<PAGE>
-------------------------------------------
OFFIT High Yield Fund
OFFIT Emerging Markets 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
---------------------------
ANNUAL REPORT
DECEMBER 31, 1999
THE
[LOGO]
INVESTMENT FUND, INC.
OFFIT
<PAGE>
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to present you with the December 31, 1999 Annual Report for The
OFFIT Investment Fund, Inc. As of that date the Funds' investment portfolios
have assets in excess of $1.9 billion.
The specific results of the respective Funds, along with an investment and
market commentary from each portfolio manager, are part of this Annual Report.
As always, we have tried to make each market commentary informative, and I hope
that you will find them helpful.
On September 1, 1999 OFFITBANK Holdings, Inc. consummated its merger with the
Wachovia Corporation. Since then OFFITBANK has been functioning as a distinct
operating subsidiary of Wachovia, and on October 22, 1999 Morris joined the
Board of the Wachovia Corporation and Wachovia Bank, N.A. From our perspective,
we are particularly pleased by the positive effects of the merger. Wachovia has
been unqualified in its support of OFFITBANK and our clients. We have been
working very closely with the Wachovia family in order to develop additional
resources and expanded wealth management services to more effectively meet the
needs of our clients.
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-DavisWallace Mathai-Davis
January 19, 2000
<PAGE>
OFFIT
HIGH YIELD FUND
- --------------------------------------------------------------------------------
The challenging market conditions that began in the summer of 1998 continued to
have an impact throughout all of 1999. The Fund's net investment return for the
second half of 1999 was a disappointing -0.79%, bringing the full year return to
1.1%. The December 31, 1999 net asset value of $9.11 after the $.05 year-end
distribution was 8% lower than the $9.91 prior year value. The net assets of the
Fund at year-end were $1,469 million. Reflective of the higher market yields and
lower prices, the 30-day SEC yield increased to 10.24% at year-end from 9.18% at
June 30, 1999.
The high yield market and the Fund fulfilled one of its primary investment goals
during 1999 by adding substantial value over investment grade fixed income
returns. However, 1999 results were unsatisfactory in many respects. We had more
credit problems than should be expected given the higher quality focus of the
portfolio. Credit deterioration, that historically would have resulted in only
modest losses, too often turned into a pricing free fall because of the
diminished liquidity for credits that have disappointed. The market is demanding
increasingly higher yields for out of favor credits and industries.
Throughout 1999, higher quality high yield holdings which are more sensitive to
interest rates than the broad market were under pressure as well. The rewards
for credit upgrades were often nonexistent due to the significant backup in
interest rates during the year. While spreads for solid double B credits are
relatively unchanged in the range of 275 to 300 basis points, absolute yields
have increased to the 9 1/2% area from below 8% a year ago. The average high
yield bond now yields nearly 11%.
Defaults and credit problems should have less of an impact on the market going
forward. Today's yields and spreads reflect the expectation that the default
rate will stay above the historic averages. Most of the price erosion for
deteriorating credits has occurred well in advance of the actual default. With
approximately 12% of the high yield market trading at yield spreads in excess of
1000 basis points, a large number of future defaults is built into today's bond
prices.
The default rate for the domestic high yield market climbed above 4% in 1999 for
the first time since 1991. The number of companies and the dollar volume of
defaults were a record due to the increased size of the market. The default rate
should stabilize and decline modestly in the coming year. The energy industry,
which contributed a large number of 1999 defaults, has turned around with the
recent doubling oil prices. And the long-term care industry, of which we are too
painfully aware, also appears to have bottomed.
After two consecutive years of sub-coupon returns, the high yield market appears
to offer total return potential in excess of the current coupon. The price of
the average bond is trading at a substantial discount to par and the average
yield is well above levels seen for the last five years. The market has digested
a large increase in problem credits and substantial new issue supply while there
has been virtually no positive mutual fund inflows. The liquidity that has
pressured pricing downward can also move prices upward should new money come
into the market.
The new money purchaser of high yield securities continues to be CBO's. Buying
by CBO's has provided substantial liquidity to the broad market as dealer
trading liquidity has become focused on a narrower list of issues. During 1999,
CBO issuance increased to an estimated $50 billion. We would expect CBO issuance
to continue to provide a cushion against dramatic spread widening.
The Fund is well positioned to benefit when the high yield market strengthens.
During the second half of 1999, we began to consolidate the number of issues in
the portfolio. We sold a large number of our smaller, less liquid positions when
the market allowed us to exit at favorable prices. We also sold some issues
trading at investment grade spreads including former core holdings Lenfest
Communications, Jones Cable, and Host Marriott Travel Plaza. We added to some of
our core higher quality holdings at lower prices. Additionally, we added a
number of large, liquid, high-quality telecom credits to the portfolio including
Global Crossing and Williams Communications.
We continue to focus on the better quality sectors of the high yield market and
have made a conscious effort to maintain portfolio quality. As of year end,
approximately 44% of the holdings in the Fund are rated Ba3 or better by Moody's
or BB- or better by Standard and Poor's. Additionally, 67% of the holdings are
rated at least B1 or B+. Many of the lower rated or unrated holdings are senior
in the capital structure, including our largest holding, Eurotunnel bank debt.
The Fund remains well diversified with over 200 issues. We continue to believe
that better quality high yield credits will outperform fixed income alternatives
over time.
Stephen T. Shapiro
January 19, 2000
2
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<PAGE>
OFFIT
HIGH YIELD FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFIT High Yield Fund (including its predecessor partnership as
discussed below) at January 1, 1988 and held through December 31, 1999 as well
as the performance of the Merrill Lynch All High Yield Bond Index over the same
period. Past performance is not predictive of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OFFIT HIGH YIELD FUND - SELECT SHARES MERRILL LYNCH ALL HIGH YIELD BOND INDEX
<S> <C> <C> <C>
1/1/1988 $250,000 $250,000
12/31/1988 $299,640 $283,683
12/31/1989 $307,292 $295,683
12/31/1990 $303,351 $282,830
12/31/1991 $403,889 $380,623
12/31/1992 $491,167 $449,746
12/31/1993 $594,883 $527,026
12/31/1994 $609,946 $520,872
12/31/1995 $718,188 $624,541
12/31/1996 $807,629 $693,634
12/31/1997 $905,334 $782,593
12/31/1998 $945,996 $811,279
12/31/1999 $956,492 $824,037
Total Return One Year Five Years Ten Years
OFFIT High Yield Fund - Select Shares* 1.10% 9.41% 12.02%
Merrill Lynch All High Yield Bond Index 1.57% 9.61% 10.79%
</TABLE>
The OFFIT High Yield Fund-MSD&T shares total return for the period November 1,
1999 (initial sale of MSD&T shares) through December 31, 1999 was 2.38%.
The performance information for the period January 1, 1988 through March 1, 1994
reflects the performance of The Senior Securities Fund, L.P. (the
"Partnership"), the predecessor limited partnership to the Fund. As a registered
investment company, the Fund is subject to certain restrictions under the
Investment Company Act and the Internal Revenue Code to which the Partnership
was not subject. Had the Partnership been registered under the Act and subject
to the Code, its performance may have been adversely affected.
* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. Without
waiver of fees, total return would have been lower.
3
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<PAGE>
OFFIT
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
CORPORATE BONDS (93.9%)
AUTOMOTIVE (4.1%)
Exide Corp. Sr Notes, 10.00%, 04/15/05.................. $ 7,000,000 $ 6,790,000
Exide Holding Europe S.A., 9.125%, 04/15/04 (144A)...... 18,000,000(a)(1) 9,014,165
Federal-Mogul Corp. Notes, 7.375%, 01/15/06............. 5,000,000 4,574,100
Federal-Mogul Corp. Notes, 7.875%, 07/01/10............. 12,000,000 10,763,280
Hayes Lemmerz International Inc. Sr Sub Notes, 9.125%,
07/15/07............................................... 10,000,000 9,775,000
Lear Corp. Sr Notes, 8.11%, 05/15/09 (144A)............. 11,500,000(1) 10,845,995
Sonic Automotive Inc. Sr Sub Notes, 11.00%, 08/01/08.... 4,500,000 4,432,500
United Auto Group Inc. Sr Sub Notes, 11.00%, 07/15/07... 4,000,000 3,760,000
--------------
59,955,040
--------------
BROADCAST/MEDIA (2.2%)
Hollinger International Publishing Sr Sub Notes, 9.25%,
03/15/07............................................... 8,000,000 7,920,000
Lamar Media Corp. Sr Sub Notes, 9.625%, 12/01/06........ 6,500,000 6,711,250
MDC Corporation Inc. Sr Sub Notes, 10.50%, 12/01/06..... 4,750,000 4,690,625
Outdoor Systems Inc. Sr Sub Notes, 8.875%, 06/15/07..... 7,000,000 7,245,000
World Color Press Sr Sub Notes, 8.375%, 11/15/08........ 7,000,000 6,841,590
--------------
33,408,465
--------------
CABLE (7.1%)
Adelphia Communications Corp. Sr Notes, 9.375%,
11/15/09............................................... 10,000,000 9,800,000
Adelphia Communications Corp. Sr Notes, 9.50%,
02/15/04............................................... 1,252,911 1,252,911
Adelphia Communications Corp. Sr Notes, 9.875%,
03/01/07............................................... 7,000,000 7,105,000
Century Communications Corp. Sr Notes, 9.75%,
02/15/02............................................... 6,500,000 6,597,500
Charter Communications Holdings LLC Sr Notes, 8.625%,
04/01/09............................................... 10,000,000 9,250,000
CSC Holdings Inc. Sr Notes, 9.25%, 11/01/05............. 5,000,000 5,112,500
Diamond Cable Communications PLC Sr Discount Notes,
0/11.75%, 12/15/05..................................... 7,500,000(2) 7,087,500
Diamond Holdings PLC Sr Notes, 9.125%, 02/01/08......... 5,000,000 4,950,000
Mediacom LLC/Capital Sr Notes, 8.50%, 04/15/08.......... 8,000,000 7,460,000
NTL Inc. Sr Notes, 0/9.75%, 04/01/08.................... 14,500,000(2) 10,150,000
Olympus Communications L.P. Sr Notes, 10.625%,
11/15/06............................................... 6,000,000 6,240,000
Telewest Communications PLC Sr Discount Notes, 0/9.875%,
04/15/09............................................... 8,000,000(d)(2) 8,076,500
Telewest Communications PLC Sr Discount Debs., 0/11.00%,
10/01/07............................................... 22,000,000(2) 20,570,000
--------------
103,651,911
--------------
CHEMICAL (3.0%)
Borden Chemicals & Plastics Sr Notes, 9.50%, 05/01/05... 10,500,000 9,765,000
CMS Energy & Atlantic Methanol, 10.875%, 12/15/04
(144A)................................................. 5,000,000(1) 5,000,000
Huntsman ICI Chemicals Sr Sub Notes, 10.125%,
07/01/09............................................... 8,000,000(b) 8,500,352
Lyondell Chemical Co. Sr Secured Notes, 9.875%,
05/01/07............................................... 12,000,000 12,240,000
Terra Industries Inc. Sr Notes, 10.50%, 06/15/05........ 12,000,000 8,640,000
--------------
44,145,352
--------------
CONSUMER GROUPS (5.4%)
Ameriserve Finance Trust Sr Secured Notes, 12.00%,
09/15/06 (144A)........................................ 5,000,000(1) 4,100,000
Ameriserve Food Co. Sr Notes, 8.875%, 10/15/06.......... 7,500,000 4,350,000
Canandaigua Brands Inc. Sr Sub Notes, 8.50%, 03/01/09... 7,500,000 7,125,000
Chiquita Brands International Inc. Sr Notes, 9.125%,
03/01/04............................................... 6,000,000 4,410,000
Chiquita Brands International Inc. Sr Notes, 10.00%,
06/15/09............................................... 6,000,000 4,560,000
Chiquita Brands International Inc. Sr Notes, 10.25%,
11/01/06............................................... 4,000,000 2,960,000
CHS Electronics Inc. Sr Notes, 9.875%, 04/15/05......... 4,500,000 540,000
Fedders N.A. Sr Sub Notes, 9.375%, 08/15/07............. 8,500,000 8,415,000
Fisher Scientific International Inc. Sr Sub Notes,
9.00%, 02/01/08........................................ 7,000,000 6,702,500
Fruit of The Loom Sr Notes, 8.875%, 04/15/06............ 8,000,000(5) 320,000
Imperial Holly Sr Sub Notes, 9.75%, 12/15/07............ 7,500,000 5,475,000
Nash Finch Co. Sr Sub Notes, 8.50%, 05/01/08............ 6,500,000 5,378,750
Playtex Products Inc. Sr Notes, 8.875%, 07/15/04........ 9,000,000 8,977,500
Revlon Consumer Products Sr Sub Notes, 8.625%,
02/01/08............................................... 12,000,000 6,120,000
</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 (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
CONSUMER GROUPS (CONTINUED)
Samsonite Corp. Sr Sub Notes, 10.75%, 06/15/08.......... $ 3,000,000 $ 2,625,000
United Artists Theatre Pass Through Certificates, 9.30%,
07/01/15............................................... 10,270,241 7,189,169
--------------
79,247,919
--------------
FINANCIAL SERVICES/INSURANCE (2.3%)
Americo Life Inc. Sr Sub Notes, 9.25%, 06/01/05......... 3,000,000 3,000,000
Amresco Inc. Sr Sub Notes, 9.875%, 03/15/05............. 10,000,000 6,300,000
Nationwide Credit Sr Notes, 10.25%, 01/15/08............ 4,000,000 2,400,000
Presidential Life Corp. Sr Notes, 7.875%, 02/15/09...... 7,250,000 6,772,732
Reliance Group Holdings Inc. Sr Sub Notes, 9.75%,
11/15/03............................................... 10,500,000 7,770,000
Willis Corroon Corp. Sr Sub Notes, 9.00%, 02/01/09...... 9,000,000 7,492,500
--------------
33,735,232
--------------
FOREST & PAPER PRODUCTS (5.0%)
Container Corp. of America Sr Notes, 9.75%, 04/01/03.... 5,000,000 5,187,500
Crown Paper Co. Sr Sub Notes, 11.00%, 09/01/05.......... 3,500,000 2,205,000
Doman Industries Limited Sr Notes, 9.25%, 11/15/07...... 8,000,000 6,400,000
Maxxam Group Holdings Inc. Sr. Notes, 12.00%,
08/01/03............................................... 4,200,000 3,948,000
Pindo Deli Financial Mauritius Gtd., 10.75%, 10/01/07... 5,500,000 3,960,000
Repap New Brunswick First Priority Sr Secured Notes,
9.00%, 06/01/04........................................ 13,000,000 12,675,000
Repap New Brunswick Sr Notes, 9.871%, 06/01/04 (144A)... 5,000,000(1)(3)(4) 4,925,000
Stone Container Corp. Sr Secured Notes, 10.75%,
10/01/02............................................... 5,500,000 5,658,125
Stone Container Corp. Sr Sub Debs., 12.25%, 04/01/02.... 7,500,000 7,518,750
Stone Container Finance Corp. Sr Notes, 11.50%, 08/15/06
(144A)................................................. 5,500,000(1) 5,898,750
Tembec Finance Corp. Sr Notes, 9.875%, 09/30/05......... 8,500,000 8,840,000
U.S. Timberlands Finance Corp. Sr Notes, 9.625%,
11/15/07............................................... 6,500,000 6,053,125
--------------
73,269,250
--------------
GENERAL INDUSTRIES/MANUFACTURING (6.5%)
Advanced Micro Devices Sr Notes, 11.00%, 08/01/03....... 4,250,000 4,239,375
Allied Waste North America Sr Sub Notes, 10.00%,
08/01/09 (144A)........................................ 5,000,000(1) 4,450,000
Allied Waste North America Sr Notes, 7.625%, 01/01/06... 10,000,000 9,000,000
Decrane Aircraft Holdings, 12.00%, 09/30/08............. 2,500,000 2,400,000
Delta Mills Inc. Sr Notes, 9.625%, 09/01/07............. 7,000,000 4,900,000
Foamex L.P. Sr Sub Notes, 9.875%, 06/15/07.............. 2,500,000 2,100,000
Galey & Lord Inc. Sr Sub Notes, 9.125%, 03/01/08........ 7,500,000 1,800,000
Loral Space & Communication Sr Notes, 9.50%, 01/15/06... 7,500,000 6,825,000
Nortek Inc Sr Notes, 9.125%, 09/01/07................... 3,500,000 3,395,000
Nortek Inc. Sr Sub Notes, 9.875%, 03/01/04.............. 5,000,000 4,950,000
Pillowtex Corp. Sr Sub Notes, 10.00%, 11/15/06.......... 10,000,000 4,600,000
Primark Corp. Sr Sub Notes, 9.25%, 12/15/08............. 6,000,000 5,700,000
Sequa Corp. Sr Notes, 9.00%, 08/01/09................... 11,000,000 10,615,000
United Rentals Inc. Sr Sub Notes, 9.50%, 06/01/08....... 8,500,000 8,223,750
Wesco Distribution Inc. Sr Sub Notes, 9.125%,
06/01/08............................................... 8,000,000 7,520,000
Westpoint Stevens Inc. Sr Notes, 7.875%, 06/15/08....... 7,500,000 6,712,500
Williams Scotsman Inc. Sr Notes, 9.875%, 06/01/07....... 8,000,000 7,760,000
--------------
95,190,625
--------------
HEALTH CARE (5.1%)
Columbia/HCA Healthcare Medium Term Notes, 8.85%,
01/01/07............................................... 7,500,000 7,463,475
Columbia/HCA Healthcare Notes, 7.00%, 07/01/07.......... 6,500,000 5,755,945
Columbia/HCA Healthcare Notes, 7.25%, 05/20/08.......... 9,000,000 8,015,940
Conmed Corp. Sr Sub Notes, 9.00%, 03/15/08.............. 8,500,000 7,947,500
Extendicare Health Services Sr Sub Notes, 9.35%,
12/15/07............................................... 7,000,000 4,690,000
Genesis Health Ventures Sr Sub Notes, 9.875%,
01/15/09............................................... 7,500,000 3,000,000
Integrated Health Services Inc. Sr Sub Notes, 9.50%,
09/15/07............................................... 12,000,000(5) 900,000
Magellan Health Services Sr Sub Notes, 9.00%,
02/15/08............................................... 7,000,000 5,670,000
</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 (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
HEALTH CARE (CONTINUED)
Medaphis Corp. Sr Notes, 9.50%, 02/15/05................ $ 6,500,000 $ 5,037,500
Pharmerica Inc. Sr Sub Notes, 8.375%, 04/01/08.......... 7,000,000 5,250,000
Tenet Healthcare Corp. Sr Sub Notes, 8.125%, 12/01/08... 12,000,000 11,370,000
Tenet Healthcare Corp. Sr Sub Notes, 8.625%, 01/15/07... 10,000,000 9,625,000
--------------
74,725,360
--------------
HOTELS & GAMING (7.4%)
Alliance Gaming Corp. Sr Sub Notes, 10.00%, 08/01/07.... 6,500,000 3,640,000
Aztar Corp. Sr Sub Notes, 8.875%, 05/15/07.............. 5,000,000 4,800,000
Felcor Suites L.P. Sr Notes, 7.625%, 10/01/07........... 10,000,000 8,975,000
Harrahs Operating Co. Inc. Sr Sub Notes, 7.875%,
12/15/05............................................... 10,000,000 9,775,000
HMH Properties Sr Notes, 7.875%, 08/01/08............... 12,500,000 11,250,000
Hollywood Park Operating Inc. Sr Sub Notes, 9.50%,
08/01/07............................................... 6,000,000 5,985,000
International Game Technology Sr Notes, 8.375%,
05/15/09............................................... 6,500,000 6,288,750
John Q. Hammons Hotels L.P. First Mtg. Notes, 8.875%,
02/15/04............................................... 10,500,000 9,502,500
John Q. Hammons Hotels L.P. First Mtg. Notes, 9.75%,
10/01/05............................................... 7,000,000 6,440,000
Park Place Entertainment Sr Sub Notes, 7.875%,
12/15/05............................................... 11,000,000 10,477,500
Prime Hospitality Corp. First Mtg. Notes, 9.25%,
01/15/06............................................... 7,000,000 7,070,000
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 8,138,750
Trump Atlantic City First Mtg. Notes, 11.25%,
05/01/06............................................... 8,500,000 6,970,000
Trump Atlantic City First Mtg. Notes II, 11.25%,
05/01/06............................................... 5,000,000 4,100,000
--------------
109,232,500
--------------
METALS & MINING (8.5%)
AK Steel Corp. Sr Notes, 9.125%, 12/15/06............... 12,000,000 12,150,000
Armco Inc. Sr Notes, 9.00%, 09/15/07.................... 8,000,000 8,110,000
Centaur Mining Exploration Sr Secured Notes, 11.00%,
12/01/07............................................... 7,500,000 7,425,000
EES Coke Battery Co. Inc. Series B Sr Secured Notes,
9.382%, 04/15/07 (144A)................................ 5,750,000(1) 5,462,500
Freeport McMoran C&G Debs., 7.20%, 11/15/26............. 8,500,000 6,375,000
Glencore Nickel Pty Ltd. Sr Secured Bonds, 9.00%,
12/01/14............................................... 16,000,000 13,760,000
Great Central Mines Ltd. Sr Notes, 8.875%, 04/01/08..... 9,000,000 8,302,500
Inland Steel Co. First Mortgage, 7.90%, 01/15/07........ 7,000,000 6,370,000
Kaiser Aluminum & Chemical Corp. Sr Notes, 9.875%,
02/15/02............................................... 5,500,000 5,500,000
Kaiser Aluminum & Chemical Corp. Sr Notes, 10.875%,
10/15/06............................................... 6,000,000 6,015,000
LTV Corp. Sr Notes, 11.75%, 11/15/09 (144A)............. 4,000,000(1) 4,200,000
LTV Corp. Sr Notes, 8.20%, 09/15/07..................... 12,500,000 11,437,500
National Steel Corp. First Mtg. Bonds, 8.375%,
08/01/06............................................... 9,235,000 8,680,900
Oregon Steel Mills First Mtg. Notes, 11.00%, 06/15/03... 5,000,000 5,150,000
Wheeling-Pittsburgh Corp. Sr Notes, 9.25%, 11/15/07..... 10,000,000 9,500,000
WHX Corporation Sr Notes, 10.50%, 04/15/05.............. 7,000,000 6,860,000
--------------
125,298,400
--------------
OIL/GAS (6.3%)
Clark R&M Inc. Sr Notes, 8.625%, 08/15/08............... 6,000,000 3,900,000
Clark R&M Inc. Sr Sub Notes, 8.875%, 11/15/07........... 6,000,000 3,300,000
Crown Central Petroleum Corp. Sr Notes, 10.875%,
02/01/05............................................... 2,400,000 1,920,000
Energy Corp. of America Sr Sub Notes, 9.50%, 05/15/07... 5,000,000 3,500,000
Ferrellgas Partner L.P. Sr Notes, 9.375%, 06/15/06...... 6,500,000 6,370,000
Frontier Oil Corp. Sr Notes, 9.125%, 02/15/06........... 3,500,000 3,202,500
Frontier Oil Corp. Sr Notes, 11.75%, 11/15/09........... 5,500,000 5,417,500
Giant Industries Services Inc. Sr Sub Notes, 9.00%,
09/01/07............................................... 10,000,000 9,250,000
Grey Wolf Inc. Sr Notes, 8.875%, 07/01/07............... 6,500,000 5,980,000
Gulf Canada Resources Ltd. Sr Sub Debs., 9.25%,
01/15/04............................................... 10,000,000 9,998,300
KCS Energy Inc. Sr Notes, 11.00%, 01/15/03.............. 11,000,000(5) 8,690,000
Newpark Resources Inc. Sr Sub Notes, 8.625%, 12/15/07... 10,000,000 9,300,000
Parker Drilling Co. Sr Notes, 9.75%, 11/15/06........... 6,000,000 5,880,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
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<PAGE>
OFFIT
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
OIL/GAS (CONTINUED)
RBF Finance Co. Sr Secured Notes, 11.375%, 03/15/09..... $ 6,000,000 $ 6,450,000
Tesoro Petroleum Corp. Sr Sub Notes, 9.00%, 07/01/08.... 6,000,000 5,730,000
Trico Marine Services Sr Notes, 8.50%, 08/01/05......... 3,500,000 3,290,000
--------------
92,178,300
--------------
REAL ESTATE (5.1%)
CB Richard Ellis Sr Sub Notes, 8.875%, 06/01/06......... 10,500,000 9,345,000
Forest City Enterprises Sr Notes, 8.50%, 03/15/08....... 7,500,000 6,975,000
Lennar Corp. Sr Notes, 7.625%, 03/01/09................. 5,000,000 4,520,400
LNR Property Corp. Sr Sub Notes, 10.50%, 01/15/09....... 7,500,000 7,425,000
MDC Holdings Inc. Sr Notes, 8.375%, 02/01/08............ 10,000,000 9,200,000
NVR Inc. Sr Notes, 8.00%, 06/01/05...................... 8,500,000 7,990,000
Rockefeller Center Properties Sr Notes, 0.00%,
12/31/00............................................... 24,000,000 20,160,000
Tanger Properties L.P. Sr Notes, 7.875%, 10/24/04....... 10,500,000 9,704,625
--------------
75,320,025
--------------
RETAIL (2.2%)
Finlay Fine Jewelry Corp. Sr Notes, 8.375%, 05/01/08.... 9,000,000 8,280,000
G&G Retail Inc. Units, 11.00%, 05/15/06................. 2,500,000 2,125,000
Nine West Group Inc. Sr Notes, 8.375%, 08/15/05......... 6,000,000 5,977,680
Petro Stopping Centers Sr Notes, 10.50%, 02/01/07....... 6,000,000 5,565,000
Travelcenters of America Inc. Sr Sub Notes, 10.25%,
04/01/07............................................... 6,000,000 5,970,000
Zale Corp. Sr Notes, 8.50%, 10/01/07.................... 5,000,000 4,850,000
--------------
32,767,680
--------------
TELECOMMUNICATIONS-WIRELESS (4.0%)
Arch Escrow Corp. Sr Notes, 13.75%, 04/15/08............ 8,000,000 6,480,000
Globalstar L.P. Capital Corp. Sr Notes, 10.75%,
11/01/04............................................... 6,000,000 3,990,000
Metrocall Inc. Sr. Sub Notes, 11.00%, 09/15/08.......... 6,000,000 3,780,000
Nextel Communications Sr Discount Notes, 0/10.65%,
09/15/07............................................... 24,000,000(2) 18,120,000
Paging Network Sr Sub Notes, 10.125%, 08/01/07.......... 12,500,000 3,875,000
Price Communications Wireless Sr Notes, 9.125%,
12/15/06............................................... 12,000,000 12,240,000
Rogers Cantel Inc. Sr Sub Notes, 8.80%, 10/01/07........ 10,500,000 10,605,000
--------------
59,090,000
--------------
TELECOMMUNICATIONS-WIRELINE (7.8%)
Alaska Communications Sr Sub Notes, 9.375%, 05/15/09.... 9,000,000 8,707,500
Call Net Enterprises Sr Discount Notes, 0/8.94%,
08/15/08............................................... 10,000,000(2) 4,925,000
E. Spire Communications Sr Discount Notes, 0/10.625%,
07/01/08............................................... 6,000,000(2) 2,160,000
Flag Limited Sr Notes, 8.25%, 01/30/08.................. 12,000,000 11,040,000
Global Crossing Holdings Ltd. Sr Notes, 9.125%, 11/15/06
(144A)................................................. 10,000,000(1) 9,887,500
Global Telesystems Europe Sr Notes, 11.00%, 12/01/09
(144A)................................................. 9,000,000(b)(1) 9,109,679
Intermedia Communications Sr Discount Notes, 0/11.25%,
07/15/07............................................... 24,000,000(2) 17,760,000
Level 3 Communications Sr Notes, 9.125%, 05/01/08....... 9,000,000 8,516,250
Metromedia Fiber Network Sr Notes, 10.00%, 12/15/09..... 7,000,000(b) 7,226,307
Metronet Communications Corp. Sr Discount Notes,
0/9.95%, 06/15/08...................................... 10,000,000(2) 8,025,000
Nextlink Communications Sr Notes, 10.75%, 11/15/08...... 6,000,000 6,180,000
Psinet Inc. Sr Notes, 10.00%, 02/15/05.................. 10,000,000 9,900,000
Williams Communications Group Inc. Sr Notes, 10.875%,
10/01/09............................................... 10,000,000 10,475,000
--------------
113,912,236
--------------
TRANSPORTATION (8.0%)
Canadian Airlines Corp. Sr Notes, 10.00%, 05/01/05...... 6,000,000 4,740,000
Eletson Holdings Inc. First Pfd. Mtg. Notes, 9.25%,
11/15/03............................................... 5,000,000 4,600,000
Eurotunnel Finance Tier 1, 5.28%, 01/15/12.............. 222,006,204(c)(4) 27,610,181
Eurotunnel Finance Tier 2, 5.28%, 12/31/18.............. 213,000,000(c)(4) 22,892,686
Eurotunnel Finance Tier 1, 7.03%, 01/15/12.............. 5,623,452(d)(4) 7,403,102
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
-------------
<PAGE>
OFFIT
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
TRANSPORTATION (CONTINUED)
Eurotunnel Finance Tier 2, 7.03%, 12/31/18.............. $ 18,623,452(d)(4) $ 21,057,723
Navigator Gas Transport First Priority Ship Mtg. Notes,
10.50%, 06/30/07 (144A)................................ 6,000,000(1) 2,760,000
Piedmont Aviation Inc. Equipment Trust Certificates 1988
Series F, 10.15%, 03/28/03............................. 1,000,000 981,150
Sea Containers Ltd. Sr Notes, 7.875%, 02/15/08.......... 7,500,000 6,375,000
Sea Containers Ltd. Sr Notes, 9.50%, 07/01/03........... 3,000,000 2,940,000
Stena AB Sr Notes, 10.50%, 12/15/05..................... 5,000,000 4,575,000
Stena Line AB Sr Notes, 10.625%, 06/01/08............... 7,500,000 4,500,000
U.S. Air Inc. Equipment Trust Certificates 1988 Series
B, 10.00%, 01/15/02.................................... 1,334,000 1,316,138
U.S. Air Inc. Equipment Trust Certificates 1990 Series
A, 11.20%, 03/19/05.................................... 3,138,023 3,279,234
U.S. Air Inc. Equipment Trust Certificates 1990 Series
B, 10.33%, 06/27/02.................................... 803,000 795,516
U.S. Air Inc. Equipment Trust Certificates 1990 Series
D, 10.28%, 06/27/01.................................... 837,000 833,300
U.S. Air Inc. Equipment Trust Certificates 1990 Series
D, 10.43%, 06/27/04.................................... 1,014,000 995,931
--------------
117,654,961
--------------
UTILITIES (3.9%)
AES Corp. Sr Notes, 8.00%, 12/31/08..................... 4,000,000 3,650,000
AES Corp. Sr Sub Notes, 8.50%, 11/01/07................. 12,000,000 11,190,000
AES Eastern Energy Pass Through Certs., 9.00%, 01/02/17
(144A)................................................. 8,000,000(1) 7,640,000
Caithness Coso Fund Corp. Sr Secured Notes, 9.05%,
12/15/09............................................... 8,000,000 7,960,000
Calpine Corp. Sr Notes, 8.75%, 07/15/07................. 8,500,000 8,500,000
Calpine Corp. Sr Notes, 10.50%, 05/15/06................ 5,500,000 5,830,000
Project Orange Funding Sr Secured Notes, 10.50%,
09/15/07 (144A)........................................ 6,000,000(1) 5,970,000
Tucson Electric Power Company, Springerville Unit 1,
10.21%, 01/01/09....................................... 5,526,015 5,691,796
--------------
56,431,796
--------------
TOTAL CORPORATE BONDS (COST $1,536,235,201)............. 1,379,215,052
--------------
ASSET-BACKED SECURITIES (1.7%)
REAL ESTATE (0.6%)
First Plus Home Loan Owner Trust 1997-4 Class B1, 7.69%,
09/11/23............................................... 4,000,000 3,303,750
First Plus Home Loan Owner Trust 1998-4 Class B1, 8.21%,
09/10/24............................................... 3,000,000 2,438,438
National Convenience Realty Co. Secured Notes, 9.50%,
06/30/03............................................... 360,784(4) 366,196
RTC Mtg. Tr. Series 1994-C1 Class F Mortgage Loan Backed
Bonds, 8.00%, 06/25/26................................. 1,893,949 1,879,744
RTC Mtg. Tr. Series 1994-C2 Class G Mortgage Loan Backed
Bonds, 8.00%, 04/25/25................................. 1,345,621 1,335,529
--------------
9,323,657
--------------
STRUCTURED FINANCE (1.1%)
Carlyle High Yield Partners Sr Sub Secured Notes Class
C, 8.74%, 05/15/07..................................... 8,000,000 7,880,000
DLJ CBO Ltd. Sr Secured Fixed Rate Notes Class B,
8.345%, 04/15/11 (144A)................................ 8,500,000(1) 8,298,125
--------------
16,178,125
--------------
TOTAL ASSET-BACKED SECURITIES (COST $24,928,446)........ 25,501,782
--------------
PREFERRED STOCKS (1.7%)
HEALTH CARE (1.0%)
Fresenius Medical Care Capital Trust II Pfd., 7.875%,
02/01/08............................................... 5,000,000 4,650,000
Fresenius Medical Care Capital Trust Pfd., 9.00%,
12/01/06............................................... 10,000,000 9,800,000
--------------
14,450,000
--------------
TELECOMMUNICATIONS-WIRELESS (0.7%)
Centaur Funding Corp. Pfc. Series B, 9.08%, 04/21/20
(144A)................................................. 10,000,000(1) 10,300,000
--------------
TOTAL PREFERRED STOCKS (COST $24,949,392)............... 24,750,000
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
- -------------
<PAGE>
OFFIT
HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.8%)
Bank of New York Repurchase Agreement, 4.00%, 01/03/00
(dated 12/31/99; proceeds $11,332,976, collateralized
by $11,515,000 U.S. Treasury Notes, 5.875%, due
10/31/01, valued at $11,558,181)....................... $ 11,329,200 $ 11,329,200
--------------
TOTAL REPURCHASE AGREEMENT (COST $11,329,200)........... 11,329,200
--------------
TOTAL INVESTMENTS (COST $1,597,442,239)(+) -- 98.1%..... 1,440,796,034
OTHER ASSETS IN EXCESS OF LIABILITIES 1.9%.............. 28,447,990
--------------
TOTAL NET ASSETS -- 100.0%.............................. $1,469,244,024
==============
</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 ................ $ 2,061,416
Unrealized depreciation ................ (158,707,621)
-------------
Net unrealized depreciation ............ $(156,646,205)
=============
</TABLE>
Principal denominated in the following currencies:
(a) Deutsche Mark
(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 December 31, 1999.
(4) Illiquid security.
(5) Security in default.
The accompanying notes are an integral part of the financial statements.
9
-------------
<PAGE>
OFFIT
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
The year-to-date total return of the OFFIT Emerging Markets Fund through
December 31, 1999 was 27.81%. For the quarter ending December 31, 1999, the Fund
had a total return of 11.41%. For the same periods the Lipper Emerging Markets
Debt Fund Objective's total return was 24.40% and 12.30%, respectively. As of
December 31, 1999, the Fund had a 30-day SEC yield of 12.9%, a current yield of
11.2%, an average duration of approximately 3.8 years, and a net asset value per
share of $9.31.
Despite unusual volatility in global financial markets over the last six years
and a negative return in 1998, the Fund has returned an average of 11.3%
annually since its March 1994 inception. This underlines the importance and
long-term value of investing through full market cycles. We believe that
OFFITBANK's strategy of focusing on well researched, US dollar-denominated
corporate debt has been the primary factor contributing to our outperformance
over the Lipper Emerging Markets Debt Fund Objective average for the year.
In fact, our analysis reveals that an 11.5% allocation to the OFFIT Emerging
Markets Fund would have added 75 basis points of return to the Lehman Brothers
Aggregate Bond index return for the period since the inception of the Fund
(March 8, 1994 to December 31, 1999), without having added any additional
volatility to the portfolio. This provides another indication of the
diversification benefits of a modest allocation to emerging markets bonds within
a typical global bond portfolio.
Today, the Fund remains invested solely in US dollar-denominated bonds, of which
approximately 80% were invested in Latin American corporate bonds and the
remainder in government bonds from the region. At year end, the country
allocations across Latin America are approximately as follows: Brazil, 47%;
Mexico, 28%; and Argentina, 20%. Cash and accrued interest represent the
remaining 5%.
Emerging markets bonds had a strong total return performance in the fourth
quarter of 1999, as the markets became less concerned with Y2K issues and
focused instead on improving global macroeconomic conditions that favor emerging
markets, and Latin America in particular. Emerging markets bond spreads
tightened by approximately 325 basis points during 1999--275 basis points of the
tightening occurred in the fourth quarter--as growth gradually resumed and
commodity prices stabilized. GDP growth across the primary markets in Latin
America contracted by 0.5% for 1999, but was already rebounding by the fourth
quarter. In contrast, 2000's forecasted average growth in the region is
approximately 3.5% to 4.5%.
In the near term, the Fund's current and SEC yields of 11.2% and 12.9%,
respectively, provide a significant cushion to a moderate increase in interest
rates in the US, Japan and the European Union.
The Fund's investment strategy remains to be invested predominantly in US
dollar-denominated, corporate bonds within Latin America with the flexibility of
investing in broader global emerging markets as compelling fundamentally sound
opportunities present themselves.
Richard M. Johnston Richard C. Madigan
January 19, 2000
10
- -------------
<PAGE>
OFFIT
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFIT Emerging Markets Fund at the trading commencement date of
March 8, 1994 and held through December 31, 1999 as well as the performance of
the J.P. Morgan Latin America Eurobond Index and the J.P. Morgan Emerging
Markets Bond Index+ over the same period. In addition, to provide a comparison
to the overall performance of the various asset classes in which the Fund
invests, the graph below includes a composite of the return of the J.P. Morgan
Emerging Markets Bond Index+, J.P. Morgan Latin America Eurobond Index and the
Lipper Emerging Markets Debt Fund Objective. Past performance is not predictive
of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C>
J.P. Morgan
OFFIT Emerging Lipper Emerging Emerging
Markets Fund Markets Debt Fund Objective Markets Bond Index+
3/8/1994 $250,000 $250,000 $250,000
12/31/1994 $240,114 $221,380 $223,245
12/31/1995 $296,290 $264,063 $283,016
12/31/1996 $374,294 $364,884 $394,257
12/31/1997 $414,750 $416,020 $445,583
12/31/1998 $365,244 $327,773 $381,644
12/31/1999 $466,904 $407,755 $480,771
Total Return One Year Five Years
OFFIT Emerging Markets Fund* 27.81% 14.23%
Composite Index; 50% J.P. Morgan Emerging Markets Bond
Index+
and 50% J.P. Morgan Latin America Eurobond Index 21.89% 15.16%
J.P. Morgan Latin America Eurobond Index 17.80% 13.73%
J.P. Morgan Emerging Markets Bond Index+ 25.97% 16.58%
Lipper Emerging Markets Debt Fund Objective 24.40% 12.99%
<CAPTION>
50% J.P. MORGAN EMERGING
<S> <C> <C>
Markets Bond Index+
J.P. Morgan Latin and 50% J.P. Morgan
America Eurobond Index Latin America Eurobond Index
3/8/1994 $250,000 $250,000
12/31/1994 $223,131 $223,188
12/31/1995 $279,125 $281,070
12/31/1996 $333,644 $363,951
12/31/1997 $370,364 $407,974
12/31/1998 $360,469 $371,056
12/31/1999 $424,626 $452,699
Since Inception
Total Return (March 8, 1994)
OFFIT Emerging Markets Fund* 11.30%
Composite Index; 50% J.P. Morgan Emerging Markets Bond
Index+
and 50% J.P. Morgan Latin America Eurobond Index 10.71%
J.P. Morgan Latin America Eurobond Index 9.51%
J.P. Morgan Emerging Markets Bond Index+ 11.86%
Lipper Emerging Markets Debt Fund Objective 8.75%
</TABLE>
* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. Without
waiver of fees, total return would have been lower.
11
-------------
<PAGE>
OFFIT
EMERGING MARKETS FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------
CORPORATE BONDS (80.8%)
BUILDING MATERIALS (6.2%)
MEXICO (6.2%)
Cemex International Capital LLC 9.66%, 11/29/49....... $ 5,300,000 $ 5,194,000
Internacional de Ceramica S.A., 9.75%, 08/01/02....... 7,150,000 5,577,000
------------
10,771,000
------------
CABLE (4.5%)
ARGENTINA (3.4%)
Cablevision S.A., 13.75%, 05/01/09.................... 6,025,000 5,859,312
------------
BRAZIL (1.1%)
Globo Cabo S.A., 12.625%, 06/18/04.................... 1,913,000 1,927,347
------------
7,786,659
------------
FOOD (9.7%)
ARGENTINA (4.3%)
Mastellone Hermanos S.A., 11.75%, 04/01/08............ 9,275,000 7,420,000
------------
BRAZIL (5.4%)
Arisco Produtos Alimenticios, 10.75%, 05/22/05........ 10,340,000 9,461,100
------------
16,881,100
------------
INDUSTRIAL (9.0%)
MEXICO (9.0%)
Sanluis Corp. S.A., 8.875%, 03/18/08.................. 8,750,000 7,809,375
Vicap S.A., 10.25%, 05/15/02.......................... 750,000 721,875
Vicap S.A., 11.375%, 05/15/07......................... 7,800,000 7,176,000
------------
15,707,250
------------
INFRASTRUCTURE (2.2%)
ARGENTINA (2.2%)
Cia Latino Americana, 11.625%, 06/01/04............... 6,050,000 3,872,000
------------
MEDIA (7.3%)
BRAZIL (7.3%)
Globo Communicacoes Participacoes, 10.50%, 12/20/06... 3,250,000 2,811,250
Globo Communicacoes Participacoes, 10.625%,
12/05/08............................................. 5,720,000 4,854,850
RBS Participacoes S.A., 11.00%, 04/01/07.............. 5,900,000 5,000,250
------------
12,666,350
------------
OIL AND GAS (5.8%)
ARGENTINA (1.5%)
Perez Companc S.A., 9.00%, 05/01/06................... 2,850,000 2,536,500
------------
BRAZIL (4.3%)
Cia Petrolifera Marlim, 13.125%, 12/17/04............. 7,250,000 7,467,500
------------
10,004,000
------------
PACKAGING (4.2%)
MEXICO (4.2%)
Grupo Industrial Durango, 12.625%, 08/01/03........... 7,315,000 7,260,138
------------
PETROCHEMICALS (3.8%)
BRAZIL (3.8%)
Copene Petroquimica do Nordeste S.A., 9.00%,
06/25/07............................................. 4,395,000 4,043,400
OPP Petroquimica S.A., 11.00%, 10/29/04............... 500,000 440,000
Trikem S.A., 10.625%, 07/24/07........................ 3,100,000 2,170,000
------------
6,653,400
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
- -------------
<PAGE>
OFFIT
EMERGING MARKETS FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
RETAIL (1.8%)
ARGENTINA (1.8%)
Disco S.A., 9.125%, 05/15/03.......................... $ 1,200,000 $ 1,086,000
Disco S.A., 9.875%, 05/15/08.......................... 2,400,000 2,094,000
------------
3,180,000
------------
STEEL (13.7%)
ARGENTINA (3.1%)
Acindar, 11.25%, 02/15/04............................. 7,000,000 5,390,000
------------
BRAZIL (6.1%)
CSN Iron S.A., 9.125%, 06/01/07....................... 10,000,000 8,337,500
Metalurgica Gerdau S.A., 11.125%, 05/24/04............ 2,250,000 2,205,000
------------
10,542,500
------------
MEXICO (4.5%)
Hylsa S.A. de C.V., 9.25%, 09/15/07................... 8,860,000 7,841,100
------------
23,773,600
------------
TELECOMMUNICATIONS (6.8%)
ARGENTINA (2.7%)
Impsat Corp., 12.125%, 07/15/03....................... 2,000,000 1,830,000
Telefonica de Argentina, 9.125%, 05/07/08............. 3,150,000 2,732,625
------------
4,562,625
------------
MEXICO (4.1%)
Alestra S.A. de C.V., 12.625%, 05/15/09............... 7,175,000 7,210,875
------------
11,773,500
------------
UTILITIES (5.8%)
BRAZIL (5.8%)
COPEL, 9.75%, 05/02/05................................ 2,750,000 2,626,250
Furnas Centrais Electricas S.A., 9.00%, 05/23/05...... 1,200,000 1,134,000
SABESP, 10.00%, 07/28/05.............................. 7,390,000 6,281,500
------------
10,041,750
------------
TOTAL CORPORATE BONDS (COST $148,335,463)............. 140,370,747
------------
FOREIGN GOVERNMENTS (14.4%)
SOVEREIGN DEBT (14.4%)
ARGENTINA (0.8%)
Republic of Argentina, 11.75%, 04/07/09............... 1,400,000 1,395,100
------------
BRAZIL (13.6%)
Republic of Brazil, 11.625%, 04/15/04................. 17,000,000 16,991,500
Republic of Brazil EI, Floating Rate Notes, 6.938%,
04/15/06............................................. 7,614,000(1) 6,676,717
------------
23,668,217
------------
TOTAL FOREIGN GOVERNMENTS (COST $23,527,580).......... 25,063,317
------------
RIGHTS/WARRANTS (0.0%)
BANKS (0.0%)
ARGENTINA (0.0%)
Banco Hipotecario..................................... 18,000 2,700
------------
TOTAL RIGHTS/WARRANTS (COST $10,800).................. 2,700
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
-------------
<PAGE>
OFFIT
EMERGING MARKETS FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (3.7%)
UNITED STATES (3.7%)
Bank of New York Repurchase Agreement, 4.00%, 01/03/00
(dated 12/31/99; proceeds $6,326,208, collaterized by
$6,305,000 U.S. Treasury Notes 5.875% due 10/31/01,
valued at $6,390,720).................................. $ 6,324,100 $ 6,324,100
------------
TOTAL REPURCHASE AGREEMENT (COST $6,324,100)............ 6,324,100
------------
TOTAL INVESTMENTS (COST $178,197,943)(+) -- 98.9%....... 171,760,864
OTHER ASSETS IN EXCESS OF LIABILITIES 1.1%.............. 1,963,174
------------
TOTAL NET ASSETS -- 100.0%.............................. $173,724,038
============
</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 ................. $ 5,074,246
Unrealized depreciation ................. (11,511,325)
------------
Net unrealized depreciation ............. $ (6,437,079)
============
</TABLE>
(1) Interest rate in effect at December 31, 1999.
Country Diversification (as a percentage of Total Investments):
<TABLE>
<S> <C>
Argentina ............................... 19.92%
Brazil ................................. 47.99%
Mexico ................................. 28.41%
United States .......................... 3.68%
-----
100.00%
-----
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
- -------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------
The year-to-date performance of the OFFIT Latin America Equity Fund through
December 31, 1999 was 52.76%. For the quarter ending December 31, 1999 the Fund
generated a total return of 43.77%. As of December 31, 1999, the Fund had a net
asset value per share of $11.08.
As of December 31, 1999, the Fund remained diversified across the three largest
economies in Latin America: Brazil (54%); Mexico (36%); and Argentina (8%). The
Fund was invested across 11 industries with the largest allocations to
Telecommunications (23%), Retail (15%), Media (11%), and Iron/Steel (11%).
Latin American equity markets had strong total return performance in the fourth
quarter of 1999 as the markets became less concerned with Y2K issues and focused
instead on companies' improving fundamentals, attractive valuations, and
strengthening macroeconomic conditions in Latin America. Additionally, GDP
growth across the primary markets in Latin America contracted by 0.5% in 1999;
in contrast, 2000 forecasted average growth in the region is 3.5% to 4.5%.
The strong performance of the fourth quarter was led by "knowledge-based" and
financial sectors--telecommunications, media, and banking--as companies in these
sectors announced their Internet and e-commerce strategies.
We believe that the significantly improving macroeconomic outlook for the year
2000 accompanied by attractive valuations and expectations of high earnings
growth, will drive investment returns this year. Under this scenario, we think
that our philosophy of investing in companies with solid earnings growth and
strong underlying business franchises at attractive valuations will benefit the
performance of the Fund. Our assumption is that if the companies that we have
focused on deliver the expected earnings, equity valuations will expand
accordingly.
Richard M. Johnston
January 19, 2000
15
-------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFIT Latin America Equity Fund at the trading commencement date of
February 13, 1996 and held through December 31, 1999 as well as the performance
of the ING Barings Emerging Markets--Latin America Equity Index. Past
performance is not predictive of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
2/13/1996 OFFIT LATIN AMERICAN ING BARINGS EMERGING
EQUITY FUND MARKETS-LATIN AMERICA
$250,000 EQUITY INDEX
$250,000
<S> <C> <C> <C>
6/30/1996 $271,686 $260,942
12/31/1996 $308,425 $267,341
6/30/1997 $408,202 $375,022
12/31/1997 $383,042 $343,192
6/30/1998 $302,813 $277,284
12/31/1998 $203,155 $221,737
6/30/1999 $239,695 $280,608
12/31/1999 $310,298 $342,814
Since Inception
Total Return One Year (February 13, 1996)
OFFIT Latin America Equity Fund* 52.76% 5.67%
ING Barings Emerging
Markets-Latin America Equity Index 54.60% 7.86%
</TABLE>
* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. Without
waiver of fees, total return would have been lower.
16
- -------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
COMMON STOCKS (44.7%)
BANKS (2.7%)
ARGENTINA (2.7%)
Banco de Galicia y Buenos Aires S.A. de C.V -- ADR.... 32,157 $ 637,110
-----------
BEVERAGES (1.2%)
MEXICO (1.2%)
Coca-Cola Femsa S.A. -- ADR........................... 16,800 295,050
-----------
BREWERY (3.0%)
MEXICO (3.0%)
Grupo Modelo S.A. de C.V. Series C.................... 262,100 719,219
-----------
BUILDING MATERIALS (4.9%)
MEXICO (4.9%)
Cemex S.A. de C.V. -- ADR*............................ 42,299 1,179,085
-----------
ENTERTAINMENT (2.2%)
MEXICO (2.2%)
Corporacion Interamericana de Entretenimiento S.A.
Class B*............................................. 131,939 527,060
-----------
FOOD (1.8%)
MEXICO (1.8%)
Grupo Industrial Bimbo S.A. de C.V. Series A*......... 191,730 427,978
-----------
IRON & STEEL (6.4%)
ARGENTINA (0.2%)
Acindar *............................................. 25,000 40,006
-----------
BRAZIL (4.0%)
Companhia Siderurgica Nacional S.A.................... 24,790 960,587
-----------
MEXICO (2.2%)
Hylsamex S.A.......................................... 120,000 352,084
Industrias CH S.A. Series B*.......................... 69,300 183,581
-----------
535,665
-----------
1,536,258
-----------
OIL/GAS (1.4%)
ARGENTINA (1.4%)
Perez Companc S.A. Class B............................ 65,550 335,663
-----------
PAPER PRODUCTS (1.2%)
MEXICO (1.2%)
Kimberly Clark de Mexico S.A de C.V. Class A.......... 75,000 292,876
-----------
RETAIL (7.5%)
MEXICO (7.5%)
Cifra S.A. de C.V. Series V*.......................... 389,757 781,561
Organizacion Soriana S.A. de C.V. Class B............. 219,200 1,006,353
-----------
1,787,914
-----------
TELECOMMUNICATIONS -- WIRED (6.8%)
ARGENTINA (0.4%)
Telefonica de Argentina S.A. Class B -- ADR........... 2,920 90,155
-----------
MEXICO (6.4%)
Carso Global Telecommunication Class A................ 59,292 556,938
Telefonos de Mexico S.A. Series L -- ADR.............. 8,600 967,500
-----------
1,524,438
-----------
1,614,593
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
-------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
TELEVISION BROADCASTING (5.6%)
MEXICO (5.6%)
Grupo Televisa S.A. -- GDR............................ 19,900 $ 1,358,175
-----------
TOTAL COMMON STOCKS (COST $8,182,535)................. 10,710,981
-----------
PREFERRED STOCKS (53.7%)
BANKS (8.4%)
BRAZIL (8.4%)
Banco Bradesco S.A. Class A........................... 49,685 389,723
Banco Itau S.A. Class A............................... 9,530 817,686
Unibanco Class A -- GDR............................... 26,740 805,543
-----------
2,012,952
-----------
CABLE NETWORKS (3.5%)
ARGENTINA (3.5%)
Globo Cabo S.A. -- ADR*............................... 46,200 831,600
-----------
IRON & STEEL (4.8%)
BRAZIL (4.8%)
Gerdau Metalurgica S.A................................ 5,000 240,797
Gerdau S.A. -- ADR.................................... 16,500 434,156
Gerdau S.A. Class A................................... 17,600 467,645
-----------
1,142,598
-----------
METALS & MINING (5.0%)
BRAZIL (5.0%)
Companhia Vale do Rio Doce S.A. Class A............... 43,250 1,197,066
-----------
OIL/GAS (6.6%)
BRAZIL (6.6%)
Petroleo Brasileiro S.A. Class A...................... 6,160 1,568,558
-----------
RETAIL (7.1%)
BRAZIL (7.1%)
Companhia Brasileira de Distribuicao Grupo Pao de
Acucar Class A....................................... 51,436 1,708,364
-----------
TELECOMMUNICATIONS (8.2%)
BRAZIL (8.2%)
Embratel Participacoes S.A. Class A................... 31,200 803,100
Telecomunicacoes Brasileiras S.A. -- ADR.............. 1,000 128,500
Telecomunicacoes Brasileiras S.A...................... 7,800 1,025,464
-----------
1,957,064
-----------
TELECOMMUNICATIONS -- WIRED (2.3%)
BRAZIL (2.3%)
Telesp Participacoes.................................. 6,402 150,634
Telesp Participacoes S.A. -- ADR...................... 5,600 136,850
Telesp Participacoes S.A. Class A..................... 10,580 256,520
-----------
544,004
-----------
TELECOMMUNICATIONS -- WIRELESS (6.1%)
BRAZIL (6.1%)
Telemig Celular S.A. Class C.......................... 50 904
Telerj Celular S.A. Class B........................... 1 27
Telesp Celular Participacoes S.A. Class A............. 10,810 191,486
Telesp Celular Participacoes S.A. -- ADR.............. 7,595 321,838
Telesp Celular S.A. Class B........................... 12,126 959,861
-----------
1,474,116
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
- -------------
<PAGE>
OFFIT
LATIN AMERICA EQUITY FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (CONTINUED)
UTILITIES (1.7%)
BRAZIL (1.7%)
Companhia Paranaense de Energia Class B*.............. 42,900 $ 415,583
-----------
TOTAL PREFERRED STOCKS (COST $8,687,896).............. 12,851,905
-----------
RIGHTS/WARRANTS (0.0%)
BANKING (0.0%)
BRAZIL (0.0%)
Banco Bradesco Rights................................. 3,226 832
-----------
METALS & MINING (0.0%)
BRAZIL (0.0%)
Companhia Vale do Rio Doce S.A........................ 40,400 0
-----------
TOTAL RIGHTS/WARRANTS (COST $0)....................... 832
-----------
REPURCHASE AGREEMENT (1.7%)
UNITED STATES (1.7%)
Chase Manhattan Bank Repurchase Agreement, 2.00%,
01/04/00 (dated 12/31/99; proceeds $395,663,
collateralized by $410,000 U.S. Treasury Note 4.50% due
09/30/00, valued at $405,452).......................... $ 395,575 395,575
-----------
TOTAL REPURCHASE AGREEMENT (COST $395,575).............. 395,575
-----------
TOTAL INVESTMENTS (COST $17,266,006)(+) -- 100.1%...... 23,959,293
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%)............ (14,542)
-----------
TOTAL NET ASSETS -- 100.0%.............................. $23,944,751
===========
</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 .................. $7,015,272
Unrealized depreciation .................. (321,985)
----------
Net unrealized appreciation .............. $6,693,287
==========
</TABLE>
* Denotes non-income producing security.
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
Country Diversification (as a percentage of Total Investments):
<TABLE>
<S> <C>
Argentina .................................... 8.08%
Brazil ....................................... 54.18%
Mexico ....................................... 36.09%
United States ................................ 1.65%
------
100.00%
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
-------------
<PAGE>
OFFIT
NEW YORK MUNICIPAL FUND
- --------------------------------------------------------------------------------
Although the municipal market outperformed the high grade taxable market
throughout 1999, at year-end most municipal investors were faced with negative
returns. The magnitude of the loss was correlated to the maturity: the longer
the bond, the greater the loss. Although income offset most of the Fund's price
decline in 1999, the total return net of fees and expenses for 1999 was a
disappointing -0.65%. By comparison, the Lehman 5 and 7 year Municipal Indices
returned 0.74% and -0.14%, respectively. For the high grade fixed income
markets, the 1999 municipal returns do not look so pallid when compared to the
- -3.5% after-tax (39.6%) return of a five-year U.S. Treasury note. Since the
Fund's inception on April 3, 1995, the annualized return net of fees and
expenses was 5.23%. The Lehman Brothers 5 Year Municipal Index's annualized
return was 5.14% for the same time period.
For the municipal market in 1999, the continued low inflation rate, improving
credit fundamentals, and a decline in new supply could not offset the negative
impact of sharply increasing Treasury yields and a stronger economy. Although
municipal yields did not match the ten-year Treasury yield's increase of 180
basis points, ten-year municipal yields did increase 95 basis points from 4.14%
on December 31, 1998 to 5.09% on December 31, 1999. The higher yields are
reflected in the Fund's 30-day SEC yield of 4.61% at year-end. Consequently, we
are beginning 2000 with a SEC yield of 75 basis points higher than year-end
1998's 3.85% yield. This higher yield environment will eventually provide
opportunities for reinvestment.
We continue to focus on stable and improving credits, many of which have
benefited from the strengthening of New York State's economy during the past few
years. Wall Street's good fortunes have particularly impacted our largest New
York holdings--New York State, New York City, NYS Local Government Assistance
Corporation (LGAC's), and MAC's--all credits that depend on sales and personal
income taxes. The region's strength is reflected in S&P's upgrade of New York
State from A to A+ in November 1999. Excluded from the portfolio are the
marginal and declining credits. Specifically, we have avoided Nassau County. Our
avoidance of innovative and risky financing is further exemplified by our
decision not to purchase New York City's tobacco bonds, which were issued under
the Tobacco Settlement Asset Securitization Corporation (TSASC).
After a difficult fixed income year which is more disheartening in light of the
healthy returns of some widely followed stock indices, the logical question is
"why bonds?" There are four primary reasons for an individual to own municipal
bonds:
- The lower volatility provides an anchor that is particularly valuable when
equity markets are less rewarding.
- The tax-free income stream is dependable.
- Preservation of principal, as bonds are interest-bearing obligations which
stipulate the repayment of principal.
- Finally, bonds provide a steady return when viewed over long-term time
horizons, e.g., the Fund's annualized after-tax return since inception is
greater than 5%.
Looking forward, we believe that today's market discounts many negatives.
Although the bond market may be vulnerable in the short term, we are confident
that the resolve of the Federal Reserve Board and many central banks around the
world is to raise rates to extinguish inflation before it gathers steam. Higher
short-term interest rates will eventually slow the economy and result in a lower
rate environment.
Michael Pietronico Carolyn N. Dolan
January 19, 2000
20
- -------------
<PAGE>
OFFIT
NEW YORK MUNICIPAL FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFIT New York Municipal Fund at the trading commencement date of
April 3, 1995 and held through December 31, 1999 as well as the performance of
the Lehman Brothers 5 Year Municipal Bond Index over the same period. Past
performance is not predictive of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lehman Brothers
OFFIT New York 5 Year Municipal
Municipal Fund Bond Index
4/3/1995 $250,000 $250,000
6/30/1995 $256,160 $256,666
12/31/1995 $270,276 $268,200
6/30/1996 $269,954 $269,680
12/31/1996 $280,342 $279,570
6/30/1997 $288,231 $286,303
12/31/1997 $302,386 $297,413
6/30/1998 $309,555 $304,233
12/31/1998 $320,642 $314,803
6/30/1999 $317,090 $314,164
12/31/1999 $318,552 $317,146
Since Inception
Total Return One Year (April 3, 1995)
OFFIT New York Municipal Fund* (0.65%) 5.23%
Lehman Brothers 5 Year Municipal Index 0.74% 5.14%
</TABLE>
* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. Without
waiver of fees, total return would have been lower.
21
-------------
<PAGE>
OFFIT
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------------
FLOATING RATE NOTES (3.7%)
TRANSPORTATION REVENUE (2.8%)
New York State Thruway Authority (FGIC), 4.90%,
01/01/24, 1-Day Notes*................................. $ 400,000 $ 400,000
Port Authority of New York & New Jersey Bonds Series 86,
4.90%, 06/01/20*....................................... 1,500,000 1,500,000
-----------
1,900,000
-----------
WATER & SEWER REVENUE (0.9%)
New York City Municipal Water Financing Authority Water
& Sewer System Revenue Bonds Series G (FGIC), 4.70%,
06/15/24, 1-Day Notes*................................. 600,000 600,000
-----------
TOTAL FLOATING RATE NOTES (COST $2,500,000)............. 2,500,000
-----------
MUNICIPAL BONDS (92.9%)
EDUCATION REVENUE (7.4%)
New York State Dormitory Authority Revenue Bonds New
York University (MBIA), 5.50%, 07/01/10................ 2,000,000 2,030,000
New York State Dormitory Authority Revenue Bonds
Columbia University, 5.00%, 07/01/02................... 500,000 505,625
New York State Dormitory Authority Revenue Bonds
Columbia University, 5.25%, 07/01/06................... 500,000 510,625
New York State Dormitory Authority Revenue Bonds Cornell
University, 4.80%, 07/01/03............................ 250,000 252,187
New York State Dormitory Authority Revenue Bonds Cornell
University, 5.25%, 07/01/07............................ 350,000 355,250
New York State Dormitory Authority Revenue Bonds New
York University (MBIA), 5.50%, 07/01/04................ 390,000 401,700
New York State Dormitory Authority Revenue Bonds
Rockefeller University, 5.00%, 07/01/10................ 500,000 491,875
New York State Dormitory Authority Revenue Bonds Vassar
College, 5.00%, 07/01/09............................... 500,000 488,750
-----------
5,036,012
-----------
GENERAL OBLIGATIONS (31.7%)
Albany County General Obligation Bonds (FGIC), 4.80%,
10/01/02............................................... 850,000 854,250
Albany County General Obligation Bonds Series B (FGIC),
5.60%, 03/15/07........................................ 300,000 310,500
Albany County General Obligation Bonds Series B (FGIC),
5.60%, 03/15/09........................................ 400,000 411,000
Dutchess County General Obligation Bonds, 4.90%,
08/01/04............................................... 215,000 216,344
Hempstead General Obligation Bonds (AMBAC), 5.00%,
02/15/09............................................... 500,000 493,750
Hempstead General Obligation Bonds (AMBAC), 5.00%,
02/15/10............................................... 1,000,000 975,000
Hempstead General Obligation Bonds Series A (FGIC),
5.00%, 11/15/08........................................ 525,000 521,062
Hempstead General Obligation Bonds Series B (FGIC),
5.625%, 02/01/04....................................... 140,000 144,375
Islip General Obligation Bonds (FGIC), 5.00%,
07/15/10............................................... 1,000,000 973,750
Monroe County General Obligation Bonds, 4.25%,
03/01/09............................................... 1,500,000 1,380,000
Monroe County General Obligation Bonds, 5.50%,
06/01/09............................................... 300,000 306,375
New Castle General Obligation Bonds, 4.75%, 06/01/08.... 210,000 204,750
New York City General Obligation Bonds Series A, 4.75%,
08/01/03............................................... 2,000,000 1,987,500
New York City General Obligation Bonds Series D, 5.75%,
08/01/07............................................... 325,000 334,750
New York City General Obligation Series F (FGIC), 5.25%,
08/01/12............................................... 1,500,000 1,464,375
New York City General Obligation Bonds Series G, 5.35%,
08/01/13............................................... 1,025,000 989,125
New York City General Obligation Bonds Series I, 5.875%,
03/15/11............................................... 980,000 1,004,500
New York City General Obligation Bonds Series I, 6.00%,
04/15/08............................................... 805,000 840,219
New York City General Obligation Series K, 4.875%,
08/01/08............................................... 1,500,000 1,426,875
New York State General Obligation Bonds Series A, 5.70%,
03/15/10............................................... 400,000 409,000
Onondaga County General Obligation Bonds, 5.00%,
05/01/11............................................... 1,000,000 965,000
Ontario County General Obligation Bonds (FGIC), 5.00%,
08/15/02............................................... 250,000 252,500
Orange County General Obligation Bonds, 6.00%,
11/15/08............................................... 470,000 498,200
Oyster Bay General Obligation Bonds (MBIA), 5.70%,
02/15/07............................................... 360,000 374,400
Putnam County General Obligation Bonds, 4.15%,
04/15/05............................................... 695,000 668,937
Rochester General Obligation Bonds (FGIC), 5.00%,
10/01/03............................................... 450,000 455,062
Rockland County General Obligation Bonds (FGIC), 5.50%,
10/15/13............................................... 375,000 374,531
Schenectady County General Obligation Bonds, 6.00%,
08/15/05............................................... 200,000 210,500
Westchester County General Obligation Bonds, 5.00%,
11/01/06............................................... 2,585,000 2,601,156
-----------
21,647,786
-----------
HEALTH CARE (1.0%)
New York State Medical Care Facility Finance Authority
(FHA), 6.20%, 08/15/14................................. 650,000 697,937
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
- -------------
<PAGE>
OFFIT
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
HOUSING REVENUE (5.4%)
New York State Mortgage Agency Revenue Bonds Series
37-A, 5.85%, 10/01/06.................................. $ 125,000 $ $129,688
New York State Mortgage Agency Revenue Bonds Series
37-A, 5.95%, 04/01/07.................................. 100,000 103,500
New York State Mortgage Agency Revenue Bonds Series 46
(AMT), 5.75%, 04/01/04................................. 200,000 205,000
New York State Mortgage Agency Revenue Bonds Series 50
(AMT), 5.80%, 10/01/06................................. 200,000 206,500
New York State Mortgage Agency Revenue Bonds Series 53,
5.35%, 04/01/07........................................ 240,000 242,700
New York State Mortgage Agency Revenue Bonds Series 61,
5.60%, 10/01/11........................................ 650,000 650,813
New York State Mortgage Agency Revenue Bonds Series 67
(AMT), 5.30%, 10/01/10................................. 585,000 570,375
New York State Mortgage Agency Revenue Bonds Series 69
(AMT), 4.90%, 04/01/08................................. 1,000,000 967,500
New York State Mortgage Agency Revenue Bonds Series 77,
5.90%, 10/01/13........................................ 610,000 610,762
-----------
3,686,838
-----------
POLLUTION CONTROL REVENUE (2.8%)
New York Environmental Pollution Corporation Pollution
Control Revenue Series A, 5.40%, 08/15/11.............. 1,920,000 1,922,400
-----------
POWER AUTHORITY REVENUE (7.9%)
Long Island Power Authority Revenue Bonds, 5.50%,
12/01/08............................................... 1,595,000 1,626,900
Long Island Power Authority Revenue Bonds, 5.25%,
04/01/10............................................... 1,725,000 1,714,219
New York State Power Authority Revenue Bonds Series A,
5.00%, 02/15/04........................................ 1,050,000 1,060,500
New York State Power Authority Revenue Bonds Series A,
5.00%, 02/15/05........................................ 1,000,000 1,007,500
-----------
5,409,119
-----------
PREREFUNDED (1.8%)
New York Environmental Facilities Corporation Pollution
Control Revenue, Prerefunded 09/15/04, 5.40%,
09/15/07............................................... 750,000 769,687
New York City Series I, Prerefunded 03/15/06, 5.875%,
03/15/11............................................... 20,000 21,125
Niagara Falls Bridge Commission New York Revenue Bonds
(FGIC), Prerefunded 10/01/02, 6.125%, 10/01/19......... 415,000 438,344
-----------
1,229,156
-----------
SALES TAX REVENUE (6.8%)
Grand Central District Management Association Inc., New
York Special Assessment Bonds, 6.50%, 01/01/22......... 530,000 558,488
Municipal Assistance Corp. for City of New York Revenue
Bonds Series D, 5.25%, 07/01/03........................ 700,000 712,250
Municipal Assistance Corp. for City of New York Revenue
Bonds Series I, 6.25%, 07/01/07........................ 750,000 803,438
New York State Local Government Assistance Corp. Revenue
Bonds Series A, 5.50%, 04/01/04........................ 2,500,000 2,568,750
-----------
4,642,926
-----------
TRANSPORTATION REVENUE (21.4%)
Metropolitan Transit Authority Revenue Bonds Series A
(MBIA), 5.00%, 07/01/09................................ 800,000 785,000
Metropolitan Transit Authority Revenue Bonds Series A
(MBIA), 5.25%, 04/01/09................................ 300,000 300,000
Metropolitan Transit Authority Revenue Bonds Series B-1
(AMBAC), 5.00%, 07/01/10............................... 500,000 486,875
New York State Bridge Authority Revenue Bonds, 5.00%,
01/01/11............................................... 1,500,000 1,449,375
New York State Thruway, Highway & Bridge Trust Fund
Bonds Series A (FGIC), 5.50%, 04/01/11................. 1,610,000 1,630,125
New York State Thruway, Highway & Bridge Trust Fund
Bonds Series B (FGIC), 5.375%, 04/01/11................ 2,850,000 2,850,000
New York State Thruway, Highway & Bridge Trust Fund
Bonds Series B (FGIC), 5.80%, 04/01/07................. 600,000 633,000
New York State Thruway, Highway & Bridge Trust Fund
Bonds Series C (FGIC), 5.75%, 01/01/09................. 500,000 526,875
Port Authority of New York & New Jersey Bonds
Series 119 (FGIC), 5.00%, 09/15/04..................... 1,500,000 1,503,750
Port Authority of New York & New Jersey Bonds
Series 112, 5.00%, 12/01/09............................ 1,250,000 1,215,625
Triborough Bridge & Tunnel Authority General Purpose
Bonds Series B, 5.00%, 01/01/09........................ 700,000 690,375
Triborough Bridge & Tunnel Authority General Purpose
Bonds Series B, 5.75%, 01/01/05........................ 1,000,000 1,038,750
Triborough Bridge & Tunnel Authority Special Obligation
Bonds Series A (FGIC), 5.25%, 01/01/13................. 1,500,000 1,453,125
-----------
14,562,875
-----------
WATER & SEWER REVENUE (6.7%)
Erie County Water Authority Improvement Revenue Bonds,
5.75%, 12/01/08........................................ 600,000 613,500
New York City Municipal Water Financing Authority Water
& Sewer System Revenue Bonds Series A, 5.35%,
06/15/09............................................... 225,000 223,875
New York City Municipal Water Financing Authority Water
& Sewer System Revenue Bonds Series B, 5.20%,
06/15/05............................................... 500,000 505,000
New York City Municipal Water Financing Authority Water
& Sewer System Revenue Bonds Series D, 5.00%,
06/15/05............................................... 1,305,000 1,305,000
New York State Environmental Facilities Corporation
Pollution Control Revenue Bonds, 5.40%, 05/15/06....... 250,000 257,813
New York State Environmental Facilities Corporation
State Clean Water & Drinking Revenue Bonds Series F,
5.00%, 06/15/05........................................ 1,000,000 1,006,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
-------------
<PAGE>
OFFIT
NEW YORK MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
WATER & SEWER REVENUE (CONTINUED)
Suffolk County Water Revenue Bonds (MBIA), 5.10%,
06/01/05............................................... $ 250,000 $ 252,813
Suffolk County Water Revenue Bonds (MBIA), 5.10%,
06/01/06............................................... 400,000 403,000
-----------
4,567,251
-----------
TOTAL MUNICIPAL BONDS (COST $64,459,177)................ 63,402,300
-----------
MONEY MARKET FUNDS (1.6%)
Dreyfus NY Municipal Money Market Fund.................. 555,269 555,269
The J.P. Morgan Institutional Service Tax Exempt Cash
Fund................................................... 555,269 555,269
-----------
TOTAL MONEY MARKET FUNDS (COST $1,110,538).............. 1,110,538
-----------
TOTAL INVESTMENTS (COST $68,069,715)(+) -- 98.2%........ 67,012,838
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.8%........... 1,215,173
-----------
TOTAL NET ASSETS -- 100.0%.............................. $68,228,011
===========
</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 .................. $ 158,093
Unrealized depreciation .................. (1,225,694)
-----------
Net unrealized depreciation .............. $(1,067,601)
===========
</TABLE>
* Interest Rate in effect at December 31, 1999.
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 Insuance Association.
The accompanying notes are an integral part of the financial statements.
24
- -------------
<PAGE>
OFFIT
CALIFORNIA MUNICIPAL FUND
- --------------------------------------------------------------------------------
The total return for the OFFIT California Municipal Fund in the second half of
1999 was 0.16%, bringing the return to -0.77% for the full year and 12.82% since
the Fund's inception on April 2, 1997. The Lehman 5 Year Municipal Index
returned 0.95% in the second half of 1999, 0.74% for the year and 13.47% since
inception. The Fund's net asset value was $10.06 on December 31, 1999, compared
to $10.54 on December 31, 1998. The 30-day SEC yield for the Fund at year-end
was 4.40%.
In 1999, the world began a synchronized economic rebound from the emerging
markets crisis of 1997-98 and many financial markets reversed the performance of
the prior year. U.S. Treasurys and high grade municipals, which had been a place
of refuge during the crisis, had a difficult year while emerging market bonds
and stocks soared. U.S. equity markets hit record highs as all the major market
benchmarks posted double-digit returns.
Yet the same economic forces that propelled these markets higher--namely central
bank easing in late 1998 and a global economic rebound in 1999--stoked
investors' fears of inflation and sent interest rates on investment grade
securities higher. As a result, many sectors of the investment grade market
finished the year with negative returns. Municipal bonds outperformed their
taxable brethren on both a pre-tax and after-tax basis because of improving
municipal credit quality brought on by the stronger economy. California enjoyed
particularly robust growth, which increased budget surpluses, reduced the need
for social expenditures and reduced the need and urgency for borrowing. A partly
related decline in new issue supply also supported the municipal market.
The Federal Reserve raised interest rates three times in 1999, returning
short-term interest rates to the levels extant before the 1998 financial crisis
began. Although inflation in the United States remains extremely low by recent
standards, it has begun to increase. The CPI, which rose by about 1.5% in 1998,
increased during 1999 by about 2.5%. Despite this increase and a low
unemployment rate, wage pressures have remained modest. In the face of continued
U.S. economic growth and a healthy global economy, fixed income markets have
already priced an imminent 50 basis point increase in the Fed Funds rate.
If central banks around the world raise interest rates and effectively
extinguish inflation before it escalates, global bond markets would likely
respond in a very favorable fashion. Higher interest rates may have already
begun to take the steam out of global equity markets, but their macroeconomic
bite may not be felt until later in the year. Therefore, the bond market may
remain vulnerable in the short term.
Within this economic environment, the Fund's duration was increased modestly
during the second half of 1999 from 5.5 years to 5.7 years. The credit quality
remains very high at AA2.
John H. Haldeman, Jr. Michael Pietronico
January 19, 2000
25
-------------
<PAGE>
OFFIT
CALIFORNIA MUNICIPAL FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFIT California Municipal Fund at the trading commencement date of
April 2, 1997 and held through December 31, 1999 as well as the performance of
the Lehman Brothers 5 Year Municipal Bond Index over the same period. Past
performance is not predictive of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OFFIT CALIFORNIA LEHMAN BROTHERS
<S> <C> <C>
Municipal Fund 5 Year Municipal Bond Index
4/2/1997 $250,000 $250,000
6/30/1997 $257,065 $256,095
9/30/1997 $262,849 $261,581
12/31/1997 $267,857 $266,033
3/31/1998 $270,966 $269,126
6/30/1998 $273,633 $272,133
9/30/1998 $283,035 $279,292
12/31/1998 $284,310 $281,588
3/31/1999 $287,149 $284,545
6/30/1999 $281,656 $281,016
9/30/1999 $283,933 $283,663
12/31/1999 $282,125 $283,684
Since Inception
Total Return One Year (April 2, 1997)
OFFIT California Municipal Fund* (0.77%) 4.49%
Lehman Brothers 5 Year Municipal Bond Index 0.74% 4.70%
</TABLE>
* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. Without
waiver of fees, total return would have been lower.
26
- -------------
<PAGE>
OFFIT
CALIFORNIA MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
FLOATING RATE NOTES (2.2%)
POLLUTION CONTROL REVENUE (2.2%)
California Pollution Control Financing Authority
Pollution Control Revenue Series B, 4.10%,
02/28/08 *............................................ $ 300,000 $ 300,000
-----------
TOTAL FLOATING RATE NOTES (COST $300,000)............... 300,000
-----------
MUNICIPAL BONDS (94.3%)
EDUCATION REVENUE (12.5%)
California Educational Facilities Authority Revenue
Santa Clara University, 5.30%, 09/01/05................ 175,000 178,500
California Educational Facilities Authority Revenue
Santa Clara University, 5.40%, 09/01/06................ 75,000 76,594
California Educational Facilities Authority Revenue
Stanford University Series J, 5.70%, 11/01/02.......... 500,000 516,250
California State Public Works Revenue Board Lease Series
B, 5.25%, 11/01/12..................................... 500,000 495,625
California State Public Works Revenue Board Lease Series
C, 5.125%, 10/01/12.................................... 450,000 435,937
-----------
1,702,906
-----------
GENERAL OBLIGATIONS (26.3%)
Berkeley, California Series A, 5.55%, 09/01/07.......... 50,000 52,000
California State, 5.00%, 04/01/04....................... 200,000 202,500
California State (FGIC), 5.25%, 10/01/11................ 125,000 125,156
Cotati-Rohnert Park Uniform School District Series D
(FSA), 6.00%, 08/01/04................................. 100,000 104,875
Cupertino Uniform School District Series B (FGIC),
6.125%, 08/01/03....................................... 50,000 52,500
East Bay California Regional Park District, 5.00%,
09/01/11............................................... 300,000 293,250
Fresno, California Uniform School District Series D
(FSA), 5.25%, 08/01/05................................. 300,000 307,125
Los Angeles, California Series A (FGIC), 5.25%,
09/01/11............................................... 500,000 500,000
Palo Alto, California Uniform School District Series B,
5.25%, 08/01/03........................................ 100,000 102,125
Palo Alto, California Uniform School District Series B,
5.25%, 08/01/05........................................ 300,000 307,125
Pasadena, California Uniform School District Series A
(FGIC), 5.00%, 05/01/05................................ 375,000 379,219
San Diego, California Uniform School District Series A
(FGIC), 0.00%, 07/01/08................................ 900,000 578,250
San Francisco, California City and County (FGIC), 5.30%,
06/15/07............................................... 250,000 254,375
San Francisco, California City and County (MBIA), 5.30%,
06/15/07............................................... 175,000 176,969
Santa Monica - Malibu Uniform School District, 5.00%,
08/01/08............................................... 150,000 149,812
-----------
3,585,281
-----------
HOUSING REVENUE (1.4%)
California Housing Finance Agency Revenue Home Mortgage
Series B (AMT) (MBIA), 5.15%, 08/01/05................. 75,000 75,094
California Housing Finance Agency Single Family Mortgage
Issue B-2 (AMT), 5.20%, 08/01/04....................... 120,000 120,600
-----------
195,694
-----------
POWER AUTHORITY REVENUE (0.8%)
Southern California Public Power San Juan Unit 3
Series A (MBIA), 5.125%, 01/01/25...................... 100,000 101,625
-----------
PREREFUNDED (3.7%)
Puerto Rico Telephone Authority Revenue Bonds Series L,
Prerefunded 01/01/02, 5.75%, 01/01/08.................. 150,000 155,062
Santa Monica - Malibu Uniform School District,
Prerefunded 08/01/03, 5.40%, 08/01/08.................. 250,000 260,000
Santa Monica - Malibu Uniform School District,
Prerefunded 08/01/03, 5.40%, 08/01/10.................. 50,000 52,000
San Francisco City & County Airports Commission
International Airport (AMBAC), Prerefunded 05/01/02,
6.25%, 05/01/11........................................ 30,000 31,725
-----------
498,787
-----------
RECREATION FACILITIES (1.5%)
Los Angeles County California Public Works Financing
Authority Revenue Series A, 5.375%, 10/01/06........... 200,000 206,000
-----------
SALES TAX REVENUE (16.5%)
Contra Costa Transportation Authority Sales Tax Revenue
Series A (FGIC), 5.50%, 03/01/08....................... 50,000 51,062
Los Angeles, California Municipal Improvement
Corporation Lease Revenue Series D (FGIC), 4.25%,
09/01/09............................................... 500,000 461,875
Orange County California Local Transportation Authority
Sales Tax Revenue, 5.50%, 02/15/11..................... 500,000 510,625
Orange County California Local Transportation Authority
Sales Tax Revenue, 5.70%, 02/15/03..................... 350,000 361,375
San Francisco Bay Area Rapid Transportation District
Sales Tax Revenue, 5.25%, 07/01/10..................... 250,000 251,562
San Francisco Bay Area Rapid Transportation District
Sales Tax Revenue, 5.50%, 07/01/05..................... 250,000 258,750
San Mateo County California Transportation District
Sales Tax Revenue (FSA), 5.25%, 06/01/11............... 200,000 199,750
San Mateo County California Transportation District
Sales Tax Revenue Series A (MBIA), 5.00%, 06/01/10..... 165,000 162,731
-----------
2,257,730
-----------
TRANSPORTATION REVENUE (11.2%)
Long Beach, California Harbor Revenue (AMT), 4.60%,
05/15/03............................................... 250,000 248,750
Long Beach, California Harbor Revenue (AMT) (MBIA),
5.75%, 05/15/07........................................ 100,000 103,875
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
-------------
<PAGE>
OFFIT
CALIFORNIA MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
TRANSPORTATION REVENUE (CONTINUED)
Los Angeles, California Department of Airports Refunding
Revenue Series A (FGIC), 5.375%, 05/15/07.............. 300,000 308,250
San Diego, California Open Space Parking Facilities
District, 5.60%, 01/01/05.............................. $ 325,000 $ 336,781
San Francisco City & County Airport Community
International Airport Revenue (MBIA), 5.00%,
05/01/07............................................... 250,000 251,250
San Francisco City & County Airport Revenue Series 6
(AMBAC) (AMT), 6.25%, 05/01/11......................... 200,000 210,500
San Francisco City & County Airport Commission
International Airport (AMBAC), 6.30%, 05/01/11......... 70,000 73,413
-----------
1,532,819
-----------
WATER & SEWER REVENUE (20.4%)
California State Department of Water Resources Series S,
5.00%, 12/01/04........................................ 300,000 304,125
California State Department of Water Resources Series S,
5.00%, 12/01/14........................................ 250,000 233,438
California State Department of Water Resources Series U,
5.00%, 12/01/09........................................ 300,000 298,125
Contra Costa Water District Water Revenue Series G
(MBIA), 6.00%, 10/01/09................................ 50,000 52,875
Long Beach, California Water Revenue Series A (MBIA),
4.35%, 05/01/05........................................ 200,000 195,750
Los Angeles County Sanitation District Financing
Authority Revenue Capital Projects Series A, 5.25%,
10/01/10............................................... 100,000 100,250
Los Angeles, California Department of Water and Power
Revenue, 5.80%, 07/15/04............................... 150,000 156,563
Metropolitan Water Distribution Southern California
Waterworks Revenue Series A, 5.25%, 03/01/13........... 300,000 295,875
Metropolitan Water Distribution Southern California
Waterworks Revenue Series A (MBIA), 5.40%, 07/01/08.... 250,000 255,938
Sacramento County Sanitation District Financing
Authority Revenue, 5.125%, 12/01/13.................... 200,000 193,000
San Diego, California Public Facility Financing
Authority Sewer Revenue (FGIC), 6.00%, 05/15/07........ 500,000 533,125
San Diego, California Water Utilities Fund (FGIC),
4.25%, 08/01/06........................................ 175,000 166,906
-----------
2,785,970
-----------
TOTAL MUNICIPAL BONDS (COST $13,319,528)................ 12,866,812
-----------
MONEY MARKET FUNDS (3.7%)
Dreyfus Tax Exempt Cash Management Money Market Fund.... 252,233 252,233
Federated California Municipal Money Market Fund........ 252,296 252,296
-----------
TOTAL MONEY MARKET FUNDS (COST $504,529)................ 504,529
-----------
TOTAL INVESTMENTS (COST $14,124,057)(+) -- 100.2%....... 13,671,341
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%)............ (26,083)
-----------
TOTAL NET ASSETS -- 100.0%.............................. $13,645,258
===========
</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 ................... $ 11,362
Unrealized depreciation ................... (464,078)
---------
Net unrealized depreciation ............... $(452,716)
=========
</TABLE>
* Interest Rate in effect at December 31, 1999.
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.
28
- -------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
- --------------------------------------------------------------------------------
The total return for The OFFIT National Municipal Fund for 1999 was 0.14%. By
way of comparison, the total returns for the Lehman 5 Year and 7 Year Municipal
Indices were 0.74% and -0.14%. Since its inception on October 20, 1997, the
Fund's annualized return was 4.41%, versus the 3.77% and 3.74% returns of the
Lehman 5 and 7 Year Municipal indices. As measured by Lipper, Inc., the average
total return of Intermediate Municipal Debt Funds was -1.63% versus the National
Fund's 0.14% return. That performance placed the National Municipal Fund 6th out
of 133 funds in Lipper's Intermediate Municipal Fund Index.
The December 31, 1999 net asset value of $10.04 was approximately 1% lower than
the $10.15 net asset value as of June 30, 1999. Reflective of the higher market
yields and lower prices, the 30-day SEC yield rose to 4.66% from 4.08% at
mid-year. The Fund's net assets as of December 31, 1999 totaled approximately
$19.0 million. The duration of the Fund was 6.22 years and the average credit
quality remained AA.
1999 will be remembered as a difficult year for fixed income investments. The
historically high level of consumer confidence related to the low unemployment
rate and the outsized gains in the equity market were the primary problems.
These factors, plus the rebounding of foreign economies, caused the United
States Treasury market to come under consistent selling pressure. The 10-year
Treasury note finished the year yielding 6.42%, up 180 basis points from its
December 31, 1998 closing yield. While inflation has increased moderately on a
year-over-year basis, concern has been mounting in the fixed income markets that
the tight labor markets in the United States will cause wage pressures to grow
and eventually lead inflation higher. The markets believe that the Federal
Reserve will continue raising rates to ensure that inflation does not take hold
in the economy.
Even with issuance down 21% from 1998, the municipal market could not escape the
selling pressure that gripped the bond markets in 1999. While outperforming its
U.S. Treasury counterparts, 10-year municipal AAA yields rose 95 basis points
during the course of the year. The consistent flow of secondary-market selling
by institutions kept the market off-balance for the better part of 1999. In
particular, the property and casualty insurance companies--which in 1998 had
been big buyers of municipal debt--reversed course and exited the market due to
low profitability and declining municipal ratios to Treasurys.
The National Municipal Fund has been able to better weather 1999's consistently
declining prices and rising yields by emphasizing bond structure in the
portfolio. The Fund underweighted lower-coupon bonds, which in a rising rate
environment tend to underperform other higher-coupon debt. Another contributing
factor to the Fund's performance has been the emphasis placed on purchasing
credits that provide superior liquidity characteristics. It is these credits
that we use to position the portfolio at points on the yield curve that we feel
are undervalued. We also believe that it has been beneficial to the performance
of the Fund that we remained overweighted with higher grade credits. The current
credit spreads offered in the municipal markets are at historically tight
levels, and it is for this reason that we will continue to underweight the lower
end of the credit spectrum.
We believe better returns lie ahead for municipal bond investors. The bond
market is currently discounting many of the negative events that may occur in
early 2000. While inflation could be slightly higher in 2000, corporate profits
and consumer spending should slow because of the increase in borrowing costs
brought on by the Fed's interest rate hikes.
Michael Pietronico
January 19, 2000
29
-------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFIT National Municipal Fund at the trading commencement date of
October 20, 1997 and held through December 31, 1999 as well as the performance
of the Lehman Brothers 5 Year Municipal Bond Index over the same period. Past
performance is not predictive of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OFFIT NATIONAL LEHMAN BROTHERS
<S> <C> <C>
Municipal Fund 5 Year Municipal Bond Index
10/20/97 $250,000 $250,000
12/31/97 $256,732 $254,256
3/31/98 $260,203 $257,211
6/30/98 $264,004 $260,086
9/30/98 $272,367 $266,927
12/31/98 $274,415 $269,122
3/31/99 $276,943 $271,947
6/30/99 $272,081 $268,575
9/30/99 $274,013 $271,105
12/31/99 $274,790 $271,125
Since Inception
Total Return One Year (October 20, 1997)
OFFIT National Municipal Fund* 0.14% 4.41%
Lehman Brothers 5 Year Municipal Bond Index 0.74% 3.77%
</TABLE>
* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. Without
waiver of fees, total return would have been lower.
30
- -------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------------
FLOATING RATE NOTES (5.8%)
POLLUTION CONTROL REVENUE (0.5%)
CALIFORNIA (0.5%)
California Pollution Control Financial Authority
Pollution Control Revenue Series A, 4.10%,
02/28/08*............................................ $ 100,000 $ 100,000
-----------
TRANSPORTATION REVENUE (1.1%)
NEW YORK (1.1%)
New York State Thruway Authority (FGIC), 1-Day Notes,
4.90%, 01/01/24*..................................... 200,000 200,000
-----------
WATER & SEWER REVENUE (4.2%)
NEW YORK (4.2%)
New York City Municipal Water Financing Authority
Water & Sewer System Revenue Bonds Series A (FGIC),
4.50%, 06/15/25*..................................... 400,000 400,000
New York City Municipal Water Financing Authority
Water & Sewer System Revenue Bonds Series G (FGIC),
4.70%, 06/15/24*..................................... 400,000 400,000
-----------
800,000
-----------
TOTAL FLOATING RATE NOTES (COST $1,100,000)........... 1,100,000
-----------
MUNICIPAL BONDS (92.2%)
GENERAL OBLIGATIONS (27.0%)
ALABAMA (0.6%)
Huntsville, Alabama Series E, 5.85%, 08/01/05......... 115,000 119,744
-----------
COLORADO (5.8%)
Douglas County Colorado Reorganized School District 1,
0.00%, 12/15/04...................................... 500,000 391,875
Denver, Colorado City and County Series A, 5.00%,
08/01/03............................................. 700,000 707,875
-----------
1,099,750
-----------
DELAWARE (3.8%)
Delaware State Series B, 5.40%, 07/01/04.............. 700,000 716,625
-----------
ILLINOIS (2.9%)
Chicago, Illinois City Colleges Capital Improvement
(FGIC), 6.00%, 01/01/12.............................. 500,000 521,730
Chicago, Illinois Project Series B (FGIC), 6.00%,
01/01/03............................................. 50,000 51,750
-----------
573,480
-----------
NEW YORK (4.5%)
New York New York Series D, 5.40%, 08/01/11........... 250,000 246,875
New York State Series B, 5.70%, 08/15/10.............. 600,000 614,250
-----------
861,125
-----------
OHIO (5.5%)
Ohio State Infrastructure Series A, 5.75%, 02/01/11... 1,000,000 1,037,500
-----------
TENNESSEE (3.9%)
Memphis, Tennessee Series B, 5.25%, 10/01/10.......... 735,000 735,919
-----------
5,144,143
-----------
HOUSING REVENUE (9.5%)
MINNESOTA (1.3%)
Minnesota State Housing Finance Agency Series 1 (AMT),
4.80%, 07/01/05...................................... 250,000 245,937
-----------
NEW YORK (8.2%)
New York State Mortgage Agency Revenue Bonds
Series 71 (AMT), 4.80%, 10/01/08..................... 500,000 480,000
New York State Mortgage Agency Revenue Bonds
Series 84 (AMT), 5.05%, 10/01/07..................... 500,000 491,875
New York State Mortgage Agency Revenue Bonds
Series 85 (AMT), 5.40%, 10/01/12..................... 610,000 597,037
-----------
1,568,912
-----------
1,814,849
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
-------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (CONTINUED)
POWER AUTHORITY REVENUE (10.0%)
FLORIDA (3.7%)
Gainsville, Florida Utilities Systems Revenue, 5.50%,
10/01/13............................................. $ 700,000 $ 700,875
-----------
TEXAS (2.6%)
San Antonio, Texas Electricity and Gas Series A,
5.25%, 02/01/11...................................... 500,000 493,125
-----------
WASHINGTON (3.7%)
Washington State Public Power Supply System Nuclear
Project 2-B, 5.00%, 07/01/01......................... 500,000 503,125
Washington State Public Power Supply System Nuclear
Project 3-A, 5.00%, 07/01/01......................... 200,000 201,250
-----------
704,375
-----------
1,898,375
-----------
SALES TAX REVENUE (10.8%)
ILLINOIS (2.5%)
Illinois State Series V, 6.375%, 06/15/14............. 450,000 472,500
-----------
TEXAS (8.3%)
Lower Colorado River Revenue Authority Texas
Series B, 6.00%, 05/15/11............................ 1,500,000 1,573,125
-----------
2,045,625
-----------
TRANSPORTATION REVENUE (19.6%)
FLORIDA (1.6%)
Miami-Dade County Florida Aviation Revenue Series A
(FGIC), 5.00%, 10/01/06.............................. 300,000 298,500
-----------
ILLINOIS (1.3%)
Illinois State, 5.50%, 08/01/03....................... 250,000 255,938
-----------
NEW JERSEY (5.3%)
New Jersey State Highway Authority Garden State
Parkway, 5.75%, 01/01/13............................. 1,000,000 1,017,500
-----------
NEW YORK (11.4%)
Metropolitan Transportation Authority Series A (FGIC),
5.00%, 04/01/03...................................... 200,000 202,000
New York State Thruway, Highway & Bridge Trust Fund
Bonds Series B (FGIC), 5.375%, 04/01/11.............. 1,000,000 1,000,000
New York State Thruway, Highway & Bridge Trust Fund
Bonds Series B (FSA), 5.50%, 04/01/09................ 100,000 102,250
Port Authority of New York & New Jersey Bonds
Series 106, 5.40%, 07/01/05.......................... 400,000 406,500
Triborough Bridge & Tunnel Authority Series A (MBIA),
5.125%, 01/01/12..................................... 475,000 455,406
-----------
2,166,156
-----------
3,738,094
-----------
WATER & SEWER REVENUE (15.3%)
CALIFORNIA (1.7%)
Contra Costa Water District Water Revenue Series G
(MBIA), 5.90%, 10/01/08.............................. 300,000 316,500
-----------
CONNECTICUT (2.1%)
South Central Connecticut Regional Water Authority
11th Series (FGIC), 5.75%, 08/01/12.................. 400,000 409,000
-----------
MASSACHUSETTS (4.7%)
Massachusetts State Water Pollution Abatement
Series A, 5.50%, 08/01/07............................ 450,000 462,375
Massachusetts State Water Authority Series B, 5.25%,
03/01/13............................................. 450,000 431,438
-----------
893,813
-----------
NEW MEXICO (1.7%)
Albuquerque, New Mexico Joint Water & Sewer System
Revenue, 6.00%, 07/01/06............................. 300,000 317,250
-----------
TEXAS (5.1%)
Texas State Water Financial Assistance, 5.25%,
08/01/11............................................. 985,000 976,381
-----------
2,912,944
-----------
TOTAL MUNICIPAL BONDS (COST $17,676,158).............. 17,554,030
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
- -------------
<PAGE>
OFFIT
NATIONAL MUNICIPAL FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
MONEY MARKET FUNDS (0.5%)
Dreyfus Tax Exempt Cash Management Money Market Fund.... $ 54,816 $ 54,816
The J.P. Morgan Institutional Service Tax Exempt Cash
Fund................................................... 54,799 54,799
-----------
TOTAL MONEY MARKET FUNDS (COST $109,615)................ 109,615
-----------
TOTAL INVESTMENTS (COST $18,885,773)(+) -- 98.5%........ 18,763,645
OTHER ASSETS IN EXCESS OF LIABILITIES 1.5%.............. 279,956
-----------
TOTAL NET ASSETS -- 100.0%.............................. $19,043,601
===========
</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 ................... $ 20,909
Unrealized depreciation ................... (143,037)
---------
Net unrealized depreciation ............... $(122,128)
=========
</TABLE>
* Interest rate in effect at December 31, 1999.
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.
33
-------------
<PAGE>
OFFIT
U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
The total return of the U.S. Government Securities Fund was -1.95% for calendar
1999. This compares with a return of -2.54% for the Merrill Lynch 5 Year
Treasury Index for the same period. As of December 31, 1999, the Fund's net
asset value was $9.76 and the 30-day SEC yield was 5.67%.
The investments in the Fund are in U.S. Treasury and U.S. Agency securities. The
average maturity of the Fund is approximately 5.6 years and the duration 4.2
years.
Investors continue to focus on U.S. economic strength and an improving global
economy. While we respect the inflation pressures that can develop in a fully
employed economy, we also do not underestimate the deflationary forces that have
become imbedded in the global economy. Ultimately, however, a Federal Reserve
that remains committed to price stability is the guarantee that inflation will
be contained.
The higher levels of current yields are also reason for optimism on the
prospects for the fixed income markets. First, these levels have built in the
majority of a worst-case scenario as several additional Fed tightenings are
fully discounted. In addition, yields of some 6.5% on intermediate Treasurys
have restored a reasonable income cushion that was lacking when these rates were
below 4% in the fall of 1998.
With these factors in mind, an anti-inflationary Federal Reserve policy and
reasonable current yields, our strategy is to be fully invested in the
intermediate sector of the Treasury and Agency markets.
Jack D. Burks
January 19, 2000
34
- -------------
<PAGE>
OFFIT
U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFIT U.S. Government Securities Fund at the trading commencement
date of July 1, 1997 and held through December 31, 1999 as well as the
performance of the Merrill Lynch 5 Year U.S. Treasury Index over the same
period. Past performance is not predictive of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MERRILL LYNCH OFFIT U.S. GOVERNMENT
<S> <C> <C>
5 Year U.S. Treasury Index Securities Fund
7/1/1997 $250,000 $250,000
9/30/1997 $255,155 $256,777
12/31/1997 $261,787 $263,179
3/31/1998 $265,840 $267,378
6/30/1998 $270,814 $272,153
9/30/1998 $287,773 $290,467
12/31/1998 $287,473 $288,994
3/31/1999 $283,087 $285,147
6/30/1999 $280,050 $282,021
9/30/1999 $282,654 $284,390
12/31/1999 $281,859 $281,640
Since Inception
Total Return One Year (July 1, 1997)
OFFIT U.S. Government Securities Fund* (1.95%) 4.91%
Merrill Lynch 5 Year U.S. Treasury Index (2.54%) 4.88%
</TABLE>
* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. Without
waiver of fees, total return would have been lower.
35
-------------
<PAGE>
OFFIT
U.S. GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (14.0%)
Federal Home Loan Mortgage Corp., 5.00%, 02/15/01....... $ 2,030,000 $ 1,999,478
Federal Home Loan Mortgage Corp., 5.75%, 07/15/03....... 2,030,000 1,966,442
Federal Home Loan Mortgage Corp., 5.00%, 01/15/04....... 2,100,000 1,967,132
-----------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (COST
$6,045,689)............................................ 5,933,052
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (14.0%)
Federal National Mortgage Association, 5.625%,
03/15/01............................................... 2,005,000 1,986,655
Federal National Mortgage Association, 5.75%,
04/15/03............................................... 2,030,000 1,972,600
Federal National Mortgage Association, 5.125%,
02/13/04............................................... 2,095,000 1,970,094
-----------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION (COST
$6,036,918)............................................ 5,929,349
-----------
U.S. TREASURY NOTES (67.3%)
Inflation Indexed Notes, 3.875%, 01/15/09............... 2,100,000 2,080,827
Notes, 5.75%, 08/15/03.................................. 2,000,000 1,958,449
Notes, 7.00%, 07/15/06.................................. 7,630,000 7,813,186
Notes, 6.50%, 10/15/06.................................. 7,825,000 7,802,138
Notes, 6.125%, 08/15/07................................. 9,150,000 8,923,791
-----------
TOTAL U.S. TREASURY NOTES (COST $29,997,816)............ 28,578,391
-----------
MONEY MARKET FUND (2.7%)
Bank of New York Cash Reserve........................... 1,152,462 1,152,462
-----------
TOTAL MONEY MARKET FUND (COST $1,152,462)............... 1,152,462
-----------
TOTAL INVESTMENTS (COST $43,232,885)(+) -- 98.0%........ 41,593,254
OTHER ASSETS IN EXCESS OF LIABILITIES 2.0%.............. 828,463
-----------
TOTAL NET ASSETS -- 100.0%.............................. $42,421,717
===========
</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 .................. $ 0
Unrealized depreciation .................. (1,732,023)
-----------
Net unrealized depreciation .............. $(1,732,023)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
- -------------
<PAGE>
OFFIT
MORTGAGE SECURITIES FUND
- --------------------------------------------------------------------------------
The total return of the Mortgage Securities Fund was 1.12% for the second half
of calendar 1999. This compares with a return of 1.29% for the Merrill Lynch
Mortgage Master Index for the same period. For the full calendar year 1999, the
returns for the Fund and the Index were 0.23% and 1.61%, respectively. As of
December 31, 1999, the Fund's net asset value was $9.71 and the 30-day SEC yield
was 6.11%.
The investments in the Fund are 39% Government National Mortgage Association,
29% Federal Home Loan Mortgage Corporation, 25% Federal National Mortgage
Association, and 7% cash equivalents. The cash equivalents are invested
primarily in short U.S. Treasurys and are larger than normal because of year-end
liquidity concerns. The average maturity of the Fund is approximately 8.0 years
and the duration is 4.0 years.
Investors continue to focus on U.S. economic strength and an improving global
economy. While we respect the inflation pressures that can develop in a fully
employed economy, we also do not underestimate the deflationary forces that have
become imbedded in the global economy. Ultimately, however, a Federal Reserve
that remains committed to price stability is the guarantee that inflation will
be contained.
Importantly, yields on Mortgage-Backed Securities have risen to levels that are
very attractive given the current financial and economic environments. Barring
an unforeseen economic or financial difficulty, bond yields should stay in a
range over the near-term. Therefore, it is our strategy to be fully invested.
Jack D. Burks
January 19, 2000
37
-------------
<PAGE>
OFFIT
MORTGAGE SECURITIES FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFIT Mortgage Securities Fund at the trading commencement date of
July 1, 1997 and held through December 31, 1999 as well as the performance of
the Merrill Lynch Mortgage Master Index over the same period. Past performance
is not predictive of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OFFIT MORTGAGE SECURITIES FUND MERRILL LYNCH MORTGAGE MASTER INDEX
<S> <C> <C>
7/1/97 $250,000 $250,000
9/30/97 $256,492 $256,577
12/31/97 $262,722 $262,506
3/31/98 $267,386 $266,985
6/30/98 $271,984 $271,635
9/30/98 $279,996 $278,883
12/31/98 $281,760 $281,385
3/31/99 $282,674 $283,964
6/30/99 $279,229 $282,272
9/30/99 $281,711 $285,134
12/31/99 $282,354 $285,919
Since Inception
Total Return One Year (July 1, 1997)
OFFIT Mortgage Securities Fund* 0.23% 4.99%
Merrill Lynch Mortgage Master Index 1.61% 5.52%
</TABLE>
* The total return may reflect the waiver of a portion of the Fund's advisory or
administrative fees for certain periods since the inception date. Without
waiver of fees, total return would have been lower.
38
- -------------
<PAGE>
OFFIT
MORTGAGE SECURITIES FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (28.7%)
Federal Home Loan Mortgage Corp., 6.00%, 04/01/03, Gold
Pool#M90534............................................ $ 799,766 $ 777,272
Federal Home Loan Mortgage Corp., 6.00%, 12/01/13, Gold
Pool#E73827............................................ 1,761,039 1,672,987
Federal Home Loan Mortgage Corp., 6.00%, 12/01/13, Gold
Pool#E00592............................................ 905,316 860,050
Federal Home Loan Mortgage Corp., 7.50%, 01/01/18, Gold
Pool#C90203............................................ 179,278 177,485
Federal Home Loan Mortgage Corp., 6.00%, 02/01/24, Gold
Pool#C80110............................................ 15,301 14,015
Federal Home Loan Mortgage Corp., 6.00%, 01/01/26, Gold
Pool#D67671............................................ 504,736 462,307
Federal Home Loan Mortgage Corp., 6.00%, 02/01/26, Gold
Pool#D68418............................................ 423,099 387,533
Federal Home Loan Mortgage Corp., 6.00%, 03/01/26, Gold
Pool#D69088............................................ 372,379 341,076
Federal Home Loan Mortgage Corp., 6.00%, 03/01/26, Gold
Pool#D69408............................................ 388,865 356,176
Federal Home Loan Mortgage Corp., 6.00%, 04/01/26, Gold
Pool#C80395............................................ 377,114 345,413
Federal Home Loan Mortgage Corp., 6.00%, 05/01/26, Gold
Pool#D71231............................................ 39,042 35,760
Federal Home Loan Mortgage Corp., 7.50%, 06/01/26, Gold
Pool#D72344............................................ 207,155 205,084
Federal Home Loan Mortgage Corp., 7.50%, 11/01/26, Gold
Pool#C80444............................................ 35,996 35,636
Federal Home Loan Mortgage Corp., 7.50%, 04/01/27, Gold
Pool#G00693............................................ 730,923 723,613
Federal Home Loan Mortgage Corp., 7.50%, 05/01/27, Gold
Pool#G00702............................................ 294,090 291,150
Federal Home Loan Mortgage Corp., 7.50%, 06/01/27, Gold
Pool#D80669............................................ 611,985 605,865
Federal Home Loan Mortgage Corp., 6.00%, 10/01/27, Gold
Pool#D82901............................................ 292,324 267,750
Federal Home Loan Mortgage Corp., 6.00%, 12/01/27, Gold
Pool#C00583............................................ 624,325 571,842
Federal Home Loan Mortgage Corp., 7.50%, 04/01/28, Gold
Pool#C00612............................................ 118,034 116,854
Federal Home Loan Mortgage Corp., 6.00%, 05/01/28, Gold
Pool#D89506............................................ 456,434 418,065
Federal Home Loan Mortgage Corp., 6.00%, 05/01/28, Gold
Pool#D89955............................................ 453,336 415,227
Federal Home Loan Mortgage Corp., 6.00%, 05/01/28, Gold
Pool#C00614............................................ 484,232 443,526
Federal Home Loan Mortgage Corp., 6.00%, 07/01/28, Gold
Pool#C00635............................................ 943,406 864,101
Federal Home Loan Mortgage Corp., 6.00%, 07/01/28, Gold
Pool#C12759............................................ 65,029 59,562
Federal Home Loan Mortgage Corp., 6.00%, 08/01/28, Gold
Pool#C13742............................................ 56,111 51,395
Federal Home Loan Mortgage Corp., 6.00%, 10/01/28, Gold
Pool#C16785............................................ 871,341 798,094
Federal Home Loan Mortgage Corp., 7.50%, 10/01/28, Gold
Pool#C16855............................................ 29,540 29,245
Federal Home Loan Mortgage Corp., 8.00%, 11/01/28, Gold
Pool#C01019............................................ 1,893,282 1,911,623
Federal Home Loan Mortgage Corp., 6.00%, 12/01/28, Gold
Pool#C19286............................................ 1,914,233 1,753,318
Federal Home Loan Mortgage Corp., 6.00%, 01/01/29, Gold
Pool#C00702............................................ 964,327 883,264
Federal Home Loan Mortgage Corp., 7.50%, 11/01/29, Gold
Pool#C33009............................................ 999,328 989,335
Federal Home Loan Mortgage Corp., 8.00%, 11/01/29, Gold
Pool#C32753............................................ 999,477 1,009,159
-----------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (COST
$18,676,685)........................................... 17,873,782
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (24.5%)
Federal National Mortgage Assoc., 6.50%, 11/01/03,
Pool#356437............................................ 62,995 61,696
Federal National Mortgage Assoc., 6.50%, 01/01/04,
Pool#359915............................................ 188,879 184,984
Federal National Mortgage Assoc., 6.50%, 09/01/04,
Pool#393759............................................ 246,442 241,359
Federal National Mortgage Assoc., 6.50%, 10/01/04,
Pool#398370............................................ 311,575 305,149
Federal National Mortgage Assoc., 6.00%, 09/01/10,
Pool#250376............................................ 70,757 67,153
Federal National Mortgage Assoc., 6.00%, 04/01/11,
Pool#339774............................................ 79,954 75,881
Federal National Mortgage Assoc., 6.00%, 03/01/13,
Pool#379876............................................ 761,129 722,359
Federal National Mortgage Assoc., 6.00%, 03/01/13,
Pool#419336............................................ 87,429 82,976
Federal National Mortgage Assoc., 6.00%, 04/01/13,
Pool#411502............................................ 808,098 766,936
Federal National Mortgage Assoc., 6.00%, 04/01/13,
Pool#425916............................................ 1,269,211 1,204,560
Federal National Mortgage Assoc., 6.00%, 05/01/13,
Pool#429019............................................ 799,312 758,597
Federal National Mortgage Assoc., 6.00%, 06/01/13,
Pool#426763............................................ 568,061 539,125
Federal National Mortgage Assoc., 6.00%, 09/01/13,
Pool#439280............................................ 76,886 72,970
Federal National Mortgage Assoc., 6.00%, 09/01/13,
Pool#440197............................................ 448,633 425,781
Federal National Mortgage Assoc., 6.00%, 09/01/13,
Pool#440240............................................ 236,252 224,218
Federal National Mortgage Assoc., 6.00%, 09/01/13,
Pool#444718............................................ 445,047 422,377
Federal National Mortgage Assoc., 6.00%, 10/01/13,
Pool#436691............................................ 361,093 342,700
Federal National Mortgage Assoc., 6.50%, 05/01/26,
Pool#345964............................................ 150,456 141,758
Federal National Mortgage Assoc., 6.50%, 08/01/27,
Pool#378287............................................ 417,287 393,163
Federal National Mortgage Assoc., 6.50%, 11/01/27,
Pool#397998............................................ 752,416 708,917
Federal National Mortgage Assoc., 6.50%, 04/01/28,
Pool#419955............................................ 20,067 18,907
Federal National Mortgage Assoc., 6.50%, 04/01/28,
Pool#421090............................................ 380,741 358,729
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
-------------
<PAGE>
OFFIT
MORTGAGE SECURITIES FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
Federal National Mortgage Assoc., 6.50%, 05/01/28,
Pool#425761............................................ $ 918,755 $ 865,640
Federal National Mortgage Assoc., 6.50%, 05/01/28,
Pool#426090............................................ 22,749 21,434
Federal National Mortgage Assoc., 6.50%, 06/01/28,
Pool#427634............................................ 1,420,367 1,338,252
Federal National Mortgage Assoc., 6.50%, 07/01/28,
Pool#251813............................................ 858,801 809,152
Federal National Mortgage Assoc., 6.50%, 10/01/28,
Pool#446616............................................ 264,453 249,164
Federal National Mortgage Assoc., 6.50%, 10/01/28,
Pool#447986............................................ 600,193 565,495
Federal National Mortgage Assoc., 6.50%, 12/01/28,
Pool#252255............................................ 764,277 720,092
Federal National Mortgage Assoc., 6.50%, 12/01/28,
Pool#456699............................................ 187,041 176,227
Federal National Mortgage Assoc., 6.50%, 02/01/29,
Pool#483395............................................ 964,535 908,773
Federal National Mortgage Assoc., 6.50%, 04/01/29,
Pool#483944............................................ 495,935 467,264
Federal National Mortgage Assoc., 8.50%, 07/01/29,
Pool#505851............................................ 256,176 262,580
Federal National Mortgage Assoc., 8.50%, 08/01/29,
Pool#456563............................................ 728,151 746,355
-----------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION (COST
$15,988,577)........................................... 15,250,723
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (38.9%)
Government National Mortgage Assoc., 7.00%, 10/15/07,
Pool#297658............................................ 54,494 53,915
Government National Mortgage Assoc., 7.00%, 07/15/08,
Pool#266910............................................ 26,916 26,630
Government National Mortgage Assoc., 6.00%, 02/15/09,
Pool#335278............................................ 90,253 85,487
Government National Mortgage Assoc., 7.00%, 09/15/09,
Pool#380616............................................ 181,385 179,458
Government National Mortgage Assoc., 7.00%, 07/15/10,
Pool#780193............................................ 565,891 560,232
Government National Mortgage Assoc., 7.00%, 10/15/10,
Pool#377618............................................ 265,983 263,157
Government National Mortgage Assoc., 7.00%, 02/15/11,
Pool#292339............................................ 306,246 302,993
Government National Mortgage Assoc., 6.00%, 05/15/11,
Pool#412601............................................ 38,129 36,115
Government National Mortgage Assoc., 6.00%, 06/15/11,
Pool#424501............................................ 142,228 134,717
Government National Mortgage Assoc., 7.00%, 06/15/11,
Pool#347186............................................ 266,503 263,671
Government National Mortgage Assoc., 6.00%, 01/15/13,
Pool#407233............................................ 739,688 700,624
Government National Mortgage Assoc., 6.00%, 02/15/13,
Pool#460756............................................ 542,916 514,243
Government National Mortgage Assoc., 6.00%, 01/15/24,
Pool#345932............................................ 150,269 136,745
Government National Mortgage Assoc., 6.00%, 01/15/24,
Pool#376364............................................ 403,488 367,174
Government National Mortgage Assoc., 6.00%, 05/15/24,
Pool#352981............................................ 166,653 151,655
Government National Mortgage Assoc., 9.00%, 09/15/25,
Pool#405492............................................ 345,503 361,591
Government National Mortgage Assoc., 7.00%, 09/15/25,
Pool#410280............................................ 82,034 79,214
Government National Mortgage Assoc., 6.00%, 01/15/26,
Pool#780312............................................ 484,094 440,828
Government National Mortgage Assoc., 7.00%, 02/15/26,
Pool#347156............................................ 38,444 37,122
Government National Mortgage Assoc., 6.00%, 03/15/26,
Pool#426301............................................ 22,458 20,437
Government National Mortgage Assoc., 7.00%, 06/15/26,
Pool#780518............................................ 20,260 19,576
Government National Mortgage Assoc., 8.00%, 06/15/26,
Pool#428867............................................ 314,168 317,310
Government National Mortgage Assoc., 8.00%, 07/15/26,
Pool#432905............................................ 66,362 67,026
Government National Mortgage Assoc., 8.00%, 08/15/26,
Pool#419634............................................ 30,871 31,180
Government National Mortgage Assoc., 8.00%, 08/15/26,
Pool#421763............................................ 157,239 158,811
Government National Mortgage Assoc., 8.00%, 09/15/26,
Pool#398884............................................ 472,248 476,971
Government National Mortgage Assoc., 8.00%, 11/15/26,
Pool#415657............................................ 120,061 121,261
Government National Mortgage Assoc., 8.00%, 11/15/26,
Pool#438875............................................ 219,964 222,164
Government National Mortgage Assoc., 8.00%, 11/15/26,
Pool#442131............................................ 245,241 247,693
Government National Mortgage Assoc., 8.00%, 12/15/26,
Pool#437256............................................ 266,825 269,494
Government National Mortgage Assoc., 7.00%, 12/15/26,
Pool#442642............................................ 160,554 155,035
Government National Mortgage Assoc., 8.00%, 12/15/26,
Pool#442190............................................ 49,773 50,270
Government National Mortgage Assoc., 8.00%, 01/15/27,
Pool#444261............................................ 35,553 35,908
Government National Mortgage Assoc., 8.00%, 01/15/27,
Pool#780497............................................ 587,841 594,087
Government National Mortgage Assoc., 8.00%, 02/15/27,
Pool#436363............................................ 463,699 468,336
Government National Mortgage Assoc., 9.00%, 03/15/27,
Pool#399193............................................ 9,882 10,342
Government National Mortgage Assoc., 7.50%, 04/15/27,
Pool#446280............................................ 12,402 12,262
Government National Mortgage Assoc., 7.50%, 05/15/27,
Pool#447186............................................ 18,944 18,731
Government National Mortgage Assoc., 8.00%, 06/15/27,
Pool#447202............................................ 53,228 53,760
Government National Mortgage Assoc., 8.00%, 08/15/27,
Pool#455387............................................ 121,652 122,868
Government National Mortgage Assoc., 7.50%, 09/15/27,
Pool#452370............................................ 98,819 97,707
Government National Mortgage Assoc., 7.50%, 09/15/27,
Pool#398090............................................ 15,504 15,330
Government National Mortgage Assoc., 7.50%, 11/15/27,
Pool#447853............................................ 13,358 13,208
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
- -------------
<PAGE>
OFFIT
MORTGAGE SECURITIES FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
Government National Mortgage Assoc., 7.50%, 11/15/27,
Pool#456987............................................ $ 16,750 $ 16,562
Government National Mortgage Assoc., 7.00%, 12/15/27,
Pool#443779............................................ 30,150 29,114
Government National Mortgage Assoc., 7.00%, 12/15/27,
Pool#460653............................................ 490,365 473,509
Government National Mortgage Assoc., 7.00%, 01/15/28,
Pool#458763............................................ 348,019 336,055
Government National Mortgage Assoc., 7.00%, 01/15/28,
Pool#460690............................................ 372,629 359,820
Government National Mortgage Assoc., 7.00%, 01/15/28,
Pool#463365............................................ 279,148 269,553
Government National Mortgage Assoc., 7.00%, 02/15/28,
Pool#433595............................................ 414,957 400,692
Government National Mortgage Assoc., 6.00%, 04/15/28,
Pool#433722............................................ 358,583 326,311
Government National Mortgage Assoc., 6.00%, 04/15/28,
Pool#452780............................................ 243,735 221,799
Government National Mortgage Assoc., 6.00%, 04/15/28,
Pool#473500............................................ 335,794 305,572
Government National Mortgage Assoc., 6.00%, 05/15/28,
Pool#465359............................................ 448,784 408,393
Government National Mortgage Assoc., 7.00%, 05/15/28,
Pool#475480............................................ 819,477 791,308
Government National Mortgage Assoc., 6.00%, 06/15/28,
Pool#449548............................................ 485,748 442,031
Government National Mortgage Assoc., 6.00%, 06/15/28,
Pool#476330............................................ 37,232 33,881
Government National Mortgage Assoc., 7.00%, 07/15/28,
Pool#464696............................................ 600,251 579,617
Government National Mortgage Assoc., 9.00%, 08/15/28,
Pool#473752............................................ 419,745 439,290
Government National Mortgage Assoc., 6.00%, 09/15/28,
Pool#780864............................................ 83,841 76,348
Government National Mortgage Assoc., 6.00%, 09/15/28,
Pool#433994............................................ 505,453 459,962
Government National Mortgage Assoc., 6.00%, 09/15/28,
Pool#457821............................................ 459,261 417,927
Government National Mortgage Assoc., 6.00%, 10/15/28,
Pool#465564............................................ 356,316 324,249
Government National Mortgage Assoc., 6.00%, 10/15/28,
Pool#467286............................................ 466,513 424,527
Government National Mortgage Assoc., 6.00%, 10/15/28,
Pool#475620............................................ 429,140 390,517
Government National Mortgage Assoc., 6.00%, 10/15/28,
Pool#484473............................................ 484,268 440,683
Government National Mortgage Assoc., 6.00%, 10/15/28,
Pool#490686............................................ 1,112,198 1,012,100
Government National Mortgage Assoc., 7.00%, 12/15/28,
Pool#426720............................................ 456,672 440,974
Government National Mortgage Assoc., 7.00%, 12/15/28,
Pool#491307............................................ 334,045 322,562
Government National Mortgage Assoc., 7.00%, 12/15/28,
Pool#472893............................................ 718,026 693,344
Government National Mortgage Assoc., 7.00%, 01/15/29,
Pool#467844............................................ 478,293 461,851
Government National Mortgage Assoc., 8.00%, 01/15/29,
Pool#495502............................................ 406,172 410,234
Government National Mortgage Assoc., 6.00%, 03/15/29,
Pool#459014............................................ 373,633 340,006
Government National Mortgage Assoc., 6.00%, 03/15/29,
Pool#466453............................................ 529,072 481,456
Government National Mortgage Assoc., 7.50%, 06/15/29,
Pool#398586............................................ 883,698 873,756
Government National Mortgage Assoc., 7.50%, 08/15/29,
Pool#481618............................................ 948,506 937,836
Government National Mortgage Assoc., 7.50%, 08/15/29,
Pool#489108............................................ 697,734 689,885
Government National Mortgage Assoc., 7.50%, 08/15/29,
Pool#481619............................................ 959,574 948,779
Government National Mortgage Assoc., 7.00%, 02/15/29,
Pool#496143............................................ 398,708 385,002
-----------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (COST
$25,435,826)........................................... 24,260,843
-----------
U.S. TREASURY NOTES (5.6%)
Notes, 5.375%, 02/15/01................................. 3,525,000 3,496,058
-----------
TOTAL U.S. TREASURY NOTES (COST $3,512,377)............. 3,496,058
-----------
MONEY MARKET FUND (1.8%)
Bank of New York Cash Reserve........................... 1,119,991 1,119,991
-----------
TOTAL MONEY MARKET FUND (COST $1,119,991)............... 1,119,991
-----------
TOTAL INVESTMENTS (COST $64,733,456) (+) -- 99.5%....... 62,001,397
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%.............. 307,436
-----------
TOTAL NET ASSETS -- 100.0%.............................. $62,308,833
===========
</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 .................. $ 0
Unrealized depreciation .................. (2,745,260)
-----------
Net unrealized depreciation .............. $(2,745,260)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
HIGH EMERGING
YIELD MARKETS
FUND FUND
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (1).......................... $1,440,796,034 $171,760,864
Interest and dividends receivable......................... 32,872,653 4,062,652
Receivable for capital shares sold........................ 1,181,697 1,823
Receivable for investment securities sold................. 45,673 --
Deferred organization expenses............................ -- --
Net unrealized appreciation on forward foreign currency
contracts (Note 2)...................................... 2,990,864 --
Prepaid expenses and other assets......................... 74,611 17,962
-------------- ------------
Total Assets............................................ 1,477,961,532 175,843,301
-------------- ------------
LIABILITIES:
Dividends payable......................................... 5,108,453 1,919,817
Payable for investment securities purchased............... -- --
Payable for capital shares redeemed....................... 2,444,124 11,359
Investment advisory fees payable.......................... 925,562 131,278
Custody fees payable...................................... 43,018 15,953
Professional fees payable................................. 47,829 19,992
Administration fees payable............................... 101,256 13,857
Other payables and accrued expenses....................... 47,266 7,007
-------------- ------------
Total Liabilities....................................... 8,717,508 2,119,263
-------------- ------------
NET ASSETS:................................................. $1,469,244,024 $173,724,038
============== ============
Net Assets consist of:
Shares of capital stock, $0.001 par value per share....... $ 161,086 $ 18,655
Additional paid-in capital................................ 1,641,844,140 224,872,019
Distributions in excess of net investment income.......... (2,984,862) (1,919,817)
Accumulated undistributed net investment income........... -- --
Accumulated undistributed net realized loss on investments
and foreign currency transactions....................... (16,016,711) (42,809,740)
Net unrealized appreciation (depreciation) of investments
and foreign currency transactions....................... (153,759,629) (6,437,079)
-------------- ------------
NET ASSETS.................................................. $1,469,244,024 $173,724,038
============== ============
SELECT SHARES:
NET ASSETS................................................ $1,454,507,155 $173,724,038
============== ============
SHARES OF CAPITAL STOCK OUTSTANDING....................... 159,616,205 18,654,632
============== ============
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER
SHARE).................................................. $ 9.11 $ 9.31
============== ============
MSD&T SHARES:
NET ASSETS................................................ $ 14,736,869
==============
SHARES OF CAPITAL STOCK OUTSTANDING....................... 1,469,511
==============
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER
SHARE).................................................. $ 10.03
==============
(1) Investments at cost..................................... $1,597,442,239 $178,197,943
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
- -------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
LATIN AMERICA NEW YORK CALIFORNIA NATIONAL U.S. GOVERNMENT MORTGAGE
EQUITY MUNICIPAL MUNICIPAL MUNICIPAL SECURITIES SECURITIES
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
ASSETS:
Investments,
at market
value
(1)... $ 23,959,293 $67,012,838 $13,671,341 $18,763,645 $ 41,593,254 $62,001,397
Interest
and
dividends
receivable... 152,458 1,056,717 177,554 294,600 888,798 406,473
Receivable
for
capital
shares
sold... -- 350,000 -- -- -- 841
Receivable
for
investment
securities
sold... -- -- -- -- -- --
Deferred
organization
expenses... 10,084 1,662 19,563 18,722 10,656 10,656
Net
unrealized
appreciation
on
forward
foreign
currency
contracts
(Note 2).... -- -- -- -- -- --
Prepaid
expenses
and
other
assets... 7,096 5,118 4,794 7,635 6,701 12,953
------------- --------- --------- --------- --------------- ---------
Total
Assets... 24,128,931 68,426,335 13,873,252 19,084,602 42,499,409 62,432,320
------------- --------- --------- --------- --------------- ---------
LIABILITIES:
Dividends
payable... 139,222 53,462 11,352 23,601 46,549 79,894
Payable
for
investment
securities
purchased... -- -- 204,060 -- -- --
Payable
for
capital
shares
redeemed... 345 100,000 -- -- 2,172 2,499
Investment
advisory
fees
payable... 18,445 15,042 483 3,705 6,674 11,722
Custody
fees
payable... 12,050 2,054 383 738 1,229 1,820
Professional
fees
payable... 9,082 14,425 7,781 9,407 13,451 13,913
Administration
fees
payable... 1,767 5,780 -- -- 3,666 5,112
Other
payables
and
accrued
expenses... 3,269 7,561 3,935 3,550 3,951 8,527
------------- --------- --------- --------- --------------- ---------
Total
Liabilities... 184,180 198,324 227,994 41,001 77,692 123,487
------------- --------- --------- --------- --------------- ---------
NET
ASSETS:... $ 23,944,751 $68,228,011 $13,645,258 $19,043,601 $ 42,421,717 $62,308,833
============= ========= ========= ========= =============== =========
Net
Assets
consist
of:
Shares
of
capital
stock,
$0.001
par
value
per
share... $ 2,160 $ 6,612 $ 1,357 $ 1,898 $ 4,349 $ 6,419
Additional
paid-in
capital... 37,198,189 69,856,566 14,110,677 19,439,242 45,138,639 65,179,437
Distributions
in excess
of net
investment
income... -- -- -- -- (143) (267)
Accumulated
undistributed
net
investment
income... -- -- 8,345 5,322 -- --
Accumulated
undistributed
net
realized
loss on
investments
and
foreign
currency
transactions... (19,924,459) (578,290) (22,405) (280,733) (1,081,497) (144,697)
Net
unrealized
appreciation
(depreciation)
of
investments
and
foreign
currency
transactions... 6,668,861 (1,056,877) (452,716) (122,128) (1,639,631) (2,732,059)
------------- --------- --------- --------- --------------- ---------
NET
ASSETS... $ 23,944,751 $68,228,011 $13,645,258 $19,043,601 $ 42,421,717 $62,308,833
============= ========= ========= ========= =============== =========
SELECT
SHARES:
NET
ASSETS... $ 23,944,751 $68,228,011 $13,645,258 $19,043,601 $ 42,421,717 $62,308,833
============= ========= ========= ========= =============== =========
SHARES
OF
CAPITAL
STOCK
OUTSTANDING... 2,160,400 6,611,659 1,357,060 1,897,662 4,348,609 6,419,298
============= ========= ========= ========= =============== =========
NET
ASSET
VALUE
(OFFERING
AND
REDEMPTION
PRICE PER
SHARE)... $ 11.08 $ 10.32 $ 10.06 $ 10.04 $ 9.76 $ 9.71
============= ========= ========= ========= =============== =========
MSD&T
SHARES:
NET
ASSETS...
SHARES
OF
CAPITAL
STOCK
OUTSTANDING...
NET
ASSET
VALUE
(OFFERING
AND
REDEMPTION
PRICE PER
SHARE)...
(1)
Investments 17,266,006 68,069,715 14,124,057 18,885,773 43,232,885 64,733,456
at
cost... $ $ $ $ $ $
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HIGH EMERGING
YIELD MARKETS
FUND FUND
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest.................................................. $169,584,383 $ 19,946,916
Dividends (2)............................................. 883,536 --
------------ ------------
Total income............................................ 170,467,919 19,946,916
------------ ------------
EXPENSES:
Advisory.................................................. 12,190,323 1,344,676
Administration............................................ 1,246,898 186,761
Professional.............................................. 198,487 53,320
Transfer agent and shareholder servicing fees............. 154,305 41,571
Custody................................................... 274,111 883
Fund accounting........................................... 15,000 15,000
Amortization of organization expenses..................... -- --
Miscellaneous............................................. 265,479 20,632
------------ ------------
Total expenses before waivers/reimbursements............ 14,344,603 1,662,843
Less expenses waived/reimbursed......................... -- (44,823)
------------ ------------
Net expenses............................................ 14,344,603 1,618,020
------------ ------------
NET INVESTMENT INCOME....................................... 156,123,316 18,328,896
------------ ------------
REALIZED AND UNREALIZED GAINS (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions.............. (15,953,811) (14,927,710)
Net realized gains (loss) on foreign currency
transactions............................................ 6,986,304 (12,074)
Net change in unrealized appreciation (depreciation) of
investments............................................. (132,802,201) 33,460,289
Net change in unrealized appreciation (depreciation) of
foreign currency transactions........................... 2,950,558 --
------------ ------------
Net realized and unrealized gains (loss) on investments..... (138,819,150) 18,520,505
------------ ------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 17,304,166 $ 36,849,401
============ ============
(2) Foreign tax withholding................................. $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
- -------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
LATIN AMERICA NEW YORK CALIFORNIA NATIONAL U.S. GOVERNMENT MORTGAGE
EQUITY MUNICIPAL MUNICIPAL MUNICIPAL SECURITIES SECURITIES
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
INVESTMENT
INCOME:
Interest... $ 10,986 $3,291,971 $ 577,793 $ 992,044 $ 2,190,970 $3,908,127
Dividends
(2)... 460,574 -- -- -- -- --
------------- --------- --------- --------- --------------- ---------
Total
income... 471,560 3,291,971 577,793 992,044 2,190,970 3,908,127
------------- --------- --------- --------- --------------- ---------
EXPENSES:
Advisory... 174,866 251,216 45,892 77,770 143,287 212,993
Administration... 21,858 89,720 16,390 27,774 51,174 76,069
Professional... 35,293 36,880 21,266 26,006 33,465 34,764
Transfer
agent
and
shareholder
servicing
fees... 18,000 18,000 18,000 18,000 18,000 18,000
Custody... (24,126) 12,661 2,368 4,568 7,466 10,116
Fund
accounting... 15,000 15,000 15,000 15,000 15,000 15,000
Amortization
of
organization
expenses... 6,273 6,551 8,435 5,322 4,364 4,364
Miscellaneous... 14,123 27,393 14,448 15,100 15,278 31,069
------------- --------- --------- --------- --------------- ---------
Total
expenses
before
waivers/reimbursements... 261,287 457,421 141,799 189,540 288,034 402,375
Less
expenses
waived/reimbursed... (37,450) (98,541) (76,352) (78,445) (83,339) (98,099)
------------- --------- --------- --------- --------------- ---------
Net
expenses... 223,837 358,880 65,447 111,095 204,695 304,276
------------- --------- --------- --------- --------------- ---------
NET
INVESTMENT
INCOME... 247,723 2,933,091 512,346 880,949 1,986,275 3,603,851
------------- --------- --------- --------- --------------- ---------
REALIZED
AND
UNREALIZED
GAINS
(LOSS) ON
INVESTMENTS:
Net
realized
loss
on
investment
transactions... (5,327,451) (578,290) (22,405) (280,733) (1,056,878) (137,336)
Net
realized
gains
(loss)
on
foreign
currency
transactions... (57,144) -- -- -- -- --
Net
change
in
unrealized
appreciation
(depreciation)
of
investments... 13,438,073 (2,913,138) (636,696) (471,504) (1,681,065) (3,193,680)
Net
change
in
unrealized
appreciation
(depreciation)
of foreign
currency
transactions... (17,986) -- -- -- -- --
------------- --------- --------- --------- --------------- ---------
Net
realized
and
unrealized
gains
(loss) on
investments... 8,035,492 (3,491,428) (659,101) (752,237) (2,737,943) (3,331,016)
------------- --------- --------- --------- --------------- ---------
INCREASE
(DECREASE)
IN NET
ASSETS
RESULTING
FROM
OPERATIONS... $ 8,283,215 $(558,337) $(146,755) $ 128,712 $ (751,668) $ 272,835
============= ========= ========= ========= =============== =========
(2)
Foreign
tax
withholding... $ 56,475 $ -- $ -- $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
HIGH YIELD FUND
--------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income..................................... $ 156,123,316 $ 137,392,018
Net realized gains (loss) on investment and foreign
currency transactions................................... (8,967,507) (903,338)
Net change in unrealized appreciation (depreciation) of
investments and foreign currency transactions........... (129,851,643) (75,066,948)
----------------- -----------------
Net increase (decrease) in net assets resulting from
operations.............................................. 17,304,166 61,421,732
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (156,123,316) (137,392,018)
Excess of net investment income........................... (8,535,732) --
Net realized gains........................................ -- --
Excess of net realized gains.............................. -- --
Return of capital......................................... -- --
----------------- -----------------
Total dividends and distributions to shareholders......... (164,659,048) (137,392,018)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 530,922,622 769,293,164
Dividends reinvested...................................... 114,020,009 95,379,400
Cost of shares redeemed................................... (767,972,952) (395,641,025)
----------------- -----------------
Net increase (decrease) in net assets from capital share
transactions............................................ (123,030,321) 469,031,539
----------------- -----------------
Total increase (decrease) in net assets................... (270,385,203) 393,061,253
NET ASSETS:
Beginning of year......................................... 1,739,629,227 1,346,567,974
----------------- -----------------
End of year*.............................................. $ 1,469,244,024 $ 1,739,629,227
================= =================
* (Including undistributed net investment
income/distributions in excess of net investment
income.).................................................. $ (2,984,862) $ (1,435,436)
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL FUND
--------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income..................................... $ 512,346 $ 318,365
Net realized gains (loss) on investment and foreign
currency transactions................................... (22,405) 39,740
Net change in unrealized appreciation (depreciation) of
investments and foreign currency transactions........... (636,696) 108,350
----------------- -----------------
Net increase (decrease) in net assets resulting from
operations.............................................. (146,755) 466,455
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (512,346) (318,365)
Excess of net investment income........................... -- (9,756)
Net realized gains........................................ -- (39,704)
Excess of net realized gains.............................. -- --
Return of capital......................................... -- --
----------------- -----------------
Total dividends and distributions to shareholders......... (512,346) (367,825)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................... 4,381,453 8,055,789
Dividends reinvested...................................... 364,877 297,972
Cost of shares redeemed................................... (1,507,814) (2,178,623)
----------------- -----------------
Net increase (decrease) in net assets from capital share
transactions............................................ 3,238,516 6,175,138
----------------- -----------------
Total increase (decrease) in net assets................... 2,579,415 6,273,768
NET ASSETS:
Beginning of year......................................... 11,065,843 4,792,075
----------------- -----------------
End of year*.............................................. $ 13,645,258 $ 11,065,843
================= =================
* (Including undistributed net investment
income/distributions in excess of net investment
income.).................................................. $ 8,345 --
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
- -------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
EMERGING MARKETS FUND LATIN AMERICA EQUITY FUND NEW YORK MUNICIPAL FUND
------------------------------------- ------------------------------------- -------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INCREASE
IN NET
ASSETS:
OPERATIONS:
Net
investment
income... $ 18,328,896 $ 23,350,270 $ 247,723 $ 935,060 $ 2,933,091 $ 2,333,812
Net
realized
gains
(loss)
on
investment
and
foreign
currency
transactions... (14,939,784) (26,279,756) (5,384,595) (12,397,589) (578,290) 358,577
Net
change
in
unrealized
appreciation
(depreciation)
of
investments
and
foreign
currency
transactions... 33,460,289 (39,570,678) 13,420,087 (11,258,757) (2,913,138) 668,521
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Net
increase
(decrease)
in net
assets
resulting
from
operations... 36,849,401 (42,500,164) 8,283,215 (22,721,286) (558,337) 3,360,910
DIVIDENDS
AND
DISTRIBUTIONS
TO
SHAREHOLDERS
FROM:
Net
investment
income... (18,026,181) (22,781,139) (247,723) (773,732) (2,933,091) (2,333,812)
Excess
of
net
investment
income... -- -- (37,119) -- -- (9,835)
Net
realized
gains... -- -- -- (40,064) -- (358,577)
Excess
of
net
realized
gains... -- (625,832) -- -- -- (14,521)
Return
of
capital... (302,715) (569,131) -- -- -- --
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total
dividends
and
distributions
to
shareholders... (18,328,896) (23,976,102) (284,842) (813,796) (2,933,091) (2,716,745)
CAPITAL
SHARE
TRANSACTIONS:
Proceeds
from
shares
issued... 50,168,407 101,711,812 6,590,882 6,292,203 28,065,457 46,233,943
Dividends
reinvested... 10,379,144 16,044,606 145,620 445,995 2,449,903 2,328,952
Cost
of
shares
redeemed... (54,249,530) (113,151,233) (7,146,256) (21,899,202) (26,588,867) (23,459,800)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Net
increase
(decrease)
in net
assets
from
capital
share
transactions... 6,298,021 4,605,185 (409,754) (15,161,004) 3,926,493 25,103,095
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total
increase
(decrease)
in net
assets... 24,818,526 (61,871,081) 7,588,619 (38,696,086) 435,065 25,747,260
NET
ASSETS:
Beginning
of
year... 148,905,512 210,776,593 16,356,132 55,052,218 67,792,946 42,045,686
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
End
of
year*... $ 173,724,038 $ 148,905,512 $ 23,944,751 $ 16,356,132 $ 68,228,011 $ 67,792,946
================= ================= ================= ================= ================= =================
*
(Including
undistributed
net
investment
income/distributions
in excess of net
investment
income.)... $ (1,919,817) $ (2,210,458) -- $ 86,976 -- --
</TABLE>
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL FUND U.S. GOVERNMENT SECURITIES FUND MORTGAGE SECURITIES FUND
------------------------------------- ------------------------------------- -------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INCREASE
IN NET
ASSETS:
OPERATIONS:
Net
investment
income... $ 880,949 $ 545,835 $ 1,986,275 $ 881,214 $ 3,603,851 $ 1,966,420
Net
realized
gains
(loss)
on
investment
and
foreign
currency
transactions... (280,733) 119,562 (1,056,878) 705,098 (137,336) 55,332
Net
change
in
unrealized
appreciation
(depreciation)
of
investments
and
foreign
currency
transactions... (471,504) 307,333 (1,681,065) 10,941 (3,193,680) 379,496
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Net
increase
(decrease)
in net
assets
resulting
from
operations... 128,712 972,730 (751,668) 1,597,253 272,835 2,401,248
DIVIDENDS
AND
DISTRIBUTIONS
TO
SHAREHOLDERS
FROM:
Net
investment
income... (880,949) (545,835) (1,986,275) (881,214) (3,603,851) (1,966,420)
Excess
of
net
investment
income... -- (6,615) (4,923) (4,391) (4,631) (21,491)
Net
realized
gains... -- (122,483) (42,714) (690,853) (9,056) (55,332)
Excess
of
net
realized
gains... -- -- -- -- -- (27,956)
Return
of
capital... -- -- -- -- -- --
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total
dividends
and
distributions
to
shareholders... (880,949) (674,933) (2,033,912) (1,576,458) (3,617,538) (2,071,199)
CAPITAL
SHARE
TRANSACTIONS:
Proceeds
from
shares
issued... 8,882,215 31,253,540 25,276,670 39,744,486 16,252,334 38,457,330
Dividends
reinvested... 678,632 630,967 1,722,886 1,476,753 2,964,170 1,911,337
Cost
of
shares
redeemed... (19,499,510) (5,252,890) (21,151,397) (5,837,572) (8,024,428) (3,274,675)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Net
increase
(decrease)
in net
assets
from
capital
share
transactions... (9,938,663) 26,631,617 5,848,159 35,383,667 11,192,076 37,093,992
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total
increase
(decrease)
in net
assets... (10,690,900) 26,929,414 3,062,579 35,404,462 7,847,373 37,424,041
NET
ASSETS:
Beginning
of
year... 29,734,501 2,805,087 39,359,138 3,954,676 54,461,460 17,037,419
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
End
of
year*... $ 19,043,601 $ 29,734,501 $ 42,421,717 $ 39,359,138 $ 62,308,833 $ 54,461,460
================= ================= ================= ================= ================= =================
*
(Including
undistributed
net
investment
income/distributions
in excess of net
investment
income.)... $ 5,322 -- $ (143) -- $ (267) $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS
HIGH YIELD FUND
<TABLE>
<CAPTION>
SELECT SHARES
---------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 9.91 $ 10.34 $ 10.15 $ 9.92 $ 9.25
---------- ---------- ---------- -------- --------
Net investment income..................... 0.90 0.88 0.87 0.89 0.90
Net realized and unrealized gain (loss)... (0.79) (0.43) 0.31 0.29 0.67
---------- ---------- ---------- -------- --------
Total income from investment operations... 0.11 0.45 1.18 1.18 1.57
---------- ---------- ---------- -------- --------
LESS DIVIDENDS AND DISTRIBUTION FROM:
Net investment income..................... (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........... (0.91) (0.88) (0.99) (0.95) (0.90)
---------- ---------- ---------- -------- --------
Net change in net asset value per share... (0.80) (0.43) 0.19 0.23 0.67
---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF PERIOD.............. $ 9.11 $ 9.91 $ 10.34 $ 10.15 $ 9.92
========== ========== ========== ======== ========
TOTAL RETURN(a)............................. 1.10% 4.49% 12.09% 12.46% 17.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).............................. $1,454,507 $1,739,622 $1,346,553 $851,720 $479,090
Ratios to average net assets:
Expenses.................................. 0.82% 0.84%*** 0.87%*** 0.98%*** 1.05%***
Net investment income..................... 8.91% 8.67% 8.46% 8.86% 9.38%
PORTFOLIO TURNOVER RATE..................... 42% 36% 47% 41% 34%
</TABLE>
HIGH YIELD FUND (CONTINUED)
<TABLE>
<CAPTION>
ADVISOR SHARES(D) MSD&T SHARES
-------------------------------------- -----------------
FOR THE PERIOD FOR THE PERIOD* FOR THE PERIOD**
ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1999
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........................ $10.34 $10.37 $ 10.00(e)
------ ------ -------
Net investment income..................................... 0.60 0.32 0.19
Net realized and unrealized gain (loss)................... (0.43) 0.09 0.05
------ ------ -------
Total income from investment operations................... 0.17 0.41 0.24
------ ------ -------
LESS DIVIDENDS AND DISTRIBUTION FROM:
Net investment income..................................... (0.60) (0.32) (0.21)
Net realized gains........................................ -- (0.12) --
------ ------ -------
Total dividends and distributions........................... (0.60) (0.44) (0.21)
------ ------ -------
Net change in net asset value per share................... (0.43) (0.03) 0.03
------ ------ -------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.91 $10.34 $ 10.03
====== ====== =======
TOTAL RETURN(a)............................................. 0.67%(b) 3.93%(b) 2.38%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $ 7 $ 15 $14,737
Ratios to average net assets:
Expenses.................................................. 0.93%(c)*** 1.03%(c)*** 1.07%(c)
Net investment income..................................... 9.54%(c) 7.87%(c) 9.01%(c)
PORTFOLIO TURNOVER RATE..................................... 36% 47% 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 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 December 31, 1999, and for substantially all of the
year then ended, there were no Advisor Shares outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
- -------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
SELECT SHARES(b)
---------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 8.20 $ 10.46 $ 11.03 $ 9.91 $ 8.84
-------- -------- -------- -------- -------
Net investment income..................... 1.06 0.99 1.15 1.00 0.90
Net realized and unrealized gain (loss)... 1.09 (2.23) -- 1.55 1.07
-------- -------- -------- -------- -------
Total income (loss) from investment
operations.............................. 2.15 (1.24) 1.15 2.55 1.97
-------- -------- -------- -------- -------
LESS DIVIDENDS AND DISTRIBUTION FROM:
Net investment income..................... (1.02) (0.97) (1.15) (1.00) (0.60)
Excess of net investment income........... -- -- (0.04) -- --
Net realized gains........................ -- -- (0.53) (0.43) --
Excess of realized gains.................. -- (0.03) -- -- --
Return of capital......................... (0.02) (0.02) -- -- (0.30)
-------- -------- -------- -------- -------
Total dividends and distributions........... (1.04) (1.02) (1.72) (1.43) (0.90)
-------- -------- -------- -------- -------
Net change in net asset value per share... 1.11 (2.26) (0.57) 1.12 1.07
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD.............. $ 9.31 $ 8.20 $ 10.46 $ 11.03 $ 9.91
======== ======== ======== ======== =======
TOTAL RETURN(a)............................. 27.81% (11.92%) 10.67% 26.56% 23.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands).............................. $173,724 $148,908 $210,777 $116,144 $49,250
Ratios to average net assets:
Expenses*................................. 1.08% 1.10% 1.29% 1.16% 1.50%
Net investment income..................... 12.27% 10.53% 9.49% 9.62% 9.97%
PORTFOLIO TURNOVER RATE..................... 74% 77% 179% 136% 60%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were 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) As of December 31, 1999, there were no Advisor Shares
outstanding.
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
LATIN AMERICA EQUITY FUND
<TABLE>
<CAPTION>
SELECT SHARES(D)
-----------------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD FROM
ENDED ENDED ENDED FEBRUARY 13, 1996*
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 THROUGH DECEMBER 31, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 7.34 $ 14.13 $ 11.66 $ 10.00(e)
------- -------- ------- -------
Net investment income (loss)..... 0.09 0.27 0.09 0.20
Net realized and unrealized gain
(loss)......................... 3.78 (6.82) 2.74 2.11
------- -------- ------- -------
Total income (loss) from
investment operations.......... 3.87 (6.55) 2.83 2.31
------- -------- ------- -------
LESS DIVIDENDS AND DISTRIBUTION
FROM:
Net investment income (loss)..... (0.09) (0.23) (0.09) (0.20)
Excess of net investment
income......................... (0.04) -- (0.02) --
Net realized gains............... -- (0.01) (0.25) (0.45)
------- -------- ------- -------
Total dividends and
distributions.................... (0.13) (0.24) (0.36) (0.65)
------- -------- ------- -------
Net change in net asset value per
share.......................... 3.74 (6.79) 2.47 1.66
------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD..... $ 11.08 $ 7.34 $ 14.13 $ 11.66
======= ======== ======= =======
TOTAL RETURN(a).................... 52.76% (46.96%) 24.22% 23.36%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands)..................... $23,945 $ 16,356 $55,034 $13,308
Ratios to average net assets:
Expenses***...................... 1.28% 1.97% 1.60% 2.00%(c)
Net Investment Income (loss)..... 1.42% 2.53% 0.26% 1.97%(c)
PORTFOLIO TURNOVER RATE............ 63% 53% 98% 133%
<CAPTION>
ADVISOR SHARES
------------------
FOR THE PERIOD**
ENDED
DECEMBER 31, 1997
<S> <C>
- -----------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $15.11
------
Net investment income (loss)..... (0.21)
Net realized and unrealized gain
(loss)......................... (0.50)
------
Total income (loss) from
investment operations.......... (0.71)
------
LESS DIVIDENDS AND DISTRIBUTION
FROM:
Net investment income (loss)..... (0.01)
Excess of net investment
income......................... --
Net realized gains............... (0.25)
------
Total dividends and
distributions.................... (0.26)
------
Net change in net asset value per
share.......................... (0.97)
------
NET ASSET VALUE, END OF PERIOD..... $14.14
======
TOTAL RETURN(a).................... (4.64%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands)..................... $ 18
Ratios to average net assets:
Expenses***...................... 1.73%(c)
Net Investment Income (loss)..... (0.73%)(c)
PORTFOLIO TURNOVER RATE............ 98%
</TABLE>
NEW YORK MUNICIPAL FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
------------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $ 10.82 $ 10.69 $ 10.40 $ 10.47
------- ------- ------- -------
Net investment income........... 0.43 0.44 0.46 0.44
Net realized and unrealized gain
(loss)........................ (0.50) 0.19 0.34 (0.06)
------- ------- ------- -------
Total income (loss) from
investment operations......... (0.07) 0.63 0.80 0.38
------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income........... (0.43) (0.44) (0.46) (0.44)
Net realized gains.............. -- (0.06) (0.05) (0.01)
------- ------- ------- -------
Total dividends and
distributions................... (0.43) (0.50) (0.51) (0.45)
------- ------- ------- -------
Net change in net asset value
per share..................... (0.50) 0.13 0.29 (0.07)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.... $ 10.32 $ 10.82 $ 10.69 $ 10.40
======= ======= ======= =======
TOTAL RETURN(a)................... (0.65%) 6.03% 7.84% 3.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands).................... $68,228 $67,793 $42,046 $20,158
Ratios to average net assets:
Expenses***..................... 0.50% 0.50% 0.50% 0.55%
Net investment income........... 4.09% 4.08% 4.22% 4.28%
PORTFOLIO TURNOVER RATE........... 93% 132% 144% 33%
<CAPTION>
SELECT SHARES(d)
----------------------
FOR THE PERIOD FROM
APRIL 3, 1995* THROUGH
DECEMBER 31, 1995
<S> <C>
- ----------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $ 10.00(e)
-------
Net investment income........... 0.33
Net realized and unrealized gain
(loss)........................ 0.47
-------
Total income (loss) from
investment operations......... 0.80
-------
LESS DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income........... (0.32)
Net realized gains.............. (0.01)
-------
Total dividends and
distributions................... (0.33)
-------
Net change in net asset value
per share..................... 0.47
-------
NET ASSET VALUE, END OF PERIOD.... $ 10.47
=======
TOTAL RETURN(a)................... 8.13%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands).................... $12,516
Ratios to average net assets:
Expenses***..................... 0.54%(c)
Net investment income........... 4.20%(c)
PORTFOLIO TURNOVER RATE........... 35%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Commencement of operations.
** Sale of Advisor Shares began on June 23, 1997.
*** During the period, certain fees were 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 December 31, 1999 there were no Advisor Shares
outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
- -------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD FROM
ENDED ENDED APRIL 2, 1997* THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD....................... $ 10.54 $ 10.37 $10.00(e)
------- ------- ------
Net investment income.................................... 0.40 0.40 0.33
Net realized and unrealized gain (loss).................. (0.48) 0.22 0.38
------- ------- ------
Total income (loss) from investment operations........... (0.08) 0.62 0.71
------- ------- ------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income.................................... (0.40) (0.40) (0.33)
Excess of net investment income.......................... -- (0.01) --
Net realized gains....................................... -- (0.04) (0.01)
------- ------- ------
Total dividends and distributions.......................... (0.40) (0.45) (0.34)
------- ------- ------
Net change in net asset value per share.................. (0.48) 0.17 0.37
------- ------- ------
NET ASSET VALUE, END OF PERIOD............................. $ 10.06 $ 10.54 $10.37
======= ======= ======
TOTAL RETURN(a)............................................ (0.77%) 6.14% 7.14%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)............... $13,645 $11,066 $4,792
Ratios to average net assets:
Expenses**............................................... 0.50% 0.50% 0.50%(c)
Net investment income.................................... 3.91% 3.87% 4.15%(c)
PORTFOLIO TURNOVER RATE.................................... 20% 51% 41%
</TABLE>
NATIONAL MUNICIPAL FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
---------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD FROM
ENDED ENDED OCTOBER 20, 1997* THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.................... $ 10.43 $ 10.19 $10.00(e)
------- ------- ------
Net investment income................................. 0.41 0.40 0.08
Net realized and unrealized gain (loss)............... (0.39) 0.29 0.19
------- ------- ------
Total income from investment operations............... 0.02 0.69 0.27
------- ------- ------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income................................. (0.41) (0.40) (0.08)
Net realized gains.................................... -- (0.05) --
------- ------- ------
Total Dividends and Distributions:...................... (0.41) (0.45) (0.08)
------- ------- ------
Net change in net asset value per share............... (0.39) 0.24 0.19
------- ------- ------
NET ASSET VALUE, END OF PERIOD.......................... $ 10.04 $ 10.43 $10.19
======= ======= ======
TOTAL RETURN(a)......................................... 0.14% 6.91% 2.70%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)............ $19,044 $29,735 $2,805
Ratios to average net assets:
Expenses**............................................ 0.50% 0.50% 0.50%(c)
Net investment income................................. 3.96% 3.90% 3.95%(c)
PORTFOLIO TURNOVER RATE................................. 299% 226% 46%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Commencement of operations.
** During the period, certain fees were reduced and/ or
reimbursed. If such fee reductions and/ or reimbursements
had not occurred, the ratio would have been higher.
(a) Total return is based on the change in net asset value
during the period and assumes reinvestment of all dividends
and distributions.
(b) Not annualized.
(c) Annualized.
(d) As of December 31, 1999, there were no Advisor Shares
outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
-----------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD FROM
ENDED ENDED JULY 1, 1997* THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.46 $ 10.17 $10.00(e)
------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.49 0.50 0.27
Net realized and unrealized gain (loss)................... (0.69) 0.48 0.19
------- ------- ------
Total income (loss) from investment operations............ (0.20) 0.98 0.46
------- ------- ------
LESS DIVIDENDS AND DISTRIBUTION FROM:
Net investment income..................................... (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........................... (0.50) (0.69) (0.29)
------- ------- ------
Net change in net asset value per share................... (0.70) 0.29 0.17
------- ------- ------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.76 $ 10.46 $10.17
======= ======= ======
TOTAL RETURN(a)............................................. (1.95%) 9.82% 4.71%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)................ $42,422 $39,359 $3,955
Ratios to average net assets:
Expenses**................................................ 0.50% 0.50% 0.50%(c)
Net investment income..................................... 4.85% 4.59% 5.32%(c)
PORTFOLIO TURNOVER RATE..................................... 225% 423% 153%
</TABLE>
MORTGAGE SECURITIES FUND
<TABLE>
<CAPTION>
SELECT SHARES(d)
---------------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD FROM
ENDED ENDED JULY 1, 1997* THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.28 $ 10.17 $ 10.00(e)
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.59 0.58 0.29
Net realized and unrealized gain (loss)................... (0.57) 0.14 0.22
------- ------- -------
Total income from investment operations................... 0.02 0.72 0.51
------- ------- -------
LESS DIVIDENDS AND DISTRIBUTION FROM:
Net investment income..................................... (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........................... (0.59) (0.61) (0.34)
------- ------- -------
Net change in net asset value per share................... (0.57) 0.11 0.17
------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 9.71 $ 10.28 $ 10.17
======= ======= =======
TOTAL RETURN(a)............................................. 0.23% 7.26% 5.10%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)................ $62,309 $54,461 $17,037
Ratios to average net assets:
Expenses**................................................ 0.50% 0.50% 0.50%(c)
Net investment income..................................... 5.92% 5.72% 5.77%(c)
PORTFOLIO TURNOVER RATE..................................... 29% 78% 81%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Commencement of operations.
** During the period, certain fees were reduced and/ or
reimbursed. If such fee reductions and/ or reimbursements
had not occurred, the ratio would have been higher.
(a) Total return is based on the change in net asset value
during the period and assumes reinvestment of all dividends
and distributions.
(b) Not annualized.
(c) Annualized.
(d) As of December 31, 1999 there were no Advisor Shares
outstanding.
(e) Initial offering price.
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
- -------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
1. ORGANIZATION. The OFFIT Investment Fund, Inc. (the "Company", formerly The
OFFITBANK Investment Fund, Inc.) 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 eight, OFFIT High Yield Fund, OFFIT Emerging Markets 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 and OFFIT Mortgage Securities Fund (individually, a "Fund", and
collectively, the "Funds") have commenced operations. The Funds have the
following inception dates:
<TABLE>
<S> <C>
High Yield Fund................ March 2, 1994
Emerging Markets Fund.......... March 8, 1994
Latin America Equity Fund...... February 13, 1996
New York Municipal Fund........ April 3, 1995
California Municipal Fund...... April 2, 1997
National Municipal Fund........ October 20, 1997
U.S. Government Securities
Fund......................... July 1, 1997
Mortgage Securities Fund....... July 1, 1997
</TABLE>
Effective May 1, 1996, all of the outstanding shares of each of the Funds then
in existence were reclassified as "Select Shares" and each Fund began offering a
new class of shares, designated as "Advisor Shares." 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 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.
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.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of significant
accounting policies followed by the Funds in the preparation of their financial
statements. The policies are in conformity with generally accepted accounting
principles. The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
PORTFOLIO VALUATIONS:
Equity securities held by a Fund are valued at the last reported sales price on
the securities exchange or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. Debt securities held by a Fund generally are valued based on quoted bid
prices. Short-term debt investments having maturities of 60 days or less are
valued at amortized cost, which approximates market value, and, if applicable,
adjusted for foreign exchange translation. Securities for which market
quotations are not readily available are valued at fair value determined in good
faith by or under the direction of the Company's Board of Directors. Securities
may be valued by independent pricing services, approved by the Company's Board
of Directors, which use prices provided by market-makers or estimates of market
value obtained from yield data relating to instruments or securities with
similar characteristics.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The 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 are realized and unrealized gains and
losses are incurred.
ORGANIZATIONAL COSTS:
Costs incurred in connection with the organization and initial registration of
the Funds have been deferred and
53
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
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 and Mortgage Securities Funds'
net investment income, if any, are declared daily and paid monthly. Dividends
from the Emerging Markets Fund's net investment income, if any, are declared
daily and paid quarterly. Dividends from the Latin America Equity Fund's net
investment income, if any, are declared and paid quarterly. Net realized gains
on portfolio securities, if any, are distributed at least annually by 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.
As of December 31, 1999, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to
paid-in-capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS) ON
INCOME INVESTMENTS
-------------- --------------
<S> <C> <C>
High Yield Fund............. $6,986,306 $(6,986,306)
Emerging Markets Fund....... 290,641 12,069
Latin America Equity Fund... (49,857) 57,144
California Municipal Fund... 8,345 --
National Municipal Fund..... 5,322 --
U.S. Government Securities
Fund....................... 4,780 --
Mortgage Securities Fund.... 4,364 --
</TABLE>
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.
Capital and currency losses incurred within the Funds' fiscal year but after
October 31, are deemed to arise on the first business day of the following
fiscal year for tax purposes. The following Funds have incurred and will elect
to defer capital and currency losses as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS CURRENCY LOSS
DEFERRED DEFERRED
------------ -------------
<S> <C> <C>
Latin America Equity Fund...... $ -- $ 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 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.
54
- -------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS:
The Funds may purchase instruments from financial institutions, such as banks
and broker-dealers, subject to the seller's agreement to repurchase them at an
agreed upon time and price ("repurchase agreements"). The seller under a
repurchase agreement is required to maintain the value of the securities subject
to the agreement at not less than the repurchase price. Default by the seller
would, however, expose the relevant Funds to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
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
December 31, 1999 are recorded for financial reporting purposes as unrealized
gains and losses by the Funds.
The table below indicates the High Yield Funds' outstanding forward currency
contract positions at December 31, 1999:
<TABLE>
<CAPTION>
VALUE ON VALUE AT
CONTRACT MATURITY ORIGINATION DECEMBER 31, UNREALIZED
CURRENCY AMOUNTS DATE DATE 1999 APPRECIATION
-------- ------------- -------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sell DEM (18,801,000) 02/09/00 $(10,046,811) $ (9,714,271) $ 332,540
Sell ECU (23,968,000) 02/09/00 (24,906,203) (24,216,459) 689,744
Sell FRF (321,627,000) 02/09/00 (51,252,848) (49,548,157) 1,704,691
Sell GBP (23,393,000) 02/09/00 (38,043,584) (37,779,695) 263,889
----------
Net unrealized appreciation on forward positions........................ $2,990,864
==========
</TABLE>
Currency Abbreviations:
<TABLE>
<S> <C> <C>
DEM -- German Deutsche Mark
ECU -- European Currency Unit
FRF -- French Franc
GBP -- British Pound
</TABLE>
Certain of the Funds may also invest in indexed securities whose value is linked
directly to changes in foreign currencies, interest rates and other financial
indices. Indexed securities may be more volatile than the underlying instrument
but the risk of loss is limited to the amount of the original investment.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES. The Company has entered
into investment advisory agreements (the "Investment Advisory Agreements") with
the Adviser. Pursuant to the terms of the Investment Advisory Agreements, the
Adviser is entitled to a fee that is calculated daily and paid monthly based on
the average daily net assets of each Fund, at the annual rate of: 0.85% 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 Fund; 1.00% for the Latin America Equity Fund;
0.35% in the case of the New York Municipal Fund, the California Municipal Fund,
the National Municipal Fund, the U.S. Securities Fund and the Mortgage
Securities Fund.
__________________________________ADVISORY FEE__________________________________
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS LATIN AMERICA NEW YORK
FUND FUND EQUITY FUND MUNICIPAL FUND
----------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Gross Fee................. $12,190,323 $1,344,676 $174,866 $251,216
Waiver.................... 0 0 (133) (76,589)
----------- ---------- -------- --------
Net Fee................... $12,190,323 $1,344,676 $174,733 $174,627
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL U.S. GOVERNMENT MORTGAGE
MUNICIPAL FUND MUNICIPAL FUND SECURITIES FUND SECURITIES FUND
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Gross Fee............ $ 45,892 $ 77,770 $143,287 $212,993
Waiver............... (38,084) (49,941) (67,394) (77,030)
-------- -------- -------- --------
Net Fee.............. $ 7,808 $ 27,829 $ 75,893 $135,963
======== ======== ======== ========
</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
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
55
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
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. PFPC waived all
of its fee for Portfolios with less than $20 million in average daily net
assets.
ADMINISTRATION FEE
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS LATIN AMERICA NEW YORK
FUND FUND EQUITY FUND MUNICIPAL FUND
---------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Gross Fee................. $1,246,898 $186,761 $ 21,858 $ 89,720
Wavier.................... 0 (44,823) (18,736) (21,533)
---------- -------- -------- --------
Net Fee................... $1,246,898 $141,938 $ 3,122 $ 68,187
========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL U.S. GOVERNMENT MORTGAGE
MUNICIPAL FUND MUNICIPAL FUND SECURITIES FUND SECURITIES FUND
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Gross Fee............ $ 16,390 $27,774 $ 51,174 $ 76,069
Waiver............... (16,390) (8,535) (12,282) (18,256)
-------- ------- -------- --------
Net Fee.............. $ 0 $19,239 $ 38,892 $ 57,813
======== ======= ======== ========
</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. PFPC waived all
of its fee for Portfolios with less than $30 million in average daily net
assets.
FUND ACCOUNTING FEE
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS LATIN AMERICA NEW YORK
FUND FUND EQUITY FUND MUNICIPAL FUND
---------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Gross Fee................. $15,000 $15,000 $ 15,000 $15,000
Waiver.................... 0 0 (15,000) 0
------- ------- -------- -------
Net Fee................... $15,000 $15,000 $ 0 $15,000
======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL U.S. GOVERNMENT MORTGAGE
MUNICIPAL FUND MUNICIPAL FUND SECURITIES FUND SECURITIES FUND
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Gross Fee............ $ 15,000 $ 15,000 $15,000 $15,000
Fee Waiver........... (15,000) (13,273) 0 0
-------- -------- ------- -------
Net Fee.............. $ 0 $ 1,727 $15,000 $15,000
======== ======== ======= =======
</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
HIGH YIELD MARKETS LATIN AMERICA NEW YORK
FUND FUND EQUITY FUND MUNICIPAL FUND
---------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Gross Fee................. $149,158 $41,571 $18,000 $18,000
Waiver.................... 0 0 (3,581) (419)
-------- ------- ------- -------
Net Fee................... $149,158 $41,571 $14,419 $17,581
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL U.S. GOVERNMENT MORTGAGE
MUNICIPAL FUND MUNICIPAL FUND SECURITIES FUND SECURITIES FUND
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Gross Fee............ $18,000 $18,000 $18,000 $18,000
Waiver............... (6,878) (6,696) (3,663) (2,813)
------- ------- ------- -------
Net Fee.............. $11,122 $11,304 $14,337 $15,187
======= ======= ======= =======
</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 year ended December 31, 1999, 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
and 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 year ended December 31, 1999, there were $5,147
shareholder servicing fees incurred in the MSD&T Share class of the High Yield
Fund.
OFFITBANK has agreed to waive and/or reimburse expenses to the extent necessary
to limit the expense ratios for the High Yield Fund at 0.84%, the Emerging
Markets Fund at 1.10%, the Latin America Equity Fund at 1.97%, the New York
Municipal, California Municipal, National Municipal, U.S. Government Securities
and Mortgage Securities Funds, at 0.50%. In order to maintain these ratios, the
Adviser has waived some or all of its advisory fee for certain Funds, as
detailed above.
4. SECURITIES TRANSACTIONS. For the year ended December 31, 1999, 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 U.S. GOVERNMENT
AND CORPORATE BONDS OBLIGATIONS
--------------------------- -------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
High Yield Fund...... $742,180,101 $701,706,722 $ -- $ --
Emerging Markets
Fund................ 114,810,272 106,137,439 -- --
Latin America Equity
Fund................ 10,799,999 10,870,238 -- --
New York Municipal
Fund................ 69,099,387 65,668,512 -- --
California Municipal
Fund................ 6,349,398 2,570,819 -- --
National Municipal
Fund................ 67,628,902 76,927,294 -- --
U.S. Government
Securities Fund..... -- -- 95,939,849 89,402,814
Mortgage Securities
Fund................ -- -- 39,050,413 16,544,291
</TABLE>
56
- -------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
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 periods ended December 31, 1999 and 1998,
respectively, were as follows:
<TABLE>
<CAPTION>
HIGH YIELD FUND SELECT SHARES
---------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares issued........ 53,165,517 $ 516,203,976 74,958,569 $ 769,112,164
Shares reinvested.... 11,975,142 114,020,009 9,400,869 95,379,400
Shares redeemed...... (81,064,498) (767,965,843) (39,058,920) (395,454,066)
----------- ------------- ----------- -------------
Net increase
(decrease).......... (15,923,839) $(137,741,858) 45,300,518 $ 469,037,498
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND ADVISOR SHARES
------------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Shares issued....................... -- $ -- 17,980 $ 181,000
Shares reinvested................... -- -- -- --
Shares redeemed..................... (715) (7,109) (18,711) (186,959)
---- ------- ------- ---------
Net decrease........................ (715) $(7,109) (731) $ (5,959)
==== ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD
MSD&T SHARES
-----------------------
PERIOD ENDED
DECEMBER 31, 1999
-----------------------
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Shares issued....................................... 1,469,511 $14,718,646
Shares reinvested................................... -- --
Shares redeemed..................................... -- --
--------- -----------
Net Increase........................................ 1,469,511 $14,718,646
========= ===========
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS FUND SELECT SHARES
-------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Shares issued........ 5,851,325 $ 50,168,407 10,089,980 $ 101,711,812
Shares reinvested.... 1,182,179 10,379,144 1,812,672 16,044,606
Shares redeemed...... (6,529,137) (54,249,530) (13,898,524) (113,151,233)
---------- ------------ ----------- -------------
Net increase
(decrease).......... 504,367 $ 6,298,021 (1,995,883) $ 4,605,185
========== ============ =========== =============
</TABLE>
<TABLE>
<CAPTION>
LATIN AMERICA EQUITY FUND SELECT SHARES
--------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued............. 792,735 $ 6,590,882 628,612 $ 6,292,203
Shares reinvested......... 13,143 145,620 39,391 445,995
Shares redeemed........... (874,456) (7,146,256) (2,332,653) (21,881,263)
-------- ----------- ---------- ------------
Net decrease.............. (68,578) $ (409,754) (1,664,650) $(15,143,065)
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
LATIN AMERICA
EQUITY FUND
ADVISOR SHARES
-------------------
PERIOD ENDED
DECEMBER 31, 1998
-------------------
SHARES AMOUNT
-------- --------
<S> <C> <C>
Shares issued............................................ -- $ --
Shares redeemed.......................................... (1,277) (17,939)
------ --------
Net decrease............................................. (1,277) $(17,939)
====== ========
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MUNICIPAL FUND SELECT SHARES
-----------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares issued.......... 2,640,255 $ 28,065,457 4,296,577 $ 46,233,943
Shares reinvested...... 231,693 2,449,903 215,897 2,328,952
Shares redeemed........ (2,525,660) (26,588,867) (2,179,819) (23,459,800)
---------- ------------ ---------- ------------
Net increase........... 346,288 $ 3,926,493 2,332,655 $ 25,103,095
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL FUND SELECT SHARES
----------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Shares issued................ 418,203 $4,381,453 763,930 $ 8,055,789
Shares reinvested............ 35,358 364,877 30,165 297,972
Shares redeemed.............. (146,655) (1,507,814) (206,273) (2,178,623)
-------- ---------- -------- -----------
Net increase................. 306,906 $3,238,516 587,822 $ 6,175,138
======== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL FUND SELECT SHARES
---------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Shares issued............ 851,833 $ 8,882,215 3,017,817 $31,253,540
Shares reinvested........ 66,193 678,632 60,611 630,967
Shares redeemed.......... (1,871,147) (19,499,510) (502,883) (5,252,890)
---------- ------------ --------- -----------
Net increase
(decrease).............. (953,121) $ (9,938,663) 2,575,545 $26,631,617
========== ============ ========= ===========
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND SELECT SHARES
---------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Shares issued............ 2,536,782 $ 25,276,670 3,790,582 $39,744,486
Shares reinvested........ 172,355 1,722,886 141,379 1,476,753
Shares redeemed.......... (2,123,510) (21,151,397) (557,911) (5,837,572)
---------- ------------ --------- -----------
Net increase............. 585,627 $ 5,848,159 3,374,050 $35,383,667
========== ============ ========= ===========
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE SECURITIES FUND SELECT SHARES
-------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued............. 1,632,551 $16,252,334 3,757,709 $38,457,330
Shares reinvested......... 298,196 2,964,170 186,150 1,911,337
Shares redeemed........... (811,643) (8,024,428) (319,246) (3,274,675)
--------- ----------- --------- -----------
Net increase.............. 1,119,104 $11,192,076 3,624,613 $37,093,992
========= =========== ========= ===========
</TABLE>
6. OTHER MATTERS. The High Yield Fund, the Emerging Markets Fund and the Latin
America Equity Fund invest in obligations of foreign entities and securities
denominated in foreign currencies. Such investments involve risk not typically
involved with 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
57
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
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.
7. REVOLVING LINE OF CREDIT AGREEMENT. The High Yield Fund, Emerging Markets
Fund and the Latin America Equity Fund have established a revolving line of
credit with The Bank of New York ("BONY"). Borrowings under the line may not
exceed the lesser of $25,000,000 or 20% of the total assets of these funds.
Interest is payable on outstanding borrowings at the Federal Funds Rate plus
.625%. Additionally, the line of credit includes an annual commitment fee equal
to .15% per annum on the daily amount of the unused commitment. During the year
ended December 31, 1999 these funds did not utilize the revolving line of
credit. Total commitment fees for the High Yield Fund, Emerging Markets Fund and
the Latin America Equity Fund, were $96, $8, and $0, respectively.
58
- -------------
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors
and Shareholders of
The OFFIT Investment Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of OFFIT High Yield Fund, OFFIT
Emerging Markets 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 and OFFIT Mortgage Securities Fund (collectively, the
"Funds," each constituting a portfolio of The OFFIT Investment Fund, Inc.,
formerly The OFFITBANK Investment Fund, Inc.) at December 31, 1999, and the
results of each of their operations, the changes in each of their net assets and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodians, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 16, 2000
59
-------------
<PAGE>
THE OFFIT INVESTMENT FUND, INC.
- -----------------------------------------------------------------------------
CHANGE IN INDEPENDENT AUDITOR (UNAUDITED). On December 16, 1999, the Board of
Directors of the Company elected Ernst & Young LLP as the independent
accountants for the Company for the year ending December 31, 2000, replacing
PricewaterhouseCoopers LLP. The Audit Committee did not take any separate action
on this matter.
PricewaterhouseCoopers LLP's reports on the Company's financial statements for
the years ended December 31, 1998 and 1997 did not contain an adverse opinion or
a disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principles.
During the years ended December 31, 1998 and 1997, and through December 16,
1999, there were no disagreements with PricewaterhouseCoopers LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of PricewaterhouseCoopers LLP, would have caused it to make
reference to the subject matter of the disagreement in its report on the
financial statements for such years.
FEDERAL INCOME TAX INFORMATION (UNAUDITED). During the year ended December 31,
1999, the following Fund declared long-term capital gain distributions in the
following amount:
<TABLE>
<S> <C>
Mortgage Securities Fund................. $9,058
</TABLE>
During the year ended December 31, 1999, the following Funds declared tax-exempt
income distributions in the following amounts:
<TABLE>
<S> <C>
New York Municipal Fund.............. $2,912,852
California Municipal Fund............ 506,037
National Municipal Fund.............. 852,953
</TABLE>
For corporate shareholders 0.52% of the total ordinary income distributions paid
during the fiscal year ended December 31, 1999 for the High Yield Fund qualifies
for the corporate dividends received deduction.
REPORT OF SHAREHOLDERS MEETING (UNAUDITED). The Company held a special meeting
of Shareholders on July 30, 1999. The two matters voted upon by Shareholders and
the resulting votes for each matter were as follows:
1. Approval of a new advisory agreement between OFFITBANK (the "Adviser") and
the Company on behalf of each Fund:
<TABLE>
<CAPTION>
VOTING RESULTS*
---------------------------------
AGAINST/
FOR WITHHELD ABSTAINED
-------- --------- ----------
<S> <C> <C> <C>
High Yield Fund......................... 107,606 32 585
Emerging Markets Fund................... 9,385 -- --
Latin America Equity Fund............... 1,474 -- --
New York Municipal Fund................. 3,783 -- --
California Municipal Fund............... 854 -- --
National Municipal Fund................. 1,599 -- --
U.S. Government Securities Fund......... 3,030 -- --
Mortgage Securities Fund................ 4,505 -- --
</TABLE>
2. Election of the following Director:
<TABLE>
<CAPTION>
VOTING RESULTS*
---------------------------------
AGAINST/
FOR WITHHELD ABSTAINED
-------- --------- ----------
<S> <C> <C> <C>
Stephen M. Peck......................... 127,409 1,009 6
</TABLE>
- --------------------
* In thousands of shares
60
- -------------
<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 D. Marky
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
48 Wall Street
New York, New York, 10286
(ALL OTHER OFFIT FUNDS)
LEGAL COUNSEL
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
<PAGE>
This report is submitted for the information of the shareholders of the 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
