<PAGE>
---------------
OFFITBANK VIF-High Yield Fund
OFFITBANK VIF-Emerging Markets Fund
DJG Value Equity Fund
OFFITBANK VIF - U.S. Small Cap Fund
OFFITBANK VIF -- Total Return Fund
---------------
ANNUAL REPORT
DECEMBER 31, 1998
THE
OFFITBANK
VARIABLE INSURANCE FUND, INC.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
VIF - HIGH YIELD FUND
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Second half 1998 performance was a function of the significant repricing of
risks across all markets after the well publicized Russian default and hedge
fund turmoil. The Fund's net investment return for the second half of 1998 after
all fees and expenses was approximately break-even. The full year total return
of 4.33% is virtually identical to the 4.28% return for the first half. For
comparative purposes, the Merrill Lynch High Yield "BB" 5-7 Year Index returned
1.34% for the quarter and 5.65% year-to-date. The December 31, 1998 NAV of
$10.40 was approximately 4% lower than the $10.87 NAV at the beginning of the
year. Reflective of the higher market yields and lower prices, the 30 day SEC
yield increased to 8.82% at year end from 7.58% on June 30, 1998.
Over the course of 1998, a number of events had a significant impact on the high
yield market. At the beginning of the year, high yield benefited from
unexpectedly strong growth in the economy and robust demand for high yield
securities. Demand continued to outstrip supply until mid July, when new issues
finally needed wider spreads to clear the market. August brought a marked change
in the environment as Russia defaulted and a large hedge fund required
additional capital. The high yield market became swept up in the global turmoil
as all spread products, regardless of quality, widened against Treasuries. For
example, the double A corporate bond spread doubled from 60 basis points in May
to over 130 basis points in mid October. Illiquidity ruled all markets. Amidst a
declining equity market, problems in the emerging markets and forced portfolio
liquidations, dealers were unwilling to bid aggressively for high yield
securities. The quoted bid of the average high yield bond declined approximately
10 points, with lower quality credits falling even more.
By October the high yield market's spread to treasuries had widened over 400
basis points to about 700 basis points. After a series of interest rate cuts by
the Federal Reserve, the market stabilized during the fourth quarter and spreads
narrowed 140 basis points to close the year 560 basis points over Treasuries.
During the year, spreads within the high yield market also widened, with the
double B to single B spread increasing 110 basis points on the year to 260 basis
points. Better quality outperformed the lower quality sectors, reversing the
trend of the past few years.
For the first time, high yield spreads widened significantly in the absence of
any large scale defaults. Market risks, liquidity premiums and the fear of
future defaults have pushed spreads back to levels last seen in late 1991.
Year-end market spreads for high yield imply significantly higher default levels
than have been experienced the past few years. Domestic default rates for 1998
were still below 2% and below the historical average which is now approximately
3%. While the fundamental credit environment is not as positive as it has been
over the past several years, we still expect defaults to remain at or below the
historic averages.
The bonds of fundamentally sound credits have turned around after every cyclical
decline in the high yield market. History has shown that following a major
repricing of the high yield market, above average returns are earned over the
following 12 to 24 months. The benefit of higher spreads compounded over a
reasonable period of time cannot be emphasized strongly enough. Current spreads
provide a large cushion against a further increase in risk premiums or the
occasional credit loss that may occur.
Technically, 1998 was another record year for new issuance. Approximately
two-thirds of the $150 billion issued came to market in the first half of the
year. New issue supply was dominated by single B's and with the large number of
tenders and debt retirements in the double B sector, the composition of the
market is changing. The double B sector in aggregate did not grow in size in
1998 and declined to below 40% of the total market. This trend may lead to a
modest natural downgrading of the portfolio over time as it may become more
difficult to replace called or upgraded bonds with similar quality and value.
We intend to stay with our philosophy and strategy of holding better quality
high yield securities. While our approach has produced good returns in strong
markets, it has provided superior performance in down cycles or periods of
dislocation such as we experienced during the second half of 1998. We were able
to modestly upgrade the portfolio by buying better quality securities during the
period of market weakness.
Several corporate actions affected the portfolio during the second half of 1998.
A large number of holdings including Harris Chemical, Unisys and Vanguard
Cellular were either called or tendered at investment grade spreads. During the
second half of 1998, 5 issues totaling approximately $1.7 million were either
called, tendered, or defeased. Over the past twelve months approximately 12% of
average net assets of the Fund have been either tendered, called or defeased.
In keeping with our focus on the better quality segment of the high yield
market, approximately 48% of the holdings in the Fund are rated either Ba3 or
better by Moody's or BB- or better by Standard & Poor's. Additionally, 75% of
the holdings are rated at least B1 or B+. The Fund is very well diversified with
over 125 issues and no single credit is larger than 2.1% of the Fund's assets.
Stephen T. Shapiro
January 20, 1999
<PAGE>
OFFITBANK
VIF - HIGH YIELD FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFITBANK VIF-High Yield Fund at the trading commencement date of
April 1, 1996 and held through December 31, 1998 against the performance of the
Merrill Lynch High Yield "BB" 5-6.99 Year and the 5 Year Treasury over the same
period.
<TABLE>
<CAPTION>
4/1/96 9/30/96 3/31/97 9/30/97 3/31/98 9/30/98 12/31/98
-------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFITBANK VIF-High Yield Fund 254,590 267,424 279,793 304,756 321,303 314,565 325,017
Merrill Lynch High Yield "BB" 5-6.99 Year 252,387 260,260 272,817 293,834 306,924 313,832 318,036
5 Year Treasury 249,328 253,332 257,566 273,638 284,935 309,541 307,971
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
April 1, 1998 - Since Inception
Total Return* December 31, 1998 (April 1, 1996)
------------- ----------------- ---------------
<S> <C> <C>
1.15% 10.01%
OFFITBANK VIF-High Yield Fund
Merrill Lynch Yield "BB" 5-6.99 Year 3.62% 9.36%
5 Year Treasury 8.08% 7.88%
- --------------------------------------------------------------------------------
</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-HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
CORPORATE BONDS (95.1%)
AEROSPACE/DEFENSE (0.3%)
Sequa Corp. Sr Notes, 8.75%,
12/15/01........................... $150,000 $ 152,625
-----------
AUTOMOTIVE (3.9%)
Exide Corp. Sr Notes, 10.00%,
04/15/05........................... 150,000 149,250
Exide Holding Europe SA, 9.125%,
04/15/04 (144A).................... 500,000(a)(1) 294,202
Federal-Mogul Corp. Notes, 7.875%,
07/01/10........................... 500,000 511,870
Hayes Wheels International Inc. Sr
Sub Notes, 9.125%, 07/15/07........ 500,000 520,000
Sonic Automotive Sr Sub Notes,
11.00%, 08/01/08................... 250,000 240,000
-----------
1,715,322
-----------
BROADCAST/MEDIA (5.4%)
Big Flower Press Sr Sub Notes,
8.875%, 07/01/07................... 530,000 540,600
Echostar Communications Sr Discount
Notes, 0/12.875%, 06/01/04
(144A)............................. 500,000(1)(2) 511,250
Heritage Media Corp. Sr Sub Notes,
8.75%, 02/15/06.................... 200,000 209,000
Hollinger International Publishing
Sr Notes, 8.625%, 03/15/05......... 250,000 263,750
Lamar Advertising Co. Sr Sub Notes,
9.625%, 12/01/06................... 250,000 270,625
Outdoor Systems, Inc. Sr Sub Notes,
9.375%, 10/15/06................... 250,000 270,000
Satelites Mexicanos SA Sr Notes,
10.125%, 11/01/04.................. 200,000 166,000
Sun Media Corp. Sr Sub Notes, 9.50%,
05/15/07........................... 155,000 172,050
-----------
2,403,275
-----------
CABLE (8.3%)
Adelphia Communications Corp. Sr
Notes, 9.875%, 03/01/07............ 200,000 221,500
Century Communications Corp. Sr
Notes, 8.875%, 01/15/07............ 400,000 442,000
Comcast Corp. Sr Sub Debs., 9.375%,
05/15/05........................... 250,000 265,625
CSC Holdings Inc. Sr Notes, 9.25%,
11/01/05........................... 300,000 319,500
Jones Intercable Inc. Sr Sub Debs.,
10.50%, 03/01/08................... 500,000 552,500
Lenfest Communications, Inc. Sr
Notes, 8.375%, 11/01/05............ 300,000 324,750
NTL Inc. Sr Notes, 0/9.75%, 04/01/08
(144A)............................. 500,000(1)(2) 308,125
Olympus Communications L.P. Sr
Notes, 10.625%, 11/15/06........... 300,000 330,000
Rogers Cablesystems Ltd. Sr Secured
2nd Priority Notes, 9.625%,
08/01/02........................... 300,000 322,500
TeleWest Communications PLC Debs.,
9.625%, 10/01/06................... 250,000 260,625
TeleWest Communications PLC Sr
Discount Debs., 0/11.00%,
10/01/07........................... 400,000(2) 334,000
-----------
3,681,125
-----------
CHEMICAL (2.9%)
Borden Chemicals & Plastics Sr
Notes, 9.50%, 05/01/05............. 500,000 410,000
ISP Holdings Inc. Sr Notes, 9.00%,
10/15/03........................... 300,000 317,250
Polymer Group Sr Sub Notes, 8.75%,
03/01/08........................... 300,000 294,750
Terra Industries Inc. Sr Notes,
10.50%, 06/15/05................... 250,000 257,500
-----------
1,279,500
-----------
CONSUMER GROUPS (9.5%)
Ameriserve Food Co. Sr Notes,
8.875%, 10/15/06................... 500,000 462,500
Chiquita Brands International Inc.
Sr Notes, 10.25%, 11/01/06......... 850,000 869,125
Fedders N.A. Sr Sub Notes, 9.375%,
08/15/07........................... 200,000 200,000
Fisher Scientific International,
Inc. Sr Sub Notes, 9.00%,
02/01/08........................... 500,000 497,500
Fleming Companies, Inc. Sr Notes,
10.625%, 12/15/01.................. 500,000 505,000
Host Marriott Travel Plaza Sr Notes,
9.50%, 05/15/05.................... 700,000 728,000
Playtex Products Inc. Sr Notes,
8.875%, 07/15/04................... 250,000 261,250
Revlon Consumer Products Sr Sub
Notes, 8.625%, 02/01/08............ 250,000 230,000
United Artists Theatre Pass Through
Certificates, 9.30%, 07/01/15...... 477,406 465,471
-----------
4,218,846
-----------
FINANCIAL SERVICES/INSURANCE (2.0%)
Amresco Inc. Sr Sub Notes, 9.875%,
03/15/05........................... 500,000 350,000
Presidential Life Corp. Sr Notes,
9.50%, 12/15/00.................... 400,000 407,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
-------------
<PAGE>
OFFITBANK
VIF-HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
FINANCIAL SERVICES/INSURANCE
(CONTINUED)
Veritas Holdings Sr Notes, 9.625%,
12/15/03........................... $126,000 $ 127,260
-----------
884,260
-----------
FOREST & PAPER PRODUCTS (3.6%)
Doman Industries Ltd. Sr Notes,
8.75%, 03/15/04.................... 200,000 156,000
Gaylord Container Corp. Sr Notes,
9.75%, 06/15/07.................... 400,000 354,000
Repap New Brunswick First Priority
Sr Secured Notes, 9.00%,
06/01/04........................... 300,000 273,000
Silgan Holdings, Inc. Sr Sub Debs.,
9.00%, 06/01/09.................... 250,000 257,500
Stone Container Corp. Sr Secured
Notes, 10.75%, 10/01/02............ 300,000 310,500
Stone Container Corp. Sr Sub Debs.,
12.25%, 04/01/02................... 250,000 255,000
-----------
1,606,000
-----------
GENERAL INDUSTIES/MANUFACTURING (6.5%)
Allied Waste North America Sr Notes,
7.625%, 01/01/06 (144A)............ 250,000(1) 252,500
Furon Company Sr Sub Notes, 8.125%,
03/01/08........................... 250,000 247,500
Galey & Lord Inc. Sr Sub Notes,
9.125%, 03/01/08................... 200,000 173,000
Nortek Inc. Sr Notes, 9.25%,
03/15/07........................... 600,000 613,500
Pillowtex Corp. Sr Sub Notes, 9.00%,
12/15/07........................... 300,000 309,000
Wesco Distribution Inc. Sr Sub
Notes, 9.125%, 06/01/08............ 500,000 500,000
Williams Scotsman Inc. Sr Notes,
9.875%, 06/01/07................... 750,000 780,000
-----------
2,875,500
-----------
HEALTH CARE (4.4%)
Columbia/HCA Healthcare Corp. Medium
Term Notes, 8.85%, 01/01/07........ 300,000 319,149
Extendicare Health Services Sr Sub
Notes, 9.35%, 12/15/07............. 250,000 237,500
Integrated Health Services Inc. Sr
Sub Notes, 9.50%, 09/15/07......... 400,000 376,000
Medaphis Corp. Sr Notes, 9.50%,
02/15/05........................... 200,000 148,000
Sun Healthcare Group Sr Sub Notes,
9.50%, 07/01/07.................... 500,000 385,000
Tenet Healthcare Corp. Sr Sub Notes,
8.625%, 01/15/07................... 300,000 312,000
Vencor Operating Inc. Sr Sub Notes,
9.875%, 05/01/05................... 200,000 166,000
-----------
1,943,649
-----------
HOTELS & GAMING (7.4%)
Felcor Suites L.P. Sr Notes, 7.625%,
10/01/07........................... 320,000 302,243
HMH Properties Sr Notes, 7.875%,
08/01/08........................... 400,000 388,000
Hollywood Park Operating Inc. Sr Sub
Notes, 9.50%, 08/01/07............. 300,000 300,000
John Q. Hammons Hotels L.P. First
Mtg. Notes, 8.875%, 02/15/04....... 550,000 506,000
John Q. Hammons Hotels L.P. First
Mtg. Notes, 9.75%, 10/01/05........ 200,000 187,000
Meristar Hospitality Corp. Sr Sub
Notes, 8.75%, 08/15/07............. 200,000 193,500
Prime Hospitality Corp. First Mtg.
Notes, 9.25%, 01/15/06............. 250,000 260,000
Prime Hospitality Corp. Sr Sub
Notes, 9.75%, 04/01/07............. 250,000 255,000
Station Casinos Sr Sub Notes,
9.625%, 06/01/03................... 250,000 259,025
Sun International Hotels Ltd. Sr Sub
Notes, 9.00%, 03/15/07............. 300,000 309,000
Trump Atlantic City First Mtg.
Notes, 11.25%, 05/01/06............ 350,000 306,250
-----------
3,266,018
-----------
METALS & MINING (8.7%)
AK Steel Corp. Sr Notes, 9.125%,
12/15/06........................... 400,000 417,000
Armco Inc. Sr Notes, 8.875%,
12/01/08 (144A).................... 250,000(1) 248,750
Armco Inc. Sr Notes, 9.00%,
09/15/07........................... 550,000 561,000
Armco Inc. Sr Notes, 9.375%,
11/01/00........................... 200,000 203,000
Centaur Mining Exploration Sr
Secured Notes, 11.00%, 12/01/07.... 250,000 227,500
Freeport McMoran C&G Deb., 7.20%,
11/15/26........................... 300,000 195,000
Glencore Nickel Pty Limited Sr
Secured Bonds, 9.00%, 12/01/14..... 250,000 205,000
Inland Steel Co. First Mortgage,
7.90%, 01/15/07.................... 300,000 300,000
Kaiser Aluminum & Chemical Corp. Sr
Notes, 10.875%, 10/15/06........... 175,000 179,375
LTV Corp. Sr Notes, 8.20%,
09/15/07........................... 500,000 450,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
- -------------
<PAGE>
OFFITBANK
VIF-HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
METALS & MINING (CONTINUED)
National Steel Corp., 8.375%,
08/01/06........................... $348,000 $ 354,090
P&L Coal Holdings Sr Sub Notes,
8.875%, 05/15/08................... 500,000 508,750
-----------
3,849,465
-----------
OIL/GAS (9.5%)
Ferrellgas Partner L.P. Sr Notes,
9.375%, 06/15/06................... 600,000 600,000
Giant Industries Services, Inc. Sr
Sub Notes, 9.00%, 09/01/07......... 200,000 192,000
Grey Wolf Inc. Sr Notes, 8.875%,
07/01/07........................... 500,000 375,000
Gulf Canada Resources Ltd. Sr Sub
Debs., 9.25%, 01/15/04............. 300,000 299,979
J Ray McDermott S.A. Sr Sub Notes,
9.375%, 07/15/06................... 300,000 312,000
KCS Energy, Inc. Sr Notes, 11.00%,
01/15/03........................... 725,000 638,000
Newpark Resources Inc. Sr Sub Notes,
8.625%, 12/15/07................... 500,000 475,000
Nuevo Energy Co. Sr Sub Notes,
9.50%, 04/15/06.................... 400,000 396,000
Tesoro Petroleum Corp. Sr Sub Notes,
9.00%, 07/01/08.................... 500,000 490,000
Trico Marine Services Sr Notes,
8.50%, 08/01/05.................... 500,000 425,000
-----------
4,202,979
-----------
REAL ESTATE (3.8%)
CB Richard Ellis Sr Sub Notes,
8.875%, 06/01/06................... 500,000 485,000
Forest City Enterprises Sr Notes,
8.50%, 03/15/08.................... 300,000 300,750
Rockefeller Center Properties Sr
Notes, 0.00%, 12/31/00............. 670,000 522,600
Tanger Properties L.P. Sr Notes,
7.875%, 10/24/04................... 300,000 283,500
Trizec Finance Ltd. Sr Notes,
10.875%, 10/15/05.................. 100,000 109,250
-----------
1,701,100
-----------
RETAIL (3.2%)
Nine West Group Inc. Sr Notes,
8.375%, 08/15/05................... 250,000 241,250
Petro Stopping Centers Sr Notes,
10.50%, 02/15/07................... 200,000 209,000
Stater Brothers Sr Notes, 11.00%,
03/01/01........................... 250,000 260,000
Travelcenters of America, Inc. Sr
Sub Notes, 10.25%, 04/01/07........ 400,000 398,000
Zale Corp. Sr Notes, 8.50%,
10/01/07........................... 300,000 291,000
-----------
1,399,250
-----------
TELECOMMUNICATIONS-WIRELESS (8.0%)
CCPR Services Inc. Sr Notes, 10.00%,
02/01/07........................... 150,000 150,000
Centennial Cellular Corp. Sr Notes,
8.875%, 11/01/01................... 500,000 530,000
Comcast Cellular Holdings Sr Notes,
9.50%, 05/01/07.................... 350,000 373,625
Nextel Communications Sr Discount
Notes, 0/10.65%, 09/15/07.......... 350,000(2) 225,750
Nextel Communications Sr Discount
Notes, 0/9.75%, 10/31/07........... 300,000(2) 183,000
Orange PLC Sr Notes, 7.625%,
08/01/08........................... 500,000(b) 587,130
Paging Network Sr Sub Notes,
10.125%, 08/01/07.................. 500,000 487,500
Price Communications Wireless Sr
Notes, 9.125%, 12/15/06 (144A)..... 500,000(1) 505,000
Rogers Cantel Inc. Sr Sub Notes,
8.80%, 10/01/07.................... 500,000 504,375
-----------
3,546,380
-----------
TELECOMMUNICATIONS-WIRELINE (2.0%)
Flag Limited Sr Notes, 8.25%,
01/30/08........................... 500,000 495,000
Intermedia Communications Sr
Discount Notes, 0/11.25%,
07/15/07........................... 600,000(2) 414,000
-----------
909,000
-----------
TRANSPORTATION (4.4%)
Airtrans Airlines Sr Notes, 10.50%,
04/15/01........................... 250,000 218,750
Eletson Holdings Inc. 1st Pfd. Mtg.
Notes, 9.25%, 11/15/03............. 500,000 487,500
Navigator Gas Transport First
Priority Ship Mtg. Notes, 10.50%,
06/30/07 (144A).................... 250,000(1) 220,000
Piedmont Aviation Inc. Equipment
Trust Certificates, 9.65%,
05/08/99........................... 277,000 278,862
Piedmont Aviation Inc. Equipment
Trust Certificates, 9.80%,
05/08/04........................... 261,000 272,093
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
-------------
<PAGE>
OFFITBANK
VIF-HIGH YIELD FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
TRANSPORTATION (CONTINUED)
Stena AB Sr Notes, 8.75%,
06/15/07........................... $500,000 $ 476,250
-----------
1,953,455
-----------
UTILITIES (1.3%)
AES Corp. Sr Sub Notes, 8.50%,
11/01/07........................... 250,000 252,500
Calpine Corp. Sr Notes, 10.50%,
05/15/06........................... 285,000 312,075
-----------
564,575
-----------
TOTAL CORPORATE BONDS (COST
$43,132,863)....................... 42,152,324
-----------
PREFERRED STOCKS (1.4%)
HEALTH CARE (1.4%)
Fresenius Medical Care Capital Trust
Pfd., 9.00%, 12/01/06.............. 600 627,000
-----------
TOTAL PREFERRED STOCKS (COST
$619,500).......................... 627,000
-----------
REPURCHASE AGREEMENTS (1.4%)
Bank of New York Repurchase
Agreement, 4.50%, 01/04/99 (dated
12/31/98; proceeds $625,413,
collateralized by $610,000 U.S.
Treasury Notes, 6.25%, due
06/30/02, valued at $639,738)...... 625,100 625,100
-----------
TOTAL REPURCHASE AGREEMENTS (COST
$625,100).......................... 625,100
-----------
TOTAL INVESTMENTS (COST
$44,377,463)(+) -- 97.9%........... 43,404,424
OTHER ASSETS IN EXCESS OF
LIABILITIES 2.1%................... 949,690
-----------
TOTAL NET ASSETS -- 100.0%.......... $44,354,114
-----------
-----------
</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 ......................... $ 858,855
Unrealized depreciation ......................... (1,831,894)
-----------
Net unrealized depreciation ..................... $ (973,039)
-----------
-----------
</TABLE>
(a) German Deutsche Mark
(b) European Currency Unit
(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.
The accompanying notes are an integral part of the financial statements.
4
- -------------
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
VIF - EMERGING MARKETS FUND
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Even though The OFFITBANK VIF Emerging Markets Fund for the period of September
30, 1998 to December 31, 1998 produced a total return of 16.7%, the total return
for 1998 was still a disappointing negative 16.23%. The net asset value per
share as of December 31, 1998 was $7.60.
The 30-day SEC yield as of December 31, 1998 for the Fund was 13.5%, compared
with 13.3% on September 30, 1998. The Fund has an average duration of 3.4 years
and an average maturity of 6.4 years.
Dollar-denominated instruments account for 100% of the portfolio. Country
diversification is as follows: Brazil (53%), Argentina (31%), and Mexico (16%).
We remain primarily focused on the U.S. dollar-denominated corporate Eurobonds
with 72% of the portfolio invested in this sector, with 25% invested in U.S.
dollar-denominated sovereign debt and 3% in cash and accrued interest.
1998 proved a difficult year for the Emerging Markets investor. The continued
effects of 1997's Asian currency crises, Russia's default on its domestic debt
in August, and the well publicized collapse of several large hedge funds
triggered a global upward re-pricing of risk. As global investors began to
increasingly avoid risky investments, credit and capital available to Emerging
Markets borrowers contracted sharply, causing further concern for those
countries and companies that had been relying on financing from the
international capital markets.
All eyes focused on Brazil in late 1998 and remain fixed there today. The
successful re-election of President Fernando Henrique Cardoso and the IMF-led
support package of US$ 42 billion temporarily reassured the markets in December.
However, the political reality of passing restrictive budget measures through a
politically diverse legislature in an economy already in recession with rising
unemployment was fraught with difficulties. Political missteps and the time
required to negotiate with Congress placed Brazil under pressure.
As we were preparing this report, Brazil announced a 9% devaluation of the Real
in an effort to execute a controlled devaluation. However, confidence in the new
foreign exchange policy collapsed and the resulting large increases in capital
outflows made the new currency target unsustainable. Within two days the
currency was allowed to free float and depreciated an additional 15%, for a
total depreciation of approximately 25%. We did not think such a devaluation was
necessary. All the implications of this action are not clear at this point, but
we do know that Brazil is a significant economy ($800 billion) with a strong
banking sector. We will be sending you an extended commentary on the economic
conditions in Brazil and their implications in the near future.
Political conditions and other imponderables not withstanding, the Fund's
portfolio is well invested in rigorously selected credits--all U.S.
DOLLAR-DENOMINATED bonds--solely sovereigns and top-tier companies in Brazil,
Argentina and Mexico with established business franchises with every indication
that they will be able to service their debt in this environment.
Richard M. Johnston Wallace Mathai-Davis
January 20, 1999
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
VIF - EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFITBANK VIF-Emerging Markets Fund at the trading commencement date
of August 28, 1996 and held through December 31, 1998 against the performance of
the J.P. Morgan Emerging Markets Bond Index+, J.P. Morgan Latin America Eurobond
Index and Lipper Analytical Emerging Markets Debt 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 invest.
<TABLE>
<CAPTION>
8/28/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OFFITBANK VIF-Emerging Markets Fund 250,000 256,332 264,828 270,706 286,590 297,639
50% J.P. Morgan Emerging Markets Bond
Index+ and 50% J.P. Morgan Latin
America Eurobond Index 250,000 259,471 276,187 279,682 302,013 319,265
J.P. Morgan Emerging Markets Bond Index+ 250,000 264,239 282,952 285,165 312,022 333,543
J.P. Morgan Latin America Eurobond Index 250,000 254,686 269,468 274,154 292,144 305,396
Lipper Analytical Emerging Market Debt Index 250,000 276,080 297,389 303,099 332,835 352,965
<CAPTION>
12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OFFITBANK VIF-Emerging Markets Fund 286,371 301,224 290,819 205,526 239,876
50% J.P. Morgan Emerging Markets Bond
Index+ and 50% J.P. Morgan Latin
America Eurobond Index 309,419 325,217 310,103 253,015 282,666
J.P. Morgan Emerging Markets Bond Index+ 319,788 336,446 316,347 249,183 273,899
J.P. Morgan Latin America Eurobond Index 299,125 314,017 303,606 256,419 291,133
Lipper Analytical Emerging Market Debt Index 339,066 356,423 329,560 239,277 267,143
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
April 1, 1998 - Since Inception
Total Return* December 31, 1998 (August 28, 1996)
------------- ----------------- -----------------
<S> <C> <C>
OFFITBANK VIF-Emerging Markets Fund (20.36%) (1.76%)
Composite Index: 50% J.P. Morgan Emerging Markets Bond Index+ and
50% J.P. Morgan Latin America Eurobond Index (13.08%) 5.37%
J.P. Morgan Emerging Markets Bond Index+ (7.29%) 3.99%
J.P. Morgan Latin America Eurobond Index (18.59%) 6.75%
Lipper Analytical Emerging Market Debt Index (25.05%) 2.88%
- -----------------------------------------------------------------------------------------------------------------
</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
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------
CORPORATE BONDS (71.8%)
AUTOMOTIVE (3.2%)
BRAZIL (3.2%)
Ford Brasil Ltd, 9.25%,
01/22/07......................... $200,000 $ 178,500
-----------
BANKS (6.5%)
ARGENTINA (6.5%)
Banco Hipotecario S.A., 10.00%,
04/17/03......................... 400,000 364,000
-----------
BUILDING MATERIALS (4.0%)
MEXICO (4.0%)
Cemex International Capital
L.L.C., 9.66%, 11/29/49 (144A)... 250,000(1) 225,625
-----------
FOOD (6.5%)
ARGENTINA (2.9%)
Mastellone Hermanos S.A., 11.75%,
04/01/08......................... 200,000 160,000
-----------
BRAZIL (3.6%)
Arisco Products Alimenticios,
10.75%, 05/22/05 (144A).......... 330,000(1) 202,125
-----------
362,125
-----------
INDUSTRIAL (1.6%)
MEXICO (1.6%)
Vicap S.A., 11.375%, 05/15/07..... 100,000 88,250
-----------
INFRASTRUCTURE (2.7%)
ARGENTINA (2.7%)
Cia Latino Americana, 11.625%,
06/01/04......................... 250,000 152,500
-----------
MANUFACTURING (2.9%)
MEXICO (2.9%)
International de Ceramica S.A.,
9.75%, 08/01/02.................. 225,000 163,125
-----------
MEDIA (2.0%)
BRAZIL (2.0%)
Globo Communicacoes Participacoes,
10.50%, 12/20/06................. 170,000 109,225
-----------
METALS & MINING (4.2%)
BRAZIL (4.2%)
Companhia Vale do Rio Doce,
10.00%, 04/02/04................. 250,000 236,250
-----------
PACKAGING (4.0%)
MEXICO (4.0%)
Grupo Industrial Durango, 12.00%,
07/15/01......................... 125,000 113,750
Grupo Industrial Durango, 12.625%,
08/01/03......................... 125,000 109,062
-----------
222,812
-----------
PETROCHEMICALS (1.7%)
BRAZIL (1.7%)
Opp Petroquimica, 11.50%,
02/23/04......................... 100,000 94,500
-----------
RETAIL (3.1%)
ARGENTINA (3.1%)
Disco S.A., 9.875%, 05/15/08...... 200,000 171,000
-----------
STEEL (10.8%)
ARGENTINA (2.9%)
Acindar, 11.25%, 02/15/04......... 200,000 160,000
-----------
BRAZIL (4.5%)
CSN Iron S.A., 9.125%, 06/01/07... 400,000 250,000
-----------
MEXICO (3.4%)
Hylsa S.A. de C.V., 9.25%,
09/15/07......................... 250,000 192,500
-----------
602,500
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
-------------
<PAGE>
OFFITBANK
VIF-EMERGING MARKETS FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS (2.5%)
ARGENTINA (2.5%)
Telefonica Argentina, 9.125%,
05/07/08 (144A).................. $150,000(1) $ 137,250
-----------
UTILITIES (16.1%)
BRAZIL (16.1%)
Companhia Energia Minas Gerais,
9.125%, 11/18/04................. 450,000 373,500
Companhia Paranaense de Energia,
9.75%, 05/02/05.................. 400,000 332,000
SABESP, 10.00%, 07/28/05.......... 275,000 192,500
-----------
898,000
-----------
TOTAL CORPORATE BONDS (COST
$4,464,587)...................... 4,005,662
-----------
FOREIGN GOVERNMENTS (25.5%)
SOVEREIGN DEBT (25.5%)
ARGENTINA (9.3%)
Republic of Argentina, Brady
Floating Rate Bonds, 6.1875%,
03/31/05......................... 611,000(3) 518,968
-----------
BRAZIL (16.2%)
Brazil Brady Capitalization
Step-Up Bonds, 5.00/8.00%,
04/15/14......................... 229,636(2) 136,203
Brazil Brady DCB Floating Rate
Bonds, 6.1875%, 04/15/12......... 200,000(3) 100,125
Republic of Brazil EI, Floating
Rate Notes, 6.125%, 04/15/06..... 432,000(3) 277,290
Republic of Brazil IDU, Floating
Rate Notes, 6.75%, 01/01/01...... 430,500(3) 387,719
-----------
901,337
-----------
TOTAL FOREIGN GOVERNMENTS (COST
$1,591,801)...................... 1,420,305
-----------
TOTAL INVESTMENTS (COST
$6,056,388)(+) -- 97.3%.......... 5,425,967
OTHER ASSETS IN EXCESS OF
LIABILITIES 2.7%................. 148,671
-----------
TOTAL NET ASSETS -- 100.0%........ $ 5,574,638
-----------
-----------
</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 ......................... $ 244,716
Unrealized depreciation ......................... (875,137)
-----------
Net unrealized depreciation ..................... $ (630,421)
-----------
-----------
</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) Step-Up Bond.
(3) Interest rate in effect at December 31, 1998.
Country Diversification (as a percentage of Total Investments):
<TABLE>
<S> <C>
Brazil ........................................... 52.89%
Argentina ........................................ 30.66%
Mexico ........................................... 16.45%
-----------
100.00%
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
- -------------
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
DJG VALUE EQUITY FUND
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
After strong performance in 1997, DJG Value Equity Fund's results for 1998 were
disappointing, despite a strong first quarter and a rebound in values during the
fourth quarter. For the year, the fund declined 2.45%. With most of the fund's
holdings selling at sharp discounts from intrinsic value, we expect that when we
look back a year from now 1998 will prove to have been an anomaly in our
investment record.
Why was the year so difficult? First, the general market environment was very
difficult for the disciplined value investor. Large cap growth, drug and general
technology stocks boomed. In sharp contrast, industrial and economically
sensitive stocks were shunned by investors or lagged substantially behind.
Common among both value and growth stocks was the "tiering" of the market where
the larger the market capitalization of the company, the better the relative
performance. In short, value stocks as a group fared poorly, both absolutely and
relatively to other investment styles, with all value indices ending the year
well below the S&P 500.
Second, event driven value stocks, which are the backbone of our portfolios,
have an investment life of their own. Until the events surface, these stocks
tend to lag in up markets. This was particularly evident in 1998. In some cases
even as value enhancing events unfold, significant price to value gaps may
remain for some time. A prime example is our largest holding, Telephone & Data
Systems, which declined in price during the year notwithstanding management's
revised plan to restructure the company and thereby surface underlying value. We
expect that there will be other value enhancing moves over time and believe the
market will give the streamlined parent company a higher valuation. In this
regard, we calculate the private market value of TDS to be over $90 per share,
nearly double its current market price.
Third, we had more than our "normal" share of disappointments during the year.
Examples include TIG Holdings, the investment case for which included an
eventual merger of its insurance business at a premium to book value. Last Fall,
when it became evident to management that it had failed in building shareholder
value, it had to settle for a deal at $16.50 per share, well below the company's
book value and our cost. Also, there was a group of stocks, which included IMC
Global, Olsten, Sensormatic and Foundation Health, where 1998 earnings
disappointed either because of macro forces or internal factors. These stocks
were pounded after they pre-announced their problems, and the decline was
compounded by a weak market at that time. Since we believe them to be distinctly
undervalued, we added to some of these positions during the fourth quarter.
The year also had a number of investment successes: Airtouch, Time Warner,
Tricon and Whitman all showed substantial appreciation. In addition, Comsat is
in the process of merging at meaningful premium. However, these gains, while
substantial, were offset by the declining issues.
Where Do We Go From Here: Spurred by the Federal Reserve's aggressive monetary
easing, the equity market has had a remarkable recovery from its October lows.
Driven by substantial liquidity, the market has built up a momentum of its own
that has overwhelmed value. Large cap stocks have dominated the recovery and
have been bid up to very lofty levels. Consequently, the S&P 500, as a
capitalization weighted index, is currently at a record high and is selling at
about 24X 1999 estimated operating earnings. Moreover, a speculative bubble has
developed in the Internet related stocks. With investor sentiment so optimistic,
there seems to be very little margin for error or disappointment from unforeseen
events. Consequently, we see continued volatility during 1999.
As we entered the new year, many of the stocks we own are selling at depressed
prices, are at large discounts to their intrinsic or underlying values and most
have a strategic plan in place to narrow the price-value gap. This should help
to bring about substantial appreciation over time.
In sum, we believe the Fund's portfolio is materially undervalued. We expect a
solid rebound in 1999 from current depressed levels barring a significant
decline in the market. Importantly, we strongly believe that patience and
adherence to our proven investment style will continue to build capital at
favorable risk adjusted returns over the longer term.
Erwin Zeuschner
Portfolio Manager and
Principal of David J. Greene & Company LLC
January 20, 1999
<PAGE>
OFFITBANK
DJG VALUE EQUITY FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the DJG Value Equity Fund at the trading commencement date of April 11,
1997 and held through December 31, 1998 as well as the performance of the S&P
500 Stock Index over the same period.
<TABLE>
<CAPTION>
4/11/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DJG Value Equity Fund 250,000 280,193 322,807 324,016 363,693 345,188 283,759 310,055
S&P 500 Stock Index 250,000 277,086 297,846 306,397 349,106 360,360 324,824 393,953
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
April 1, 1998 - Since Inception
Total Return* December 31, 1998 (April 11, 1997)
------------- ----------------- ----------------
<S> <C> <C>
DJG Value Equity Fund (14.75%) 14.83%
S&P 500 Stock Index 12.85% 34.04%
- -------------------------------------------------------------------------------
</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
DJG VALUE EQUITY FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------
COMMON STOCKS (80.0%)
AGRICULTURE (3.7%)
AGCO Corp........................... 5,000 $ 39,375
IMC Global, Inc..................... 1,950 41,681
-----------
81,056
-----------
ARMORED CAR SERVICES (2.9%)
Pittston Brink's Group.............. 2,000 63,750
-----------
AUTOMOTIVE (6.2%)
General Motors Corp................. 600 42,937
Ryder System, Inc................... 3,500 91,000
-----------
133,937
-----------
CABLE (1.1%)
Time Warner Inc..................... 400 24,825
-----------
COMPUTERS (2.9%)
BancTec, Inc.*...................... 5,000 62,812
-----------
CONSULTING (2.1%)
Comdisco, Inc....................... 2,700 45,562
-----------
ELECTRONICS (4.6%)
Sensormatic Electronics Corp.*...... 6,000 41,625
Varian Associates, Inc.............. 1,500 56,812
-----------
98,437
-----------
FINANCIAL SERVICES (2.4%)
Dime Bancorp, Inc................... 2,000 52,875
-----------
HOTELS & GAMING (4.5%)
International Game Technology....... 2,500 60,781
Mirage Resorts, Inc.*............... 2,500 37,344
-----------
98,125
-----------
HUMAN RESOURCES (1.2%)
Olsten Corp......................... 3,500 25,813
-----------
INSURANCE (4.9%)
Everest Reinsurance Holdings,
Inc................................ 1,100 42,831
TIG Holdings, Inc................... 4,000 62,250
-----------
105,081
-----------
MANUFACTURING (13.5%)
Calgon Carbon Corp.................. 5,000 37,500
Hussman International, Inc.......... 3,000 58,125
ITT Industries, Inc................. 1,500 59,625
Navistar International Corp. *...... 3,000 85,500
Whitman Corp........................ 2,000 50,750
-----------
291,500
-----------
MEDICAL HOSPITAL SERVICES (3.5%)
Aetna Inc........................... 500 39,313
Foundation Health Systems, Inc. --
Class A*........................... 3,000 35,813
-----------
75,126
-----------
METALS & MINING (0.7%)
Freeport McMoran Exploration Co.*... 1,135 15,464
-----------
RETAIL (12.4%)
American Stores Co.................. 2,500 92,344
Footstar, Inc.*..................... 3,500 87,500
HomeBase, Inc.*..................... 5,800 36,975
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
-------------
<PAGE>
OFFITBANK
DJG VALUE EQUITY FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
Toys 'R' Us, Inc.*.................. 3,000 $ 50,625
-----------
267,444
-----------
TELECOMMUNICATIONS (13.4%)
AirTouch Communications, Inc.*...... 900 64,913
COMSAT Corp......................... 2,500 90,000
Telephone & Data Systems, Inc....... 3,000 134,813
-----------
289,726
-----------
TOTAL COMMON STOCKS (COST
$1,633,604)........................ 1,731,533
-----------
RIGHTS/WARRANTS (0.0%)
AGRICULTURE (0.0%)
IMC Global, Inc..................... 500 344
-----------
TOTAL RIGHTS/WARRANTS (COST $0)..... 344
-----------
MONEY MARKET FUNDS (19.5%)
Bank of New York Cash Reserve....... $420,863 420,863
-----------
TOTAL MONEY MARKET FUNDS (COST
$420,863).......................... 420,863
-----------
TOTAL INVESTMENTS (COST
$2,054,467)(+) -- 99.5%............ 2,152,740
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.5%................... 11,638
-----------
TOTAL NET ASSETS -- 100.0%.......... $ 2,164,378
-----------
-----------
</TABLE>
- ---------------
+ Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation ......................... $ 349,341
Unrealized depreciation ......................... (251,068)
-----------
Net unrealized appreciation ..................... $ 98,273
-----------
-----------
</TABLE>
* Denotes non-income producing security.
The accompanying notes are an integral part of the financial statements.
8
- -------------
<PAGE>
VIF - U.S. SMALL CAP FUND
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Despite a strong finish, 1998 will go down as the fifth year in a row that U.S.
small capitalization stocks underperformed the U.S. large capitalization market.
The performance gap between the Russell 2000 Index and the S&P 500 Index was at
it widest ever. For the year ended December 31, 1998 the S&P 500 Index was up
28.6% while the Russell 2000 was down 2.6%. A differential of over 3000 basis
points. This year will also be remembered as one in which the market was driven
by liquidity, valuations were considered and more often than not ignored and
bigger was definitely better.
The OFFITBANK VIF - U.S. Small Cap Fund returned 16.2% net of fees, for the
quarter and -1.8% for the year ended December 31, 1998. The Russell 2000 Index
returned 16.3% and -2.6% for those respective time frames. For the quarter, the
funds' overweighted position as well as stock selection within the technology
sector positively added to absolute and relative performance. Stock selection
within the utility sector also added positively to absolute performance. Returns
within in the health care sector were mixed but in aggregate negatively impacted
overall performance. Of the ten worst performing stocks in the third quarter,
nine posted positive returns in the fourth quarter, and three Amkor Technology,
(+121%), Primus Telecommunications (+91%) and Integrated Systems (+80%), more
than made up their previous losses.
Three new stocks were added to the portfolio in the fourth quarter of 1998.
Billing Concepts, a provider of third party billing clearing house and
information services to the telecommunications industry, currently dominates the
local exchange market with 65% market share. Future growth is expected to come
from the introduction of e-commerce billing products later this year. Nielsen
Media Research, the leading source of audience measurement for the electronic
media industry, has a nearly monopolistic position in its core industry and will
be introducing an Internet measurement product early in 1999. Pacific Gateway
Exchange, a supplier of international telecommunications services primarily to
long distance providers, has one of the lowest cost structures in the industry.
Worldwide telecommunication deregulation and exploding demand for bandwidth is
expected to drive future demand.
The portfolio as of December 31 continues to be overweighted, vis a vis the
Russell 2000 Index, in the technology and health care sectors, while remaining
underweight in the financial services and the materials and processing sectors.
As we said in our last letter, we have seen signs of a rebound in small
capitalization stocks. But this rebound has been selective at best. The lack of
liquidity in small capitalization stocks continues to negatively impact their
comparative returns. While valuations remain attractive, particularly on a
relative basis, they do not appear to be driving the market. Our focus continues
to be company specific.
Rockefeller & Co.
January 20, 1999
<PAGE>
OFFITBANK
VIF - U.S. SMALL CAP FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFITBANK VIF- U.S. Small Cap Fund at the trading commencement date
of April 11, 1997 and held through December 31, 1998 as well as the performance
of the Russell 2000 Index over the same period.
<TABLE>
<CAPTION>
4/11/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OFFITBANK VIF-U.S. Samll Cap
Fund 250,000 283,774 337,265 324,492 353,528 350,053 274,175 311,214
Russell 2000 Index 250,000 289,720 332,836 321,689 354,045 337,536 269,539 313,506
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
April 1, 1998 - Since Inception
Total Return* December 31, 1998 (April 11, 1997)
------------- ----------------- ----------------
<S> <C> <C>
OFFITBANK VIF-U.S. Small Cap Fund (11.95%) 13.33%
Russell 2000 Index (11.45%) 13.81%
- -------------------------------------------------------------------------------
</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. Small Cap
Funds typically carry additional risk since smaller companies generally have a
higher risk of failure.
<PAGE>
OFFITBANK
VIF-U.S. SMALL CAP FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------
COMMON STOCKS (92.7%)
AUTOMOBILE PARTS (1.9%)
Exide Corp.......................... 1,410 $ 22,912
-----------
BUILDING/CONSTRUCTION (1.5%)
Dal-Tile International, Inc.*....... 1,765 18,312
-----------
COMMERCIAL SERVICES (2.0%)
Iron Mountain, Inc.*................ 665 23,982
-----------
COMPUTERS (17.7%)
BancTec, Inc.*...................... 1,458 18,316
BISYS Group, Inc.*.................. 750 38,719
Broadway & Seymour, Inc.*........... 1,770 3,982
Integrated Systems, Inc.*........... 2,230 33,311
Kronos, Inc.*....................... 885 39,217
PLATINUM Technology, Inc.*.......... 1,383 26,450
Sykes Enterprises, Inc.*............ 1,850 56,425
-----------
216,420
-----------
DATA PROCESSING (10.9%)
Information Resources, Inc.*........ 2,030 20,681
Network Appliance, Inc.*............ 1,210 54,450
Object Design, Inc.*................ 4,500 29,812
Sterling Software, Inc.............. 1,040 28,145
-----------
133,088
-----------
ELECTRONICS (8.7%)
Amkor Technology, Inc.*............. 5,300 57,306
Mentor Graphics Corp.*.............. 3,580 30,430
Microsemi Corp...................... 1,740 19,140
-----------
106,876
-----------
FINANCIAL SERVICES (14.4%)
DVI, Inc.*.......................... 1,570 28,456
Dynex Capital, Inc.................. 3,800 17,575
Financial Federal Corp.............. 1,502 37,174
Franchise Mortgage Acceptance
Co.*............................... 3,000 23,250
GA Financial, Inc................... 1,300 20,150
Imperial Credit Industries, Inc.*... 1,000 8,375
Oregon Trail Financial Corp......... 1,600 19,600
Warwick Community Bancorp, Inc...... 1,400 20,650
-----------
175,230
-----------
HEALTH SERVICES/HEALTHCARE (10.1%)
ADAC Laboratories................... 1,070 21,367
Healthcare Services Group, Inc...... 2,825 25,778
ReSound Corporation*................ 6,730 25,237
Trex Medical Corp.*................. 2,300 19,550
Unilab Corp.*....................... 13,000 30,875
-----------
122,807
-----------
MANUFACTURING (1.0%)
Windmere-Durable Holdings, Inc...... 1,620 12,555
-----------
OIL & GAS EXPLORATION (2.2%)
Range Resources Corp................ 2,610 8,972
Rio Alto Exploration Ltd.*.......... 1,900(a) 18,555
-----------
27,527
-----------
RETAIL (2.4%)
Buffets, Inc.*...................... 2,420 28,889
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
-------------
<PAGE>
OFFITBANK
VIF-U.S. SMALL CAP FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------
<S> <C> <C>
SAFETY SERVICES (2.0%)
Rural/Metro Corp.*.................. 2,200 $ 24,063
-----------
TECHNOLOGY (2.7%)
Nielsen Media Research, Inc......... 1,800 32,400
-----------
TELECOMMUNICATIONS (15.2%)
Billing Concepts Corp.*............. 2,400 26,400
EchoStar Communications Corp. Class
A*................................. 1,000 48,375
Pacific Gateway Exchange, Inc.*..... 520 24,993
Primus Telecommunications Group,
Inc.*.............................. 2,028 33,462
RSL Communications, Ltd. -- Class
A*................................. 1,740 51,330
-----------
184,560
-----------
TOTAL COMMON STOCKS (COST
$1,070,719)........................ 1,129,621
-----------
MONEY MARKET FUNDS (6.3%)
Bank of New York Cash Reserve....... $76,513 76,513
-----------
TOTAL MONEY MARKET FUNDS (COST
$76,513)........................... 76,513
-----------
TOTAL INVESTMENTS (COST
$1,147,232)(+) -- 99.0%............ 1,206,134
OTHER ASSETS IN EXCESS OF
LIABILITIES 1.0%................... 11,711
-----------
TOTAL NET ASSETS -- 100.0%.......... $ 1,217,845
-----------
-----------
</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 ......................... $ 231,038
Unrealized depreciation ......................... (172,136)
-----------
Net unrealized appreciation ..................... $ 58,902
-----------
-----------
</TABLE>
* Denotes non-income producing security.
(a) Canadian Dollar.
The accompanying notes are an integral part of the financial statements.
10
- -------------
<PAGE>
VIF - TOTAL RETURN FUND
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
The total return for the VIF-Total Return Fund was 1.70% for the six months
ending December 31, 1998. This compares with a return of 4.58% for the benchmark
Lehman Aggregate Bond Index. The performance of the Fund was adversely affected
by allocations to High Yield and Emerging Markets as these investments
significantly underperformed during the unsettled conditions that existed during
1998.
The sector allocation as of December 31 was 41% Treasurys, 20% Mortgage Backed
Securities, 27% High Yield Corporates, and 10% Cash Equivalents. The average
maturity was 6.1 years and the effective duration 4.3 years.
In our view, interest rates will remain in a relatively narrow range for the
immediate future. Slower global growth and continuing disinflationary pressures
are largely discounted in the markets. The probability of worse conditions has
been reduced by the commitment of central bankers to avoiding a further global
downturn. Significant increases in bond yields are also unlikely because of
continued low inflation and global economic uncertainties.
We do not believe that an extreme duration is justified at current interest rate
levels. Instead, value can best be added by overweighting higher yielding
sectors that will benefit from lower volatility and renewed confidence in the
viability of the financial system.
Jack D. Burks
January 20, 1999
<PAGE>
OFFITBANK
VIF - TOTAL RETURN FUND
- --------------------------------------------------------------------------------
The following graph represents the total return based on a $250,000 investment
made in the OFFITBANK VIF-Total Return Fund at the trading commencement date of
June 30, 1998 and held through December 31, 1998 as well as the performance of
the Lehman Aggregate Fund Index over the same period.
<TABLE>
<CAPTION>
6/30/98 7/30/98 8/31/98 9/30/98 10/31/98 11/30/98 12/31/98
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFITBANK VIF-Total Return Fund 250,000 250,700 246,989 252,500 250,232 253,735 254,242
Lehman Aggregate Fund Index 250,000 250,525 254,609 260,566 259,185 260,663 261,445
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Since Inception
Total Return* (June 30, 1998)
------------- ----------------
<S> <C>
OFFITBANK VIF-Total Return Fund 1.70%
Lehman Aggregate Fund Index 4.58%
- -------------------------------------------------------------------------------
</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 TOTAL RETURN FUND
- -------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (9.7%)
Federal Home Loan Mortgage Corp.,
6.00%, 06/01/13, Gold
Pool#E70611........................ $ 96,445 $ 96,807
-----------
TOTAL FEDERAL HOME LOAN MORTGAGE
CORPORATION (COST $95,709)......... 96,807
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (9.9%)
Government National Mortgage Assoc.,
6.00%, 05/15/13, Pool#474218....... 99,044 99,725
-----------
TOTAL GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (COST $98,858)......... 99,725
-----------
MUTUAL FUNDS (27.3%)
OFFITBANK VIF-High Yield Fund....... 26,239 272,885
-----------
TOTAL MUTUAL FUNDS (COST
$284,268).......................... 272,885
-----------
U.S. TREASURY NOTES (41.4%)
TREASURY NOTES (41.4%)
Notes, 7.00%, 07/15/06.............. 100,000 114,107
Notes, 6.50%, 10/15/06.............. 270,000 300,232
-----------
TOTAL U.S. TREASURY NOTES (COST
$414,157).......................... 414,339
-----------
MONEY MARKET FUNDS (9.8%)
Bank of New York Cash Reserve....... 97,908 97,908
-----------
TOTAL MONEY MARKET FUNDS (COST
$97,908)........................... 97,908
-----------
TOTAL INVESTMENTS (COST $990,900)(+)
-- 98.1%........................... 981,664
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.9%................ 19,224
-----------
TOTAL NET ASSETS -- 100.0%.......... $ 1,000,888
-----------
-----------
</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 ......................... $ 3,850
Unrealized depreciation ......................... (13,086)
-----------
Net unrealized depreciation ..................... $ (9,236)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
-------------
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
VIF - HIGH YIELD FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $44,377,463)........... $ 43,404,424
Interest and dividends receivable......................... 961,425
Deferred organization expenses............................ 31,606
Receivable from Adviser................................... 23,157
Unrealized appreciation on open forward currency
contracts................................................ 317
Other assets.............................................. 45
---------------
Total Assets............................................ $ 44,420,974
LIABILITIES:
Payable for capital shares redeemed....................... 1,882
Professional fees payable................................. 31,500
Administration fees payable............................... 3,553
Transfer agent fees payable............................... 1,548
Fund accounting fees payable.............................. 1,250
Other payables and accrued expenses....................... 27,127
---------------
Total Liabilities....................................... 66,860
---------------
NET ASSETS.................................................. $ 44,354,114
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
4,264,221 issued and outstanding......................... $ 4,264
Additional paid-in capital................................ 45,090,739
Accumulated undistibuted net investment income............ 2,758
Accumulated net realized gains on investment and foreign
currency transactions.................................... 228,073
Net unrealized depreciation of investments and foreign
currency transactions.................................... (971,720)
---------------
NET ASSETS.................................................. $ 44,354,114
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $10.40
---------------
---------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (continued)
DECEMBER 31, 1998
VIF - EMERGING MARKETS FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $6,056,388)............ $ 5,425,967
Interest receivable....................................... 148,695
Deferred organization expenses............................ 37,418
Receivable from Adviser................................... 10,417
---------------
Total Assets.............................................. $ 5,622,497
LIABILITIES:
Payable for capital shares redeemed....................... 322
Professional fees payable................................. 32,573
Due to custodian.......................................... 10,531
Transfer agent fees payable............................... 1,577
Other fees payable........................................ 2,856
---------------
Total Liabilities....................................... 47,859
---------------
NET ASSETS.................................................. $ 5,574,638
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
733,165 issued and outstanding........................... $ 733
Additional paid-in capital................................ 7,565,094
Distributions in excess of net investment income.......... (17)
Accumulated net realized loss on investment and foreign
currency transactions.................................... (1,360,751)
Net unrealized depreciation of investments................ (630,421)
---------------
NET ASSETS.................................................. $ 5,574,638
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $7.60
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
DJG VALUE EQUITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $2,054,467)............ $ 2,152,740
Dividends receivable...................................... 2,549
Receivable from Adviser................................... 25,896
Deferred organization expenses............................ 5,880
Prepaid expenses and other assets......................... 443
---------------
Total Assets............................................ $ 2,187,508
LIABILITIES:
Professional fees payable................................. 19,500
Other payables and accrued expenses....................... 3,630
---------------
Total Liabilities....................................... 23,130
---------------
NET ASSETS.................................................. $ 2,164,378
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
181,718 issued and outstanding........................... $ 182
Additional paid-in capital................................ 1,949,403
Accumulated undistributed net investment income........... 5,649
Accumulated net realized gains on investment
transactions............................................. 110,871
Net unrealized appreciation of investments................ 98,273
---------------
NET ASSETS.................................................. $ 2,164,378
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $11.91
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
VIF - U.S. SMALL CAP FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $1,147,232)............ $ 1,206,134
Interest and dividends receivable......................... 845
Receivable for investment securities sold................. 328
Receivable from Adviser................................... 33,320
Deferred organization expenses............................ 5,880
Prepaid expenses and other assets......................... 434
---------------
Total Assets............................................ $ 1,246,941
LIABILITIES:
Payable for investment securities purchased............... 5,057
Professional fees payable................................. 19,501
Transfer agent fees payable............................... 1,492
Administration fees payable............................... 1,417
Other payables and accrued expenses....................... 1,629
---------------
Total Liabilities....................................... 29,096
---------------
NET ASSETS.................................................. $ 1,217,845
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
107,408 issued and outstanding........................... $ 107
Additional paid-in capital................................ 1,139,470
Accumulated net realized gains on investment and foreign
currency transactions.................................... 19,366
Net unrealized appreciation of investment and foreign
currency transactions.................................... 58,902
---------------
NET ASSETS.................................................. $ 1,217,845
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $11.34
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
VIF - TOTAL RETURN FUND
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSETS:
Investments, at market value (cost $990,900).............. $ 981,664
Deferred organization expenses............................ 50,733
Interest and dividends receivable......................... 10,266
---------------
Total Assets............................................ $ 1,042,663
LIABILITIES:
Payable to Adviser........................................ 18,883
Payable for capital shares redeemed....................... 175
Transfer agent fees payable............................... 1,560
Professional fees payable................................. 19,641
Other payables and accrued expenses....................... 1,516
---------------
Total Liabilities....................................... 41,775
---------------
NET ASSETS.................................................. $ 1,000,888
---------------
---------------
Net Assets consist of:
Shares of capital stock, $0.001 par value per share,
98,382 issued and outstanding............................ $ 98
Additional paid-in capital................................ 979,775
Undistributed net investment income....................... 28,216
Accumulated net realized gains on investment
transactions............................................. 2,035
Net unrealized depreciation of investments................ (9,236)
---------------
NET ASSETS.................................................. $ 1,000,888
---------------
---------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE)... $10.17
---------------
---------------
</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
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE
DECEMBER 31, YEAR ENDED
1998 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 2,893,226 $ 2,552,527
Dividends..................................................................... -- 19,959
---------------- ----------------
Total Income................................................................ 2,893,226 2,572,486
EXPENSES:
Advisory...................................................................... 261,563 239,489
Professional.................................................................. 97,296 78,377
Administration................................................................ 40,112 42,263
Fund accounting............................................................... 14,547 32,308
Amortization of organization expenses......................................... 10,972 14,184
Transfer agent................................................................ 10,827 446
Custody....................................................................... 9,265 9,093
Trustees...................................................................... 8,154 9,896
Miscellaneous & other expenses................................................ 23,702 9,308
---------------- ----------------
Total expenses before waivers/reimbursements................................ 476,438 435,364
Less expenses waived/reimbursed............................................. (122,654) (111,335)
---------------- ----------------
Net expenses................................................................ 353,784 324,029
---------------- ----------------
NET INVESTMENT INCOME........................................................... 2,539,442 2,248,457
---------------- ----------------
REALIZED AND UNREALIZED GAINS (LOSS) ON INVESTMENTS:
Net realized gains on investment and foreign currency transactions............ 223,896 199,824
Net change in unrealized appreciation (depreciation) of investments and
foreign currency transactions................................................ (2,312,290) 1,342,036
---------------- ----------------
Net realized and unrealized gains (loss) on investments....................... (2,088,394) 1,541,860
---------------- ----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 451,048 $ 3,790,317
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF OPERATIONS (CONTINUED)
VIF - EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE
DECEMBER 31, YEAR ENDED
1998 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 522,322 $ 536,223
Dividends..................................................................... -- 1,206
---------------- ---------------
Total Income................................................................ 522,322 537,429
---------------- ---------------
EXPENSES:
Advisory...................................................................... 39,569 49,468
Professional.................................................................. 46,237 30,748
Fund accounting............................................................... 13,754 30,000
Amortization of organization expenses......................................... 10,952 14,184
Transfer agent................................................................ 10,529 165
Administration................................................................ 5,741 8,245
Miscellaneous................................................................. 1,421 13,553
---------------- ---------------
Total expenses before waivers/reimbursements................................ 128,203 146,363
---------------- ---------------
Less expenses waived/reimbursed............................................. (62,252) (63,917)
Net expenses................................................................ 65,951 82,446
---------------- ---------------
NET INVESTMENT INCOME........................................................... 456,371 454,983
---------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSS) ON INVESTMENTS:
Net realized gains (loss) on investment transactions.......................... (1,360,751) 42,169
Net realized gains (loss) on foreign currency transactions.................... (10,025) 21,834
Net change in unrealized appreciation (depreciation) of investments........... (742,956) 65,549
Net change in unrealized appreciation (depreciation) of foreign currency
transactions................................................................. (7,713) 4,357
---------------- ---------------
Net realized and unrealized gains (loss) on investments......................... (2,121,445) 133,909
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................... $ (1,665,074) $ 588,892
---------------- ---------------
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF OPERATIONS (CONTINUED)
DJG VALUE EQUITY FUND
<TABLE>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 11, 1997*
DECEMBER 31, 1998 THROUGH MARCH
31, 1998
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends..................................................................... $ 22,203 $ 19,228
---------------- ---------------
Total Income................................................................ 22,203 19,228
EXPENSES:
Advisory...................................................................... 11,499 10,934
Professional.................................................................. 29,896 22,751
Fund accounting............................................................... 13,935 30,154
Transfer agent................................................................ 10,500 79
Administration................................................................ 1,846 2,050
Amortization of organization expenses......................................... 1,416 1,761
Miscellaneous................................................................. 2,046 2,081
---------------- ---------------
Total expenses before waivers/reimbursements................................ 71,138 69,810
Less expenses waived/reimbursed............................................. (53,168) (52,719)
---------------- ---------------
Net expenses................................................................ 17,970 17,091
---------------- ---------------
NET INVESTMENT INCOME........................................................... 4,233 2,137
---------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSS) ON INVESTMENTS:
Net realized gains on investment transactions................................. 110,871 120,079
Net change in unrealized appreciation (depreciation) of investments........... (343,779) 442,052
---------------- ---------------
Net realized and unrealized gains (loss) on investments......................... (232,908) 562,131
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................... $ (228,675) $ 564,268
---------------- ---------------
---------------- ---------------
</TABLE>
* Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF OPERATIONS (CONTINUED)
VIF - U.S. SMALL CAP FUND
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 11, 1997*
DECEMBER 31, THROUGH MARCH
1998 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 3,082 $ 451
Dividends..................................................................... 2,253 7,682
---------------- ---------------
Total Income................................................................ 5,335 8,133
EXPENSES:
Advisory...................................................................... 9,323 10,796
Professional.................................................................. 28,917 22,660
Fund accounting............................................................... 14,214 30,685
Transfer Agent................................................................ 10,790 77
Amortization of organization expenses......................................... 1,416 1,761
Administration................................................................ 1,201 1,619
Miscellaneous................................................................. 6,222 4,741
---------------- ---------------
Total expenses before waivers/reimbursements................................ 72,083 72,339
Less expenses waived/reimbursed............................................. (58,300) (56,138)
---------------- ---------------
Net expenses................................................................ 13,783 16,201
---------------- ---------------
NET INVESTMENT LOSS............................................................. (8,448) (8,068)
---------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSS) ON INVESTMENTS:
Net realized gains on investment and foreign currency transactions............ 19,891 125,730
Net change in unrealized appreciation (depreciation) of investments and
foreign currency transactions................................................ (178,262) 237,164
---------------- ---------------
Net realized and unrealized gains (loss) on investments....................... (158,371) 362,894
---------------- --------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................... $ (166,819) $ 354,826
---------------- ---------------
---------------- ---------------
</TABLE>
* Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENTS OF OPERATIONS (CONTINUED)
VIF - TOTAL RETURN FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 30, 1998*
THROUGH DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest...................................................................... $ 26,608
Dividends..................................................................... 1,608
----------------
Total Income................................................................ $ 28,216
EXPENSES:
Advisory...................................................................... 3,670
Professional.................................................................. 28,671
Transfer agent................................................................ 9,050
Fund accounting............................................................... 7,542
Amortization of organization expenses......................................... 5,689
Administration................................................................ 573
Miscellaneous................................................................. 1,502
----------------
Total expenses before waivers/reimbursements................................ 56,697
Less expenses waived/reimbursed............................................. (53,027)
----------------
Net expenses................................................................ 3,670
----------------
NET INVESTMENT INCOME........................................................... 24,546
----------------
REALIZED AND UNREALIZED GAINS (LOSS) ON INVESTMENTS:
Net realized gains on investment transactions................................. 2,035
Net change in unrealized depreciation of investments.......................... (9,236)
----------------
Net realized and unrealized loss on investments............................... (7,201)
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 17,345
----------------
----------------
</TABLE>
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
VIF - HIGH YIELD FUND
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED FOR THE APRIL 1, 1996*
DECEMBER 31, YEAR ENDED THROUGH
1998 MARCH 31, 1998 MARCH 31, 1997
- -------------------------------------------------------------------------------------------------------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income.................................................. $ 2,539,442 $ 2,248,457 $ 677,139
Net realized gains on investment and foreign currency transactions..... 223,896 199,824 24,669
Net changes unrealized appreciation (depreciation) appreciation of
investments and foreign currency transactions........................ (2,312,290) 1,342,036 (1,466)
---------------- ---------------- ----------------
Net increase in net assets resulting from operations................... 451,048 3,790,317 700,342
---------------- ---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................. (2,539,442) (2,248,457) (677,139)
Excess of net investment income........................................ (42,172) -- --
Net realized gains..................................................... (199,784) -- --
---------------- ---------------- ----------------
Total dividends and distributions to shareholders...................... (2,781,398) (2,248,457) (677,139)
---------------- ---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................................ 18,295,737 6,518,774 25,477,804
Dividends reinvested................................................... 2,989,391 2,040,697 677,347
Cost of shares redeemed................................................ (6,275,630) (3,540,505) (1,097,547)
---------------- ---------------- ----------------
Net increase in net assets from capital share transactions............. 15,009,498 5,018,966 25,057,604
---------------- ---------------- ----------------
Total increase in net assets........................................... 12,679,148 6,560,826 25,080,807
---------------- ---------------- ----------------
NET ASSETS:
Beginning of period.................................................... 31,674,966 25,114,140 33,333
---------------- ---------------- ----------------
End of period (including undistributed net investment income
of $44,930, $42,172 and $8,755, respectively)........................ $ 44,354,114 $ 31,674,966 $ 25,114,140
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>
* Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
VIF - EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED FOR THE AUGUST 28, 1996*
DECEMBER 31, YEAR ENDED THROUGH
1998 MARCH 31, 1998 MARCH 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................................... $ 456,371 $ 454,983 $ 120,931
Net realized gains (loss) on investment and foreign currency transactions (1,370,776) 64,003 28,664
Net change in unrealized appreciation (depreciation) of investments and
foreign currency transactions........................................... (750,669) 69,906 50,342
---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from operations.......... (1,665,074) 588,892 199,937
---------------- ---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................... (456,371) (454,983) (120,931)
Excess of net investment income.......................................... (41,459) (10,015) --
Net realized gains....................................................... (52,829) -- (11,806)
---------------- ---------------- ----------------
Total dividends and distributions to shareholders........................ (550,659) (464,998) (132,737)
---------------- ---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.............................................. 3,688,615 1,004,183 4,138,941
Dividends reinvested..................................................... 673,517 338,633 120,931
Cost of shares redeemed.................................................. (2,351,293) (32,780) (14,803)
---------------- ---------------- ----------------
Net increase in net assets from capital share transactions............... 2,010,839 1,310,036 4,245,069
---------------- ---------------- ----------------
Total increase (decrease) in net assets.................................. (204,894) 1,433,930 4,312,269
---------------- ---------------- ----------------
NET ASSETS:
Beginning of period...................................................... 5,779,532 4,345,602 33,333
---------------- ---------------- ----------------
End of period (including distributions in excess of net investment income
of $17 and undistributed net investment income of $33,147 and $11,824,
respectively)........................................................... $ 5,574,638 $ 5,779,532 $ 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.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
DJG VALUE EQUITY FUND
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 11, 1997*
DECEMBER 31, THROUGH
1998 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income......................................................... $ 4,233 $ 2,137
Net realized gains on investment transactions................................. 110,871 120,079
Net change in unrealized appreciation (depreciation) of investments........... (343,779) 442,052
---------------- ----------------
Net increase (decrease) in net assets resulting from operations............... (228,675) 564,268
---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Excess of net investment income............................................... (3,898) --
Excess of net realized gains.................................................. (120,079) --
---------------- ----------------
Total dividends and distributions to shareholders............................. (123,977) --
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................................................... 390,383 1,472,103
Dividends reinvested.......................................................... 123,977 --
Cost of shares redeemed....................................................... (15,213) (18,488)
---------------- ----------------
Net increase in net assets from capital share transactions.................... 499,147 1,453,615
---------------- ----------------
Total increase in net assets.................................................. 146,495 2,017,883
---------------- ----------------
NET ASSETS:
Beginning of period........................................................... 2,017,883 --
---------------- ----------------
End of period (including undistributed net investment income of $5,649 and
$3,898, respectively)........................................................ $ 2,164,378 $ 2,017,883
---------------- ----------------
---------------- ----------------
</TABLE>
* Commencement of operations.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
VIF - U.S. SMALL CAP FUND
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 11, 1997*
DECEMBER 31, THROUGH
1998 MARCH 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss........................................................... $ (8,448) $ (8,068)
Net realized gains on investment and foreign currency transactions............ 19,891 125,730
Net change in unrealized appreciation (depreciation) of investments and
foreign currency transactions................................................ (178,262) 237,164
---------------- ----------------
Net increase (decrease) in net assets resulting from operations............... (166,819) 354,826
---------------- ----------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net realized gains............................................................ (119,956) --
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................................................... -- 1,054,094
Dividends reinvested.......................................................... 119,956 --
Cost of shares redeemed....................................................... (9,616) (14,640)
---------------- ----------------
Net increase in net assets from capital share transactions.................... 110,340 1,039,454
---------------- ----------------
Total increase (decrease) in net assets....................................... (176,435) 1,394,280
---------------- ----------------
NET ASSETS:
Beginning of period........................................................... 1,394,280 --
---------------- ----------------
End of period................................................................. $ 1,217,845 $ 1,394,280
---------------- ----------------
---------------- ----------------
</TABLE>
* Commencement of operations
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
VIF - TOTAL RETURN FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 30, 1998* THROUGH
DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income......................................................... $ 24,546
Net realized gains on investment transactions................................. 2,035
Net change in unrealized depreciation of investments.......................... (9,236)
----------------
Net increase in net assets resulting from operations.......................... 17,345
----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................................................... 1,034,053
Cost of shares redeemed....................................................... (50,510)
----------------
Net increase in net assets resulting from capital share transactions.......... 983,543
----------------
Total increase in net assets.................................................. 1,000,888
----------------
NET ASSETS:
Beginning of period........................................................... --
----------------
End of period (including undistributed net investment income of $28,216)...... $ 1,000,888
----------------
----------------
</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
FOR THE NINE FOR THE APRIL 1, 1996*
MONTHS ENDED YEAR ENDED THROUGH
DECEMBER 31, 1998 MARCH 31, 1998 MARCH 31, 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.00 $ 10.37 $ 10.00(d)
------- ------- -------
Net investment
income................ 0.65 0.86 0.78
Net realized and
unrealized gains
(loss)................ (0.53) 0.63 0.37
------- ------- -------
Total income from
investment
operations............ 0.12 1.49 1.15
------- ------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income................ (0.65) (0.86) (0.78)
Excess of net
investment income..... (0.02)
Net realized gains..... (0.05) 0.00 --
------- ------- -------
Total dividends and
distributions.......... (0.72) (0.86) (0.78)
------- ------- -------
Net change in net asset
value per share....... (0.60) 0.63 0.37
------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 10.40 $ 11.00 $ 10.37
------- ------- -------
TOTAL RETURN (a)......... 1.15%(b) 14.84% 11.90%(b)
------- ------- -------
------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (in
thousands)............ $ 44,354 $ 31,675 $ 25,114
Ratios to average net
assets:
Expenses**............. 1.15%(c) 1.15% 1.15%(c)
Net investment
income................ 8.25%(c) 7.98% 7.45%(c)
PORTFOLIO TURNOVER
RATE................... 14%(b) 32% 4%(b)
</TABLE>
- ---------------
* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratio would have been higher.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) Initial offering price.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
VIF - EMERGING MARKETS FUND
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED FOR THE AUGUST 28, 1996*
DECEMBER 31, YEAR ENDED THROUGH
1998 MARCH 31, 1998 MARCH 31, 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD... $ 10.55 $ 10.30 $ 10.00(d)
--------------- ----------------- --------
Net investment
income................ 0.66 0.86 0.48
Net realized and
unrealized gains
(loss)................ (2.79) 0.27 0.34
--------------- ----------------- --------
Total income (loss)
from investment
operations............ (2.13) 1.13 0.82
--------------- ----------------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income................ (0.66) (0.86) (0.48)
Excess of net
investment income..... (0.07) (0.02) --
Net realized gains..... (0.09) -- (0.04)
--------------- ----------------- --------
Total dividends and
distributions.......... (0.82) (0.88) (0.52)
--------------- ----------------- --------
Net change in net asset
value per share....... (2.95) 0.25 0.30
--------------- ----------------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 7.60 $ 10.55 $ 10.30
--------------- ----------------- --------
--------------- ----------------- --------
TOTAL RETURN (a)......... (20.36%)(b) 11.26% 8.29%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (in
thousands)............ $ 5,575 $ 5,780 $ 4,346
Ratios to average net
assets:
Expenses**............. 1.50%(c) 1.50% 1.50%(c)
Net investment
income................ 10.38%(c) 8.27% 8.04%(c)
PORTFOLIO TURNOVER
RATE................... 100%(b) 53% 96%(b)
</TABLE>
- ---------------
* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/ or
reimbursed. If such voluntary fee reductions and/ or reimbursements had not
occurred, the ratio would have been higher.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) Initial offering price.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
DJG VALUE EQUITY FUND
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 11, 1997*
DECEMBER 31, THROUGH
1998 MARCH 31, 1998
- --------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD... $ 14.94 $ 10.00(d)
------- -------
Net investment
income................ 0.05 0.02
Net realized and
unrealized gains
(loss)................ (2.16) 4.92
------- -------
Total income from
investment
operations............ (2.11) 4.94
------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income................ (0.03) --
Net realized gains..... (0.89) --
------- -------
Total dividends and
distributions......... (0.92) --
------- -------
Net change in net asset
value per share....... (3.03) 4.94
------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 11.91 $ 14.94
------- -------
------- -------
TOTAL RETURN (a)......... (14.75%)(b) (49.40%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (in
thousands)............ $ 2,164 $ 2,018
Ratios to average net
assets:
Expenses**............. (1.25%)(c) (1.25%)(c)
Net investment
income................ (0.29%)(c) (0.16%)(c)
PORTFOLIO TURNOVER
RATE................... 21%(b) 33%(b)
</TABLE>
- ---------------
* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/ or
reimbursed. If such voluntary fee reductions and/ or reimbursements had not
occurred, the ratio would have been higher.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) Initial offering price.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
VIF - U.S. SMALL CAP FUND
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 11, 1997*
DECEMBER 31, THROUGH
1998 MARCH 31, 1998
- --------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD... $ 14.14 $ 10.00(d)
------- ------
Net investment
(loss)................ (0.08) (0.08)
Net realized and
unrealized gains
(loss)................ (1.50) 4.22
------- ------
Total income (loss)
from investment
operations............ (1.58) 4.14
------- ------
LESS DIVIDENDS AND
DISTRIBUTIONS FROM:
Net investment
income................ -- --
Net realized gains..... (1.22) --
------- ------
Total dividends and
distributions.......... (1.22) --
------- ------
Net change in net asset
value per share....... (2.80) 4.14
------- ------
NET ASSET VALUE, END OF
PERIOD................. $ 11.34 $ 14.14
------- ------
------- ------
TOTAL RETURN (A)......... (11.95%)(b) 41.40%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (in
thousands)............ $ 1,218 $ 1,394
Ratios to average net
assets:
Expenses**............. 1.50%(c) 1.50%(c)
Net investment
income................ (.92%)(c) (.74%)(c)
PORTFOLIO TURNOVER
RATE................... 39%(b) 51%(b)
</TABLE>
- ---------------
* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/ or
reimbursed. If such voluntary fee reductions and/ or reimbursements had not
occurred, the ratio would have been higher.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) Initial offering price.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
VIF - TOTAL RETURN FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 30, 1998* THROUGH
DECEMBER 31, 1998
- --------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD... $ 10.00(d)
Net investment
income................ 0.25
Net realized and
unrealized loss....... (0.08)
Total income from
investment
operations............ 0.17
-------
Net change in net asset
value per share....... $ 0.17
-------
NET ASSET VALUE, END OF
PERIOD................. $ 10.17
-------
-------
TOTAL RETURN (A)......... %1.70(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (in
thousands)............ $ 1,001
Ratios to average net
assets:
Expenses**............. %0.80(c)
Net investment
income................ %5.35(c)
PORTFOLIO TURNOVER
RATE................... %(b58)
</TABLE>
- ---------------
* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/ or
reimbursed. If such voluntary fee reductions and/ or reimbursements had not
occurred, the ratio would have been higher.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) Initial offering price.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
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 five, OFFITBANK VIF-High Yield Fund
(VIF-High Yield Fund), OFFITBANK VIF-Emerging Markets Fund (VIF-Emerging Markets
Fund), DJG Value Equity Fund, OFFITBANK VIF-U.S. Small Cap Fund (VIF-U.S. Small
Cap Fund) and OFFITBANK VIF-Total Return Fund (VIF-Total Return Fund)
(individually, a "Fund", and collectively, the "Funds") have commenced
operations. The Funds have the following inception dates:
<TABLE>
<S> <C>
VIF-High Yield Fund April 1, 1996
VIF-Emerging Markets Fund August 28, 1996
DJG Value Equity Fund April 11, 1997
VIF-U.S. Small Cap Fund April 11, 1997
VIF-Total Return Fund June 30, 1998
</TABLE>
The VIF-High Yield Fund, VIF-Emerging Markets Fund and VIF-Total Return Fund
operate as non-diversified, open-end management investment companies. The DJG
Value Equity Fund and VIF-U.S. Small Cap Fund operate as diversified, open-end
management investment companies.
The VIF-High Yield Fund seeks to provide investors with a high level of current
income by investing primarily in high yield, high-risk corporate debt securities
and sovereign debt obligations. The VIF-Emerging Markets Fund seeks to provide
investors with a competitive total investment return by focusing on current
yield and opportunities for capital appreciation primarily by investing in
corporate and sovereign debt securities of emerging market countries. The DJG
Value Equity Fund seeks to achieve its objectives of long-term appreciation and
preservation of capital by researching and investing in equity securities priced
at a discount to their intrinsic values. The VIF-U.S. Small Cap Fund invests
primarily in a diversified portfolio of securities of smaller companies located
in the United States to achieve its investment objective of capital
appreciation. The VIF-Total Return Fund invests primarily in a portfolio of
fixed income securities of varying maturities.
OFFITBANK serves as the VIF-High Yield, VIF-Emerging Markets, VIF-U.S. Small Cap
and VIF-Total Return Funds' investment adviser. David J. Greene and Company
serve as the DJG Value Equity Fund's investment adviser. Rockefeller & Company,
Inc. serves as the sub-adviser for the VIF-U.S. Small Cap Fund. Effective June
1, 1998, PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank
Corp., began providing administrative and fund accounting services for the
Funds. OFFIT Funds Distributor, Inc. (the "Distributor"), serves as the
distributor of the Funds' shares. PFPC also provides transfer and dividend
disbursing agent services for the Funds. Prior to June 1, 1998, BISYS Fund
Services, Limited Partnership, and BISYS Fund Services, Inc. provided
administrative, fund accounting, transfer and dividend disbursing agent
services.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
Equity securities held by a Fund are valued at the last reported sales price on
the securities exchange or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. Debt securities held by a Fund generally are valued based on quoted bid
prices. Short-term debt investments having maturities of 60 days or less are
valued at amortized cost, which approximates market value, and, if applicable,
adjusted for foreign exchange translation. 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.
ORGANIZATIONAL EXPENSES:
Costs incurred in connection with the organization and initial registration of
the Funds have been deferred and
<PAGE>
THE OFFITBANK 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 VIF-High Yield Fund's net investment income, if any, are
declared daily and paid monthly. Dividends from the VIF-Emerging Markets Fund's
net investment income, if any, are declared daily and paid quarterly. Dividends
from the DJG Value Equity, VIF-U.S. Small Cap and VIF-Total Return Funds' net
investment income, if any, are declared and paid annually. 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 distributions from net investment income and 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 distributions in excess of 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, 1998, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to
paid-in-capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET INVESTMENT GAIN/(LOSS) ON
INCOME INVESTMENTS
--------------- ---------------
<S> <C> <C>
VIF-High Yield Fund......... $ 2,758 $ 4,137
VIF-Emerging Markets Fund... 8,295 10,025
DJG Value Equity Fund....... 1,416 --
VIF-U.S. Small Cap Fund..... 8,448 8
VIF-Total Return Fund....... 3,670 --
</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>
VIF-Emerging Markets Fund...... $ 42,703 $ 17
VIF-U.S. Small Cap Fund........ 9,679 --
</TABLE>
For federal income tax purposes, the following Fund had capital loss
carryforwards:
<TABLE>
<CAPTION>
DATE OF
FUND CLCF EXPIRATION
- --------------------------- ------------ -----------------
<S> <C> <C>
VIF-Emerging Markets....... $1,318,048 December 31, 2006
</TABLE>
Accordingly, no capital gain distribution is expected to be paid to shareholders
until net gains have been realized in excess of the aggregate of each amount.
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 and certain
foreign currency denominated debt obligations, 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 recorded on the Fund books and amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities, other than
investments in securities, resulting from changes in exchange rates.
REPURCHASE AGREEMENTS:
The Funds may purchase instruments from financial institutions, such as banks
and broker-dealers, subject to the seller's agreement to repurchase them at an
agreed upon time and price ("repurchase agreements"). The
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
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:
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 and transactions.
A forward foreign exchange contract is a commitment to sell or buy a foreign
currency at a future date at a negotiated exchange rate. 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 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, 1998 are recorded for financial reporting purposes as unrealized gains and
losses by the Funds.
At December 31, 1998, there were no outstanding forward currency contracts for
the VIF-Emerging Markets, DJG Value Equity, VIF-U.S. Small Cap Fund and VIF-
Total Return Funds. The table below indicates the VIF-High Yield Fund's
outstanding forward currency contract positions at December 31, 1998:
<TABLE>
<CAPTION>
VALUE ON VALUE AT UNREALIZED
CONTRACT MATURITY ORIGINATION DECEMBER 31, APPRECIATION
CURRENCY AMOUNTS DATE DATE 1998 (DEPRECIATION)
----------- ----------- ----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Sell DEM (522,000) 02/05/99 $(313,175) $ (313,602) $ (427)
Sell ECU (500,000) 02/05/99 (587,750) (587,006) 744
-----
Net unrealized appreciation on forward positions........................... $ 317
-----
-----
</TABLE>
Currency Abbreviations:
DEM -- German Deutsche Mark
ECU -- European Currency Unit
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.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES:
The Company has entered into investment advisory agreements (the "Investment
Advisory Agreements") with OFFITBANK (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 million of average daily
net assets for the VIF-High Yield Fund and 0.75% of average daily net assets in
excess of $200 million; 0.90% of the first $200 million of average daily net
assets for the VIF-Emerging Markets Fund and 0.80% of average daily net assets
in excess of $200 million; 1.00% of average daily net assets for the VIF-U.S.
Small Cap Fund; and 0.80% of average daily net assets for the VIF-Total Return
Fund. Rockefeller & Company, Inc. serves as sub-adviser for the U.S. Small Cap
Fund and is entitled to a fee from the Adviser that is calculated daily and
payable monthly at the annual rate of 1.00% of the Fund's average daily net
assets. Pursuant to the terms of its Investment Advisory Agreement, David J.
Greene and Company is entitled to a fee that is calculated daily and payable
monthly at the annual rate of 0.80% of the average daily net assets of the DJG
Value Equity Fund. For the period ended December 31, 1998, the Adviser earned
fees of $261,563 and $39,569 and waived fees of $59,096 and $31,386 for the
VIF-High Yield Fund and VIF-Emerging Markets Fund, and earned and waived fees of
$9,323 and $3,670 for the VIF-U.S. Small Cap Fund and VIF- Total Return Fund.
David J. Greene and Company earned and waived fees of $11,499 for the DJG Value
Equity Fund. For the period ended March 31, 1998, the Adviser earned fees of
$239,489 and waived fees of $77,746 for the VIF-High Yield Fund, and earned and
waived fees of $49,468 and $10,796 for the VIF-Emerging Markets Fund and
VIF-U.S. Small Cap Fund, respectively. For the period ended March 31, 1998,
David J. Greene and Company earned and waived fees of $10,934 for the DJG Value
Equity Fund.
Commencing on June 1, 1998 PFPC provided the Funds 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
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
daily net assets; 0.08% of each Portfolio's next $300 million in average daily
net assets; 0.05% of each Portfolio's next $300 million in average daily net
assets; and 0.0275% of each Portfolio's average daily net assets in excess of
$1.2 billion. From time to time, PFPC may waive all or a portion of its fees.
For the period from June 1, 1998 through December 31, 1998, PFPC was entitled to
fees of $32,307, $4,273, $1,341, $885 and $573 for the VIF-High Yield Fund,
VIF-Emerging Markets Fund, DJG Value Equity Fund, VIF-U.S. Small Cap Fund and
VIF-Total Return Fund, respectively. PFPC waived fees of $7,753, $4,273, $1,341,
$885 and $573 for the VIF-High Yield Fund, VIF-Emerging Markets Fund, DJG Value
Equity Fund, VIF-U.S. Small Cap Fund and VIF-Total Return Fund, respectively.
For the period from April 1, 1998 through May 31, 1998 BISYS Fund Services,
Inc., the previous administrator, was entitled to fees of $7,805, $1,468, $505
and $316 for VIF-High Yield Fund, VIF-Emerging Markets Fund, DJG Value Equity
Fund and VIF-U.S. Small Cap Fund, respectively. BISYS Fund Services, Inc. waived
fees of $3,689, $1,468, $505 and $316 for VIF-High Yield Fund, VIF-Emerging
Markets Fund, DJG Value Equity Fund and VIF-U.S. Small Cap Fund, respectively.
For the period ended March 31, 1998, BISYS earned fees of $42,263 and waived
fees of $23,302 for the VIF-High Yield Fund, and earned and waived fees of
$8,245, $2,050 and $1,619 for the VIF-Emerging Markets Fund, DJG Value Equity
Fund and VIF-U.S. Small Cap Fund, respectively.
Commencing on June 1, 1998 PFPC provided the Funds with fund accounting and
related services pursuant to a fund accounting agreement with the Company. For
these services PFPC is entitled a fee of $1,250 per month per Fund plus out of
pocket expenses. From time to time, PFPC may waive all or a portion of its fees.
For the period June 1, 1998 through December 31, 1998, the VIF-High Yield Fund
earned fees of $8,992. For the period from June 1, 1998 through December 31,
1998, PFPC earned and waived fees of $8,750, $8,750, $8,992 and $7,542 for the
VIF-Emerging Markets Fund, DJG Value Equity Fund, VIF-U.S. Small Cap Fund and
VIF-Total Return Fund, respectively. For the period from April 1, 1998 through
May 31, 1998 BISYS Funds Services, Inc., the previous Fund accounting agent
earned fees, including reimbursement of out of pocket expenses, of $5,555,
$5,004, $5,185, and $5,222 for the VIF-High Yield Fund, VIF-Emerging Markets
Fund, DJG Value Equity Fund and VIF-U.S. Small Cap Fund, respectively. For the
period ended March 31, 1998, BISYS earned fees of $32,308, $30,000, $30,154 and
$30,685 for the VIF-High Yield Fund, VIF-Emerging Markets Fund, DJG Value Equity
Fund and VIF-U.S. Small Cap Fund, respectively.
Commencing on June 1, 1998, PFPC also served as transfer agent for the Funds and
received reimbursement of certain expenses plus a fee for related services
pursuant to a transfer agency agreement with the Company. From time to time,
PFPC may waive all or portion of these fees. For the period from June 1, 1998
through December 31, 1998, PFPC earned fees of $10,790, $10,529, $10,500,
$10,790 and $9,050 for the VIF-High Yield Fund, VIF-Emerging Markets Fund, DJG
Value Equity Fund, VIF-U.S. Small Cap Fund and VIF-Total Return Fund. PFPC
waived fees of $4,945, $4,815, $5,176, $5,464 and $3,703 for the VIF-High Yield
Fund, VIF-Emerging Markets Fund, DJG Value Equity Fund, VIF-U.S. Small Cap Fund
and VIF-Total Return Funds, respectively. For the period from April 1, 1998
through May 31, 1998, BISYS Fund Services, Inc., the previous transfer agent,
earned fees, including reimbursement of out pocket expenses of $37, for the
VIF-High Yield Fund. For the period ended March 31, 1998, BISYS earned fees of
$446, $165, $79 and $77 for the VIF-High Yield Fund, VIF-Emerging Markets Fund,
DJG Value Equity Fund and VIF-U.S. Small Cap Fund, respectively.
The Company has entered into a distribution agreement (the "Distribution
Agreement') with the Distributor. 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 existing shareholders. There is no fee
payable under the Distribution Agreement.
OFFITBANK and David J. Greene and Company have voluntarily agreed to limit the
expense ratios for the Funds at 1.15%, 1.50%, 1.25%, 1.50% and 0.80% for the
VIF-High Yield Fund, VIF-Emerging Markets Fund, DJG Value Equity, VIF-U.S. Small
Cap Fund and VIF-Total Return Funds, respectively. In order to maintain these
ratios, for the period ended December 31, 1998, the Adviser and David J. Greene
and Company have waived all or a portion of their advisory fee and have also
agreed to reimburse the VIF-High Yield Fund, VIF-Emerging Markets Fund, DJG
Value Equity Fund, VIF-U.S. Small Cap Fund and VIF-Total Return Fund for
expenses in the amounts of $47,171, $11,560, $25,897, $33,320 and $53,027,
respectively. For the period ended March 31, 1998, the Adviser and David J.
Greene and Company have waived all or a portion of their advisory fee and have
also agreed to reimburse the VIF-High Yield Fund, VIF-Emerging Markets Fund, DJG
Value Equity Fund and VIF-U.S. Small Cap Fund for expenses in the amounts of
$10,287, $6,204, $39,735 and $43,723, respectively.
<PAGE>
THE OFFITBANK INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
NOTE 4 -- SECURITIES TRANSACTIONS
For the period ended December 31, 1998, 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>
VIF-High Yield Fund......... $21,638,585 $5,387,564 $ -- $ --
VIF-Emerging Markets Fund... 7,210,057 5,250,220 -- --
DJG Value Equity Fund....... 593,611 326,256
VIF-U.S. Small Cap Fund..... 441,793 469,380 -- --
VIF-Total Return Fund....... 315,000 27,664 1,053,366 452,452
</TABLE>
NOTE 5 -- CAPITAL SHARE 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 December 31, 1998 and March 31, 1998, respectively,
were as follows:
<TABLE>
<CAPTION>
VIF-HIGH YIELD
----------------------------------------------
PERIOD ENDED YEAR ENDED
DECEMBER 31, 1998 MARCH 31, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued............... 1,687,147 $18,295,737 608,193 $ 6,518,774
Shares reinvested........... 282,185 2,989,391 189,195 2,040,697
Shares redeemed............. (585,179) (6,275,630) (338,000) (3,540,505)
--------- ----------- --------- -----------
Net increase................ 1,384,153 $15,009,498 459,388 $ 5,018,966
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
VIF-EMERGING MARKETS
----------------------------------------------
PERIOD ENDED YEAR ENDED
DECEMBER 31, 1998 MARCH 31, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued............... 380,449 $ 3,688,615 97,067 $ 1,004,183
Shares reinvested........... 80,312 673,517 31,980 338,633
Shares redeemed............. (275,382) (2,351,293) (3,135) (32,780)
--------- ----------- --------- -----------
Net increase................ 185,379 $ 2,010,839 125,912 $ 1,310,036
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
DJG VALUE EQUITY
----------------------------------------------
PERIOD ENDED YEAR ENDED
DECEMBER 31, 1998 MARCH 31, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued............... 38,461 $ 390,383 136,577 $ 1,472,103
Shares reinvested........... 9,350 123,977 -- --
Shares redeemed............. (1,204) (15,213) (1,466) (18,488)
--------- ----------- --------- -----------
Net increase................ 46,607 $ 499,147 135,111 $ 1,453,615
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
VIF-U.S. SMALL CAP
----------------------------------------------
PERIOD ENDED YEAR ENDED
DECEMBER 31, 1998 MARCH 31, 1998
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares issued............... -- $ -- 99,803 $ 1,054,094
Shares reinvested........... 9,627 119,956 -- --
Shares redeemed............. (822) (9,616) (1,200) (14,640)
--------- ----------- --------- -----------
Net increase................ 8,805 $ 110,340 98,603 $ 1,039,454
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
VIF-TOTAL RETURN
---------------------
PERIOD ENDED
DECEMBER 31, 1998
---------------------
SHARES AMOUNT
--------- ----------
<S> <C> <C>
Shares issued.......................................... 103,416 $1,034,053
Shares redeemed........................................ (5,034) (50,510)
--------- ----------
Net increase........................................... 98,382 $ 983,543
--------- ----------
--------- ----------
</TABLE>
NOTE 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. 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.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
The OFFITBANK Variable Insurance 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 OFFITBANK VIF-High Yield Fund,
OFFITBANK VIF-Emerging Markets Fund, DJG Value Equity Fund, OFFITBANK VIF-U.S.
Small Cap Fund and OFFITBANK VIF-Total Return Fund, (collectively, the 'Funds,'
each constituting a portfolio of The OFFITBANK Variable Insurance Fund, Inc.) at
December 31, 1998, 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
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
'financial statements') are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodians and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
February 22, 1999
<PAGE>
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
- -----------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Morris W. Offit
CHAIRMAN OF THE BOARD, PRESIDENT AND
DIRECTOR
Edward J. Landau
DIRECTOR
The Very Reverend
James Parks Morton
DIRECTOR
Dr. Wallace Mathai-Davis
SECRETARY AND TREASURER
David C. Lebisky
ASSISTANT SECRETARY
Gary M. Gardner
ASSISTANT SECRETARY
Vincent M. Ralla
ASSISTANT TREASURER
David D. Marky
ASSISTANT TREASURER
Stephen M. Wynne
ASSISTANT TREASURER
INVESTMENT ADVISER -- DJG VALUE EQUITY FUND
David J. Greene & Company
599 Lexington Avenue
New York, New York 10022
INVESTMENT ADVISOR -- ALL OTHER VIF FUNDS
OFFITBANK
520 Madison Avenue
New York, New York 10022-4213
INVESTMENT SUB-ADVISER -- U.S. SMALL CAP FUND
Rockefeller & Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
DISTRIBUTOR
OFFIT Funds Distributor, Inc.
Four Falls Corporate Center, 6th Floor
West Conshochocken, Pennsylvania 19428-2961
ADMINISTRATOR
PFPC Inc.
103 Bellevue parkway
Wilmington, DE 19809
TRANSFER AND DIVIDEND DISBURSING AGENT
PFPC, Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
CUSTODIAN -- VIF-EMERGING MARKETS FUND
The Chase Manhattan Bank
3 Metro Tech Center, 6th Floor
Brooklyn, New York 11245
CUSTODIAN -- ALL OTHER VIF FUNDS
The Bank of New York
90 Washington Street, 11th Floor
New York, New York 10286
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 OFFITBANK Variable Insurance Fund, Inc.
400 Bellevue Parkway, Suite 108 Wilmington, DE 19809
(800) 618-9510