ESTATE (0.3%)
National Convenience Realty Co. Secured Notes, 9.50%,
06/30/03............................................... $ 185,235(4) $ 185,235
RTC Mtg. Tr. Series 1994-C1 Class F Mortgage Loan Backed
Bonds, 8.00%, 06/25/26................................. 1,826,520 1,799,122
RTC Mtg. Tr. Series 1994-C2 Class G Mortgage Loan Backed
Bonds, 8.00%, 04/25/26................................. 1,306,810 1,287,208
--------------
3,271,565
--------------
STRUCTURED FINANCE (1.2%)
Carlyle High Yield Partners Sr Sub Secured Notes
Class C, 8.74%, 05/15/07............................... 8,000,000 7,720,000
DLJ CBO Ltd. Sr Secured Fixed Rate Notes Class B,
8.345%, 04/15/11, (144A)............................... 8,500,000(1) 7,820,000
--------------
15,540,000
--------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $18,927,239)..... 18,811,565
--------------
PREFERRED STOCKS (2.0%)
HEALTH CARE (1.1%)
Fresenius Medical Care Capital Trust II Pfd., 7.875%,
02/01/08............................................... 5,000,000 4,550,000
Fresenius Medical Care Capital Trust Pfd., 9.00%,
12/01/06............................................... 10,000,000 9,700,000
--------------
14,250,000
--------------
TELECOMMUNICATIONS-WIRELESS (0.9%)
Centaur Funding Corp. Pfc. Series B, 9.08%, 04/21/20
(144A)................................................. 10,000,000(1) 10,200,000
--------------
TOTAL PREFERRED STOCKS (COST $24,965,885)............... 24,450,000
--------------
REPURCHASE AGREEMENT (6.4%)
Bank of New York Repurchase Agreement, 6.125%, 07/03/00
(dated 06/30/00; proceeds $80,559,998, collateralized
by $32,450,000 U.S Treasury Notes, 6.375%, due
08/15/02, valued at $33,196,350; $31,195,000 U.S.
Treasury Notes, 5.375%, due 06/30/03, valued at
$30,376,131; and $18,480,000 U.S. Treasury Notes,
5.75%, due 08/15/03 valued at $18,563,160)............. 80,518,900 80,518,900
--------------
TOTAL REPURCHASE AGREEMENT (COST $80,518,900)........... 80,518,900
--------------
MONEY MARKET FUND (0.0%)
Bank of New York Cash Reserve........................... 83,149 83,149
--------------
TOTAL MONEY MARKET FUND (COST $83,149).................. 83,149
--------------
TOTAL INVESTMENTS (COST $1,436,034,347) (+) -- 98.5%.... 1,237,245,459
OTHER ASSETS IN EXCESS OF LIABILITIES 1.5%.............. 19,093,400
--------------
TOTAL NET ASSETS -- 100.0%.............................. $1,256,338,859
==============
</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 ................ $ 5,487,835
Unrealized depreciation ................ (204,276,723)
-------------
Net unrealized depreciation ............ $(198,788,888)
=============
</TABLE>
Principal denominated in the following currencies:
(a) Euro
(b) European Currency Unit
(c) French Franc
(d) British Pound
(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 in effect at June 30, 2000.
(4) Illiquid Security.
(5) Security in default.
The accompanying notes are an integral part of the financial statements.
7
-------------
<PAGE>
OFFIT
EMERGING MARKETS BOND FUND
--------------------------------------------------------------------------------
For the quarter ending June 30, 2000, the OFFIT Emerging Markets Bond Fund had a
negative total return of 2.35%. Year-to-date through quarter end, the Fund had a
positive total return of 3.46%. As of this writing, and following Mexico's
recent presidential election, the Fund had a positive year-to-date total return
in excess of 6%. As of June 30, 2000, the Fund had a 30-day SEC yield of 13.95%
and a current yield of 12.08%. The average duration of the Fund was
approximately 4.01 years and the net asset value per share was $9.11.
The Fund remains 100% invested in US dollar-denominated bonds--84% in corporate
bonds, with the remainder in government bonds across the Emerging Markets. At
quarter end, core country allocations were as follows: Mexico, 38%;
Brazil, 34%; and Argentina, 16%. We continue to add to investments across global
Emerging Markets countries where we find compelling--and
sustainable--fundamental value. Outside the Latin American region, we maintained
a modest position in Moroccan sovereign bonds, 2%; and have added corporate
positions in Poland, 2%; and Turkey, 1%. Cash and accrued interest represent the
remaining 7%.
During the second quarter, the U.S. financial markets continued to be the
principal driver of sentiment throughout the global capital markets. However, as
we approached the end of the quarter, the market began to increasingly accept a
soft landing for the U.S. economy as the most probable scenario. This implies
that the U.S. financial markets are less likely to face a significant correction
and has resulted in a reassertion of individual market fundamentals away from
the U.S. and a willingness on the part of investors to once again embrace more
risk.
The Fund will continue its strategy of focusing on US dollar-denominated
corporate bonds with solid credit fundamentals within Latin America--where we
continue to identify the greatest risk-adjusted return opportunities. As a
complement to this core strategy, we will continue to explore investment
opportunities in other emerging markets outside the region where we recognize
compelling value. Our investment philosophy remains one of capitalizing on
improving credit fundamentals over a medium-term horizon.
Our continued unwillingness to speculate on countries with highly uncertain
economic prospects led us to underperform the Lipper Emerging Markets Debt Fund
Universe, which had a year-to-date return through June 30 of 6.45%. The top
performing countries which boosted these returns for the market in June and
their returns were: Ukraine +17%; Russia +12% (+50% year-to-date); Ecuador +8%;
Bulgaria +7%; and Ivory Coast +7%. The average one-month return volatility for
these countries, however, was 22%--compared to the Fund's one-month return
volatility of 8%. Russian bonds are back in favor, having gained 50% since the
beginning of this year, and now trade only 225 basis points over comparable
Brazilian sovereign bonds.
We reiterate that we do not follow an index strategy, but rather, we look for
absolute risk-adjusted value in the countries that we believe have improving
fundamentals and in businesses that have strong management and sound business
franchises--as we have throughout the market cycles of the last eight years.
At the close of the second quarter, the Mexican elections became the most
important driver in our markets. Our latest commentary is posted on our Website,
WWW.OFFITBANK.COM.
As always, should you have any questions regarding the Fund or our investment
strategy, please do not hesitate to call.
Richard M. Johnston Richard C. Madigan
July 25, 2000
8
-------------
<PAGE>
OFFIT
EMERGING MARKETS BOND FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
----------------------------------------------------------------------------------------------
CORPORATE BONDS (81.3%)
BUILDING MATERIALS (4.1%)
MEXICO (4.1%)
Cemex, 9.66%, 11/29/49................................ $ 2,300,000 $ 2,248,250
Internacional de Ceramica S.A., 9.75%, 08/01/02....... 6,150,000 5,104,500
------------
7,352,750
------------
CABLE (5.6%)
ARGENTINA (5.6%)
Cablevision S.A., 12.50%, 03/02/03.................... 5,150,000 4,763,750
Cablevision S.A., 13.75%, 05/01/09.................... 4,500,000 4,095,000
Multicanal S.A., 10.50%, 02/01/07..................... 1,500,000 1,256,250
------------
10,115,000
------------
FOOD (4.7%)
ARGENTINA (4.7%)
Mastellone Hermanos S.A., 11.75%, 04/01/08............ 11,275,000 8,456,250
------------
INDUSTRIAL (9.2%)
MEXICO (9.2%)
Sanluis Corp. S.A., 8.875%, 03/18/08.................. 9,000,000 8,190,000
Vicap S.A., 11.375%, 05/15/07......................... 9,800,000 8,526,000
------------
16,716,000
------------
INFRASTRUCTURE (1.4%)
ARGENTINA (1.4%)
Cia Latino Americana, 11.625%, 06/01/04............... 4,500,000 2,520,000
------------
MEDIA (14.4%)
BRAZIL (9.7%)
Globo Communicacoes Participacoes, 10.50%, 12/20/06... 6,250,000 5,367,187
Globo Communicacoes Participacoes, 10.625%,
12/05/08............................................. 4,200,000 3,528,000
RBS Participacoes S.A., 11.00%, 04/01/07.............. 10,500,000 8,649,375
------------
17,544,562
------------
MEXICO (4.7%)
TV Azteca S.A. de C.V., 10.125%, 02/15/04............. 9,150,000 8,440,875
------------
25,985,437
------------
OIL/GAS (0.5%)
BRAZIL (0.5%)
Cia Petrolifera Marlim, 13.125%, 12/17/04............. 900,000 931,500
------------
PACKAGING (1.8%)
MEXICO (1.8%)
Grupo Industrial Durango, 12.625%, 08/01/03........... 3,315,000 3,323,287
------------
PETROCHEMICALS (1.3%)
BRAZIL (1.3%)
Trikem S.A., 10.625%, 07/24/07........................ 3,100,000 2,301,750
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
-------------
<PAGE>
OFFIT
EMERGING MARKETS BOND FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
RETAIL (6.6%)
ARGENTINA (1.7%)
Disco S.A., 9.125%, 05/15/03.......................... $ 1,200,000 $ 1,095,000
Disco S.A., 9.875%, 05/15/08.......................... 2,400,000 2,022,000
------------
3,117,000
------------
MEXICO (4.9%)
Grupo Elektra S.A. de C.V., 12.00%, S.A. de C.V.,
04/01/08............................................. 9,825,000 8,891,625
------------
12,008,625
------------
STEEL (13.5%)
ARGENTINA (2.6%)
Acindar, 11.25%, 02/15/04............................. 7,000,000 4,655,000
------------
BRAZIL (6.7%)
CSN Iron S.A., 9.125%, 06/01/07....................... 15,000,000 12,112,500
------------
MEXICO (4.2%)
Hylsa S.A. de C.V., 9.25%, 09/15/07................... 8,860,000 7,531,000
------------
24,298,500
------------
TELECOMMUNICATIONS (14.7%)
BRAZIL (2.4%)
Comtel Brasileira Ltd., 10.75%, 09/26/04.............. 4,500,000 4,275,000
------------
MEXICO (9.0%)
Alestra S.A. de C.V., 12.625%, 05/15/09............... 9,850,000 8,901,938
Innova, 12.875%, 04/01/07............................. 8,050,000 7,406,000
------------
16,307,938
------------
POLAND (2.2%)
Netia Holdings B.V., 13.75%, 06/15/10................. 4,000,000(a) 3,897,623
------------
TURKEY (1.1%)
Turkcell, 12.75%, 08/01/05............................ 2,000,000 2,080,000
------------
26,560,561
------------
UTILITIES (3.5%)
BRAZIL (3.5%)
SABESP, 10.00%, 07/28/05.............................. 7,390,000 6,355,400
------------
TOTAL CORPORATE BONDS (COST $161,215,931)............. 146,925,060
------------
FOREIGN GOVERNMENTS (10.9%)
SOVEREIGN DEBT (10.9%)
BRAZIL (9.4%)
Republic of Brazil, 12.75%, 01/15/20.................. 13,500,000 12,875,625
Republic of Brazil EI, Floating Rate Notes, 7.375%,
04/15/06............................................. 4,650,000(1) 4,237,313
------------
17,112,938
------------
MOROCCO (1.5%)
Kingdom of Morocco Floating Rate Bond, 7.75%,
01/01/09............................................. 3,000,000(1) 2,685,000
------------
TOTAL FOREIGN GOVERNMENTS (COST $20,467,905).......... 19,797,938
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
-------------
<PAGE>
OFFIT
EMERGING MARKETS BOND FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (7.1%)
UNITED STATES (7.1%)
Bank of New York Repurchase Agreement, 6.125%,
07/03/00 (dated 06/30/00; proceeds $12,892,677;
collateralized by $13,085,000 U.S. Treasury Notes,
5.75% due 08/15/03, valued at $13,143,883)........... $12,886,100 $ 12,886,100
------------
TOTAL REPURCHASE AGREEMENT (COST $12,886,100)......... 12,886,100
------------
TOTAL INVESTMENTS (COST $194,569,936) (+) -- 99.3%.... 179,609,098
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%............ 1,180,361
------------
TOTAL NET ASSETS -- 100.0%............................ $180,789,459
============
</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 ................. $ 1,773,272
Unrealized depreciation ................. (16,737,110)
------------
Net unrealized depreciation ............. $(14,960,838)
============
</TABLE>
Principal denominated in the following currency:
(a) Euro
(1) Interest rate in effect at June 30, 2000.
Country Diversification (as a percentage of Total Investments):
<TABLE>
<S> <C>
Argentina ............................... 16.07%
Brazil .................................. 33.76%
Mexico .................................. 38.17%
Morocco ................................. 1.49%
Poland .................................. 2.17%
Turkey .................................. 1.16%
United States ........................... 7.18%
-----
100.00%
-----
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
-------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
--------------------------------------------------------------------------------
For the quarter ending June 30, 2000, the OFFIT Latin America Equity Fund had a
negative total return of 7.09%. As of June 30, 2000, the Fund had a net asset
value per share of $10.73. Year-to-date through June 30, 2000, the performance
of the Fund was negative 3.16%.
As of June 30, 2000, the Fund remained diversified across the three largest
economies in Latin America: Brazil (56%); Mexico (38%); and Argentina (5%). The
Fund was invested across 12 industries with the largest allocations to
Telecommunications (24%); Retail (16%); Bank (14%); Media (13%); and Oil/Gas
(8%).
During the second quarter, the volatility and negative performance of the US
equity markets, particularly the NASDAQ, which fell 13.2%, continued to put
downward pressure on the Latin American equity markets. Correlations between
NASDAQ and the major Latin stock exchanges have been running as high as 98%.
However, we believe that this relationship should shift over time, as investors
refocus on the increasingly robust fundamentals of the major countries within
the region.
In Brazil, the Central Bank lowered the benchmark interest rate by 100 basis
points at their June 20th meeting and another 50 basis points to 17% on July
7th. In Mexico, the uncertainty surrounding the presidential elections had put
negative pressure on the currency and the domestic equity market. Vicente Fox's
unexpected victory on July 2nd prompted a post-election rally in both the
currency and the local equity market. Market participants also became more
convinced, as quarter-end approached, that the Argentine economy was finally
turning the corner.
Investor focus is also being drawn to the Latin American region by large M&A
transactions led by multinational companies. Telefonica de Espana successfully
concluded its tender offer for four of its telephone subsidiaries in Brazil,
Argentina and Peru. In Mexico, Banco Bilbao Vizcaya Argentaria successfully
reached an agreement to merge with GF Bancomer, forming the largest financial
institution in Mexico. In Brazil, Telecom Italia paid $800 million for a 30%
equity stake in Globo.com, the new internet venture of the Globo group, Latin
America's largest media group AOL Latin America announced its plans for an IPO
which is expected to take place during July. These transactions highlight the
franchise opportunities and attractive valuations attainable in the region.
We believe that the continued improvement of the macroeconomic and political
fundamentals in the three major countries of the region will lead investors to
refocus on the attractive valuations, expected higher earnings growth, and lower
country risk premia that we anticipate during the second half of the year. The
Fund will continue to invest in leading companies that we believe have strong
underlying business franchises at attractive valuations and will produce
superior earnings growth.
Richard M. Johnston Scott D. McKee
July 25, 2000
12
-------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------------
COMMON STOCKS (52.7%)
BANKS (4.0%)
ARGENTINA (2.1%)
Banco de Galicia y Buenos Aires S.A. de C.V. -- ADR... 30,957 $ 458,551
-----------
MEXICO (1.9%)
Grupo Financiero Banamex Accival S.A. de C.V.
Class O.............................................. 99,000 416,389
-----------
874,940
-----------
BREWERY (2.4%)
MEXICO (2.4%)
Grupo Modelo S.A. de C.V. Series C.................... 223,600 519,065
-----------
BUILDING MATERIALS (7.4%)
MEXICO (7.4%)
Cemex S.A. de C.V. -- ADR............................. 69,126 1,615,820
-----------
ENTERTAINMENT (2.4%)
MEXICO (2.4%)
Corporacion Interamericana de Entretenimiento S.A. de
C.V. Class B*........................................ 131,939 516,057
-----------
IRON & STEEL (5.4%)
BRAZIL (5.4%)
Companhia Siderurgica Nacional*....................... 24,790 776,427
Companhia Siderurgica Nacional -- ADR................. 12,600 388,238
-----------
1,164,665
-----------
RETAIL (9.2%)
MEXICO (9.2%)
Wal-Mart de Mexico S.A. de C.V. Series V.............. 386,257 906,468
Grupo Elektra S.A. de C.V. -- ADR..................... 21,000 215,250
Organizacion Soriana S.A. de C.V. Class B............. 219,200 872,953
-----------
1,994,671
-----------
TELECOMMUNICATIONS (14.6%)
BRAZIL (7.0%)
Embratel Participacoes S.A. -- ADR.................... 22,950 542,194
Telemig Celular Participacoes S.A. -- ADR............. 2,700 193,050
Telesp Celular Participacoes S.A. -- ADR.............. 17,315 777,011
-----------
1,512,255
-----------
MEXICO (7.6%)
Carso Global Telecommunication Class A................ 237,168 677,059
Telefonos de Mexico S.A. de C.V. Series L -- ADR...... 17,200 982,550
-----------
1,659,609
-----------
3,171,864
-----------
TELEVISION BROADCASTING (7.3%)
MEXICO (7.3%)
Grupo Televisa S.A. -- GDR*........................... 23,100 1,592,456
-----------
TOTAL COMMON STOCKS (COST $9,302,906)................. 11,449,538
-----------
PREFERRED STOCKS (46.4%)
BANKS (9.5%)
BRAZIL (9.5%)
Banco Bradesco S.A.................................... 52,911 459,025
Banco Itau S.A........................................ 9,530 832,049
Unibanco -- GDR....................................... 26,740 768,775
-----------
2,059,849
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
-------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (CONTINUED)
CABLE (3.0%)
ARGENTINA (3.0%)
Globo Cabo S.A. -- ADR*............................... 46,200 $ 641,025
-----------
IRON & STEEL (3.0%)
BRAZIL (3.0%)
Gerdau Metalurgica S.A................................ 10,000 216,192
Gerdau S.A............................................ 35,200 429,280
-----------
645,472
-----------
METALS & MINING (5.3%)
BRAZIL (5.3%)
Companhia Vale do Rio Doce Class A.................... 41,250 1,161,389
-----------
OIL/GAS (7.7%)
BRAZIL (7.7%)
Petroleo Brasileiro S.A............................... 55,500 1,676,737
-----------
RETAIL (6.8%)
BRAZIL (6.8%)
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar............................................... 45,336 1,470,194
-----------
TELECOMMUNICATIONS (5.2%)
BRAZIL (5.2%)
Embratel Participacoes S.A............................ 31,200 737,648
Telecomunicacoes Brasileiras S.A. -- ADR.............. 4,000 388,500
-----------
1,126,148
-----------
TELECOMMUNICATIONS -- WIRELESS (4.1%)
BRAZIL (4.1%)
Telemig Celular S.A. Class C.......................... 50 1,265
Telerj Celular S.A. Class B*.......................... 1 32
Telesp Celular Participacoes S.A...................... 49,713 893,154
Telesp Celular Participacoes S.A. Class A -- ADR...... 0 8
-----------
894,459
-----------
UTILITIES (1.8%)
BRAZIL (1.8%)
Companhia Paranaense de Energia Class B*.............. 42,900 399,523
-----------
TOTAL PREFERRED STOCKS (COST $6,706,371).............. 10,074,796
-----------
RIGHTS/WARRANTS (0.0%)
METALS & MINING (0.0%)
BRAZIL (0.0%)
Vale Do Rio Doce...................................... 40,400 0
-----------
TOTAL RIGHTS/WARRANTS (COST $0)....................... 0
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
-------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.7%)
UNITED STATES (0.7%)
Chase Manhattan Bank Repurchase Agreement, 3.50%,
07/03/00 (dated 06/30/00; proceeds $163,608;
collateralized by $165,000 U.S. Treasury Notes,
6.125%, due 08/15/07; valued at $167,785)............ $ 163,560 $ 163,560
-----------
TOTAL REPURCHASE AGREEMENT (COST $163,560)............ 163,560
-----------
TOTAL INVESTMENTS (COST $16,172,837) (+) -- 99.8%..... 21,687,894
OTHER ASSETS IN EXCESS OF LIABILITIES 0.2%............ 39,211
-----------
TOTAL NET ASSETS -- 100.0%............................ $21,727,105
===========
</TABLE>
---------------
+ Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation .................. $5,595,434
Unrealized depreciation .................. (80,377)
----------
Net unrealized appreciation .............. $5,515,057
==========
</TABLE>
* Denotes non-income producing security.
ADR -- American Depositary Receipt.
GDR -- Global Depository Receipt.
Country Diversification (as a percentage of Total Investments):
<TABLE>
<S> <C>
Argentina ................................ 5.07%
Brazil ................................... 55.84%
Mexico ................................... 38.34%
United States ............................ 0.75%
-----
100.00%
-----
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
-------------
<PAGE>
OFFIT
NEW YORK MUNICIPAL FUND
--------------------------------------------------------------------------------
The total return for the OFFIT New York Municipal Fund for the period ending
June 30, 2000 was 4.00%. By comparison, the total returns for the Lehman
Brothers Five-Year and Seven-Year Municipal indices were 2.79% and 3.23%. As
measured by Lipper, Inc., the Fund ranked 1st among its peers on a three-year
basis and 2nd on a five-year basis. Over the last five years, the average annual
return of all New York intermediate municipal funds in the Lipper Universe was
4.64%. The OFFIT New York Municipal Fund has achieved a 5.27% annualized return
over the same time period.
The June 30, 2000 net asset value of $10.49 was approximately 1.6% higher than
the $10.32 NAV as at December 31, 1999. The Fund's net assets as of June 30,
2000 totaled $68.9 million. The duration of the Fund was 6.25 years, while the
average credit quality remained high at AA.
There were two dominant reasons for the outstanding performance of municipals
during the first six months of this year. The first reason was the dramatic
drop-off in issuance. New issue supply for the entire market declined by 22%
from the same six-month period last year. New York supply declined even more,
falling 42%. Why such a dramatic drop-off in supply? Consistent strong economic
growth continued to push tax receipts higher and increased surpluses at the
state level. It is because of this economic prosperity that borrowing by
municipal issuers tends to stay at a minimum. Also compounding the situation was
the sharp decline in advance refunding issues. The higher yielding environment
earlier in the year made advance refundings of prior issues financially
unattractive to many issuers. The second reason for the outstanding performance
of municipals during the first six months was the volatility in the equity
markets. We anticipated very early in the year that because of the Federal
Reserve's tighter monetary policy, the volatility of the equity markets would
cause investors to seek the safety of bonds. Our outlook compelled us to buy
intermediate municipals as yields approached six percent, a level not seen in
municipals over the past few years. We continue to believe that as municipal
yields move closer to six percent, monies ordinarily earmarked for equities will
be reallocated to municipal bonds.
Moving forward, our investment philosophy with regards to credit selection will
remain the same. We will seek to invest in municipal sectors including general
obligation, tax-backed, transportation, and public education. We still believe
that the riskiest sectors of the municipal market, such as health care,
industrial development bonds, and multi-family housing will underperform the
general municipal market.
Going forward, we believe the future remains a bright one for municipal
investors. We expect bond yields to decline in the second half of the year as
the Federal Reserve's interest rate increases filter into the economy. The Fed
has already increased short-term interest rates by 175 basis points, and when
they are perceived as being finished, the environment for bonds will be
favorable. Retail buyers remain the primary source of demand in the municipal
market, and we believe that given the current rate environment they will
continue to invest a portion of their wealth into fixed income.
Michael Pietronico Carolyn N. Dolan
July 25, 2000
16
-------------
<PAGE>
OFFIT
NEW YORK MUNICIPAL FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
-----------------------------------------------------------------------------------------
FLOATING RATE NOTE (1.7%)
WATER & SEWER REVENUE (1.7%)
New York City Municipal Water Financing Authority
Water & Sewer System Revenue Bonds Series A (FGIC),
4.40%, 06/15/24, 1-Day Note*........................... $1,200,000 $ 1,200,000
-----------
TOTAL FLOATING RATE NOTE (COST $1,200,000).............. 1,200,000
-----------
MUNICIPAL BONDS (92.0%)
EDUCATION REVENUE (9.5%)
New York State Dormitory Authority Revenue Bonds
Columbia University, 5.25%, 07/01/06................... 500,000 511,740
New York State Dormitory Authority Revenue Bonds Cornell
University, 5.25%, 07/01/07............................ 350,000 356,940
New York State Dormitory Authority Revenue Bonds New
York University (MBIA), 5.50%, 07/01/04................ 390,000 399,937
New York State Dormitory Authority Revenue Bonds New
York University (MBIA), 5.50%, 07/01/10................ 2,000,000 2,072,160
New York State Dormitory Authority Revenue Bonds New
York University Series B, 5.25%, 05/15/10.............. 1,000,000 1,006,340
New York State Dormitory Authority Revenue Bonds New
York University Series C (MBIA), 5.75%, 07/01/12....... 670,000 699,567
Tompkins County New York Industrial Development Agency
Revenue Civic Facility Cornell University, 5.75%,
07/01/15............................................... 1,435,000 1,475,611
-----------
6,522,295
-----------
GENERAL OBLIGATIONS (21.1%)
Albany County General Obligation Bonds Series B (FGIC),
5.60%, 03/15/07........................................ 300,000 311,634
Albany County General Obligation Bonds Series B (FGIC),
5.60%, 03/15/09........................................ 400,000 413,572
Hempstead General Obligation Bonds Series A (FGIC),
5.00%, 11/15/08........................................ 425,000 425,595
Hempstead General Obligation Bond Series B (FGIC),
5.625%, 02/01/04....................................... 5,000 5,157
Hempstead General Obligation Bonds Series B, 5.625%,
02/01/04............................................... 135,000 138,787
Islip General Obligation Bonds (FGIC), 5.375%,
06/15/12............................................... 1,430,000 1,450,220
Monroe County General Obligation Bonds (FGIC), 6.50%,
06/01/06............................................... 2,025,000 2,204,354
Monroe County General Obligation Bonds, 4.25%,
03/01/09............................................... 1,000,000 927,470
New Castle General Obligation Bonds, 4.75%, 06/01/08.... 210,000 206,873
New York City General Obligation Bonds Series A, 6.50%,
05/15/12............................................... 1,000,000 1,088,770
New York City General Obligation Bonds Series B, 5.80%,
08/01/13............................................... 435,000 446,997
New York City General Obligation Bonds Series G, 5.35%,
08/01/13............................................... 1,025,000 1,009,471
New York City General Obligation Bonds Series I, 5.875%,
03/15/11............................................... 980,000 1,012,654
New York City General Obligation Bonds Series I, 6.00%,
04/15/08............................................... 805,000 848,357
New York State General Obligation Bonds Series A, 5.25%,
07/15/10............................................... 2,500,000 2,516,375
New York State General Obligation Bonds Series A, 5.70%,
03/15/10............................................... 400,000 412,020
Orange County General Obligation Bonds, 6.00%,
11/15/08............................................... 470,000 502,491
Putnam County General Obligation Bonds, 4.15%,
04/15/05............................................... 445,000 427,908
Schenectady County General Obligation Bonds, 6.00%,
08/15/05............................................... 200,000 210,960
-----------
14,559,665
-----------
HEALTH CARE (4.8%)
New York City Health and Hospital Corp. Revenue, 6.30%,
02/15/20............................................... 2,500,000 2,642,525
New York State Medical Care Facility Finance Authority
(FHA), 6.20%, 08/15/14................................. 650,000 697,756
-----------
3,340,281
-----------
HOUSING REVENUE (4.0%)
New York State Mortgage Agency Revenue Bonds
Series 37-A, 5.85%, 10/01/06........................... 125,000 129,924
New York State Mortgage Agency Revenue Bonds
Series 37-A, 5.95%, 04/01/07........................... 100,000 103,927
New York State Mortgage Agency Revenue Bonds Series 46
(AMT), 5.75%, 04/01/04................................. 200,000 204,284
New York State Mortgage Agency Revenue Bonds Series 50
(AMT), 5.80%, 10/01/06................................. 200,000 205,588
New York State Mortgage Agency Revenue Bonds Series 53,
5.35%, 04/01/07........................................ 240,000 243,175
New York State Mortgage Agency Revenue Bonds Series 61,
5.60%, 10/01/11........................................ 650,000 657,566
New York State Mortgage Agency Revenue Bonds Series 67
(AMT), 5.30%, 10/01/10................................. 585,000 573,522
New York State Mortgage Agency Revenue Bonds Series 77,
5.90%, 10/01/13........................................ 610,000 614,471
-----------
2,732,457
-----------
POWER AUTHORITY REVENUE (4.8%)
Long Island Power Authority Revenue Bonds Series A
(FSA), 5.50%, 12/01/12................................. 3,220,000 3,306,264
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
-------------
<PAGE>
OFFIT
NEW YORK MUNICIPAL FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
SALES TAX REVENUE (13.2%)
Municipal Assistance Corp. for City of New York Revenue
Bonds Series G (AMBAC), 6.00%, 07/01/06................ $2,800,000 $ 2,966,516
Municipal Assistance Corp. for City of New York Revenue
Bonds Series I, 6.25%, 07/01/07........................ 750,000 808,808
New York City Transitional Finance Authority Tax Revenue
Series B, 5.75%, 11/15/07.............................. 1,500,000 1,575,045
New York City Transitional Finance Authority Tax Revenue
Series C, 5.25%, 05/01/12.............................. 1,335,000 1,332,063
New York State Local Government Assistance Corp. Revenue
Bonds Series A, 5.50%, 04/01/04........................ 1,600,000 1,639,968
New York State Local Government Assistance Corp. Revenue
Bonds Series E, 6.00%, 04/01/14........................ 700,000 744,324
-----------
9,066,724
-----------
TRANSPORTATION REVENUE (18.5%)
Metropolitan Transit Authority Revenue Bonds Series A
(FGIC), 5.60%, 04/01/13................................ 665,000 679,131
Metropolitan Transit Authority Revenue Bonds Series A
(MBIA), 6.25%, 04/01/13................................ 3,250,000 3,551,048
New York State Bridge Authority Revenue Bonds, 5.00%,
01/01/11............................................... 1,500,000 1,480,050
New York State Thruway Highway & Bridge Trust Fund Bonds
Series B, 5.25%, 04/01/12.............................. 3,440,000 3,443,818
New York State Thruway Highway & Bridge Trust Fund Bonds
Series C (FGIC), 5.75%, 01/01/09....................... 500,000 529,130
Port Authority of New York & New Jersey Bonds Series 99
(FGIC), 5.25%, 11/01/05................................ 525,000 534,051
Port Authority of New York & New Jersey Bonds
Series 119 (FGIC), 5.00%, 09/15/04..................... 1,500,000 1,505,895
Triborough Bridge & Tunnel Authority General Purpose
Bonds Series B, 5.75%, 01/01/05........................ 1,000,000 1,039,950
-----------
12,763,073
-----------
WATER & SEWER REVENUE (16.1%)
New York City Municipal Water Financing Authority
Water & Sewer System Revenue Bonds Series A, 6.00%,
06/15/10............................................... 1,000,000 1,071,440
New York City Municipal Water Financing Authority
Water & Sewer System Revenue Bonds Series B, 5.20%,
06/15/05............................................... 500,000 508,725
New York City Municipal Water Financing Authority
Water & Sewer Revenue Bonds Series B, 5.30%,
06/15/06............................................... 1,675,000 1,707,830
New York State Environmental Facilities Corporation
Clean Water & Drinking Revenue Bonds, 5.50%,
06/15/10............................................... 1,950,000 2,021,370
New York State Environmental Facilities Corporation
Clean Water & Drinking Revenue Bonds, 5.70%,
06/15/12............................................... 1,010,000 1,048,107
New York State Environmental Facilities Corporation
Clean Water & Drinking Revenue Bonds, 5.75%,
06/15/13............................................... 1,000,000 1,034,030
New York State Environmental Facilities Corporation
Pollution Control Revenue, 5.75%, 06/15/10............. 2,900,000 3,062,719
Suffolk County Water Revenue Bonds (MBIA), 5.10%,
06/01/05............................................... 250,000 252,918
Suffolk County Water Revenue Bonds (MBIA), 5.10%,
06/01/06............................................... 400,000 404,560
-----------
11,111,699
-----------
TOTAL MUNICIPAL BONDS (COST $62,640,981)................ 63,402,458
-----------
FEDERAL HOME LOAN BANK (2.2%)
Federal Home Loan Bank Discount Note, 6.57%, 07/03/00... 1,500,000 1,499,453
-----------
TOTAL FEDERAL HOME LOAN BANK (COST $1,499,453).......... 1,499,453
-----------
MONEY MARKET FUNDS (2.9%)
Dreyfus NY Municipal Money Market Fund.................. 1,021,242 1,021,242
The J.P. Morgan Institutional Service Tax Exempt Cash
Fund................................................... 1,021,242 1,021,242
-----------
TOTAL MONEY MARKET FUNDS (COST $2,042,484).............. 2,042,484
-----------
TOTAL INVESTMENTS (COST $67,382,918) (+) -- 98.8%....... 68,144,395
OTHER ASSETS IN EXCESS OF LIABILITIES 1.2%.............. 799,148
-----------
TOTAL NET ASSETS -- 100.0%.............................. $68,943,543
===========
</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 .................. $1,075,484
Unrealized depreciation .................. (314,007)
----------
Net unrealized appreciation .............. $ 761,477
==========
</TABLE>
* Interest Rate in effect at June 30, 2000
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.
MBIA -- Municipal Bond Insurance Association.
The accompanying notes are an integral part of the financial statements.
18
-------------
<PAGE>
OFFIT
CALIFORNIA MUNICIPAL FUND
--------------------------------------------------------------------------------
The total return for the OFFIT California Municipal Fund for the period ending
June 30, 2000 was 4.17%. This compares favorably with the 2.79% and 3.23%
returns of the Lehman Brothers Five-Year and Seven-Year Municipal indices. The
Fund also compares well when measured against its peer group. Over the last
three years, the total return of the California Municipal Fund ranked eighth out
of thirty-two funds as measured by Lipper, Inc.
The June 30, 2000 net asset value of $10.26 was approximately 2.0% higher than
the $10.06 NAV as of December 31, 1999. The Fund's net assets as of June 30,
2000 totaled approximately $14.5 million. The duration of the Fund was 5.5
years, while the average credit quality remained high at AA.
The demand for intermediate California municipal debt remained nothing short of
spectacular in the first half of 2000. The premium that California paper demands
relative to the rest of the municipal market reached an all-time high during
this time. In particular, California municipals with maturities between two and
seven years seemed to be trading in an environment of relentless demand.
California municipals in this range consistently yield 30-40 basis points less
than bonds from other states.
We believe that there are some unique fundamental developments in the California
economy that should keep the demand component of the market quite high for years
to come.
- An overabundance of recently created wealth generated primarily by "New
Economy" companies.
- A particularly onerous state tax rate that, when combined with the Federal
rate, exceeds 45% for some taxpayers.
- A considerably more diverse state economy that should lack the cyclicality
of years past.
- Clearly improved state financial management and heightened awareness to
debt management issues.
Without question, the April 2000 shakeout in the NASDAQ and, in particular, the
"Dot.com" companies led to a substantial reallocation from equities to bonds.
Entrepreneurs of the new economy, particularly in the high tech sector, now seem
more interested in finding ways to preserve their new found wealth. We believe
this will keep California municipals well-bid and rich relative to national
municipals for the foreseeable future.
One of the strongest performing credits in the first half of 2000 was the State
of California General Obligation Bond. This credit, rated AA by the major rating
agencies, now trades at yields less than those offered by other state general
obligations rated AAA. While the trading value of the credit has clearly been
enhanced by the favorable supply/demand components currently in place in the
California market, we believe the market is expecting the substantial surpluses
currently enjoyed by the State to result in a further rating upgrade in the
future. This credit is a core holding of the Fund, and we will look to add to
existing positions if an attractive entry point becomes possible.
Looking forward, we believe that the second half of the year could be as equally
as rewarding as the first half for fixed-income investors. We expect economic
growth to moderate, and the Federal Reserve to conduct a more stable monetary
policy. We believe it remains in the Fund's best interest to be overweighted in
top-tier credits and fully invested in this environment.
Michael Pietronico John H. Haldeman, Jr.
July 25, 2000
19
-------------
<PAGE>
OFFIT
CALIFORNIA MUNICIPAL FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
---------------------------------------------------------------------------------------------
MUNICIPAL BONDS (96.9%)
EDUCATION REVENUE (5.8%)
California Educational Facilities Authority Revenue
Santa Clara University, 5.30%, 09/01/05................ $ 175,000 $ 181,146
California Educational Facilities Authority Revenue
Santa Clara University, 5.40%, 09/01/06................ 75,000 77,696
California State Public Works Revenue Board Lease
Series C, 5.125%, 10/01/12............................. 450,000 451,210
California State Universities and Colleges Student
Revenue, 6.125%, 11/01/24.............................. 125,000 135,770
-----------
845,822
-----------
GENERAL OBLIGATIONS (21.4%)
Berkeley, California Series A, 5.55%, 09/01/07.......... 50,000 52,989
California State General Obligation Bonds, 5.75%,
12/01/14............................................... 700,000 733,733
Cotati-Rohnert Park Uniform School District Series D
(FSA), 6.00%, 08/01/04................................. 100,000 105,037
Cupertino Uniform School District Series B (FGIC),
6.125%, 08/01/03....................................... 50,000 52,581
Los Angeles, California School District, 6.00%,
07/01/13............................................... 500,000 545,210
Los Angeles, California Series A (FGIC), 5.25%,
09/01/12............................................... 500,000 514,300
Metropolitan Water District Southern California
Series A, 5.50%, 03/01/10.............................. 500,000 515,250
San Francisco, California City & County (FGIC), 5.30%,
06/15/07............................................... 250,000 258,007
San Francisco, California City & County (MBIA), 5.30%,
06/15/07............................................... 175,000 178,474
Santa Monica -- Malibu Uniform School District, 5.00%,
08/01/08............................................... 150,000 153,408
-----------
3,108,989
-----------
HOUSING REVENUE (3.3%)
California Housing Finance Agency Single Family Mortgage
Issue B-2 (AMT), 5.20%, 08/01/04....................... 110,000 111,778
Los Angeles, California Department of Apartment Revenue,
6.00%, 05/15/05........................................ 150,000 159,996
San Francisco, California City and County Apartment
Revenue, 5.50%, 05/01/08............................... 200,000 208,376
-----------
480,150
-----------
POWER AUTHORITY REVENUE (0.7%)
Southern California Public Power San Juan Unit 3
Series A (MBIA), 5.125%, 01/01/05...................... 100,000 102,879
-----------
PREREFUNDED (2.2%)
Santa Monica -- Malibu Uniform School District,
Prerefunded 08/01/03, 5.40%, 08/01/08.................. 250,000 262,135
Santa Monica -- Malibu Uniform School District,
Prerefunded 08/01/03, 5.40%, 08/01/10.................. 50,000 52,427
-----------
314,562
-----------
RECREATION FACILITIES (1.4%)
Los Angeles County California Public Works Financing
Authority Revenue Series A, 5.375%, 10/01/06........... 200,000 209,602
-----------
SALES TAX REVENUE (13.4%)
Contra Costa Transportation Authority Sales Tax Revenue
Series A (FGIC), 5.50%, 03/01/08....................... 50,000 51,715
Los Angeles, California Municipal Inprovement
Corporation Lease Revenue Series D (FGIC), 4.25%,
09/01/09............................................... 500,000 477,060
Orange County California Local Transportation Authority
Sales Tax Revenue, 5.50%, 02/15/11..................... 500,000 526,475
Orange County California Local Transportation Authority
Sales Tax Revenue, 5.70%, 02/15/03..................... 350,000 361,865
San Francisco Bay Area Rapid Transportation District
Sales Tax Revenue, 5.25%, 07/01/10..................... 250,000 259,130
San Francisco Bay Area Rapid Transportation District
Sales Tax Revenue, 5.50%, 07/01/05..................... 250,000 262,105
-----------
1,938,350
-----------
TELECOMMUNICATION REVENUE (1.1%)
Puerto Rico Telephone Authority Revenue Bonds Series L,
5.75%, 01/01/08........................................ 150,000 154,330
-----------
TRANSPORTATION REVENUE (20.0%)
Long Beach, California Harbor Revenue, 6.00%,
05/15/09............................................... 300,000 322,866
Long Beach, California Harbor Revenue, 6.00%,
05/15/11............................................... 450,000 485,582
Long Beach, California Harbor Revenue (AMT) (MBIA),
5.75%, 05/15/07........................................ 100,000 105,783
Los Angeles, California Department of Airports Refunding
Revenue Series A (FGIC), 5.375%, 05/15/07.............. 300,000 312,831
Port Oakland California Series K, 5.25%, 11/01/07....... 885,000 910,922
San Diego, California Open Space Parking Facilities
District, 5.60%, 01/01/05.............................. 325,000 340,161
San Francisco City & County Airport Revenue Series 6
(AMBAC) (AMT), 6.25%, 05/01/11......................... 200,000 212,682
San Mateo County California District, 5.25%, 06/01/11... 200,000 206,110
-----------
2,896,937
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
-------------
<PAGE>
OFFIT
CALIFORNIA MUNICIPAL FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
WATER & SEWER REVENUE (27.6%)
California State Department of Water Resource Series L,
5.75%, 12/01/13........................................ $ 300,000 $ 307,872
California State Department of Water Resources
Series U, 5.00%, 12/01/09.............................. 300,000 305,019
California State Department Water Project Revenue Bonds
Series L, 5.60%, 12/01/10.............................. 250,000 256,670
Contra Costa, California Water District Water Revenue
Series G, 5.75%, 10/01/14.............................. 700,000 721,973
Contra Costa Water District Water Revenue Series G
(MBIA), 6.00%, 10/01/09................................ 50,000 53,385
Los Angeles, California Department Water and Power,
5.50%, 10/15/12........................................ 500,000 518,835
Los Angeles, California Wastewater System Revenue Bond,
5.375%, 11/01/07....................................... 500,000 518,875
Los Angeles County Sanitation District Financing
Authority Revenue Capital Projects Series A, 5.25%,
10/01/10............................................... 100,000 101,883
Los Angeles, California Department of Water and Power
Revenue, 5.80%, 07/15/04............................... 150,000 156,891
Metropolitan Water Distribution Southern California
Waterworks Revenue Series A (MBIA), 5.40%, 07/01/08.... 250,000 260,913
Sacramento County California Finance Authority Revenue
Bonds Series A, 6.00%, 12/01/15........................ 250,000 264,945
San Diego, California Public Facility Financing
Authority Sewer Revenue, 6.00%, 05/15/07............... 500,000 540,420
-----------
4,007,681
-----------
TOTAL MUNICIPAL BONDS (COST $14,027,324)................ 14,059,302
-----------
MONEY MARKET FUNDS (2.7%)
Dreyfus Tax Exempt Cash Management Money Market Fund.... 192,643 192,643
Federated California Municipal Money Market Fund........ 192,521 192,521
-----------
TOTAL MONEY MARKET FUNDS (COST $385,164)................ 385,164
-----------
TOTAL INVESTMENTS (COST $14,412,488)(+) -- 99.6%........ 14,444,466
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4%.............. 58,307
-----------
TOTAL NET ASSETS -- 100.0%.............................. $14,502,773
===========
</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 ................... $ 138,782
Unrealized depreciation ................... (106,804)
---------
Net unrealized appreciation ............... $ 31,978
=========
</TABLE>
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.
The accompanying notes are an integral part of the financial statements.
21
-------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
--------------------------------------------------------------------------------
The total return for The OFFIT National Municipal Fund for the first six months
of 2000 was 4.17%. By comparison, the total returns for the Lehman Brothers
Five-Year and Seven-Year Municipal indices were 2.79% and 3.23%, respectively.
As measured by Lipper, Inc., the average total return of all intermediate
municipal debt funds over the last two years was 4.52% versus the 8.41% returned
by The National Municipal Fund. That performance placed the National Municipal
Fund first out of 120 funds in Lipper's Intermediate Municipal Debt Fund Index.
The June 30, 2000 net asset value of $10.22 was approximately 1.8% higher than
the $10.04 NAV as of December 31, 1999. Reflective of the higher market yields
available during the first half of 2000 and our slight lengthening of the
portfolio, the 30-Day SEC yield rose from 4.66% at December 31, 1999 to 4.80%.
The Fund's net assets as of June 30, 2000 totaled approximately $19 million. The
duration of the Fund was 6.25 years and the average credit quality remained high
at AA.
The driving force behind the stellar returns enjoyed by municipal investors in
the first half of 2000 was the contraction in supply. Compared to the first six
months of last year, primary market supply was down 22%. While the press has
been replete with articles about the possible extinction of United States
Treasury Bonds resulting from overwhelming surpluses at the Federal level, most
local governments have been greeted by bulging tax receipts and declining
borrowing needs as well. This lack of supply, combined with the increasingly
volatile equity markets, proved to be a catalyst for substantial price
appreciation in municipals with maturities greater than five years.
It has always been our philosophy when managing the National Municipal Fund to
try and identify potential states that could be susceptible to a supply
"squeeze." Likely candidates for this "squeeze" generally are states with a
healthy concentration of wealthy individuals, a high state income tax rate, and
generally positive credit fundamentals. One state that we thought fit this
profile was New York. We moved aggressively early in the year to overweight the
Fund with New York municipals, and it proved to be a value added move. Supply in
New York municipals fell a more pronounced 42% on a year-over-year basis. This
dramatic drop-off in supply caused New York spreads to narrow relative to
municipals in the national market. Medium investment-grade New York credits,
such as New York City General Obligation bonds and New York State Dormitory
Authority State University of New York Revenue bonds, were two examples of the
Fund's holdings that were "bid up" aggressively because of the lack of New York
supply.
Moving forward, we believe that the second half of the year can be as rewarding
as the first half for fixed-income investors. With most of the major central
banks around the world currently tightening credit, we believe slower global
economic growth and lower bonds yields are to be expected.
Michael Pietronico John H. Haldeman, Jr.
July 25, 2000
22
-------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
--------------------------------------------------------------------------------------------
FLOATING RATE NOTE (0.5%)
WATER & SEWER REVENUE (0.5%)
NEW YORK (0.5%)
New York City Municipal Water Financing Authority
Water & Sewer System Revenue Bonds Series A (FGIC),
4.40%, 06/15/25*..................................... $ 100,000 $ 100,000
-----------
TOTAL FLOATING RATE NOTE (COST $100,000).............. 100,000
-----------
MUNICIPAL BONDS (97.8%)
EDUCATION REVENUE (7.0%)
NEW JERSEY (1.3%)
Freehold, New Jersey Regional High School (FGIC),
5.60%, 03/01/13...................................... 250,000 256,420
-----------
OHIO (3.1%)
Ohio State Higher Education Facilities Series A,
5.25%, 02/01/11...................................... 575,000 581,158
-----------
NEW YORK (2.6%)
New York State Dormitory Authority Lease Revenue
Series A, 6.00%, 07/01/13............................ 465,000 487,362
-----------
1,324,940
-----------
GENERAL OBLIGATIONS (29.1%)
ILLINOIS (0.3%)
Chicago, Illinois Project Series B (FGIC), 6.00%,
01/01/03............................................. 50,000 51,390
-----------
MASSACHUSETTS (14.8%)
Boston, Massachusetts Series A, 5.75%, 02/01/13....... 600,000 620,196
Framingham, Massachusetts, 6.00%, 03/01/14............ 820,000 862,345
Massachusetts State Series A, 6.00%, 02/01/14......... 1,235,000 1,295,527
-----------
2,778,068
-----------
NEW YORK (3.8%)
New York, New York, 6.75%, 08/15/03................... 325,000 342,501
New York, New York Series B, 6.375%, 08/15/12......... 350,000 368,221
-----------
710,722
-----------
OHIO (2.2%)
Cincinnati, Ohio Police & Firemen's Disability, 5.65%,
12/01/14............................................. 400,000 408,956
-----------
WASHINGTON (5.5%)
Washington State Series S-4, 5.75%, 01/01/12.......... 1,000,000 1,036,480
-----------
WASHINGTON D.C. (2.5%)
District of Columbia Series A (FGIC), 5.80%,
06/01/04............................................. 450,000 465,655
-----------
5,451,271
-----------
HOUSING REVENUE (9.2%)
NEW YORK (2.6%)
New York State Mortgage Agency Revenue Bonds
Series 71 (AMT), 4.80%, 10/01/08..................... 500,000 479,930
-----------
TEXAS (6.6%)
Texas State Veterans Housing Assistance Fund II
Series C (AMT), 5.60%, 06/01/09...................... 415,000 421,213
Texas State Veterans Housing Assistance Fund II
Series C (AMT), 5.75%, 06/01/11...................... 670,000 693,169
Texas State Veterans Housing Assistance Fund II
Series C, 5.90%, 12/01/14............................ 130,000 133,160
-----------
1,247,542
-----------
1,727,472
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
-------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
POWER AUTHORITY REVENUE (6.5%)
NEW YORK (5.4%)
Long Island Power Authority Revenue Bonds Series A
(FSA), 5.50%, 12/01/12............................... $1,000,000 $ 1,026,790
-----------
WASHINGTON (1.1%)
Washington State Public Power Supply System Nuclear
Project 3-A, 5.00%, 07/01/01......................... 200,000 200,952
-----------
1,227,742
-----------
SALES TAX REVENUE (25.7%)
FLORIDA (2.7%)
Jacksonville, Florida Excise Tax Revenue (AMT)(FGIC),
5.50%, 10/01/07...................................... 505,000 513,065
-----------
ILLINOIS (5.4%)
Illinois State Sales Tax Revenue Series R, 5.40%,
06/15/11............................................. 1,000,000 1,008,500
-----------
NEW YORK (9.1%)
Municipal Assistance Corp. for City of New York
Revenue Bonds Series G (AMBAC), 6.00%, 07/01/06...... 500,000 529,735
New York City Transitional Finance Authority Tax
Revenue Series C, 5.25%, 05/01/12.................... 875,000 873,075
New York State Local Government Assistance Corp.
Revenue Bonds Series E, 6.00%, 04/01/14.............. 300,000 318,996
-----------
1,721,806
-----------
TEXAS (8.5%)
Lower Colorado River Authority Texas Series B, 6.00%,
05/15/11............................................. 1,500,000 1,593,225
-----------
4,836,596
-----------
TRANSPORTATION REVENUE (12.5%)
COLORADO (1.1%)
Denver, Colorado City and County Airport Revenue
Series C (AMT), 6.55%, 11/15/02...................... 200,000 206,530
-----------
CALIFORNIA (2.9%)
Long Beach, California Harbor Revenue (AMT)(FGIC),
6.00%, 05/15/11...................................... 500,000 539,535
-----------
NEW JERSEY (1.6%)
New Jersey State Turnpike Authority Series A (MBIA),
5.50%, 01/01/08...................................... 300,000 309,840
-----------
NEW YORK (2.9%)
Metropolitan Transportation Authority Dedicated Tax
Fund Series A (MBIA), 6.25%, 04/01/13................ 500,000 546,315
-----------
WISCONSIN (4.0%)
Wisconsin State Transportation Revenue Reference
Series A, 5.50%, 07/01/09............................ 725,000 747,954
-----------
2,350,174
-----------
WATER & SEWER REVENUE (7.8%)
CALIFORNIA (2.3%)
Sacramento County Sanitation District Financing
Authority Revenue Series A, 6.00%, 12/01/13.......... 410,000 439,971
-----------
MARYLAND (3.8%)
Washington Suburban Sanitation Distribution of
Maryland, 5.40%, 07/01/01............................ 700,000 704,599
-----------
NEW MEXICO (1.7%)
Albuquerque, New Mexico Joint Water & Sewer System
Revenue, 6.00%, 07/01/06............................. 300,000 317,523
-----------
1,462,093
-----------
TOTAL MUNICIPAL BONDS (COST $18,049,254).............. 18,380,288
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
-------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
MONEY MARKET FUNDS (0.5%)
Dreyfus Tax Exempt Cash Management Money Market Fund.... $ 49,870 $ 49,870
The J.P. Morgan Institutional Service Tax Exempt Cash
Fund................................................... 49,870 49,870
-----------
TOTAL MONEY MARKET FUNDS (COST $99,740)................. 99,740
-----------
TOTAL INVESTMENTS (COST $18,248,994) (+) -- 98.8%....... 18,580,028
OTHER ASSETS IN EXCESS OF LIABILITIES 1.2%.............. 227,941
-----------
TOTAL NET ASSETS -- 100.0%.............................. $18,807,969
===========
</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 .................... $349,260
Unrealized depreciation .................... (18,226)
--------
Net unrealized appreciation ................ $331,034
========
</TABLE>
* Interest rate in effect at June 30, 2000.
AMBAC -- AMBAC Indemnity Corporation.
AMT -- Interest on securities subject to Federal Alternative Minimum Tax.
FGIC -- Insured by Financial Guaranty Insurance Group.
FSA -- Financial Security Assurance.
MBIA -- Municipal Bond Insurance Assoiation.
The accompanying notes are an integral part of the financial statements.
25
-------------
<PAGE>
OFFIT
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
The total return of the U.S. Government Securities Fund was 3.90% in the first
half of 2000. This compares with a return of 3.78% for the Merrill Lynch
Five-Year Treasury Index. As of June 30, 2000 the Fund's net asset value was
$9.85 and the 30-day SEC yield was 5.84%. The Fund holds a mix of commercial
paper, U.S. Treasurys and U.S. Agency securities. The average maturity of the
Fund is 5.45 years with a 4.35 year effective duration. The benchmark maturity
is 4.87 years with a 4.08 year effective duration.
We have maintained a duration longer than the benchmark throughout the first
half of this year. Our expectation that interest rates would move lower reflects
the view that the inverted Treasury yield curve (yields are lower as maturity
lengthens) would slow the economy. Earlier this year, many felt that the
inverted curve was much more a statement of diminished Treasury supply than
market expectation of future growth. While there is some credence to this
argument, it fails to hold when the inversion includes the 2 to 5 year part of
the curve.
What makes the curve inversion such a compelling argument for a slower economy
is that it links to the economy through its impact on credit extension. From the
standpoint of interest arbitrage, as the Fed tightens and the curve inverts,
banks and other lending institutions find margins squeezed. With less profit
from lending and more predictable returns from short-term securities, lenders
are more cautious when extending credit. The tie between the curve, bank
lending, and the economy was clearly evident during the 1990-91 recession.
During this time, the Fed was successfully able to induce bank lending by
engineering a steeply positive curve--which was stimulating factor for several
years. As with any Fed endeavor, the transmission of policy works first, and
fastest, through its effect on investor psychology. Before the curve actually
curtails lending, the curve signals expectations of a softer economy. This alone
reduces the confidence of borrowers and lenders.
Throughout the second quarter, the yield curve inverted further and Treasury
bond yields have trended lower. The inversion continued because the Federal
Reserve maintained its expected resolve and tightened policy even as equity
values weakened. More to the point, evidence of the inverted curve's impact on
credit extension emerged. Indeed, the second quarter marked an important
transition for the economy. Tighter monetary policy, in concert with the
inverted yield curve, was finally able to decelerate growth towards a pace less
likely to ignite inflationary pressures.
Based on recent economic data, however, it is not yet clear whether the spring
slowdown is the onset of still slower growth or a brief pause in the expansion.
The Federal Reserve kept to its policy bias in mid-May by raising the Federal
funds rate 50 basis points to 6.5%. In late June, the Fed reaffirmed its bias to
tighten, but in reaction to the mixed economic signals held off from another
rate hike. From our perspective, the economy will continue to slow because the
inverted curve has started the process of reducing the appetite for debt.
Looking forward, the ongoing potential for more Fed tightening in combination
with a sustained inversion of the yield curve will hold back credit creation and
the equity market. This, in turn, will check any nascent inflation risk. It is a
favorable environment for bonds, especially in the 5-to-7 year maturity range,
whose yields reflect much of the perceived near-term inflation risk. Therefore,
we maintain our view that interest rates will continue to trend lower. As such,
the Fund will keep its modestly longer benchmark.
In light of Chairman Greenspan's recent testimony, there is a greater likelihood
that the Fund will increase its holdings of U.S. Agency debt. The mid-year
policy outlook outlined by the Fed Chairman contained an important policy shift.
While we believe the near-term potential for a rate hike is more balanced than
the market seems to believe, Greenspan is more accepting of a higher rate of
economic growth moving forward. It was generally accepted that he wanted to
drive growth below 3% in order to create sufficient slack in the economy and, as
a result, reduce inflationary pressure. It is now apparent that he believes the
productivity gains are structural rather than cyclical and that 3.5%-4.0% real
growth without raising unemployment will achieve the central bank goal. This
environment, still favorable to bonds as economic momentum continues to slow,
should also now reduce some of the scarcity bid in Treasurys and, in turn, make
non-Treasury issues such as Agencies more attractive.
Steven Blitz Isaac Frankel
July 25, 2000
26
-------------
<PAGE>
OFFIT
U.S. GOVERNMENT SECURITIES FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------------------------------------
CORPORATE BOND (4.7%)
FINANCIAL SERVICES (4.7%)
General Electric Capital Corp., 7.00%, 03/01/02......... $ 2,030,000 $ 2,023,967
-----------
TOTAL CORPORATE BOND (COST $2,028,226).................. 2,023,967
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (11.5%)
Federal Home Loan Mortgage Corp., 5.75%, 03/15/09....... 5,460,000 4,957,385
-----------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (COST
$4,946,273)............................................ 4,957,385
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.5%)
Federal National Mortgage Assoc., 7.125%, 02/15/05...... 1,950,000 1,956,755
-----------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION (COST
$1,946,678)............................................ 1,956,755
-----------
U.S. TREASURY NOTES (72.8%)
Inflation Indexed Notes, 3.875%, 01/15/09............... 2,100,000 2,160,081
Notes, 5.625%, 05/15/08................................. 5,630,000 5,429,431
Notes, 6.00%, 08/15/09.................................. 4,375,000 4,339,453
Notes, 6.75%, 05/15/05.................................. 19,090,000 19,537,432
-----------
TOTAL U.S. TREASURY NOTES (COST $31,029,584)............ 31,466,397
-----------
COMMERCIAL PAPER (9.2%)
Consolidated Edison Inc., 6.88%, 07/03/00............... 4,000,000 3,998,471
-----------
TOTAL COMMERCIAL PAPER (COST $3,998,471)................ 3,998,471
-----------
MONEY MARKET FUND (0.2%)
Bank of New York Cash Reserve........................... 82,527 82,527
-----------
TOTAL MONEY MARKET FUND (COST $82,527).................. 82,527
-----------
TOTAL INVESTMENTS (COST $44,031,759) (+) -- 102.9%...... 44,485,502
LIABILITIES IN EXCESS OF OTHER ASSETS (2.9%)............ (1,254,590)
-----------
TOTAL NET ASSETS -- 100.0%.............................. $43,230,912
===========
</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 .................... $478,777
Unrealized depreciation .................... (25,034)
--------
Net unrealized appreciation ................ $453,743
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
-------------
<PAGE>
OFFIT
MORTGAGE SECURITIES FUND
--------------------------------------------------------------------------------
The total return of the Mortgage Securities Fund was 3.37% for the first half of
calendar 2000. This compares with a return of 3.71% for the Merrill Lynch
Mortgage Master Index. As of June 30, 2000, the Fund's net asset value was $9.72
and the 30-day SEC yield was 6.50%.
At the end of the second quarter 37% of the Fund is invested in Government
National Mortgage Association 30-year mortgage pass-throughs, 37% Federal Home
Loan Mortgage Corporation and Federal National Mortgage Association 30-year
mortgage pass-throughs, 20% in GNMA, FHLMC, or FNMA 15-year pass-throughs, 3%
mortgages with short final maturities and 3% Cash Equivalents. The Fund's
average maturity is approximately 8.0 years and the duration 4.3 years. The
average duration of the Merrill Lynch Mortgage Master Index is 4.1 years.
Mortgage-Backed Securities provided little more than their coupon income in the
first half of 2000. In a period of volatile equity markets and interest rates,
this stability was comforting. Nonetheless, the Fund and the Mortgage Index did
not keep pace with U.S. Treasurys. Intermediate Treasurys provided returns in
excess of 4.5% for the first six months of 2000. Mortgage Securities lagged,
along with other non-Treasury sectors because of the diminished supply of
Treasurys. This scarcity value expanded as credit concerns increased with
expectations for a slower economy. In comparison with credit products, mortgages
have outperformed.
Looking forward, we believe that the trend to slower economic activity and lower
interest rates will continue. Mortgages are an attractive investment area under
these circumstances. The yield on mortgages is substantially higher than
Treasury issues. Credit risk in Agency-quality Mortgage-Backed Securities is
very low. And the vast majority of all available Mortgage-Backed Securities
trade at prices below $98, alleviating some of the risk of early repayment.
Accordingly, it is our strategy to be fully invested in the Fund with a duration
longer than that of the Mortgage Index.
Steven Blitz Isaac Frankel
July 25, 2000
28
-------------
<PAGE>
OFFIT
MORTGAGE SECURITIES FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
--------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (31.3%)
Federal Home Loan Mortgage Corp., 6.00%, 04/01/03 to
12/01/28............................................... $8,524,411 $ 7,926,021
Federal Home Loan Mortgage Corp., 6.50%, 05/01/26 to
06/01/30............................................... 1,999,801 1,887,937
Federal Home Loan Mortgage Corp., 7.50%, 01/01/18 to
11/01/29............................................... 2,416,525 2,384,807
Federal Home Loan Mortgage Corp., 8.00%, 11/01/28 to
11/01/29............................................... 2,252,513 2,265,184
Federal Home Loan Mortgage Corp., 30 Year TBA, 6.00%.... 1,200,000 1,098,750
-----------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (COST
$16,059,642)........................................... 15,562,699
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (24.8%)
Federal National Mortgage Assoc., 6.00%, 09/01/10 to
10/01/13............................................... 4,081,867 3,860,682
Federal National Mortgage Assoc., 6.50%, 11/01/03 to
01/01/30............................................... 7,668,210 7,246,658
Federal National Mortgage Assoc., 8.50%, 05/01/20 to
08/01/29............................................... 1,193,990 1,235,631
-----------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION (COST
$12,795,708)........................................... 12,322,971
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (42.5%)
Government National Mortgage Assoc., 6.00%, 02/15/09 to
07/15/29............................................... 7,604,525 7,048,879
Government National Mortgage Assoc., 7.00%, 10/15/07 to
01/15/30............................................... 8,671,156 8,472,884
Government National Mortgage Assoc., 7.50%, 06/15/29.... 834,270 828,273
Government National Mortgage Assoc., 8.00%, 06/15/26 to
08/15/27............................................... 2,373,767 2,399,048
Government National Mortgage Assoc., 9.00%, 03/15/27 to
02/15/30............................................... 2,356,714 2,435,060
-----------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (COST
$21,896,378)........................................... 21,184,144
-----------
COMMERCIAL PAPER (3.0%)
Consolidated Edison Inc., 6.88%, 07/03/00............... 1,500,000 1,499,427
-----------
TOTAL COMMERCIAL PAPER (COST $1,499,427)................ 1,499,427
-----------
MONEY MARKET FUND (0.2%)
Bank of New York Cash Reserve........................... 80,276 80,276
-----------
TOTAL MONEY MARKET FUND (COST $80,276).................. 80,276
-----------
TOTAL INVESTMENTS (COST $52,331,431) (+) 101.8%......... 50,649,517
LIABILITIES IN EXCESS OF OTHER ASSETS (1.8%)............ (898,332)
-----------
TOTAL NET ASSETS -- 100.0%.............................. $49,751,185
===========
</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 ................. $ 69,700
Unrealized depreciation ................. (1,751,614)
-----------
Net unrealized depreciation ............. $(1,681,914)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
-------------
<PAGE>
OFFIT
TOTAL RETURN FUND
--------------------------------------------------------------------------------
The total return of the Total Return Fund was 0.55% from its inception on
June 22, 2000 through June 30. This compares with a return of 0.54% for the
Lehman Aggregate Bond Index. As of June 30, 2000 the Fund's net asset value was
$10.04 and the 30-day SEC yield was 5.87%. The investments in the Fund are 30%
U.S. Treasurys, 15% U.S. Agency securities, 10% Mortgage pass-thrus, 20%
Investment-grade Corporates, 20% OFFIT High Yield Fund and 5% OFFIT Emerging
Markets Bond Fund. The average maturity of the Fund is 7.21 years with a 4.94
year effective duration. The benchmark maturity is 8.79 years with a 4.91 year
effective duration.
The assets other than the OFFIT Funds have a duration longer than the benchmark.
This expectation that interest rates would move lower reflects the view that the
inverted Treasury yield curve (yields are lower as maturity lengthens) would
slow the economy. Earlier this year, many felt that the inverted curve was much
more a statement of diminished Treasury supply than market expectation of future
growth. While there is some credence to this argument, it fails to hold when the
inversion includes the 2 to 5 year part of the curve.
What makes the curve inversion such a compelling argument for a slower economy
is that it links to the economy through its impact on credit extension. From the
standpoint of interest arbitrage, as the Fed tightens and the curve inverts,
banks and other lending institutions find margins squeezed. With less profit
from lending and more predictable returns from short-term securities, lenders
are more cautious when extending credit. The tie between the curve, bank
lending, and the economy was clearly evident during the 1990-91 recession.
During this time, the Fed was successfully able to induce bank lending by
engineering a steeply positive curve--which was stimulating factor for several
years. As with any Fed endeavor, the transmission of policy works first, and
fastest, through its effect on investor psychology. Before the curve actually
curtails lending, the curve signals expectations of a softer economy. This alone
reduces the confidence of borrowers and lenders.
Throughout the second quarter, the yield curve inverted further and Treasury
bond yields have trended lower. The inversion continued because the Federal
Reserve maintained its expected resolve and tightened policy even as equity
values weakened. More to the point, evidence of the inverted curve's impact on
credit extension emerged. Indeed, the second quarter marked an important
transition for the economy. Tighter monetary policy, in concert with the
inverted yield curve, was finally able to decelerate growth towards a pace less
likely to ignite inflationary pressures.
Based on recent economic data, however, it is not yet clear whether the spring
slowdown is the onset of still slower growth or a brief pause in the expansion.
The Federal Reserve kept to its policy bias in mid-May by raising the Federal
funds rate 50 basis points to 6.5%. In late June, the Fed reaffirmed its bias to
tighten, but in reaction to the mixed economic signals held off from another
rate hike. From our perspective, the economy will continue to slow because the
inverted curve has started the process of reducing the appetite for debt.
Within the fixed-income markets, intermediate maturity bonds have responded most
favorably to the current environment. An inverted curve (yields are lower as
maturity lengthens) is especially constructive for 5-to-7 year maturities
because these yields reflect much of the perceived near-term inflation risk. As
the negative curve slows the expansion of credit, the inflation premium is
likewise reduced. By quarter end, short and intermediate interest rates were
lower but the yield curve was still negative. This reflects an expectation for
more subdued growth and a Fed that keeps the funds rate in the 6.5%-7.0% range,
at least through year-end. Another aspect of the anticipatory nature of capital
markets is that, through much of this year, there has been a tiering of credit
in corporate bonds. Now that the expected credit problems are being realized,
credit spreads are stabilizing and have even narrowed somewhat from the
extraordinary levels reached in late May.
The high yield market benefited from the growing market consensus that credit
risk has been adequately discounted, and finished the quarter on a strong note.
Good investor inflow helped to generate improved returns in high yield, as
investors recognized the overcompensation for potential default rates. At
present, BB Corporates are yielding 430 basis points more than like maturity
Treasurys, compared with 400 basis points at the end of the first quarter.
Emerging markets in Latin America also firmed late in the second quarter as
investors saw Argentina and Brazil weather this year's 100 basis point increase
in the Federal funds rate and a volatile U.S. equity market. In the past, this
U.S. market environment would have created outsized negative market volatility
in Latin America. Another indication of progress was the presidential election
in Mexico. The democratic result underscores the positive changes that have
upgraded Mexican debt to investment grade status. The OFFIT Emerging Markets
Bond Fund had a 30-day SEC yield of 13.95% on June 30, compared with 11.29% at
the end of the first quarter.
Looking forward, the ongoing potential for more Fed tightening in combination
with a sustained inversion of the yield curve will hold back credit creation and
the equity market. This, in turn, will check any nascent inflation risk. It is a
30
-------------
<PAGE>
OFFIT
TOTAL RETURN FUND
--------------------------------------------------------------------------------
favorable environment for bonds, especially in the 5-to-7 year maturity range,
whose yields reflect much of the perceived near-term inflation risk. Therefore,
we maintain our view that interest rates will continue to trend lower. As such,
the Fund will keep its modestly longer benchmark.
In light of Chairman Greenspan's recent testimony, there is a greater likelihood
that the Fund will increase its holdings of non-Treasury debt. The mid-year
policy outlook outlined by the Fed Chairman contained an important policy shift.
While we believe the near-term potential for a rate hike is more balanced than
the market seems to believe, Greenspan is more accepting of a higher rate of
economic growth moving forward. It was generally accepted that he wanted to
drive growth below 3% in order to create sufficient slack in the economy and, as
a result, reduce inflationary pressure. It is now apparent that he believes the
productivity gains are structural rather than cyclical and that 3.5%-4.0% real
growth without raising unemployment will achieve the central bank goal. This
environment, still favorable to bonds as economic momentum continues to slow,
should also now reduce some of the scarcity bid in Treasurys and, in turn, make
non-Treasury issues such as Agencies, corporates, high yield, and emerging
market debt more attractive.
Steven Blitz Isaac Frankel
July 25, 2000
31
-------------
<PAGE>
OFFIT
TOTAL RETURN FUND
-------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
------------------------------------------------------------------------------------------
CORPORATE BONDS (21.1%)
FINANCIAL SERVICES (11.6%)
Associates Corp., 6.375%, 10/15/02...................... $ 25,000 $ 24,480
Ford Motor Credit Company, 5.80%, 01/12/09.............. 50,000 43,497
Wells Fargo Company, 6.625%, 07/15/04................... 50,000 48,771
----------
116,748
----------
TELECOMMUNICATIONS (4.9%)
Deutsche Telekom International Finance, 8.00%,
06/15/10............................................... 25,000 25,202
U.S. West Communications, 6.375%, 10/15/02.............. 25,000 24,389
----------
49,591
----------
UTILITIES (4.6%)
Consolidated Edison Inc., 6.375%, 02/01/08.............. 25,000 45,875
----------
TOTAL CORPORATE BONDS (COST $211,610)................... 212,214
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (5.0%)
Federal Home Loan Mortgage Corp., 6.57%, 07/03/0........ 50,000 49,982
----------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (COST
$49,982)............................................... 49,982
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (25.0%)
Federal National Mortgage Assoc., 5.625%, 03/15/01...... 50,000 49,588
Federal National Mortgage Assoc., 6.00%, 05/15/08....... 110,000 102,380
Federal National Mortgage Assoc., 30 year TBA, 6.50%.... 105,000 99,061
----------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION (COST
$249,648).............................................. 251,029
----------
MUTUAL FUNDS (24.8%)
OFFIT Emerging Markets Bond Fund........................ 5,512(1) 50,221
OFFIT High Yield Fund................................... 23,095(1) 198,845
----------
TOTAL MUTUAL FUNDS (COST $250,000)...................... 249,066
----------
U.S. TREASURY NOTE (27.2%)
Note, 6.125%, 08/15/07.................................. 275,000 273,367
----------
TOTAL U.S. TREASURY NOTE (COST $270,904)................ 273,367
----------
MONEY MARKET FUND (5.4%)
Bank of New York Cash Reserve........................... 54,398 54,398
----------
TOTAL MONEY MARKET FUND (COST $54,398).................. 54,398
----------
TOTAL INVESTMENTS (COST $1,086,542) (+) 108.5%.......... 1,090,056
LIABILITIES IN EXCESS OF OTHER ASSETS (8.5%)............ (86,311)
----------
TOTAL NET ASSETS -- 100.0%.............................. $1,003,745
==========
</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 ................. $ 4,734
Unrealized depreciation ................. (1,220)
-----------
Net unrealized appreciation ............. $ 3,514
===========
</TABLE>
(1) Represents an investment in an affiliate.
The accompanying notes are an integral part of the financial statements.
32
-------------
<PAGE>
(This page has been left blank intentionally.)
33
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
HIGH EMERGING MARKETS
YIELD FUND BOND FUND
<S> <C> <C>
----------------------------------------------------------
ASSETS:
Investments, at market
value (1)............ $1,237,245,459 $ 179,609,098
Interest and dividends
receivable........... 26,696,019 5,271,937
Receivable for capital
shares sold.......... 89,406 50,000
Receivable for
investment securities
sold................. 6,426,528 100,000
Deferred organization
expenses............. -- --
Net unrealized
appreciation on
forward foreign
currency contracts
(Note 2)............. 1,770,876 --
Prepaid expenses and
other assets......... 107,406 24,356
------------- ----------------
Total Assets......... 1,272,335,694 185,055,391
------------- ----------------
LIABILITIES:
Dividends payable...... 2,630,430 1,786,164
Net unrealized
depreciation on
forward currency
contracts
(Note 2)............. -- 58,774
Payable for investment
securities
purchased............ 7,000,000 2,187,667
Payable for capital
shares redeemed...... 5,179,054 52,673
Investment advisory
fees payable......... 724,061 130,346
Custody fees payable... 26,653 14,376
Professional fees
payable.............. 38,507 12,220
Administration fees
payable.............. 90,564 13,759
Other payables and
accrued expenses..... 307,566 17,989
------------- ----------------
Total Liabilities.... 15,996,835 4,273,968
------------- ----------------
NET ASSETS:.............. $1,256,338,859 $ 180,781,423
============= ================
Net assets consist of:
Shares of capital
stock, $0.001 par
value per share...... $ 145,804 $ 19,834
Additional paid-in
capital.............. 1,506,473,793 237,980,769
Distributions in excess
of net investment
income............... (3,385,625) (1,919,817)
Accumulated
undistributed net
investment income.... -- --
Accumulated
undistributed net
realized gains (loss)
on investments and
foreign currency
transactions......... (49,819,783) (40,280,021)
Net unrealized
appreciation
(depreciation) of
investments and
foreign currency
transactions......... (197,075,330) (15,019,342)
------------- ----------------
NET ASSETS............... $1,256,338,859 $ 180,781,423
============= ================
SELECT SHARES:
NET ASSETS............. $1,237,843,501 $ 180,086,408
============= ================
SHARES OF CAPITAL STOCK
OUTSTANDING.......... 143,851,074 19,758,030
============= ================
NET ASSET VALUE
(OFFERING AND
REDEMPTION PRICE PER
SHARE)............... $ 8.61 $ 9.11
============= ================
ADVISOR SHARES:
NET ASSETS............. -- $ 695,015
============= ================
SHARES OF CAPITAL STOCK
OUTSTANDING.......... -- 76,253
============= ================
NET ASSET VALUE
(OFFERING AND
REDEMPTION PRICE PER
SHARE)............... -- $ 9.12
============= ================
MSD&T SHARES:
NET ASSETS............. $ 18,495,358
=============
SHARES OF CAPITAL STOCK
OUTSTANDING.......... 1,953,048
=============
NET ASSET VALUE
(OFFERING AND
REDEMPTION PRICE PER
SHARE)............... $ 9.47
=============
(1) Investments at
cost................... $1,436,034,347 $ 194,569,936
============= ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
U.S.
NEW YORK CALIFORNIA NATIONAL GOVERNMENT MORTGAGE TOTAL
LATIN AMERICA MUNICIPAL MUNICIPAL MUNICIPAL SECURITIES SECURITIES RETURN
EQUITY FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market
value (1)............ $ 21,687,894 $68,144,395 $14,444,466 $18,580,028 $44,485,502 $50,649,517 $1,090,056
Interest and dividends
receivable........... 69,733 888,259 190,012 262,512 524,843 285,743 13,643
Receivable for capital
shares sold.......... -- -- -- -- 400,000 -- --
Receivable for
investment securities
sold................. 209,814 -- 605,970 -- -- -- 25,457
Deferred organization
expenses............. 5,598 -- 15,231 15,391 8,530 8,530 --
Net unrealized
appreciation on
forward foreign
currency contracts
(Note 2)............. -- -- -- -- -- -- --
Prepaid expenses and
other assets......... 8,162 7,228 5,076 8,829 6,810 16,570 --
------------- ----------- ----------- ----------- ----------- ----------- ----------
Total Assets......... 21,981,201 69,039,882 15,260,755 18,866,760 45,425,685 50,960,360 1,129,156
------------- ----------- ----------- ----------- ----------- ----------- ----------
LIABILITIES:
Dividends payable...... -- 50,476 11,716 18,224 49,174 71,406 1,466
Net unrealized
depreciation on
forward currency
contracts
(Note 2)............. -- --
Payable for investment
securities
purchased............ 210,737 -- 733,674 -- 2,117,544 1,101,013 123,861
Payable for capital
shares redeemed...... -- -- -- 25,000 -- -- --
Investment advisory
fees payable......... 16,865 14,870 2,029 3,664 8,113 8,778 --
Custody fees payable... 21,651 3,267 610 1,007 2,214 3,047 1
Professional fees
payable.............. 1,125 9,602 2,827 4,181 7,027 8,877 2
Administration fees
payable.............. 1,399 5,155 -- -- 3,179 3,955 --
Other payables and
accrued expenses..... 2,319 12,969 7,126 6,715 7,522 12,099 81
------------- ----------- ----------- ----------- ----------- ----------- ----------
Total Liabilities.... 254,096 96,339 757,982 58,791 2,194,773 1,209,175 125,411
------------- ----------- ----------- ----------- ----------- ----------- ----------
NET ASSETS:.............. $ 21,727,105 $68,943,543 $14,502,773 $18,807,969 $43,230,912 $49,751,185 $1,003,745
============= =========== =========== =========== =========== =========== ==========
Net assets consist of:
Shares of capital
stock, $0.001 par
value per share...... $ 2,024 $ 6,573 $ 1,414 $ 1,840 $ 4,388 $ 5,116 $ 100
Additional paid-in
capital.............. 35,768,767 69,459,835 14,676,086 18,843,291 45,537,097 52,666,940 999,900
Distributions in excess
of net investment
income............... -- -- -- -- (143) (267) --
Accumulated
undistributed net
investment income.... 37,842 -- 8,345 5,322 -- -- --
Accumulated
undistributed net
realized gains (loss)
on investments and
foreign currency
transactions......... (19,594,975) (1,284,342) (215,050) (373,518) (2,764,173) (1,238,690) 231
Net unrealized
appreciation
(depreciation) of
investments and
foreign currency
transactions......... 5,513,447 761,477 31,978 331,034 453,743 (1,681,914) 3,514
------------- ----------- ----------- ----------- ----------- ----------- ----------
NET ASSETS............... $ 21,727,105 $68,943,543 $14,502,773 $18,807,969 $43,230,912 $49,751,185 $1,003,745
============= =========== =========== =========== =========== =========== ==========
SELECT SHARES:
NET ASSETS............. $ 21,727,105 $68,943,543 $14,502,773 $18,807,969 $43,230,912 $49,751,185 $1,003,745
============= =========== =========== =========== =========== =========== ==========
SHARES OF CAPITAL STOCK
OUTSTANDING.......... 2,024,286 6,572,559 1,413,874 1,839,643 4,387,913 5,116,239 100,000
============= =========== =========== =========== =========== =========== ==========
NET ASSET VALUE
(OFFERING AND
REDEMPTION PRICE PER
SHARE)............... $ 10.73 $ 10.49 $ 10.26 $ 10.22 $ 9.85 $ 9.72 $ 10.04
============= =========== =========== =========== =========== =========== ==========
ADVISOR SHARES:
NET ASSETS.............
SHARES OF CAPITAL STOCK
OUTSTANDING..........
NET ASSET VALUE
(OFFERING AND
REDEMPTION PRICE PER
SHARE)...............
MSD&T SHARES:
NET ASSETS.............
SHARES OF CAPITAL STOCK
OUTSTANDING..........
NET ASSET VALUE
(OFFERING AND
REDEMPTION PRICE PER
SHARE)...............
16,172,837 67,382,918 14,412,488 18,248,994 44,031,759 52,331,431 1,086,542
(1) Investments at
cost................... $ $ $ $ $ $ $
============= =========== =========== =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
HIGH EMERGING MARKETS
YIELD FUND BOND FUND
<S> <C> <C>
--------------------------------------------------------
INVESTMENT INCOME:
Interest............... $67,242,756 $ 12,247,604
Dividends.............. -- --
----------- ----------------
Total income (2)..... 67,242,756 12,247,604
----------- ----------------
EXPENSES:
Advisory............... 4,732,875 874,732
Administration......... 563,816 122,212
Professional........... 150,126 20,824
Transfer agent and
shareholder servicing
fees................. 95,124 21,255
Custody................ 80,286 19,763
Fund accounting........ 7,500 7,500
Amortization of
organization
expenses............. -- --
Miscellaneous.......... 186,978 27,488
----------- ----------------
Total expenses before
waivers/reimbursements... 5,816,705 1,093,774
Less expenses
waived/reimbursed... (61,795) (29,331)
----------- ----------------
Net expenses......... 5,754,910 1,064,443
----------- ----------------
NET INVESTMENT INCOME.... 61,487,846 11,183,161
----------- ----------------
REALIZED AND UNREALIZED
GAINS (LOSS) ON
INVESTMENTS:
Net realized gains
(loss) on investment
transactions......... (39,395,130) 2,529,719
Net realized gains
(loss) on foreign
currency
transactions......... 5,592,058 --
Net change in
unrealized
appreciation
(depreciation) of
investments.......... (42,142,683) (8,523,759)
Net change in
unrealized
appreciation
(depreciation) of
foreign currency
transactions......... (1,173,018) (58,504)
----------- ----------------
Net realized and
unrealized gains (loss)
on investments......... (77,118,773) (6,052,544)
----------- ----------------
INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS........ $(15,630,927) $ 5,130,617
=========== ================
(2) Foreign Witholding
tax.................... $ 266,240 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
U.S.
NEW YORK CALIFORNIA NATIONAL GOVERNMENT MORTGAGE TOTAL
LATIN AMERICA MUNICIPAL MUNICIPAL MUNICIPAL SECURITIES SECURITIES RETURN
EQUITY FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest............... $ 3,737 $1,700,227 $ 324,153 $ 484,365 $ 1,156,020 $ 1,798,594 $ 1,663
Dividends.............. 203,718 -- -- -- -- -- --
------------- ---------- --------- --------- ----------- ----------- -------
Total income (2)..... 207,455 1,700,227 324,153 484,365 1,156,020 1,798,594 1,663
------------- ---------- --------- --------- ----------- ----------- -------
EXPENSES:
Advisory............... 109,955 116,382 23,718 32,686 63,697 90,478 123
Administration......... 13,744 41,565 8,471 11,674 22,749 32,314 31
Professional........... 6,905 5,786 1,875 1,841 2,897 4,942 2
Transfer agent and
shareholder servicing
fees................. 9,012 9,968 9,000 9,000 9,000 9,000 393
Custody................ 22,460 5,986 1,139 1,618 3,524 5,247 1
Fund accounting........ 7,500 7,500 7,500 7,500 7,500 7,500 1,250
Amortization of
organization
expenses............. 4,486 1,662 4,332 3,331 2,126 2,126 --
Miscellaneous.......... 8,828 14,377 8,483 9,586 8,376 19,514 168
------------- ---------- --------- --------- ----------- ----------- -------
Total expenses before
waivers/reimbursements... 182,890 203,226 64,518 77,236 119,869 171,121 1,968
Less expenses
waived/reimbursed... (13,277) (36,966) (30,635) (30,541) (28,872) (41,867) (1,771)
------------- ---------- --------- --------- ----------- ----------- -------
Net expenses......... 169,613 166,260 33,883 46,695 90,997 129,254 197
------------- ---------- --------- --------- ----------- ----------- -------
NET INVESTMENT INCOME.... 37,842 1,533,967 290,270 437,670 1,065,023 1,669,340 1,466
------------- ---------- --------- --------- ----------- ----------- -------
REALIZED AND UNREALIZED
GAINS (LOSS) ON
INVESTMENTS:
Net realized gains
(loss) on investment
transactions......... 350,516 (706,052) (192,645) (92,785) (1,682,676) (1,093,993) 231
Net realized gains
(loss) on foreign
currency
transactions......... (21,032) -- -- -- -- -- --
Net change in
unrealized
appreciation
(depreciation) of
investments.......... (1,178,230) 1,818,354 484,694 453,162 2,093,374 1,050,145 3,514
Net change in
unrealized
appreciation
(depreciation) of
foreign currency
transactions......... 22,816 -- -- -- -- -- --
------------- ---------- --------- --------- ----------- ----------- -------
Net realized and
unrealized gains (loss)
on investments......... (825,930) 1,112,302 292,049 360,377 410,698 (43,848) 3,745
------------- ---------- --------- --------- ----------- ----------- -------
INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS........ $ (788,088) $2,646,269 $ 582,319 $ 798,047 $ 1,475,721 $ 1,625,492 $ 5,211
============= ========== ========= ========= =========== =========== =======
(2) Foreign Witholding
tax.................... $ 22,447 $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
HIGH YIELD FUND
------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 2000 ENDED
(UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................. $ 61,487,846 $ 156,123,316
Net realized gains (loss) on
investment and foreign currency
transactions........................ (33,803,072) (8,967,507)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency transactions....... (43,315,701) (129,851,643)
------------- -------------
Net increase (decrease) in net assets
resulting from operations........... (15,630,927) 17,304,166
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income................. (61,888,609) (156,123,316)
Excess of net investment income....... -- (8,535,732)
------------- -------------
Total dividends and distributions to
shareholders........................ (61,888,609) (164,659,048)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued........... 132,786,158 530,922,622
Dividends reinvested.................. 44,559,042 114,020,009
Cost of shares redeemed............... (312,730,829) (767,972,952)
------------- -------------
Net increase (decrease) in net assets
from capital share transactions..... (135,385,629) (123,030,321)
------------- -------------
Total increase (decrease) in net
assets.............................. (212,905,165) (270,385,203)
NET ASSETS:
Beginning of period................... 1,469,244,024 1,739,629,227
------------- -------------
End of period*........................ $1,256,338,859 $1,469,244,024
============= =============
* (Including distributions in excess of
net investment income.)............... $ (3,385,625) $ (2,984,862)
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL FUND
------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 2000 ENDED
(UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................. $ 290,270 $ 512,346
Net realized gains (loss) on
investment and foreign currency
transactions........................ (192,645) (22,405)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency transactions....... 484,694 (636,696)
---------- ----------
Net increase (decrease) in net assets
resulting from operations........... 582,319 (146,755)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income................. (290,270) (512,346)
Excess of net investment income....... -- --
Net realized gains.................... -- --
---------- ----------
Total dividends and distributions to
shareholders........................ (290,270) (512,346)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued........... 2,891,473 4,381,453
Dividends reinvested.................. 201,097 364,877
Cost of shares redeemed............... (2,527,104) (1,507,814)
---------- ----------
Net increase (decrease) in net assets
from capital share transactions..... 565,466 3,238,516
---------- ----------
Total increase (decrease) in net
assets.............................. 857,515 2,579,415
NET ASSETS:
Beginning of period................... 13,645,258 11,065,843
---------- ----------
End of period*........................ $14,502,773 $13,645,258
========== ==========
* (Including undistributed net
investment income/distributions in
excess of net investment income.)..... $ 8,345 $ 8,345
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
EMERGING MARKETS BOND FUND LATIN AMERICA EQUITY FUND
------------------------------------ ------------------------------------
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED FOR THE YEAR ENDED FOR THE YEAR
JUNE 30, 2000 ENDED JUNE 30, 2000 ENDED
(UNAUDITED) DECEMBER 31, 1999 (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................. $ 11,183,161 $ 18,328,896 $ 37,842 $ 247,723
Net realized gains (loss) on
investment and foreign currency
transactions........................ 2,529,719 (14,939,784) 329,484 (5,384,595)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency transactions....... (8,582,263) 33,460,289 (1,155,414) 13,420,087
------------ ------------ ---------- ----------
Net increase (decrease) in net assets
resulting from operations........... 5,130,617 36,849,401 (788,088) 8,283,215
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income................. (11,183,161) (18,026,181) -- (247,723)
Excess of net investment income....... -- -- -- (37,119)
------------ ------------ ---------- ----------
Total dividends and distributions to
shareholders........................ (11,183,161) (18,328,896) -- (284,842)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued........... 102,974,134 50,168,407 1,537,533 6,590,882
Dividends reinvested.................. 7,283,042 10,379,144 -- 145,620
Cost of shares redeemed............... (97,147,247) (54,249,530) (2,967,091) (7,146,256)
------------ ------------ ---------- ----------
Net increase (decrease) in net assets
from capital share transactions..... 13,109,929 6,298,021 (1,429,558) (409,754)
------------ ------------ ---------- ----------
Total increase (decrease) in net
assets.............................. 7,057,385 24,818,526 (2,217,646) 7,588,619
NET ASSETS:
Beginning of period................... 173,724,038 148,905,512 23,994,751 16,356,132
------------ ------------ ---------- ----------
End of period*........................ $180,781,423 $173,724,038 $21,727,105 $23,944,751
============ ============ ========== ==========
* (Including undistributed net
investment income/distributions in
excess of net investment income.)..... $ (1,919,817) $ (1,919,817) -- --
<CAPTION>
NEW YORK MUNICIPAL FUND
------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 2000 ENDED
(UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
----------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................. $ 1,533,967 $ 2,933,091
Net realized gains (loss) on
investment and foreign currency
transactions........................ (706,052) (578,290)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency transactions....... 1,818,354 (2,913,138)
----------- -----------
Net increase (decrease) in net assets
resulting from operations........... 2,646,269 (558,337)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income................. (1,533,967) (2,933,091)
Excess of net investment income....... -- --
----------- -----------
Total dividends and distributions to
shareholders........................ (1,533,967) (2,933,091)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued........... 8,895,584 28,065,457
Dividends reinvested.................. 1,187,914 2,449,903
Cost of shares redeemed............... (10,480,268) (26,588,867)
----------- -----------
Net increase (decrease) in net assets
from capital share transactions..... (396,770) 3,926,493
----------- -----------
Total increase (decrease) in net
assets.............................. 715,532 435,065
NET ASSETS:
Beginning of period................... 68,228,011 67,792,946
----------- -----------
End of period*........................ $68,943,543 $68,228,011
=========== ===========
* (Including undistributed net
investment income/distributions in
excess of net investment income.)..... -- --
</TABLE>
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL FUND U.S. GOVERNMENT SECURITIES FUND
------------------------------------ ------------------------------------
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED FOR THE YEAR ENDED FOR THE YEAR
JUNE 30, 2000 ENDED JUNE 30, 2000 ENDED
(UNAUDITED) DECEMBER 31, 1999 (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................. $ 437,670 $ 880,949 $ 1,065,023 $ 1,986,275
Net realized gains (loss) on
investment and foreign currency
transactions........................ (92,785) (280,733) (1,682,676) (1,056,878)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency transactions....... 453,162 (471,504) 2,093,374 (1,681,065)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations........... 798,047 128,712 1,475,721 (751,668)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income................. (437,670) (880,949) (1,065,023) (1,986,275)
Excess of net investment income....... -- -- -- (4,923)
Net realized gains.................... -- -- -- (42,714)
---------- ----------- ----------- -----------
Total dividends and distributions to
shareholders........................ (437,670) (880,949) (1,065,023) (2,033,912)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued........... 2,169,862 8,882,215 14,852,474 25,276,670
Dividends reinvested.................. 312,371 678,632 781,235 1,722,886
Cost of shares redeemed............... (3,078,242) (19,499,510) (15,235,212) (21,151,397)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
from capital share transactions..... (596,009) (9,938,663) 398,497 5,848,159
---------- ----------- ----------- -----------
Total increase (decrease) in net
assets.............................. (235,632) (10,690,900) 809,195 3,062,579
NET ASSETS:
Beginning of period................... 19,043,601 29,734,501 42,421,717 39,359,138
---------- ----------- ----------- -----------
End of period*........................ $18,807,969 $19,043,601 $43,230,912 $42,421,717
========== =========== =========== ===========
* (Including undistributed net
investment income/distributions in
excess of net investment income.)..... $ 5,322 $ 5,322 $ (143) $ (143)
<CAPTION>
MORTGAGE SECURITIES FUND
------------------------------------
FOR THE SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 2000 ENDED
(UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
----------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................. $ 1,669,340 $3,603,851
Net realized gains (loss) on
investment and foreign currency
transactions........................ (1,093,993) (137,336)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency transactions....... 1,050,145 (3,193,680)
----------- ----------
Net increase (decrease) in net assets
resulting from operations........... 1,625,492 272,835
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income................. (1,669,340) (3,603,851)
Excess of net investment income....... -- (4,631)
Net realized gains.................... -- (9,056)
----------- ----------
Total dividends and distributions to
shareholders........................ (1,669,340) (3,617,538)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued........... 7,710,634 16,252,334
Dividends reinvested.................. 1,196,607 2,964,170
Cost of shares redeemed............... (21,421,041) (8,024,428)
----------- ----------
Net increase (decrease) in net assets
from capital share transactions..... (12,513,800) 11,192,076
----------- ----------
Total increase (decrease) in net
assets.............................. (12,557,648) 7,847,373
NET ASSETS:
Beginning of period................... 62,308,833 54,461,460
----------- ----------
End of period*........................ $49,751,185 $62,308,833
=========== ==========
* (Including undistributed net
investment income/distributions in
excess of net investment income.)..... $ (267) $ (267)
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
TOTAL RETURN FUND
-----------------------
FOR THE PERIOD FROM
JUNE 22, 2000* THROUGH
JUNE 30, 2000
(UNAUDITED)
<S> <C>
---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................... $ 1,466
Net realized gains on investment and foreign currency
transactions............................................ 231
Net change in unrealized appreciation of investments and
foreign currency
transactions............................................ 3,514
---------------------
Net increase in net assets resulting from operations...... 5,211
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (1,466)
---------------------
Total dividends and distributions to shareholders......... (1,466)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 1,000,000
---------------------
Net increase in net assets from capital share
transactions............................................ 1,000,000
---------------------
Total increase in net assets.............................. 1,003,745
NET ASSETS:
Beginning of period....................................... --
---------------------
End of period............................................. $ 1,003,745
=====================
</TABLE>
---------------
<TABLE>
<C> <S>
* Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND
<TABLE>
<CAPTION>
SELECT SHARES
---------------------------------------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE FOR THE FOR THE
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE, BEGINNING
OF PERIOD............... $ 9.11 $ 9.91 $ 10.34 $ 10.15 $ 9.92 $ 9.25
---------- ---------- ---------- ---------- -------- --------
Net investment income... 0.40 0.90 0.88 0.87 0.89 0.90
Net realized and
unrealized gain
(loss)................ (0.49) (0.79) (0.43) 0.31 0.29 0.67
---------- ---------- ---------- ---------- -------- --------
Total income (loss) from
investment
operations............ (0.09) 0.11 0.45 1.18 1.18 1.57
---------- ---------- ---------- ---------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTION FROM:
Net investment income... (0.41) (0.90) (0.88) (0.87) (0.89) (0.89)
Excess of net investment
income................ -- (0.01) -- -- -- --
Net realized gains...... -- -- -- (0.12) (0.06) (0.01)
---------- ---------- ---------- ---------- -------- --------
Total dividends and
distributions........... (0.41) (0.91) (0.88) (0.99) (0.95) (0.90)
---------- ---------- ---------- ---------- -------- --------
Net change in net asset
value per share....... (0.50) (0.80) (0.43) 0.19 0.23 0.67
---------- ---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF
PERIOD.................. $ 8.61 $ 9.11 $ 9.91 $ 10.34 $ 10.15 $ 9.92
========== ========== ========== ========== ======== ========
TOTAL RETURN(A)........... (1.00%)(b) 1.10% 4.49% 12.09% 12.46% 17.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in
thousands)............ 1,237,844 $1,454,507 $1,739,622 $1,346,553 $851,720 $479,090
Ratios to average net
assets:
Expenses................ 0.86%(c)*** 0.82% 0.84%*** 0.87%*** 0.98%*** 1.05%***
Net investment income... 9.22%(c) 8.91% 8.67% 8.46% 8.86% 9.38%
PORTFOLIO TURNOVER RATE... 10% 42% 36% 47% 41% 34%
</TABLE>
HIGH YIELD FUND (CONTINUED)
<TABLE>
<CAPTION>
ADVISOR SHARES (D) MSD&T SHARES
---------------------------------------- ------------------------------------------
FOR THE FOR THE FOR THE SIX MONTHS FOR THE
PERIOD ENDED PERIOD* ENDED ENDED JUNE 30, 2000 PERIOD** ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD... $10.34 $10.37(e) $ 10.03 $ 10.00(e)
------ ------ ------- -------
Net investment income................ 0.60 0.32 0.41 0.19
Net realized and unrealized gain
(loss)............................. (0.43) 0.09 (0.53) 0.05
------ ------ ------- -------
Total income (loss) from investment
operations......................... 0.17 0.41 (0.12) 0.24
------ ------ ------- -------
LESS DIVIDENDS AND DISTRIBUTION FROM:
Net investment income................ (0.60) (0.32) (0.44) (0.21)
Net realized gains................... -- (0.12) -- --
------ ------ ------- -------
Total dividends and distributions...... (0.60) (0.44) (0.44) (0.21)
------ ------ ------- -------
Net change in net asset value per
share................................ (0.43) (0.03) (0.56) 0.03
------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD......... $ 9.91 $10.34 $ 9.47 $ 10.03
====== ====== ======= =======
TOTAL RETURN(A)........................ 0.67%(b) 3.93%(b) (1.22%)(b) 2.38%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)......................... $ 7 $ 15 $18,495 $14,737
Ratios to average net assets:
Expenses............................. 0.93%(c)*** 1.03%(c)*** 1.11%(c)*** 1.07%(c)
Net investment income................ 9.54%(c) 7.87%(c) 9.02%(c) 9.01%(c)
PORTFOLIO TURNOVER RATE................ 36% 47% 10% 42%
</TABLE>
---------------
<TABLE>
<C> <S>
* Sales of Advisor Shares began on August 14, 1997.
** Sales of MSD&T Shares began on November 1, 1999.
*** During the period, certain fees were voluntarily reduced
and/or reimbursed. If such 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, 2000 there were no Advisor Shares
outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
EMERGING MARKETS BOND FUND
<TABLE>
<CAPTION>
SELECT SHARES
--------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE
ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 31, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 9.31 $ 8.20 $ 10.46 $ 11.03
-------- -------- -------- --------
Net investment income................. 0.52 1.06 0.99 1.15
Net realized and unrealized gain
(loss).............................. (0.20) 1.09 (2.23) --
-------- -------- -------- --------
Total income (loss) from investment
operations.......................... 0.32 2.15 (1.24) 1.15
-------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income................. (0.52) (1.02) (0.97) (1.15)
Excess of net investment income....... -- -- -- (0.04)
Net realized gains.................... -- -- -- (0.53)
Excess of realized gains.............. -- -- (0.03) --
Return of capital..................... -- (0.02) (0.02) --
-------- -------- -------- --------
Total dividends and distributions....... (0.52) (1.04) (1.02) (1.72)
-------- -------- -------- --------
Net change in net asset value per
share............................... (0.20) 1.11 (2.26) (0.57)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.......... $ 9.11 $ 9.31 $ 8.20 $ 10.46
======== ======== ======== ========
TOTAL RETURN(A)......................... 3.46%(b) 27.81% (11.92%) 10.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands).......................... $180,094 $173,724 $148,908 $210,777
Ratios to average net assets:
Expenses**............................ 1.09%(c) 1.08% 1.10% 1.29%
Net investment income................. 11.44%(c) 12.27% 10.53% 9.49%
PORTFOLIO TURNOVER RATE................. 61% 74% 77% 179%
<CAPTION>
SELECT SHARES ADVISOR SHARES
----------------------------- -------------------
FOR THE PERIOD FROM
FOR THE FOR THE JUNE 7, 2000*
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, JUNE 30, 2000
1996 1995 (UNAUDITED)
<S> <C> <C> <C>
----------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 9.91 $ 8.84 $ 8.92(e)
-------- -------- --------
Net investment income................. 1.00 0.90 0.07
Net realized and unrealized gain
(loss).............................. 1.55 1.07 0.19
-------- -------- --------
Total income (loss) from investment
operations.......................... 2.55 1.97 0.26
-------- -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income................. (1.00) (0.60) (0.07)
Excess of net investment income....... -- -- --
Net realized gains.................... (0.43) -- --
Excess of realized gains.............. -- --
Return of capital..................... -- (0.30) --
-------- -------- --------
Total dividends and distributions....... (1.43) (0.90) (0.07)
-------- -------- --------
Net change in net asset value per
share............................... 1.12 1.07 0.19
-------- -------- --------
NET ASSET VALUE, END OF PERIOD.......... $ 11.03 $ 9.91 $ 9.11
======== ======== ========
TOTAL RETURN(A)......................... 26.56% 23.38% 3.03%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands).......................... $116,144 $ 49,250 $ 695
Ratios to average net assets:
Expenses**............................ 1.16% 1.50% 1.34%(c)
Net investment income................. 9.62% 9.97% 11.81%(c)
PORTFOLIO TURNOVER RATE................. 136% 60% 61%
</TABLE>
LATIN AMERICA EQUITY FUND
<TABLE>
<CAPTION>
SELECT SHARES
--------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE
ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 11.08 $ 7.34 $ 14.13 $ 11.66
------- ------- ------- -------
Net investment income (loss)................... 0.02 0.09 0.27 0.09
Net realized and unrealized gain (loss)........ (0.37) 3.78 (6.82) 2.74
------- ------- ------- -------
Total income (loss) from investment
operations................................... (0.35) 3.87 (6.55) 2.83
------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTION FROM:
Net investment income (loss)................... -- (0.09) (0.23) (0.09)
Excess of net investment income................ -- (0.04) -- (0.02)
Net realized gains............................. -- -- (0.01) (0.25)
------- ------- ------- -------
Total dividends and distributions................ -- (0.13) (0.24) (0.36)
------- ------- ------- -------
Net change in net asset value per share........ (0.35) 3.74 (6.79) 2.47
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD................... $ 10.73 $ 11.08 $ 7.34 $ 14.13
======= ======= ======= =======
TOTAL RETURN(A).................................. (3.16%)(b) 52.76% (46.96%) 24.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)..... $21,727 $23,945 $16,356 $55,034
Ratios to average net assets
Expenses**..................................... 1.54%(c) 1.28% 1.97% 1.60%
Net Investment Income (loss)................... 0.34%(c) 1.42% 2.53% 0.26%
PORTFOLIO TURNOVER RATE.......................... 21% 63% 53% 98%
<CAPTION>
SELECT SHARES
----------------- ADVISOR SHARES (D)
FOR THE PERIOD ------------------
FROM FEBRUARY 13, FOR THE PERIOD
1996*** THROUGH ENDED
DECEMBER 31, DECEMBER 31,
1996 1997****
<S> <C> <C>
-------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 10.00(e) $ 15.11
------- -------
Net investment income (loss)................... 0.20 (0.21)
Net realized and unrealized gain (loss)........ 2.11 (0.50)
------- -------
Total income (loss) from investment
operations................................... 2.31 (0.71)
------- -------
LESS DIVIDENDS AND DISTRIBUTION FROM:
Net investment income (loss)................... (0.20) (0.01)
Excess of net investment income................ -- --
Net realized gains............................. (0.45) (0.25)
------- -------
Total dividends and distributions................ (0.65) (0.26)
------- -------
Net change in net asset value per share........ 1.66 (0.97)
------- -------
NET ASSET VALUE, END OF PERIOD................... $ 11.66 $ 14.14
======= =======
TOTAL RETURN(A).................................. 23.36%(b) (4.64%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)..... $13,308 $ 18
Ratios to average net assets
Expenses**..................................... 2.00%(c) 1.73%(c)
Net Investment Income (loss)................... 1.97%(c) (0.73%)(c)
PORTFOLIO TURNOVER RATE.......................... 133% 98%
</TABLE>
---------------
<TABLE>
<C> <S>
* Sales of Advisor Shares began on June 6, 2000.
** 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.
*** Commencement of operations.
**** Sale 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, 2000 there were no Advisor Shares
outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
NEW YORK MUNICIPAL FUND
<TABLE>
<CAPTION>
SELECT SHARES (D)
------------------------------------------------------------------------------------------------
FOR THE
FOR THE PERIOD FROM
SIX MONTHS FOR THE FOR THE FOR THE FOR THE APRIL 3, 1995*
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 10.32 $ 10.82 $ 10.69 $ 10.40 $ 10.47 $ 10.00(e)
------- ------- ------- ------- ------- -------
Net investment income........ 0.24 0.43 0.44 0.46 0.44 0.33
Net realized and unrealized
gain (loss)................ 0.17 (0.50) 0.19 0.34 (0.06) 0.47
------- ------- ------- ------- ------- -------
Total income (loss) from
investment operations...... 0.41 (0.07) 0.63 0.80 0.38 0.80
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment income........ (0.24) (0.43) (0.44) (0.46) (0.44) (0.32)
Net realized gains........... -- -- (0.06) (0.05) (0.01) (0.01)
------- ------- ------- ------- ------- -------
Total dividends and
distributions................ (0.24) (0.43) (0.50) (0.51) (0.45) (0.33)
------- ------- ------- ------- ------- -------
Net change in net asset value
per share.................. 0.17 (0.50) 0.13 0.29 (0.07) 0.47
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD....................... $ 10.49 $ 10.32 $ 10.82 $ 10.69 $ 10.40 $ 10.47
======= ======= ======= ======= ======= =======
TOTAL RETURN(A)................ 4.00%(b) (0.65%) 6.03% 7.84% 3.72% 8.13%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands)............. $68,944 $68,228 $67,793 $42,046 $20,158 $12,516
Ratios to average net assets:
Expenses**................... 0.50%(c) 0.50% 0.50% 0.50% 0.55% 0.54%(c)
Net investment income........ 4.61%(c) 4.09% 4.08% 4.22% 4.28% 4.20%(c)
PORTFOLIO TURNOVER RATE........ 117% 93% 132% 144% 33% 35%
</TABLE>
CALIFORNIA MUNICIPAL FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
---------------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE PERIOD FROM
ENDED YEAR ENDED YEAR ENDED APRIL 2, 1997* THROUGH
JUNE 30, 2000 DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 10.06 $ 10.54 $ 10.37 $ 10.00(e)
------- ------- ------- -------
Net investment income........................... 0.22 0.40 0.40 0.33
Net realized and unrealized gain (loss)......... 0.20 (0.48) 0.22 0.38
------- ------- ------- -------
Total income (loss) from investment
operations.................................... 0.42 (0.08) 0.62 0.71
------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income........................... (0.22) (0.40) (0.40) (0.33)
Excess of net investment income................. -- -- (0.01) --
Net realized gains.............................. -- -- (0.04) (0.01)
------- ------- ------- -------
Total dividends and distributions................. (0.22) (0.40) (0.45) (0.34)
------- ------- ------- -------
Net change in net asset value per share......... 0.20 (0.48) 0.17 0.37
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................... $ 10.26 $ 10.06 $ 10.54 $ 10.37
======= ======= ======= =======
TOTAL RETURN(A)................................... 4.17%(b) (0.77%) 6.14% 7.14%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)...... $14,503 $13,645 $11,066 $ 4,792
Ratios to average net assets:
Expenses**...................................... 0.50%(c) 0.50% 0.50% 0.50%(c)
Net investment income........................... 4.28%(c) 3.91% 3.87% 4.15%(c)
PORTFOLIO TURNOVER RATE........................... 59% 20% 51% 41%
</TABLE>
---------------
<TABLE>
<C> <S>
* Commencement of operations.
** During the period certain fees were voluntarily reduced
and/or reimbursed. If such 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.
(b) Not annalized.
(c) Annualized.
(d) As of June 30, 2000 there were no Advisor Shares
outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
NATIONAL MUNICIPAL FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
--------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE PERIOD FROM
ENDED YEAR ENDED YEAR ENDED OCTOBER 20, 1997*
JUNE 30, 2000 DECEMBER 31, DECEMBER 31, THROUGH
(UNAUDITED) 1999 1998 DECEMBER 31, 1997
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCES:
NET ASSET VALUE, BEGINNING OF PERIOD....................... $ 10.04 $ 10.43 $ 10.19 $10.00(e)
------- ------- ------- ------
NET INVESTMENT INCOME.................................... 0.23 0.41 0.40 0.08
Net realized and unrealized gain (loss).................. 0.18 (0.39) 0.29 0.19
------- ------- ------- ------
Total income from investment operations.................. 0.41 0.02 0.69 0.27
------- ------- ------- ------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income.................................... (0.23) (0.41) (0.40) (0.08)
Net realized gains....................................... -- -- (0.05) --
------- ------- ------- ------
Total Dividends and Distributions:......................... (0.23) (0.41) (0.45) (0.08)
------- ------- ------- ------
Net change in net asset value per share.................. 0.18 (0.39) 0.24 0.19
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD............................. $ 10.22 $ 10.04 $ 10.43 $10.19
======= ======= ======= ======
TOTAL RETURN(A)............................................ 4.17%(b) 0.14% 6.91% 2.70%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)............... $18,808 $19,044 $29,735 $2,805
Ratios to average net assets:
Expenses**............................................... 0.50%(c) 0.50% 0.50% 0.50%(c)
Net Investment Income.................................... 4.69%(c) 3.96% 3.90% 3.95%(c)
PORTFOLIO TURNOVER RATE.................................... 170% 299% 226% 46%
</TABLE>
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
-----------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE PERIOD FROM
ENDED YEAR ENDED YEAR ENDED JULY 1, 1997*
JUNE 30, 2000 DECEMBER 31, DECEMBER 31, THROUGH
(UNAUDITED) 1999 1998 DECEMBER 31, 1997
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.................. $ 9.76 $ 10.46 $ 10.17 $ 10.00(e)
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................... 0.28 0.49 0.50 0.27
Net realized and unrealized gain (loss)............. 0.09 (0.69) 0.48 0.19
------- ------- ------- -------
Total income (loss) from investment operations...... 0.37 (0.20) 0.98 0.46
------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income............................... (0.28) (0.49) (0.50) (0.27)
Excess of net investment income..................... -- -- -- (0.01)
Net realized gains.................................. -- (0.01) (0.19) (0.01)
------- ------- ------- -------
Total dividends and distributions..................... (0.28) (0.50) (0.69) (0.29)
------- ------- ------- -------
Net change in net asset value per share............. 0.09 (0.70) 0.29 0.17
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD........................ $ 9.85 $ 9.76 $ 10.46 $ 10.17
======= ======= ======= =======
TOTAL RETURN(A)....................................... 3.90%(b) (1.95%) 9.82% 4.71%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands).......... $43,231 $42,422 $39,359 $ 3,955
Ratios to average net assets:
Expenses**.......................................... 0.50%(c) 0.50% 0.50% 0.50%(c)
Net investment income............................... 5.85%(c) 4.85% 4.59% 5.32%(c)
PORTFOLIO TURNOVER RATE............................... 201% 225% 423% 153%
</TABLE>
---------------
<TABLE>
<C> <S>
* 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, 2000 there were no Advisor Shares
outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
----------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD FROM
SIX MONTHS ENDED YEAR ENDED YEAR ENDED JULY 1, 1997*
JUNE 30, 2000 DECEMBER 31, DECEMBER 31, THROUGH
(UNAUDITED) 1999 1998 DECEMBER 31, 1997
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 9.71 $ 10.28 $ 10.17 $ 10.00(e)
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................. 0.31 0.59 0.58 0.29
Net realized and unrealized gain (loss)................ 0.01 (0.57) 0.14 0.22
------- ------- ------- -------
Total income from investment operations................ 0.32 0.02 0.72 0.51
------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income.................................. (0.31) (0.59) (0.58) (0.29)
Excess of net investment income........................ -- -- (0.01) (0.01)
Net realized gains..................................... -- -- (0.02) (0.04)
------- ------- ------- -------
Total dividends and distributions........................ (0.31) (0.59) (0.61) (0.34)
------- ------- ------- -------
Net change in net asset value per share................ 0.01 (0.57) 0.11 0.17
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD........................... $ 9.72 $ 9.71 $ 10.28 $ 10.17
======= ======= ======= =======
TOTAL RETURN(A).......................................... 3.37%(b) 0.23% 7.26% 5.10%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)............. $49,751 $62,309 $54,461 $17,037
Ratios to average net assets:
Expenses**............................................. 0.50%(c) 0.50% 0.50% 0.50%(c)
Net investment income.................................. 6.46%(c) 5.92% 5.72% 5.77%(c)
PORTFOLIO TURNOVER RATE.................................. 26% 29% 78% 81%
</TABLE>
TOTAL RETURN FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
-----------------------
FOR THE PERIOD FROM
JUNE 22, 2000* THROUGH
JUNE 30, 2000
(UNAUDITED)
<S> <C>
---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00(e)
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.01
Net realized and unrealized gain.......................... 0.04
-------
Total income from investment operations................... 0.05
-------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income..................................... (0.01)
-------
Total dividends and distributions........................... (0.01)
-------
Net change in net asset value per share................... 0.04
-------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.04
=======
TOTAL RETURN(A)............................................. 0.55%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)................ $ 1,004
Ratios to average net assets:
Expenses**................................................ 0.80%(c)
Net investment income..................................... 5.96%(c)
PORTFOLIO TURNOVER RATE..................................... 3%
</TABLE>
---------------
<TABLE>
<C> <S>
* 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, 2000, there were no Advisor Shares
outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
-----------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION. The OFFIT Investment Fund, Inc. (the "Company", formerly
OFFITBANK) 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, open-end management investment
company. The Company consists of eleven separately managed funds, of which nine,
OFFIT High Yield Fund, OFFIT Emerging Markets Bond Fund, OFFIT Latin America
Equity Fund, OFFIT New York Municipal Fund, OFFIT California Municipal Fund,
OFFIT National Municipal Fund, OFFIT U.S. Government Securities Fund, OFFIT
Mortgage Securities Fund and OFFIT Total Return 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 Bond Fund..... March 8, 1994
Latin America Equity Fund...... February 13, 1996
New York Municipal Fund........ April 3, 1995
California Municipal Fund...... April 2, 1997
National Municipal Fund........ October 20, 1997
U.S. Government Securities
Fund......................... July 1, 1997
Mortgage Securities Fund....... July 1, 1997
Total Return Fund.............. June 22, 2000
</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." Effective November 1, 1999,
the High Yield Fund offered a new class of shares, designated as "MSD&T Shares".
Each class of shares outstanding bears the same voting, dividend, liquidation
and other rights and conditions, except that the Advisor and MSD&T 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 Bond 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 National Municipal Fund seeks to maximize total after-tax return, 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 Total Return Fund's investment
objective is to maximize total return from a combination of capital appreciation
and current income.
OFFITBANK (the "Adviser") serves as the Funds' investment adviser. PFPC Inc.
("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp., provides
administrative, fund accounting, transfer and dividend disbursing agent services
for the Funds. OFFIT Funds Distributor, Inc. (the "Distributor") serves as the
distributor of the Funds' shares.
NOTE 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. Investments in registered investment
companies are valued at net asset value. 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 Funds record security 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 security 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 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 and realized and unrealized gains and
losses are incurred.
46
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
-----------------------------------------------------------------------------
ORGANIZATIONAL COSTS:
Costs incurred in connection with the organization and initial registration of
the Funds have been deferred and are being amortized on a straight-line basis
over a sixty-month period beginning with each of the Fund's commencement of
operations.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from the High Yield, New York Municipal, California Municipal,
National Municipal, U.S. Government Securities, Mortgage Securities and Total
Return Funds' net investment income, if any, are declared daily and paid
monthly. Dividends from the Emerging Markets Bond 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 yearly. Net
realized gains on portfolio securities, if any, are distributed at least
annually by each Fund. However, to the extent net realized gains can be offset
by capital loss carryovers, such gains will not be distributed. 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 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 their net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
As of December 31, 1999, 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 losses as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS CURRENCY LOSS
DEFERRED DEFERRED
------------ -------------
<S> <C> <C>
Latin American Equity.......... $ -- $368
New York Municipal Fund........ 107,325 --
California Municipal Fund...... 19,810 --
National Municipal Fund........ 3,981 --
U.S. Government Securities
Fund.......................... 21,725 --
Mortgage Securities Fund....... 13,413 --
</TABLE>
For federal income tax purposes, the following Funds have capital loss
carry-forwards:
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS LATIN AMERICA NEW YORK
DATE OF EXPIRATION: FUND BOND FUND EQUITY FUND MUNICIPAL FUND
------------------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
2006.................. $ 62,898 $23,411,476 $11,489,603 $ --
2007.................. 15,953,813 19,398,264 8,434,856 460,241
----------- ----------- ----------- --------
Total................. $16,016,711 $42,809,740 $19,924,459 $460,241
=========== =========== =========== ========
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL U.S. GOVERNMENT MORTGAGE
DATE OF EXPIRATION: MUNICIPAL FUND MUNICIPAL FUND SECURITIES FUND SECURITIES FUND
------------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
2006................. $ -- $ -- $ -- $ --
2007................. 2,595 276,752 967,380 118,083
------ -------- -------- --------
Total................ $2,595 $276,752 $967,380 $118,083
====== ======== ======== ========
</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 exchange rates.
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
47
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
-----------------------------------------------------------------------------
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.
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 exposure to changes in foreign currency
exchange rates on their portfolio holdings.
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. A 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 related 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,
2000 are recorded for financial reporting purposes as unrealized gains and
losses by the Funds.
The table below indicates the High Yield Fund's outstanding forward currency
contract positions at June 30, 2000:
<TABLE>
<CAPTION>
VALUE ON VALUE AT UNREALIZED
CONTRACT MATURITY ORIGINATION JUNE 30, APPRECIATION
CURRENCY AMOUNTS DATE DATE 2000 (DEPRECIATION)
-------- ------------- -------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Sell EUR $ (8,227,000) 07/11/00 $ (7,913,551) $(7,891,834) $ 21,717
Sell EUR (5,602,000) 09/27/00 (5,294,068) (5,399,310) (105,242)
Sell FRF (313,491,000) 07/11/00 (46,136,899) (45,844,819) 292,080
Sell GBP (22,861,000) 07/11/00 (36,179,133) (34,616,812) 1,562,321
----------
Net unrealized appreciation on forward positions....................... $1,770,876
==========
</TABLE>
The table below indicates the Emerging Markets Bond Fund's outstanding forward
currency contract position at June 30, 2000:
<TABLE>
<CAPTION>
VALUE ON VALUE AT
CONTRACT MATURITY ORIGINATION JUNE 30, UNREALIZED
CURRENCY AMOUNTS DATE DATE 2000 DEPRECIATION
-------- ----------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Sell EUR $(4,308,000) 11/08/00 $(4,104,188) $(4,162,962) $(58,774)
</TABLE>
Currency Abbreviations:
<TABLE>
<S> <C> <C>
EUR -- Euro
FRF -- French Franc
GBP -- British Pound
</TABLE>
Indexed securities may be more volatile than the underlying instrument but the
risk of loss is limited to the amount of the original investment.
NOTE 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% of 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 Bond Fund; 1.00% for the Latin
America Equity Fund; 0.50% in the case of the Total Return Fund; 0.35% in the
case of the New York Municipal Fund, the California Municipal Fund, the National
Municipal Fund, the U.S. Government Securities Fund and the Mortgage Securities
Fund.
__________________________________ADVISORY FEE__________________________________
<TABLE>
<CAPTION>
EMERGING
MARKETS BOND LATIN AMERICA
HIGH YIELD FUND FUND EQUITY FUND
--------------- -------------- --------------
<S> <C> <C> <C>
Gross Fee................ $4,732,875 $874,732 $109,955
Waiver................... (61,795) 0 0
---------- -------- --------
Net Fee.................. $4,671,080 $874,732 $109,955
========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
NEW YORK CALIFORNIA NATIONAL
MUNICIPAL FUND MUNICIPAL FUND MUNICIPAL FUND
--------------- -------------- --------------
<S> <C> <C> <C>
Gross Fee................ $116,382 $ 23,718 $32,686
Waiver................... (26,990) (12,195) (9,011)
-------- -------- -------
Net Fee.................. $ 89,392 $ 11,523 $23,675
======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT MORTGAGE TOTAL RETURN
SECURITIES FUND SECURITIES FUND FUND
--------------- --------------- ------------
<S> <C> <C> <C>
Gross Fee................... $ 63,697 $ 90,478 $ 123
Waiver...................... (22,477) (33,696) (123)
-------- -------- -----
Net Fee..................... $ 41,220 $ 56,782 $ 0
======== ======== =====
</TABLE>
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
48
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
-----------------------------------------------------------------------------
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.
ADMINISTRATION FEE
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS BOND LATIN AMERICA
FUND FUND EQUITY FUND
-------------- -------------- --------------
<S> <C> <C> <C>
Gross Fee................ $563,816 $122,212 $ 13,744
Wavier................... 0 (29,331) (5,231)
-------- -------- --------
Net Fee.................. $563,816 $ 92,881 $ 8,513
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
NEW YORK CALIFORNIA NATIONAL
MUNICIPAL FUND MUNICIPAL FUND MUNICIPAL FUND
-------------- -------------- --------------
<S> <C> <C> <C>
Gross Fee................ $ 41,565 $ 8,471 $ 11,674
Waiver................... (9,976) (8,471) (11,570)
-------- -------- --------
Net Fee.................. $ 31,589 $ 0 $ 104
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT MORTGAGE TOTAL RETURN
SECURITIES FUND SECURITIES FUND FUND
--------------- --------------- --------------
<S> <C> <C> <C>
Gross Fee................ $ 22,749 $ 32,314 $ 31
Waiver................... (5,460) (7,755) (31)
-------- -------- --------
Net Fee.................. $ 17,289 $ 24,559 $ 0
======== ======== ========
</TABLE>
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.
FUND ACCOUNTING FEE
<TABLE>
<CAPTION>
EMERGING
MARKETS BOND LATIN AMERICA
HIGH YIELD FUND FUND EQUITY FUND
--------------- -------------- --------------
<S> <C> <C> <C>
Gross Fee................ $7,500 $7,500 $ 7,500
Waiver................... 0 0 (7,500)
------ ------ -------
Net Fee.................. $7,500 $7,500 $ 0
====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
NEW YORK CALIFORNIA NATIONAL
MUNICIPAL FUND MUNICIPAL FUND MUNICIPAL FUND
--------------- -------------- --------------
<S> <C> <C> <C>
Gross Fee................ $7,500 $7,500 $ 7,500
Fee Waiver............... 0 (7,500) (7,500)
------ ------ -------
Net Fee.................. $7,500 $ 0 $ 0
====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT MORTGAGE TOTAL RETURN
SECURITIES FUND SECURITIES FUND FUND
--------------- --------------- --------------
<S> <C> <C> <C>
Gross Fee................ $7,500 $7,500 $ 1,250
Waiver................... 0 0 (1,250)
------ ------ -------
Net Fee.................. $7,500 $7,500 $ 0
====== ====== =======
</TABLE>
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 a portion or all
of its fees.
TRANSFER AGENT FEE
<TABLE>
<CAPTION>
EMERGING
MARKETS BOND LATIN AMERICA
HIGH YIELD FUND FUND EQUITY FUND
--------------- -------------- --------------
<S> <C> <C> <C>
Gross Fee................ $73,549 $21,143 $ 9,000
Waiver................... 0 0 (546)
------- ------- -------
Net Fee.................. $73,549 $21,143 $ 8,454
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NEW YORK CALIFORNIA NATIONAL
MUNICIPAL FUND MUNICIPAL FUND MUNICIPAL FUND
--------------- -------------- --------------
<S> <C> <C> <C>
Gross Fee................ $9,968 $9,000 $ 9,000
Waiver................... 0 (2,469) (2,460)
------ ------ -------
Net Fee.................. $9,968 $6,531 $ 6,540
====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT MORTGAGE TOTAL RETURN
SECURITIES FUND SECURITIES FUND FUND
--------------- --------------- --------------
<S> <C> <C> <C>
Gross Fee................ $9,000 $9,000 $ 393
Waiver................... (935) (416) (337)
------ ------ -------
Net Fee.................. $8,065 $8,584 $ 56
====== ====== =======
</TABLE>
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, the Advisor class of each Fund is
authorized to spend up to 0.25% of its net assets annually 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 for the Funds to recipients other than existing shareholders. For
the period ended June 30, 2000, 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
or MSD&T Shares. Shareholder administrative support services will be performed
by Shareholder Servicing Agents for their customers who beneficially own Advisor
or MSD&T 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 or MSD&T
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 or MSD&T Shares. For the six months ended June 30, 2000, there were
$21,546 shareholder servicing fees incurred in the MSD&T Share Class of the High
Yield Fund. For the period ended June 30, 2000 there were $29, $112 and $12
shareholder servicing fees incurred in the Advisor Share Class of the High
Yield, Emerging Markets Bond & Latin American Equity Funds, respectively.
49
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
-----------------------------------------------------------------------------
OFFITBANK has contractually agreed to limit the expense ratios for the
California Municipal, National Municipal, U.S. Government Securities and
Mortgage Securities Funds at 0.50% and the Total Return Fund at 0.80%. In order
to maintain these ratios, the Adviser has waived some or all of its advisory fee
and has also agreed to reimburse the Total Return Fund for expenses in the
amount of $30.
NOTE 4 -- SECURITIES TRANSACTIONS. For the period ended June 30, 2000, the cost
of purchases and the proceeds from sales of the Funds' portfolio securities
(excluding short-term investments), were as follows:
<TABLE>
<CAPTION>
COMMON STOCKS AND U.S. GOVERNMENT
CORPORATE BONDS OBLIGATIONS
--------------------------- -------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
High Yield Fund...... $122,522,444 $319,229,522 $ -- $ --
Emerging Markets Bond
Fund................ 126,832,460 112,830,036 -- --
Latin America Equity
Fund................ 4,492,618 5,756,158 -- --
New York Municipal
Fund................ 72,924,122 73,956,949 -- --
California Municipal
Fund................ 8,249,260 7,327,352 -- --
National Municipal
Fund................ 30,529,052 30,042,464 -- --
U.S. Government
Securities Fund..... -- -- 72,085,104 72,590,971
Mortgage Securities
Fund................ -- -- 13,139,529 22,291,478
Total Return Fund.... 250,000 -- 658,469 24,859
</TABLE>
NOTE 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 period ended June 30, 2000 and December 31,
1999, respectively, were as follows:
<TABLE>
<CAPTION>
HIGH YIELD FUND SELECT SHARES
-----------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------------
----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares issued........ 14,244,326 $ 125,781,800 53,165,517 $ 516,203,976
Shares reinvested.... 5,075,252 44,559,042 11,975,142 114,020,009
Shares redeemed...... (35,084,709) (310,480,367) (81,064,498) (767,965,843)
------------ ------------- ------------ -------------
Net decrease......... (15,765,131) $(140,139,525) (15,923,839) $(137,741,858)
============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND ADVISOR SHARES
-------------------------------------------
PERIOD ENDED PERIOD ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Shares issued................... 54,216 $ 470,051 -- $ --
Shares redeemed................. (54,216) (463,902) (715) (7,109)
------- --------- -------- ---------
Net increase (decrease)......... 0 $ 6,149 (715) $ (7,109)
======= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND MSD&T SHARES
---------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 2000 DECEMBER 31, 1999
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares issued........... 666,120 $ 6,534,307 1,469,511 $14,718,646
Shares redeemed......... (182,583) (1,786,560) -- --
--------- ----------- ----------- -----------
Net increase............ 483,537 $ 4,747,747 1,469,511 $14,718,646
========= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS BOND FUND SELECT SHARES
-------------------------------------------------------
PERIOD ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares issued........ 10,629,004 $102,299,134 5,851,325 $ 50,168,407
Shares reinvested.... 777,705 7,277,751 1,182,179 10,379,144
Shares redeemed...... (10,303,311) (97,147,247) (6,529,137) (54,249,530)
----------- ------------ ----------- ------------
Net increase......... 1,103,398 $ 12,429,638 504,367 $ 6,298,021
=========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS
BOND FUND ADVISOR
SHARES
-------------------
PERIOD ENDED
JUNE 30, 2000
-------------------
SHARES AMOUNT
-------- --------
<S> <C> <C>
Shares issued............................................ 75,673 $675,000
Shares reinvested........................................ 580 5,291
------ --------
Net increase............................................. 76,253 $680,291
====== ========
</TABLE>
<TABLE>
<CAPTION>
LATIN AMERICA EQUITY FUND SELECT SHARES
-------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares issued.............. 116,850 $ 1,287,533 792,735 $ 6,590,882
Shares reinvested.......... -- -- 13,143 145,620
Shares redeemed............ (252,964) (2,716,023) (874,456) (7,146,256)
-------- ----------- ---------- -----------
Net decrease............... (136,114) $(1,428,490) (68,578) $ (409,754)
======== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
LATIN AMERICA EQUITY
FUND ADVISOR SHARES
--------------------
PERIOD ENDED
JUNE 30, 2000
--------------------
SHARES AMOUNT
-------- ---------
<S> <C> <C>
Shares issued........................................... 27,174 $ 250,000
Shares redeemed......................................... (27,174) (251,068)
------- ---------
Net decrease............................................ 0 $ (1,068)
======= =========
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MUNICIPAL FUND SELECT SHARES
-----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued.......... 856,841 $ 8,895,584 2,640,255 $ 28,065,457
Shares reinvested...... 114,867 1,187,914 231,693 2,449,903
Shares redeemed........ (1,010,808) (10,480,268) (2,525,660) (26,588,867)
---------- ------------ ---------- ------------
Net increase
(decrease)............ (39,100) $ (396,770) 346,288 $ 3,926,493
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL FUND SELECT SHARES
-----------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares issued............... 286,361 $ 2,891,473 418,203 $ 4,381,453
Shares reinvested........... 19,843 201,097 35,358 364,877
Shares redeemed............. (249,390) (2,527,104) (146,655) (1,507,814)
-------- ----------- -------- -----------
Net increase................ 56,814 $ 565,466 306,906 $ 3,238,516
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL FUND SELECT SHARES
-----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued.......... 216,054 $ 2,169,862 851,833 $ 8,882,215
Shares reinvested...... 30,975 312,371 66,193 678,632
Shares redeemed........ (305,048) (3,078,242) (1,871,147) (19,499,510)
---------- ------------ ---------- ------------
Net decrease........... (58,019) $ (596,009) (953,121) $ (9,938,663)
========== ============ ========== ============
</TABLE>
50
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND SELECT SHARES
-----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued.......... 1,522,132 $ 14,852,474 2,536,782 $ 25,276,670
Shares reinvested...... 80,010 781,235 172,355 1,722,886
Shares redeemed........ (1,562,838) (15,235,212) (2,123,510) (21,151,397)
---------- ------------ ---------- ------------
Net increase........... 39,304 $ 398,497 585,627 $ 5,848,159
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE SECURITIES FUND SELECT SHARES
---------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Shares issued............ 801,515 $ 7,710,634 1,632,551 $16,252,334
Shares reinvested........ 124,203 1,196,607 298,196 2,964,170
Shares redeemed.......... (2,228,777) (21,421,041) (811,643) (8,024,428)
---------- ------------ --------- -----------
Net increase
(decrease).............. (1,303,059) $(12,513,800) 1,119,104 $11,192,076
========== ============ ========= ===========
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN FUND
SELECT SHARES
---------------------
PERIOD ENDED
JUNE 30, 2000
---------------------
SHARES AMOUNT
-------- ----------
<S> <C> <C>
Shares issued.......................................... 100,000 $1,000,000
------- ----------
Net increase........................................... 100,000 $1,000,000
======= ==========
</TABLE>
NOTE 6 -- OTHER MATTERS. The High Yield Fund, the Emerging Markets Bond 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
the 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 State of New York and California,
respectively, and their agencies, instrumentalities and various political
subdivisions. These 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
government entities are unable to meet their financial obligations, the income
derived by these Funds and their ability to preserve capital and liquidity could
be adversely affected.
51
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
-----------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Dr. Wallace Mathai-Davis
CHAIRMAN OF THE BOARD, PRESIDENT AND
DIRECTOR
Edward J. Landau
DIRECTOR
The Very Reverend
James Parks Morton
DIRECTOR
Stephen M. Peck
DIRECTOR
Stephen Brent Wells
SECRETARY
Vincent M. Rella
TREASURER
Michael S. Kagan
ASSISTANT TREASURER
David C. Lebisky
ASSISTANT SECRETARY
Gary M. Gardner
ASSISTANT SECRETARY
INVESTMENT ADVISER
OFFITBANK
520 Madison Avenue
New York, New York 10022
DISTRIBUTOR
OFFIT Funds Distributor, Inc.
Four Falls Corporate Center, 6th Floor
West Conshohocken, Pennsylvania 19428-2961
ADMINISTRATOR
PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
TRANSFER AND DIVIDEND DISBURSING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
CUSTODIANS
The Chase Manhattan Bank
4 Metro Tech Center, 18th Floor South
Brooklyn, New York 11245
(OFFIT LATIN AMERICA EQUITY FUND ONLY)
The Bank of New York
100 Church Street, 10th Floor
New York, New York 10286
(ALL OTHER OFFIT FUNDS)
LEGAL COUNSEL
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Claredon Street
Boston, Massachusetts 02116
<PAGE>
This report is submitted for the information of the shareholders of the Funds.
It is not authorized for distribution to prospective investors in the Funds
unless preceded or accompanied by an effective prospectus which includes
information regarding the Funds' objectives and policies, charges, expenses and
other data. Please read the prospectus carefully before you invest or send
money.
The OFFIT Investment Fund, Inc.
400 Bellevue Parkway, Suite 108
Wilmington, DE 19809
(800) 618-9510
