OFFITBANK VARIABLE INSURANCE FUND INC, N-30D, 1997-05-30

OFFITBANK VARIABLE INSURANCE FUND INC
N-30D, 1997-05-30

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THE OFFITBANK VARIABLE INSURANCE FUND, INC.
HIGH YIELD FUND
March 31, 1997
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S LETTER

Dear Investor:

The Fund's net investment return for the fiscal year ending March 31, 1997 after
all fees and expenses was 11.90%. For comparative purposes, the return on
intermediate U.S. Treasurys was 3.03% and the Merrill Lynch BB 5-6.99 year Index
returned 9.08%. The Fund continued to grow as net assets increased to
approximately $25 million at March 31, 1997.

For the first two months of 1997 the high yield market performed well on an
absolute basis and very well compared to Treasurys. High yield demand
outstripped supply as spreads to Treasurys tightened 50 basis points through
February to all time lows. Given the general strength of the economy, credit
fundamentals were less of a factor than the technicals of the marketplace. In
late March, faced with the Fed tightening, a full high yield new issue calendar
and the first net redemptions from high yield mutual funds in over a year, the
high yield market came under some pressure. Spreads widened, ending the quarter
approximately 15 points tighter than they started the year. Spreads have
continued to widen in early April.

The first quarter saw record issuance of $26 billion of high yield debt
surpassing the previous record set last quarter. Over $11 billion was issued in
March alone. As in 1996, over 50% of the new issues were Rule 144A securities,
and the quality was largely mid-single B. On the demand side, high yield mutual
fund net inflows for January and February totaled an impressive $4.6 billion. By
contrast, March net inflows were $200 million, the lowest monthly amount in over
two years. The technicals of the high yield market are presently more neutral
than they have been in months. During February, virtually all new issues traded
up a few points as soon as they broke syndicate, in spite of very aggressive
initial pricing. Demand for paper simply overwhelmed all other considerations.
By contrast, many of the deals brought to market during the last few weeks of
March were forced to come at wider spreads in order to attract buyers, and then
traded down. A few deals were postponed due to "market conditions."

High yield market technical imbalances tend to be self-correcting over time. The
new issue calendar will taper off as both absolute and relative yield levels
rise. Mutual funds represent the marginal flow of money to and from the high
yield market, and will ebb and flow naturally with prices and yield levels.
However, a solid base of demand for high yield securities remains intact as new
long-term investors, such as pension funds and CBO's, continue to enter the
market.

We view the present back up in interest rates and spread widening in high yield
to be an opportunity to become more fully invested. Unlike year-end and much of
the first quarter, it is no longer difficult to put new money to work. We are
finding many issues that we believe offer attractive values in today's market.
Prices are the lowest and yields are at the highest levels that we have seen in
many months. Absolute yields of 9 1/2%-to-10% for decent credits are achievable
in the current market. The Fund has ample liquidity to take advantage of
improving investment opportunities as they arise.

Although the portfolio has increased in size, the composition of the Fund has
remained steady. We continue to focus on the better quality segment of the high
yield market. Approximately 43.08% of the corporate holdings in the Fund are
rated either Ba3 and better by Moody's or BB- and better by Standard & Poor's.
79.20% of the holdings are rated at least B1 or B+. We continue to believe that
better quality high yield credits will outperform fixed income alternatives over
time.

Stephen T. Shapiro
April 10, 1997

<PAGE>

OFFITBANK
VIF - HIGH YIELD FUND
- --------------------------------------------------------------------------------

The following graph illustrates comparative total return for a $250,000
investment made in the OFFITBANK VIF-High Yield Fund at the trading commencement
date of April 1, 1996 and held through March 31, 1997 against the performance of
the Merrill Lynch High Yield "BB" 5-6.99 Year and the 5 Year Treasury over the
same period.

[Line graph which illustrates comparative total return for the period April 1,
1996 (commencement of trading) through March 31, 1997 of a $250,000 investment
in the OFFITBANK VIF-High Yield Fund (which investment was worth $279,793 at the
end of the period) against the same investment in two indices, including the
Merrill Lynch High Yield "BB" 5-6.99 Year index and the 5 Year Treasury over the
same period (which investment was worth $272,703 and $257,597 at the end of such
period, respectively).]

- -------------------------------------------------------------------------
Since Inception
Total Return* (April 1, 1996)

OFFITBANK VIF-High Yield Fund 11.90%
Merrill Lynch High Yield "BB" 5-6.99 Year 9.08%
5 Year Treasury 3.03%
- -------------------------------------------------------------------------

* Assumes reinvestment of all dividends and distributions. The total return may
reflect the waiver of a portion of the Fund's advisory or administrative fees
for certain periods since inception date. In such instances, and without waiver
of fees, total return would have been lower. Performance data quoted represents
past performance and is not predictive of future performance. Investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance data quoted does
not include insurance charges imposed in connection with variable insurance
contracts, and if insurance charges were included, performance numbers would
have been lower. Indices shown for comparative purposes only, and are not
available for investment.

<PAGE>

OFFITBANK
VIF - HIGH YIELD FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
March 31, 1997
<TABLE>
<CAPTION>

PRINCIPAL Market
AMOUNT Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE/DEFENSE (1.64%)
CORPORATE BONDS
Sequa Corp. Sr Notes, 8.75%, 12/15/01 ................................... $150,000 $150,000
UNC Inc. Sr Notes, 9.125%, 07/15/03 ..................................... 250,000 262,500
----------
412,500
----------

BROADCAST/TELECOMMUNICATIONS (5.55%)
CORPORATE BONDS
CCPR Services Sr Sub Notes, 10.00%, 02/01/07 (144A) .................... 200,000(1) 190,000
Centennial Cellular Corp. Sr Notes, 8.875%, 11/01/01 ................... 300,000 289,500
Heritage Media Corp. Sr Sub Notes, 8.75%, 02/15/06 ..................... 200,000 210,000
Paging Network Sr Sub Notes, 10.125%, 08/01/07 ......................... 250,000 225,000
Vanguard Cellular Systems, Inc. Sr Debs., 9.375%, 04/15/06 ............. 200,000 199,500
Viacom Inc. Sub Notes, 8.00%, 07/07/06 ................................. 300,000 280,875
----------
1,394,875
----------

CABLE (9.53%)
CORPORATE BONDS
Cablevision Systems Corp. Sr Sub Notes, 9.25%, 11/01/05 ................ 300,000 288,750
Comcast Corp. Sr Sub Debs., 9.375%, 05/15/05 ........................... 250,000 250,000
International Cabletel Sr Notes, 10.00%, 02/15/07 (144A) ............... 200,000(1) 193,000
Jones Intercable Inc. Sr Sub Debs., 10.50%, 03/01/08 ................... 350,000 376,250
Lenfest Communications Inc. Sr Notes, 8.375%, 11/01/05 ................. 300,000 274,500
Olympus Communications L.P. Sr Notes, 10.625%, 11/15/06 (144A) ......... 300,000(1) 301,500
Rogers Cablesystems Ltd. Sr Secured 2nd Priority Notes, 9.625%, 08/01/02 300,000 309,750
TeleWest Plc Sr Debs., 9.625%, 10/01/06 ................................ 250,000 240,000
Videotron Ltee Sr Sub Notes, 10.25%, 10/15/02 .......................... 150,000 159,000
----------
2,392,750
----------

CHEMICALS (3.84%)
CORPORATE BONDS
Borden Chemicals & Plastics Sr Notes, 9.50%, 05/01/05 .................. 250,000 260,625
Harris Chemical North America, Inc. Sr Secured Notes, 10.25%, 07/15/01 . 250,000 252,500
ISP Holdings Inc. Sr Notes, 9.00%, 10/15/03 (144A) ..................... 300,000(1) 301,500
Sifto Canada Inc. Sr Notes, 8.50%, 07/15/00 ............................ 150,000 149,250
----------
963,875
----------

CONSUMER GROUPS (4.96%)
CORPORATE BONDS
Fleming Companies Inc. Floating Rate Sr Notes, 7.875%, 12/15/01 ........ 150,000(2) 139,125
Host Marriott Travel Plaza Sr Notes, 9.50%, 05/15/05 ................... 150,000 152,250
Revlon Consumer Products Sr Notes, 9.375%, 04/01/01 .................... 500,000 506,250
Sealy Corp. Sr Sub Notes, 10.25%, 05/01/03 ............................. 145,000 148,625
Westpoint Stevens Inc. Sr Sub Debs., 9.375%, 12/15/05 .................. 300,000 300,000
----------
1,246,250
----------

</TABLE>

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

<PAGE>

OFFITBANK
VIF - HIGH YIELD FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
March 31, 1997
<TABLE>
<CAPTION>

PRINCIPAL Market
AMOUNT Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES/INSURANCE (2.80%)
CORPORATE BONDS
Amresco Inc. Sr Sub Notes, 10.00%, 03/15/04 ............................ $200,000 $196,750
Presidential Life Corp. Sr Notes, 9.50%, 12/15/00 ...................... 150,000 153,000
Reliance Group Holdings, Inc. Sr Sub Notes, 9.75%, 11/15/03 ............ 150,000 155,625
Veritas Holdings Sr Notes, 9.625%, 12/15/03 (144A) ..................... 200,000(1) 198,000
----------
703,375
----------

FOREST & PAPER PRODUCTS (4.70%)
CORPORATE BONDS
Fort Howard Corp. Sr Sub Notes, 9.00%, 02/01/06 ........................ 150,000 151,500
Repap New Brunswick 1st Priority Floating Rate Sr Secured Notes, 8.875%,
07/15/00 ............................................................ 250,000(2) 243,750
Repap New Brunswick 1st Priority Sr Secured Notes, 9.875%, 07/15/00 .... 150,000 150,000
Repap Wisconsin Inc. 1st Priority Sr Secured Notes, 9.25%, 02/01/02 .... 150,000 147,750
Stone Container Corp. Sr Secured Notes, 10.75%, 10/01/02 ............... 300,000 295,125
PREFERRED STOCKS
Asia Pulp & Paper Pfd., 12.00%, Series A (144A) ........................ 200,000(1) 192,000
----------
1,180,125
----------

GENERAL INDUSTRIES/MANUFACTURING (8.58%)
CORPORATE BONDS
Allied Waste N.A. Sr Sub Notes, 10.25%, 12/01/06 (144A) ................ 200,000(1) 207,500
Dominion Textile (USA) Inc. Guaranteed Sr Notes, 9.25%, 04/01/06 ....... 300,000 303,000
Emcor Group Inc. Notes, 11.00%, 12/15/01 ............................... 250,000 255,000
Exide Corp. Sr Notes, 10.00%, 04/15/05 ................................. 150,000 151,500
Exide Corp. Sr Notes, 10.75%, 12/15/02 ................................. 150,000 153,938
Nortek Inc. Sr Notes, 9.25%, 03/15/07 (144A) ........................... 300,000(1) 294,000
Unisys Corp. Sr Notes, 15.00%, 07/01/97 ................................ 300,000 315,000
Unisys Corp. Sr Notes, 11.75%, 10/15/04 ................................ 250,000 260,000
CONVERTIBLE BONDS
Computervision Industries Conv. Sub Debs., 8.00%, 12/01/09 ............ 250,000 216,250
----------
2,156,188
----------

HEALTH CARE (2.54%)
CORPORATE BONDS
Beverly Enterprises Inc. Sr Notes, 9.00%, 02/15/06 ..................... 150,000 147,000
Regency Health Services, Inc. Sr Sub Notes, 9.875%, 10/15/02 ........... 200,000 202,000
Tenet Healthcare Corp. Sr Sub Notes, 8.625%, 01/15/07 .................. 300,000 289,500
----------
638,500
----------

HOTELS & GAMING (8.28%)
CORPORATE BONDS
Host Marriott Properties Sr Secured Notes, 9.50%, 05/15/05 ............. 300,000 298,500
John Q. Hammons Hotels L.P. 1st Mortgage Notes, 8.875%, 02/15/04 ....... 300,000 293,250
Prime Hospitality Corp. 1st Mortgage Notes, 9.25%, 01/15/06 ............ 250,000 251,250
Prime Hospitality Corp. Sr Sub Notes, 9.75%, 04/01/07 (144A) ........... 250,000(1) 250,938

</TABLE>
The accompanying notes are an integral part of the financial statements.

<PAGE>

OFFITBANK
VIF - HIGH YIELD FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL Market
AMOUNT Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOTELS & GAMING (CONTINUED)
CORPORATE BONDS (CONTINUED)

Station Casinos Sr Sub Notes, 9.625%, 06/01/03 (A) .................. $250,000 $238,750
Station Casinos Sr Sub Notes, 9.625%, 06/01/03 (B) .................. 250,000 238,750
Sun International Hotels Ltd. Sr Sub Notes, 9.00%, 03/15/07 (144A) .. 200,000(1) 191,000
Trump Atlantic City 1st Mortgage Notes, 11.25%, 05/01/06 ............ 350,000 315,875
----------
2,078,313
----------

METALS/MINING/IRON/STEEL (3.16%)
CORPORATE BONDS
Armco Inc. Sr Notes, 9.375%, 11/01/00 ............................... 200,000 203,500
Kaiser Aluminum & Chemical Sr Notes, 9.875%, 02/15/02 ............... 200,000 200,000
Westmin Resources Ltd. Sr Secured Notes, 11.00%, 03/15/07 ........... 250,000 248,125
Wheeling-Pittsburgh Corp. Sr Notes, 9.375%, 11/15/03 ................ 150,000 141,563
----------
793,188
----------

OIL/GAS (4.38%)
CORPORATE BONDS
Clark Oil & Refining Sr Notes, 10.50%, 12/01/01 ..................... 200,000 205,000
Clark Refining & Marketing Holdings Sr Secured Notes, 0.00%, 02/15/00 400,000 291,000
Ferrellgas Partner L.P. Sr Notes, 9.375%, 06/15/06 .................. 400,000 403,000
Petroleum Heat & Power Sub Notes, 10.125%, 04/01/03 ................. 200,000 200,500
----------
1,099,500
----------

PACKAGING/CONTAINERS (1.25%)
CORPORATE BONDS
Gaylord Container Sr Notes, 11.50%, 05/15/01 ........................ 150,000 157,500
Owens-Illinois Corp. Sr Sub Notes, 10.00%, 08/01/02 ................. 150,000 157,313
----------
314,813
----------

PUBLISHING/ADVERTISING (4.78%)
CORPORATE BONDS
Hollinger International Publishing Sr Notes, 8.625%, 03/15/05 ....... 250,000 243,750
K-III Communication Corp. Sr Notes, 8.50%, 02/01/06 ................. 200,000 195,500
K-III Communication Corp. Sr Notes, 10.625%, 05/01/02 ............... 300,000 312,000
Outdoor Systems Inc. Sr Sub Notes, 9.375%, 10/15/06 ................. 250,000 246,875
Universal Outdoor Inc. Sr Sub Notes, 9.75%, 10/15/06 ................ 200,000 201,500
----------
1,199,625
----------

REAL ESTATE (0.65%)
CORPORATE BONDS
Trizec Finance Ltd. Sr Notes, 10.875%, 10/15/05 ..................... 150,000 162,563
----------

RETAIL (1.76%)
CORPORATE BONDS
Petro Stopping Centers Sr Notes, 10.50%, 02/01/07 (144A) ............ 200,000(1) 197,000
TravelCenters of America Sr Sub Notes, 10.25%, 04/01/07 (144A) ...... 250,000(1) 245,000
----------
442,000
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.

<PAGE>

OFFITBANK
VIF - HIGH YIELD FUND
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
March 31, 1997
<TABLE>
<CAPTION>

PRINCIPAL Market
AMOUNT Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION (2.14%)
TRUST CERTIFICATES
Piedmont Aviation Inc. Equipment Trust Certificates, 9.65%, 05/08/99 $277,000 $277,000
Piedmont Aviation Inc. Equipment Trust Certificates, 9.80%, 05/08/04 261,000 260,352
-----------
537,352
--------

UTILITIES (0.64%)
CORPORATE BONDS
Cleveland Electric Illum 1st Mortgage Notes, 9.50%, 05/15/05 ....... 150,000 159,938
-----------

TOTAL INVESTMENTS (COST $17,877,196) (71.18%) ............................. 17,875,730

CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (28.82%) ................... 7,238,410
-----------

TOTAL NET ASSETS (100.00%) ................................................ $25,114,140
===========
</TABLE>
- ----------------------------------

(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) Interest rate reflected is rate in effect at March 31, 1997.

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

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
EMERGING MARKETS FUND
March 31, 1997
- -------------------------------------------------------------------------------
PORTFOLIO MANAGER'S LETTER

Dear Investor:

The OFFITBANK VIF-Emerging Markets Fund produced a net investment return of
8.29% since the Fund's inception on August 28, 1996 to March 31, 1997. The J. P.
Morgan Emerging Markets Index Plus and J. P. Morgan Latin America Eurobond Index
returned 14.06% and 9.67%, respectively over the same period. Our chosen
benchmark of a 50%/50% composite of the two indices returned 11.87% for the
period.

As of March 31, 1997, the net asset value per share was $10.30 and the 30 day
SEC yield was 9.99%. The approximate yield to maturity of the Fund as of March
31, 1997 was 11.75%, with an approximate average maturity of 7.5 years and
approximate average duration of 4 years. At fiscsal year end, the Fund was
allocated 42% to Eurobonds, 31% to Brady and pre-Brady sovereign debt, 6% to
local market instruments, and 21% in cash and accrued income. As of fiscal year
end, the Fund maintained an 74% allocation to Latin America with the largest
allocations to Brazil (23%), Mexico (18%), and Venezuela (13%). The Fund also
remains focused on dollar denominated assets which comprised 90% of the overall
portfolio at fiscal year end (including the 17% cash holding).

The first quarter of 1997 experienced a resurgence of interest in Emerging
Markets investments among global investors. The resultant funds flow into the
sector buoyed the markets through the first two months of the quarter. Beginning
in March, concern over the direction of U.S. interest rates engendered
de-leveraging among hedge fund investors and cross-over buyers from other
sectors (domestic high yield and other non-traditional Emerging Markets
investors) resulting in a correction of overbought conditions in the Emerging
Markets asset class. The result is that more value is being offered in Emerging
Markets debt, especially among corporate Eurobonds, while fundamentals remain
solidly on track.

Emerging Markets corporate Eurobonds, which constitute what we consider
"International High Yield," continue to offer spreads of 350 - 550 basis points
over equivalent duration U.S. Treasuries for Single B to Double B rated or
equivalent issues. On average, Latin American debt currently delivers spreads of
approximately 40 basis points above other Emerging Markets debt, as measured by
the J. P. Morgan Emerging Markets Bond Index Plus.

The Fund continues to focus on good quality corporate Eurobonds and on the Latin
American region where we see some of the most attractive investment
opportunities in Emerging Markets. We have adopted a slightly more defensive
posture by shortening duration and concentrating on high current yield bonds.
The Fund is currently positioned with cash holdings to take selective advantage
of new issues and opportunities presented by the re-pricing of the market. We
remain positive on overall macro-economic and political trends in the major
markets.

As evidenced by Standard & Poor's recent ratings upgrades of Argentina and
Brazil, international confidence in the region continues to improve. We believe
that positive local news on privatization, governmental reform, and economic
growth will be the main drivers of the Emerging Markets asset class for the
remainder of 1997.

Richard M. Johnston
April 10, 1997

<PAGE>

OFFITBANK
VIF - EMERGING MARKETS FUND
- -------------------------------------------------------------------------------

The following graph illustrates comparative total return for a $250,000
investment made in the OFFITBANK VIF-Emerging Markets Fund at the trading
commencement date of August 28, 1996 and held through March 31, 1997 against the
performance of the J.P. Morgan Emerging Markets Bond Index+ and the J.P. Morgan
Latin America Eurobond Index over the same period. In addition, the graph below
includes a composite of the return of such indices which we believe provides a
comparison to the overall performance of the various asset classes in which the
Fund invests.

[Line graph which illustrates comparative total return for the period August 28,
1996 (commencement of trading) through March 31, 1997 of a $250,000 investment
in the OFFITBANK VIF-Emerging Markets Fund (which investment was worth $270,414
at the end of the period) against the same investment in three indices including
(i) a composite comprised of 50% of the J.P. Morgan Emerging Markets Bond Index+
and 50% of the J.P. Morgan Latin America Eurobond Index, (ii) the J.P. Morgan
Emerging Markets Bond Index+ and (iii) the J.P. Morgan Latin America Eurobond
Index over the same period (which investment was worth $279,638, $285,166 and
$274,135 at the end of the period, respectively).]

- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Since Inception
Total Return* (August 28, 1996)

<S> <C>
Composite Index: 50% J.P. Morgan Emerging Markets Bond Index+
and 50% J.P. Morgan Latin America Eurobond Index 11.87%
J.P. Morgan Emerging Markets Bond Index+ 14.06%
J.P. Morgan Latin America Eurobond Index 9.67%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Assumes reinvestment of all dividends and distributions. The total return may
reflect the waiver of a portion of the Fund's advisory or administrative fees
for certain periods since inception date. In such instances, and without waiver
of fees, total return would have been lower. Performance data quoted represents
past performance and is not predictive of future performance. Investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance data quoted does
not include insurance charges imposed in connection with variable insurance
contracts, and if insurance charges were included, performance numbers would
have been lower. Indices shown for comparative purposes only, and are not
available for investment.

<PAGE>

OFFITBANK
VIF - EMERGING MARKETS FUND

- -------------------------------------------------------------------------------
Portfolio of Investments
March 31, 1997
<TABLE>
<CAPTION>

PRINCIPAL Market
AMOUNT Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

SOVEREIGN DEBT
ARGENTINA (10.96%)
Argentina Brady Floating Rate Bonds, 6.75%, 03/31/05 ........... $291,000(4) $259,718
Argentina Peso Bocon Pre-1 Floating Rate Bonds, 3.462%, 04/01/01 135,000(b)(4) 165,240
Republic of Argentina Global Bonds, 11.00%, 10/09/06 ........... 50,000 51,375
--------
476,333
--------
BRAZIL (3.62%)
Brazil Brady DCB Floating Rate Bonds, 6.5625%, 04/15/12 ........ 200,000(4) 157,500
--------

ECUADOR (2.24%)
Ecuador Brady Discount Floating Rate Bonds, 6.4375%, 02/28/25 .. 150,000(4) 97,500
--------

PANAMA (4.66%)
Panama Brady PDI Floating Rate Bonds, 6.5625%, 07/17/16 ........ 253,515(4) 202,495
--------

VENEZUELA (9.77%)
Venezuela Brady DCB Floating Rate Bonds, 6.50%, 12/18/07 ....... 250,000(4) 215,000
Venezuela Brady FLIRB Floating Rate Bonds, 6.625%, 03/31/07 .... 238,095(4) 209,524
--------
424,524
--------
AUTO PARTS (1.16%)
BRAZIL
Iochpe Maxion S.A., 12.375%, 11/08/02 .......................... 50,000 50,500
--------

BANKS (7.40%)
CHILE
Citibank Chilean Peso-Linked Time Deposit, UF +5.35%, 10/30/97 42,060,000(a)(2) 106,254
--------

MOROCCO
Morocco Tranche A Loan, 6.375%, 01/01/09 ...................... 250,000(2)(4) 215,000
--------

BUILDING MATERIALS (3.61%)
MEXICO
Cemex, 12.75%, 07/15/06 (144A) ................................ 40,000(1) 44,800
Cemex, 12.75%, 07/15/06 ....................................... 100,000 112,000
--------
156,800
--------
CONSTRUCTION (2.37%)
MEXICO
Bufete Industrial, 11.375%, 07/15/99 (144A) ................... 100,000(1) 103,000
--------

ENTERTAINMENT (3.43%)
MEXICO
Group Posadas S.A., 10.375%, 02/13/02 (144A) .................. 150,000(1) 148,875
--------

INDUSTRIAL (3.50%)
BRAZIL
Elevadores Atlas S.A. Step-Up Bonds, 11.00/11.50%, 07/11/04 ... 50,000(3) 51,688
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.

<PAGE>

OFFITBANK
VIF - EMERGING MARKETS FUND
- -------------------------------------------------------------------------------
Portfolio of Investments (continued)
March 31, 1997
<TABLE>
<CAPTION>

PRINCIPAL Market
AMOUNT Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL (CONTINUED)
MEXICO
Ispat Mexicana, 10.375%, 03/15/01 .................................... $100,000 $100,250
-----------

MEDIA (10.23%)
BRAZIL
Globo Communicacoes, 10.50%, 12/20/06 (144A) ......................... 170,000(1) 171,487
RBS Participacoes S.A., Putable, 14.00%, 12/15/03 .................... 100,000 112,000
-----------
283,487
-----------
MEXICO
Grupo Televisa S.A., Step-Up Callable Bonds, 0/13.25%, 05/15/08 (144A) 200,000(1)(3) 129,000
Grupo Televisa S.A., Step-Up Callable Bonds, 0/13.25%, 05/15/08 ...... 50,000(3) 32,250
-----------
161,250
-----------
PAPER/PULP (3.06%)
MEXICO
Grupo Industrial Durango, 12.625%, 08/01/03 .......................... 125,000 133,125
-----------

PETROCHEMICALS (2.33%)
BRAZIL
Opp Petroquimica, Putable, 11.50%, 02/23/04 (144A) ................... 100,000(1) 101,375
-----------

TELECOMMUNICATIONS (8.74%)
BRAZIL
Comtel Brasileira LTDA, 10.75%, 09/26/04 ............................. 225,000 232,312
-----------

VENEZUELA
CANTV Financial LTD., 8.875%, 02/01/02 (144A) ........................ 50,000(1) 49,000
CANTV Financial LTD., 9.25%, 02/01/04 ................................ 100,000 98,250
-----------
147,250
-----------
UTILITIES (3.67%)

BRAZIL
Comp Energetica Sao Paulo, 9.25%, 05/10/01 ........................... 250,000(c) 159,635
-----------

TOTAL INVESTMENTS (COST $3,462,167) (80.75%) .................................... 3,509,153

CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (19.25%) ......................... 836,449
-----------

TOTAL NET ASSETS (100.00%) ...................................................... $4,345,602
===========
</TABLE>
- -------------------------------------------
Principal denominated in the following currency:
(a) Chilean Peso (b) Argentine Peso (c) German Deutschmark

(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(2) Illiquid Security.
(3) Step-Up Bond.
(4) Interest rate reflected is rate in effect at March 31, 1997.

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

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - MARCH 31, 1997
VIF - HIGH YIELD FUND

- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at market value (cost $17,877,196) (Note 1a) .................................... $17,875,730
Cash ......................................................................................... 7,397,041
Interest receivable .......................................................................... 498,341
Receivable for investments sold .............................................................. 271,125
Receivable from Adviser (Note 2) ............................................................. 9,501
Deferred organization expense ................................................................ 56,762
------------
Total Assets ...................................................................... $26,108,500

LIABILITIES:
Payable for investments purchased ............................................................ 878,205
Organization expense payable ................................................................. 70,953
Other payables and accrued expenses .......................................................... 45,202
------------
Total Liabilities ................................................................. 994,360
------------
NET ASSETS ...................................................................................... $25,114,140
============

Net assets consist of:
Shares of capital stock, $0.001 par value per share, 2,420,680 issued and outstanding
(Note 4) ................................................................................ $2,421
Additional paid-in capital ................................................................... 25,079,761
Accumulated undistributed net investment income .............................................. 8,755
Accumulated net realized gain on investments ................................................. 24,669
Net unrealized depreciation on investments ................................................... (1,466)
------------
NET ASSETS ...................................................................................... $25,114,140
============
NET ASSET VALUE PER SHARE ....................................................................... $10.37
============
</TABLE>

VIF - EMERGING MARKETS FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at market value (cost $3,462,167) (Note 1a) ..................................... $3,509,153
Cash ......................................................................................... 374,598
Receivable for investments sold .............................................................. 378,050
Interest receivable .......................................................................... 84,435
Receivable from Adviser (Note 2) ............................................................. 34,716
Deferred organization expense ................................................................ 62,554
Net unrealized appreciation on forward currency contracts (Note 5) ........................... 3,261
------------
Total Assets ...................................................................... $4,446,767

LIABILITIES:
Organization expense payable ................................................................. 70,953
Other payables and accrued expenses .......................................................... 30,212
------------
Total Liabilities ................................................................. 101,165
------------
NET ASSETS ....................................................................................... $4,345,602
============

Net assets consist of:
Shares of capital stock, $0.001 par value per share, 421,874 issued and outstanding (Note 4) . $422
Additional paid-in capital ................................................................... 4,272,354
Accumulated undistributed net investment income .............................................. 11,824

Accumulated net realized gain on investments and foreign currency transactions ............... 10,660
Net unrealized appreciation on investments and foreign currency transactions ................. 50,342
------------
NET ASSETS ....................................................................................... $4,345,602
============
NET ASSET VALUE PER SHARE ........................................................................ $10.30
============
</TABLE>
The accompanying notes are an integral part of the financial statements.

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF OPERATIONS
VIF - HIGH YIELD FUND
FOR THE PERIOD FROM APRIL 1, 1996* THROUGH MARCH 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest income ............................................................................... $781,616
---------
$781,616
EXPENSES
Advisory (Note 2) ............................................................................. 76,943
Professional .................................................................................. 42,534
Fund accounting (Note 2) ...................................................................... 30,000
Amortization of organization expenses ......................................................... 14,191
Administrative services (Note 2) .............................................................. 13,578
Directors ..................................................................................... 9,650
Registration .................................................................................. 7,620
Custodian ..................................................................................... 2,078
Insurance ..................................................................................... 1,512
Transfer and shareholder servicing agent (Note 2) ............................................. 867
Miscellaneous ................................................................................. 5,526
---------
Total expenses before waivers/reimbursements .......................................... 204,499

Less expenses waived/reimbursed (Note 2) .............................................. (100,022)

----------
Net expenses .......................................................................... 104,477
----------
NET INVESTMENT INCOME ......................................................................... 677,139
----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments ..................................................... 24,669
Net unrealized depreciation on investments ........................................... (1,466)
---------
Net realized and unrealized gain on investments ................................. 23,203
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................. $700,342
==========
</TABLE>

VIF - EMERGING MARKETS FUND
FOR THE PERIOD FROM AUGUST 28, 1996* THROUGH MARCH 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest income ............................................................................... $143,397
---------
$143,397
EXPENSES
Professional ................................................................................ 24,510
Fund accounting (Note 2) .................................................................... 15,000
Advisory (Note 2) ........................................................................... 13,449
Amortization of organization expenses ....................................................... 8,399
Custodian ................................................................................... 4,599
Administrative services (Note 2) ............................................................ 2,241
Directors ................................................................................... 1,350
Registration ................................................................................ 1,295
Transfer and shareholder servicing agent (Note 2) ........................................... 538
Miscellaneous ............................................................................... 1,491
---------
Total expenses before waivers/reimbursements .......................................... 72,872
Less expenses waived/reimbursed (Note 2) .............................................. (50,406)
---------
Net expenses .......................................................................... 22,466
---------
NET INVESTMENT INCOME ......................................................................... 120,931
---------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments ..................................................... 22,466
Net realized gain on foreign currency transactions ................................... 6,198
Net unrealized appreciation on investments ........................................... 46,986
Net unrealized appreciation on foreign currency transactions ......................... 3,356
---------
Net realized and unrealized gain on investments and foreign currency transactions 79,006
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................................... $199,937
=========
* Commencement of operations.
</TABLE>
The accompanying notes are an integral part of the financial statements.

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
VIF - HIGH YIELD FUND
<TABLE>
<CAPTION>

FOR THE PERIOD FROM
APRIL 1, 1996*
THROUGH MARCH 31, 1997
- -----------------------------------------------------------------------------------------------------------------

INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C>
Net investment income................................................. $ 677,139
Net realized gain on investments...................................... 24,669
Net unrealized depreciation on investments............................ (1,466)
-----------------------------------
Net increase in net assets resulting from operations.................. 700,342
-----------------------------------

DIVIDENDS TO SHAREHOLDERS FROM

Net investment income................................................. (677,139)

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

CAPITAL SHARE TRANSACTIONS (NOTE 4)

Net increase in net assets from capital share transactions............ 25,057,604
-----------------------------------

Total increase in net assets.......................................... 25,080,807

NET ASSETS
Beginning of period................................................... 33,333
-----------------------------------
End of period......................................................... $25,114,140
===================================
</TABLE>

VIF - EMERGING MARKETS FUND
<TABLE>
<CAPTION>

FOR THE PERIOD FROM
AUGUST 28, 1996*
THROUGH MARCH 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C>
NET INVESTMENT INCOME........................................................ $ 120,931
Net realized gain on investments and foreign currency transactions........... 28,664
Net unrealized appreciation on investments and foreign currency transactions. 50,342
-----------------------------------
Net increase in net assets resulting from operations......................... 199,937
-----------------------------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM

Net investment income........................................................ (120,931)
Realized gains............................................................... (11,806)

-----------------------------------
Total dividends and distributions to shareholders......................... (132,737)
-----------------------------------

CAPITAL SHARE TRANSACTIONS (NOTE 4)

Net increase in net assets from capital share transactions................... 4,245,069
-----------------------------------

Total increase in net assets................................................. 4,312,269

NET ASSETS
Beginning of period.......................................................... 33,333
-----------------------------------
End of period................................................................ $4,345,602
===================================
</TABLE>

* Commencement of operations.

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

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
FINANCIAL HIGHLIGHTS
VIF - HIGH YIELD FUND
<TABLE>
<CAPTION>

FOR THE PERIOD FROM
APRIL 1, 1996*
SELECTED RATIOS AND DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGH THE PERIOD: THROUGH MARCH 31, 1997
- -----------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE:
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....................................... $10.00
---------------------------
Net investment income.................................................. 0.78
Net realized and unrealized gains on investments....................... 0.37
---------------------------
Total from investment operations....................................... 1.15
---------------------------

LESS DIVIDENDS FROM:

Net investment income.................................................. (0.78)
--------------------------
Total dividends........................................................ (0.78)
--------------------------
NET ASSET VALUE, END OF PERIOD............................................. $10.37
==========================

TOTAL INVESTMENT RETURN+................................................... 11.90%
RATIOS/ SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............................... $25,114
Ratios to average net assets:
Expenses............................................................... 1.15% (2)
Net investment income.................................................. 7.45%
PORTFOLIO TURNOVER RATE.................................................... 4%
</TABLE>

VIF - EMERGING MARKETS FUND
<TABLE>
<CAPTION>

FOR THE PERIOD FROM
AUGUST 28, 1996*
SELECTED RATIOS AND DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGH THE PERIOD: THROUGH MARCH 31, 1997
- ------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE:
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................................ $10.00
---------------------------
Net investment income................................................... 0.48
Net realized and unrealized gains on investments........................ 0.34
---------------------------
Total from investment operations........................................ 0.82
---------------------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income................................................ (0.48)

Realized gains.......................................................... (0.04)
--------------------------
Total dividends and distributions....................................... (0.52)
--------------------------
NET ASSET VALUE, END OF PERIOD.............................................. $10.30
===========================

TOTAL INVESTMENT RETURN+.................................................... 8.29%
RATIOS/ SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................................ $4,346
Ratios to average net assets:
Expenses................................................................ 1.50% (1)(2)
Net investment income................................................... 8.04% (1)
PORTFOLIO TURNOVER RATE..................................................... 96%
</TABLE>

-----------------
* Commencement of operations.
(1) Annualized.
(2) If the Funds had borne all expenses that were assumed or waived by the
Adviser and Administrator, the above expense ratios would have been 2.25%
and 4.87% annualized for the VIF-High Yield and VIF-Emerging Markets
Funds, respectively.
+ Total return is based on the change in net assets value during the period
and assumes reinvestment of all dividends and distributions.

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

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES. The OFFITBANK Variable Insurance Fund, Inc.
(the "Company") was incorporated in Maryland on July 1, 1994. The Company is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Company consists of ten separately managed funds, of which two,
OFFITBANK VIF-High Yield Fund and OFFITBANK VIF-Emerging Markets Fund had
commenced operations on April 1, 1996 and August 28, 1996, respectively. Both
Funds operate as non-diversified, open-end management investment companies. The
OFFITBANK VIF-U.S. Small Cap Fund and OFFITBANK VIF-DJG Value Equity Fund
commenced operations on April 11, 1997 and operate as diversified, open-end
management investment companies.

The following are significant accounting policies followed by the Company in the
preparation of its financial statements:

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

B. FOREIGN EXCHANGE TRANSACTIONS. The books and records of the Funds are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies are translated as follows:

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

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

The resultant foreign exchange gains and losses are included in the Statement of
Operations. The Funds do not isolate the effect of fluctuations in foreign
exchange rates from the effect of fluctuations in the market price of
securities.

C. ORGANIZATIONAL EXPENSES. Costs incurred in connection with the organization
and initial registration of the Funds have been deferred and are being amortized
over a sixty-month period beginning with each Fund's commencement of operations.

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

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

F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment
income are declared daily and paid monthly for the VIF-High Yield Fund and
declared daily and paid quarterly for the VIF-Emerging Markets Fund.
Distributions of net realized gains, if any, are normally declared and paid at
least annually by each Fund. The Funds record dividends and distributions to
shareholders on the ex dividend date.

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

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

G. FEDERAL INCOME TAXES. The Funds intend to qualify as "regulated investment
companies" under Subchapter L and Subchapter M of the Internal Revenue Code and
distribute all of their taxable income to their shareholders. Therefore, no
federal income tax provision is required.

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

2. INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION AGREEMENTS. The Company
has entered into investment advisory agreements (the "Investment Advisory
Agreements") with OFFITBANK (the "Adviser"). The Investment Advisory Agreements
provide that each Fund pays the Adviser an investment advisory fee that is
calculated daily and paid monthly on the average daily net assets of each Fund,
at the annual rate of 0.85% of net assets in the case of the VIF-High Yield Fund
and 0.90% of net assets for the VIF-Emerging Markets Fund. The Adviser provides
portfolio management and certain administrative, clerical and bookkeeping
services for the Company. For the period ended March 31, 1997, the Adviser
earned and waived fees of $76,943 and $13,449 for the VIF-HighYield and
VIF-Emerging Markets Funds, respectively.

Furman Selz LLC ("Furman Selz") provided the Company with administrative, fund
accounting, dividend disbursing and transfer agency services pursuant to an
administration agreement (the "Administration Agreement"). The services under
the Administration Agreement were 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 paid Furman Selz a monthly fee for its services which on
an annualized basis will not exceed 0.15% of the average daily net assets of the
Company. From April 1, 1996 to December 31, 1996, Furman Selz earned and waived
fees of $6,710 for the VIF-High Yield Fund. From August 26, 1996 to December 31,
1996, Furman Selz earned and waived fees of $1,005 for the VIF-Emerging Markets
Fund.

As Administrator, Furman Selz provided the Funds with fund accounting and
related services. For these services Furman Selz was paid a fee of $2,500 per
month. From April 1, 1996 to December 31, 1996, Furman Selz earned fees of
$22,500 for the VIF-High Yield Fund. From August 26, 1996 to December 31, 1996,
Furman Selz earned fees of $7,500 for the VIF-Emerging Markets Fund.

Furman Selz acted as Transfer Agent for the Funds and received reimbursement of
certain expenses plus a per account fee of $15.00 per year. From April 1, 1996
to December 31, 1996, Furman Selz earned fees of $697 for the VIF-High Yield
Fund. From August 26, 1996 to December 31, 1996, Furman Selz earned fees of $414
for the VIF-Emerging Markets Fund.

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

The Company has entered into a distribution agreement (the "Distribution
Agreement') with OFFIT Funds Distributor, Inc. Under the Distribution Agreement,
the Distributor, as agent of the Company, agrees to use its best efforts as sole
distributor of the Company's shares. The Distribution Agreement provides that
the Company will bear the costs of the registration of its shares with the
Commission and various states and the printing of its prospectuses, statements
of additional information and reports to shareholders. There is no fee payable
under the Distribution Agreement.

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

From January 1, 1997 to March 31, 1997, BISYS earned administrative services
fees, fund accounting fees and transfer agent fees, amounting to $6,868, $7,500
and $170, respectively, for the VIF-High Yield Fund and $1,236, $7,500 and $124,
respectively, for the VIF-Emerging Markets Fund. During the same period, BISYS
waived the administrative service fees for each Fund.

OFFITBANK has voluntarily agreed to limit the expense ratios for the VIF-High
Yield and VIF-Emerging Markets Funds at 1.15% and 1.50%, respectively. In order
to maintain these ratios, the Adviser has waived its advisory fee and has also
agreed to reimburse the VIF-High Yield Fund and VIF-Emerging Markets Fund $9,501
and $34,716, respectively.

3. INVESTMENTS. Purchase and sales of securities for the period ended March 31,
1997, other than short-term securities, amounted to $17,774,984 and $271,125,
respectively for the VIF-High Yield Fund and $5,501,745 and $1,930,781,
respectively for the VIF-Emerging Markets Fund. The cost of securities is
substantially the same for Federal income tax purposes as it is for financial
reporting purposes.

<TABLE>
<CAPTION>
VIF-High VIF-Emerging
Yield Markets
---------------------------- ----------------------------

<S> <C> <C>
Aggregate cost................................ $17,877,196 $3,462,167
============================ ============================

Gross unrealized appreciation................. $213,046 $69,352

Gross unrealized depreciation................. (214,512) (22,366)
----------------------------- -----------------------------

Net unrealized appreciation (depreciation).... $ (1,466) $46,986
============================ =============================
</TABLE>

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

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. CAPITAL STOCK TRANSACTIONS. The Company's Articles of Incorporation permit
the Company to issue nine billion shares (par value $0.001). Transactions in
shares of common stock for the period ended March 31, 1997, were as follows:
<TABLE>
<CAPTION>

VIF-HIGH YIELD VIF-Emerging Markets
----------------------------------------- -----------------------------
SHARES Amount SHARES Amount
------------------ ------------------ -------------- ----------------
<S> <C> <C> <C> <C>
Shares sold....................... 2,458,912 $25,477,804 408,159 $4,138,941
Shares issued in
reinvestment of dividends
and distributions............... 65,476 677,347 11,829 120,931

Shares redeemed................... (107,041) (1,097,547) (1,447) (14,803)
----------------- ------------------- -------------- -----------------

Net increase...................... 2,417,347 $25,057,604 418,541 $4,245,069
================= =================== ============== =================
</TABLE>

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

Each of the Funds is also permitted to enter into swap agreements to manage
interest rate or currency exposure. Swap agreements involve the committment to
exchange with another party cash flows which are based upon the application of
interest rates or currency movements to a notional principal amount. Gains and
losses associated with currency swap transactions are included in realized gains
and losses on foreign currency translation.

A forward foreign exchange contract is a commitment to sell or buy a foreign
currency at a future date at a negotiated exchange rate. The Fund bears the
market risk which arises from possible changes in foreign exchange values. Risks
may arise from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of the foreign
currency relative to the U.S. dollar. Forward foreign exchange contracts may
involve market or credit risk in excess of the 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 March 31, 1997 are recorded for financial reporting
purposes as unrealized gains and losses by the Funds.

At March 31, 1997, there were no outstanding forward currency contracts for the
VIF-High Yield Fund. The table below indicates the VIF-Emerging Markets Fund's
outstanding forward currency contract positions at March 31, 1997:

Value on Value at Unrealized
Contract Maturity Origination March 31, Appreciation
Currency Amounts Date Date 1997 (Depreciation)
---------- ----------- ---------- ------------ ---------- ---------------
BUY DEM 240,000 04-22-97 $145,378 $143,841 $(1,537)
SELL DEM (520,000) 04-22-97 (316,454) (311,656) 4,798

A purchased option contract gives the Fund the right to sell (puts) or purchase
(calls) a specified amount of foreign currency at a fixed price. The maximum
exposure to loss for any purchased option is limited to the premium initially
paid for the option. Such options are reflected at value in the Fund's portfolio
of investments. There were no purchased options owned at March 31, 1997.

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

The VIF-Emerging Markets Fund 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.

6. OTHER MATTERS. The VIF-High Yield Fund and the VIF-Emerging Markets Fund
invest in obligations of foreign entities and securities denominated in foreign
currencies that involve risk not typically involved in domestic investments.
Such risks include fluctuations in the foreign exchange rates, ability to
convert proceeds into U.S. dollars, less publically available information about
foreign financial instruments, less liquidity resulting from substantially less
trading volume, more volatile prices and generally less government supervision
of foreign markets and issuers.

7. FEDERAL INCOME TAX STATUS. For the year ended March 31, 1997 the
reclassification arising from permanent book/tax differences resulted in
increases (decreases) to the components of net assets as follows:
<TABLE>
<CAPTION>

VIF-High VIF-Emerging
Yield Markets
------------------- ---------------------------------------

<S> <C> <C>
Accumulated undistributed net investment income........ $ 8,755 $11,824
Accumulated net realized gain on investments and
foreign currency transactions...................... -- (6,198)

Additional paid-in capital............................. (8,755) (5,626)

Permanent book/tax differences are primarily attributable to non-deductible
organization costs and foreign exchange gains/losses.
</TABLE>

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------

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

In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of OFFITBANK VIF-High Yield Fund and
OFFITBANK VIF-Emerging Markets Fund (the "Funds", each constituting a portfolio
of The OFFITBANK Variable Insurance Fund, Inc.) at March 31, 1997, and the
results of each of their operations, the changes in each of their net assets and
the financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at March 31, 1997 by
correspondence with the custodians and brokers, provides a reasonable basis for
the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
May 9, 1997

<PAGE>

THE OFFITBANK VARIABLE INSURANCE FUND, INC.

OFFICERS AND DIRECTORS Investment Adviser
OFFITBANK
Morris W. Offit 520 Madison Avenue
Chairman of the Board, President and New York, New York 10022-4213
Director
DISTRIBUTOR
Edward J. Landau OFFIT Funds Distributor, Inc.
Director 3435 Stelzer Road
Columbus, Ohio 43219
The Very Reverend
James Parks Morton ADMINISTRATOR
Director BISYS Fund Services Limited Partnership
125 West 55th Street
Dr. Wallace Mathai-Davis New York, New York 10019
Secretary and Treasurer
TRANSFER AND DIVIDEND DISBURSING AGENT
Kristine Kelly BISYS Fund Services, Inc.
Assistant Secretary 3435 Stelzer Road
Columbus, Ohio 43219
Alaina V. Metz
Assistant Secretary CUSTODIAN - VIF-HIGH YIELD FUND
The Bank of New York
Bruce Treff 90 Washington Street, 11th Floor
Assistant Secretary New York, New York 10286

Vincent M. Rella CUSTODIAN - VIF-EMERGING MARKETS FUND
Assistant Treasurer The Chase Manhattan Bank
3 MetroTech Center, 6th Floor
Michael Sakala Brooklyn, New York 11245
Assistant Treasurer
LEGAL COUNSEL
Stephen Brent Wells Kramer, Levin, Naftalis & Frankel
Assistant Treasurer 919 Third Avenue
New York, New York 10022

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036

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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 OFFITBANK VARIABLE INSURANCE FUND, INC.
125 WEST 55TH STREET, NEW YORK, NY 10019
(212) 758 - 9600

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OFFITBANK VIF-High Yield Fund

OFFITBANK VIF-Emerging Markets Fund

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ANNUAL REPORT

MARCH 31, 1997

THE
OFFITBANK
VARIABLE INSURANCE FUND, INC.