<PAGE>
[LOGO OF MarketWatch]
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1996
----------------------------------------------
CENTRAL FIDELITY NATIONAL BANK, INVESTMENT ADVISER
BISYS FUND SERVICES
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
<TABLE>
<S> <C>
Letter to Shareholders........................ 3
Performance Report............................ 6
Statements of Assets and Liabilities.......... 12
Statements of Operations...................... 13
Statements of Changes in Net Assets........... 14
Schedules of Portfolio Investments............ 16
Notes to Financial Statements................. 23
Financial Highlights.......................... 28
</TABLE>
2
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
DEAR SHAREHOLDERS:
The six months ended May 31, 1996, were challenging ones for both stock and
bond investors. Barely pausing to acknowledge its 100th-year anniversary in
late May, the Dow Jones Industrial Average marched steadily upward. During the
period, it moved more than 500 points higher and, ultimately, fell just 11
points short of breaking through the 5700 level. Throughout the period,
however, the market's attention rotated rapidly from sector to sector and from
stock to stock. Nevertheless, stocks posted gains across the board.
The fixed-income markets, on the other hand, were preoccupied by reports that
the economy had not slowed as much as had been anticipated. Concern about
inflationary pressures increased. Interest rates spiked higher, bond prices
headed lower, and the markets grew more volatile. Investor enthusiasm, which
had rallied along with bond prices in 1995, was effectively dampened. As a
result, despite starting the period on a relatively high note, the six months
ended May 31, 1996, were disappointing ones for many bond investors.
SLOW AND STEADY GROWTH AHEAD
Even though employment reports seem to indicate that economic activity is
picking up rapidly, we expect to see growth continue at a modest pace. Interest
rates are now reaching levels where they should begin to impact the economy and
prevent any acceleration of growth. At the same time, however, consumer
confidence and consumer spending levels are relatively high. Consequently, in
the second half of 1996, while we expect to see the economy slow, we do not
expect to see it stop moving forward or contract any time in the near future.
We anticipate that, for the year overall, the economy will grow at a rate of
approximately two to three percent.
STOCKS: CAUTION VERSUS COMPLACENCY
Nevertheless, rising inflationary pressures and higher interest rates support a
more cautious approach to the stock market. For all of the recent fireworks,
stocks, on average, are selling at about 16 times estimated 1996 earnings,
which, by historical standards, is still a reasonable ratio. Moreover,
investors continue to pour money into
SHARES OF THE FUNDS
. ARE NOT FDIC INSURED
. ARE NOT DEPOSITS OR OTHER OBLI-
GATIONS OF, OR GUARANTEED BY,
CENTRAL FIDELITY NATIONAL BANK
. ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED
3
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
the market. But, given the dramatic gains over the past two years, we believe
that stocks have earned a rest and will likely pause at some point.
At the same time, the economy is growing, corporate profits are still rising,
and the dollar is strengthening. Consequently, under current conditions, should
the market decide to take a breather, we would view the decline as a correction
rather than the start of a bear market. Long-term prospects for stocks are
still bright, and we would view any pause in the market's move upward as a
buying opportunity.
BONDS: BETTER DAYS AHEAD
Our short-term outlook for interest rates and for the fixed-income markets has
also changed from positive to neutral due to an increase in inflationary
pressures. While it is far too early to tell whether the recent rise in
interest rates is a temporary blip or something longer lasting, we will monitor
the situation closely and approach the markets cautiously in the months ahead.
Looking past the next six to 12 months, however, we believe the prospects for
the bond market are also solid. However, there is no denying that the past
three years have been trying ones indeed for even the most stalwart of fixed-
income investors. In this context, it is worth noting that, historically, over
a 10-year, 20-year or 30-year span, intermediate-term U.S. Government and
corporate bonds have outperformed cash reserves, money market funds and
Treasury bills./1/ In each of these time periods, the fixed-income markets
experienced one or more years of under- performance. Nevertheless, those
investors with the fortitude to hold on through short-term ups and downs were
rewarded.
Moreover, a portfolio with 50% of its assets invested in stocks, 40% in bonds
and 10% in cash would have earned an average annual return of about 20% over
the 25 years ended in March 1996. (For purposes of these examples, stock
performance is represented by the Standard & Poor's 500 Stock Index, bonds by
five-year Treasury bonds, and cash by 90-day Treasury bills./2/)
During the same period, a portfolio with 90% of its assets invested in stocks
and the remainder in cash would have earned close to 30% annually, but reaping
this additional premium involved assuming a good deal more risk than a more
diversified portfolio would have entailed. Remember, too, that in achieving
these returns, the markets endured several bearish periods and Black Monday in
1987 in addition to their recent breathtaking run-ups in 1995.
Consequently, if you haven't already done so, you might want to consider
investing in more than one MarketWatch Fund. The Equity Fund, combined
4
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
with one or more fixed-income funds, can help you diversify your assets and may
help protect them from the ups and downs in any one market over time.
IN CLOSING
Finally, we would like to thank you for your continued confidence in us, and we
look forward to providing you with investment management that will serve your
needs now and in the future. If you would like a prospectus, have any
questions, or require any assistance, please do not hesitate to call us at
1-800-232-9091.
Sincerely,
/s/ J. David Huber
J. David Huber
Chairman, MarketWatch Funds
/s/ Paul P. Baran
Paul P. Baran
Senior Vice President and Chief Investment Officer
Central Fidelity National Bank
Investment Adviser to the MarketWatch Funds
/1/Ibbotson Associates, Inc., 1996 Although bonds with longer maturities tend to
have higher returns than shorter-term securities, they are more sensitive to
changes in interest rates.
/2/Source: Standard & Poor's Corporation; Ryan Labs, Inc.; Lehman Brothers;
Bureau of Labor Statistics; and Crandall, Pierce & Co. Returns are based on
one-year rolling periods from January 1950 through March 1996.
5
<PAGE>
PERFORMANCE REPORT
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
THE EQUITY FUND
Breaking record after record, the bull market thundered onward and upward
throughout the six months ended May 31, 1996. And, once again, technology
issues were among the market's leaders. Slightly overweighted in this sector,
the Fund benefited handsomely. Intel (2.29% of the portfolio), for example, was
a particularly strong performer. Holdings in other sectors also made
substantial contributions to performance. Both Callaway Golf (2.10%) and Sturm
Ruger (2.24%) posted sizable gains.*
As a result, we are pleased to report that for the six months ended May 31,
1996, the Fund outperformed its industry benchmark. For the period, the Fund
produced a total return of 13.46%+ compared to a gain of 11.78% in the S&P 500
Stock Index** for the same period.
CAUTIOUS OPTIMISM
Our indicators suggest that the environment in the stock market is still
favorable and, at its current heady levels, also increasingly risky. On the
positive side, the economy is still growing, corporate earnings growth is still
strong and inflationary pressures, while increasing slightly, are still in
check. On the other hand, interest rates have risen over the past several
months, which later in the year, could cause growth to falter.
As a result, while we are hardly bearish on the market's prospects, we are
taking a more cautious approach to stocks and moving to a more neutral
positioning in an effort to minimize risk and capitalize on buying
opportunities that any weakness in the market might create.
While the portfolio is currently market weighted in most sectors of the market,
we are still slightly overweighted in technology. In the months ahead, we
expect to see opportunities continue to arise in this sector, and we will
continue to actively seek out those companies that have been overlooked or
undervalued by the market. As always, our focus is on those companies with
proven track records of earnings growth.
As of May 31, 1996, the Fund's top five holdings were State Street Boston
(2.54%), Lockheed Martin (2.45%), Equifax (2.41%), Intel (2.29%) and Merck
(2.25%).
*The composition of the Fund's portfolio is subject to change.
**The S&P 500 Stock Index is an unmanaged index generally representative of the
stock market as a whole.
+The Fund's return with the maximum 4.50% sales charge was 8.33% for the
period. Past performance is not indicative of future results. The value of
shares in the MarketWatch Funds will fluctuate, so that the shares, when
redeemed, may be worth more or less than their original cost.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Load No Load
<S> <C> <C>
01/29/93 $9,551 $10,000
11/30/93 $9,878 $10,342
11/30/94 $9,654 $10,108
11/30/95 $12,897 $13,504
05/31/96 $14,633 $15,321
</TABLE>
Past performance is not indicative of future results. The value of shares in
the MarketWatch Funds will fluctuate, so that the shares, when redeemed, may be
worth more or less than their original cost.
6
<PAGE>
PERFORMANCE REPORT
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
EQUITY FUND
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD SINCE
ENDED INCEPTION
5/31/96 1 YEAR 3 YEAR (1/29/93)
<S> <C> <C> <C>
Load* 22.76% 12.34% 12.07%
No-Load 28.55% 14.06% 13.63%
</TABLE>
*Reflects the maximum 4.50% sales charge.
- --------------------------------------------------------------------------------
THE INTERMEDIATE FIXED INCOME FUND AND THE FLEXIBLE INCOME FUND
The six months ended May 31, 1996, were difficult for investors in every sector
of the fixed-income markets. Reports on the economy's strength sparked a rise
in interest rates in the first quarter of 1996, causing bonds to once again
fall back and disappoint investors. Responding to the change in the
environment, maturities were lengthened slightly in both Funds. However, since
the Funds were already positioned at the longer end of their maturity ranges at
the start of the period, performance suffered slightly despite these moves to
capture higher yields.
For the six months ended May 31, 1996, the Intermediate Fixed Income Fund
posted a total return of -2.09%, and the Flexible Income Fund returned -0.28%,+
compared to -0.22% and 0.77% for their benchmarks, the Lehman Brothers
Intermediate Government/Corporate Index and the Merrill Lynch 1-5 Year
Government/Corporate Bond Index,** respectively.
RESPONSIVENESS IS KEY
Currently, four of our five inflation indicators suggest that the market's
anxiety regarding inflationary pressures is indeed justified. At the same time,
however, we expect to see the effects of increased interest rates kick in and
slow the economy later in the year. Slower growth should deflate any
inflationary bubble, and interest rates should back off slightly. But, over the
past year, not only have such trends become more difficult to predict, but they
also have compressed.
In the past, an inflationary, deflationary or slow-growth trend would last
approximately two to two-and-a-half years. Missing a month or two of the "turn"
seldom hurt performance. However, recent trends in the fixed-income markets are
much shorter lived. As a result, flexibility is now critical to performance. In
response, we are studying our indicators closely to increase our responsiveness
to the market's fast-changing climate.
+The returns for the Intermediate Fixed Income Fund and the Flexible Income
Fund with the maximum 4.50% sales charge were -6.45% and -4.74%, respectively,
for the period. Past performance is not indicative of future results. The value
of shares in the MarketWatch Funds will fluctuate, so that the shares, when
redeemed, may be worth more or less than their original cost.
**The Lehman Brothers Intermediate Government/Corporate Index and the Merrill
Lynch 1-5 Year Government/Corporate Bond Index are unmanaged indices generally
representative of the performance of government and corporate bonds with
maturities of 1 to 10 years and 1 to 5 years, respectively.
7
<PAGE>
PERFORMANCE REPORT
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
In addition, we have shortened the average maturities of both Funds to more
closely approximate the maturities of market averages. Bond funds with shorter
average maturities tend to be less sensitive to changes in interest rates than
longer-term bond funds. As of May 31, 1996, the average maturity of the
Intermediate Fixed Income Fund was 7.48 years, of the Flexible Income Fund,
2.72 years. The average credit quality of the securities in both portfolios was
AAA.
While we expect to see interest rates trade in a relatively narrow range
throughout the balance of the year, we believe that the Funds are now
positioned to capitalize on whatever opportunities do arise.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Load No Load
<S> <C> <C>
01/29/93 $9,551 $10,000
11/30/93 $10,047 $10,519
11/30/94 $9,654 $10,150
11/30/95 $11,094 $11,616
05/31/96 $10,863 $11,373
</TABLE>
Past performance is not indicative of future results. The value of shares in
the MarketWatch Funds will fluctuate, so that the shares, when redeemed, may be
worth more or less than their original cost.
INTERMEDIATE FIXED INCOME FUND
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD SINCE
ENDED INCEPTION
5/31/96 1 YEAR 3 YEAR (1/29/93)
<S> <C> <C> <C>
Load* -2.33% 2.09% 2.51%
No-Load 2.30% 3.69% 3.93%
</TABLE>
*Reflects the maximum 4.50% sales charge.
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Load No Load
<S> <C> <C>
01/29/93 $9,551 $10,000
11/30/93 $9,816 $10,277
11/30/94 $9,804 $10,265
11/30/95 $10,656 $11,156
05/31/96 $10,626 $11,126
</TABLE>
Past performance is not indicative of future results. The value of shares in
the MarketWatch Funds will fluctuate, so that the shares, when redeemed, may be
worth more or less than their original cost.
FLEXIBLE INCOME FUND
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD SINCE
ENDED INCEPTION
5/31/96 1 YEAR 3 YEAR (1/29/93)
<S> <C> <C> <C>
Load* -1.29% 1.64% 1.84%
No-Load 3.39% 3.20% 3.25%
</TABLE>
*Reflects the maximum 4.50% sales charge.
- --------------------------------------------------------------------------------
8
<PAGE>
PERFORMANCE REPORT
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
THE VIRGINIA MUNICIPAL BOND FUND
Like all fixed-income markets, the Virginia municipal market suffered as
interest rates rose during the six months ended May 31, 1996. Lack of Virginia
Bonds in the period made it difficult for us to shift maturities quickly. At
the period's start, the Fund was positioned at the longer end of its maturity
range.
As a result, the Fund slightly underperformed industry averages for the six
months ended May 31, 1996. For the period, the Virginia Municipal Bond Fund
returned -1.91%+, compared to -0.57% for the Lehman Brothers Municipal Bond
Index and -0.16% for the Lehman Brothers Municipal Bond 7-Year Index.* It is
important to note, however, that broad market indices are not representative of
the Virginia market alone. Rather, they reflect the performance of municipal
bonds across the country, including securities with much lower credit quality
than those held by the Fund.
A STRONG BASE AND SOLID PROSPECTS
We are optimistic about the prospects for the Virginia municipal markets and
for the Fund. The state's economic base is very strong, as indicated by the
fact that several large manufacturers, including Motorola, have recently
announced their intentions to locate plants in the Richmond area. In addition,
as the period drew to a close, the supply of municipal securities increased,
and the quality of issuance was very high. As a result, we have every reason to
believe that the Virginia market will perform in line with municipal markets
across the country in the months ahead.
Of course, as we move through the presidential campaign season, we anticipate
that debate about a flat tax will resurface periodically. Interest rates, too,
are expected to remain a focus of attention. Barring a major eruption of
inflation, it is unlikely that the Federal Reserve will attempt any further
fine-tuning of the economy prior to Election Day. As a result, we anticipate no
major changes in the credit or maturity structure of the Fund's portfolio in
the near term. At period's end, the Fund was well diversified, with 25
different issuers in the portfolio. All securities were rated A or better, and
the average maturity was 10.06 years.
+Fund performance with the maximum 4.50% sales charge was -6.30% for the
period. Past performance is not indicative of future results. The value of
shares in the MarketWatch Funds will fluctuate so, that the shares, when
redeemed, may be worth more or less than their original cost.
*The Lehman Brothers Municipal Bond Index and the Lehman Brothers Municipal
Bond 7-Year Index are unmanaged indices generally representative of the
municipal bond market as a whole and municipal bonds with remaining maturities
of 7 years, respectively.
9
<PAGE>
PERFORMANCE REPORT
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Load No Load
<S> <C> <C>
02/01/93 $9,551 $10,000
11/30/93 $10,108 $10,584
11/30/94 $9,585 $10,036
11/30/95 $11,907 $11,420
05/31/96 $10,698 $11,202
</TABLE>
Past performance is not indicative of future results. The value of shares in
the MarketWatch Funds will fluctuate, so that the shares, when redeemed, may
be worth more or less than their original cost.
VIRGINIA MUNICIPAL BOND FUND
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD SINCE
ENDED INCEPTION
5/31/96 1 YEAR 3 YEAR (2/1/93)
<S> <C> <C> <C>
Load* -1.38% 1.50% 2.05%
No-Load 3.29% 3.07% 3.46%
</TABLE>
*Reflects the maximum 4.50% sales charge.
- --------------------------------------------------------------------------------
THE MONEY MARKET FUND
Uncertainty dominated the money markets during the six-month period ended May
31, 1996, as government reports and industry estimates indicated that the
economy was more robust than previously thought. Volatility increased, and
interest rates spurted upward in response. While our indicators suggested no
precipitous climb in rates was in the offing, we nevertheless approached the
markets very cautiously. The Fund's average maturity ranged between 30 and 40
days, and, as a result, the portfolio was well positioned to take advantage of
the rise in interest rates during the period.
LOOKING AHEAD
Despite recent reports of heightened economic activity, our indicators still
give us little reason to believe that the economy is, in fact, speeding up
significantly--or that we will see a dramatic increase or decrease in interest
rates in the near term. Throughout the balance of the year, we expect rates to
trade in a relatively narrow range and, at current levels, result in weakened
growth later in the year. The Fund has been positioned in line with this
outlook, and barring any unforeseen disruptions in our economy, we do not
expect to make any major changes in the portfolio's maturity structure or
allocation in the months ahead.
As of May 31, 1996, the average maturity of the fund was 39 days, and the
Fund's assets were invested primarily in U.S. Treasury securities and
repurchase agreements collateralized by U.S. Treasury securities.
10
<PAGE>
PERFORMANCE REPORT
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
Performance data represent past performance and are not indicative of future
performance. An investment in the MarketWatch Money Market Fund is neither in-
sured nor guaranteed by the U.S. Government or any government agency. Yields
will fluctuate, and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
For more complete information, including charges and expenses, call 1-800-232-
9091 for a prospectus, which you should read carefully before you invest or
send money.
The MarketWatch Funds are distributed by BISYS Fund Services.
SHARES OF THE FUNDS
. ARE NOT FDIC INSURED
. ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, CENTRAL FI-
DELITY NATIONAL BANK
. ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCI-
PAL AMOUNT INVESTED
11
<PAGE>
Statements of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Funds MAY 31, 1996
<TABLE>
<CAPTION>
Intermediate Flexible Virginia
Money Market Equity Fixed Income Income Municipal Bond
Fund Fund Fund Fund Fund
------------ ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $13,146,431,
$104,155,126,
$39,879,540,
$8,981,092,
$63,391,471)........... $ 8,903,826 $143,684,119 $38,251,738 $8,959,801 $63,192,316
Repurchase agreements... 4,242,605 1,498,416
----------- ------------ ----------- ---------- -----------
13,146,431 143,684,119 39,750,154 8,959,801 63,192,316
Interest and dividends
receivable............. 16,203 378,271 469,566 141,315 1,148,994
Receivable for capital
shares sold............ 133,628
Receivable for
investments sold....... 2,338
Receivable from
investment adviser..... 11,336
Prepaid expenses and
other assets........... 6,655 15,725 6,421 7,063 8,830
----------- ------------ ----------- ---------- -----------
Total Assets........... 13,180,625 144,211,743 40,226,141 9,110,517 64,350,140
----------- ------------ ----------- ---------- -----------
LIABILITIES:
Dividends payable....... 52,862
Payable for investments
purchased.............. 961,420
Accrued expenses and
other payables:
Investment advisory
fees.................. 89,233 6,497 20,998
Administration fees.... 538 5,935 1,616 526 2,654
Distribution and
services fees......... 29,982 8,301 2,751 13,513
Accounting and transfer
agent fees............ 4,277 8,234 5,330 3,500 3,610
Legal and audit fees... 3,055 26,614 8,326 4,328 14,261
Other.................. 3,021 18,867 6,220 3,819 8,334
----------- ------------ ----------- ---------- -----------
Total Liabilities...... 63,753 178,865 997,710 14,924 63,370
----------- ------------ ----------- ---------- -----------
NET ASSETS:
Capital................. 13,117,371 102,221,262 42,441,836 9,872,357 66,662,748
Undistributed net
investment income...... 71,357 94,937 27,935 117,031
Net unrealized
appreciation
(depreciation) from
investments............ 39,528,993 (129,386) (21,291) (199,155)
Accumulated
undistributed net
realized gains (losses)
from investment
transactions........... (499) 2,211,266 (3,178,956) (783,408) (2,293,854)
----------- ------------ ----------- ---------- -----------
Net Assets............. $13,116,872 $144,032,878 $39,228,431 $9,095,593 $64,286,770
=========== ============ =========== ========== ===========
Outstanding units of
beneficial interest
(shares)............... 13,117,371 10,015,825 4,088,306 932,306 6,535,063
=========== ============ =========== ========== ===========
Net asset value--
redemption price per
share.................. $ 1.00 $ 14.38 $ 9.60 $ 9.76 $ 9.84
=========== ============ =========== ========== ===========
Maximum Sales Charge.... 4.50% 4.50% 4.50% 4.50%
------------ ----------- ---------- -----------
Maximum Offering Price
(100%/(100%--Maximum
Sales Charge) of net
asset value adjusted to
nearest cent) per
share.................. $ 1.00(a) $ 15.06 $ 10.05 $ 10.22 $ 10.30
=========== ============ =========== ========== ===========
</TABLE>
- ------
(a) Offering price and redemption price are the same for the Money Market Fund.
See notes to financial statements.
12
<PAGE>
Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Funds For The Six Months Ended May 31, 1996
<TABLE>
<CAPTION>
Intermediate Flexible Virginia
Money Market Equity Fixed Income Income Municipal Bond
Fund Fund Fund Fund Fund
------------ ----------- ------------ -------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income......... $ 361,638 $1,217,217 $530,283 $ 1,641,251
Dividend income......... 8,977 $ 1,654,284 36,954 20,977 25,551
--------- ----------- ---------- -------- -----------
Total Income.......... 370,615 1,654,284 1,254,171 551,260 1,666,802
--------- ----------- ---------- -------- -----------
EXPENSES:
Investment advisory
fees................... 35,759 660,602 139,381 67,546 226,181
Administration fees..... 14,304 132,120 37,671 18,256 61,130
Distribution and
services fees.......... 17,880 164,983 47,065 22,900 85,008
Custodian and accounting
fees................... 15,195 34,071 20,571 18,686 29,254
Legal and audit fees.... 4,404 38,628 11,790 6,372 17,892
Registration and filing
fees................... 2,085 11,046 4,683 3,369 4,050
Trustees' fees and
expenses............... 732 5,967 1,722 1,026 2,757
Transfer agent fees..... 9,057 38,751 13,056 7,263 14,265
Printing costs.......... 2,610 14,163 4,695 2,451 6,804
Other................... 526 4,941 1,525 733 2,515
Expenses voluntarily
reduced................ (57,215) (204,211) (58,168) (32,588) (131,089)
--------- ----------- ---------- -------- -----------
Total expenses before
reimbursement by
investment adviser
and administrator.... 45,337 901,061 223,991 116,014 318,767
Reimbursement of
expenses by
investment adviser
and administrator.... (22,450) (2,567) (18,507) (11,503) (1,569)
--------- ----------- ---------- -------- -----------
Total Expenses...... 22,887 898,494 205,484 104,511 317,198
--------- ----------- ---------- -------- -----------
Net Investment Income... 347,728 755,790 1,048,687 446,749 1,349,604
--------- ----------- ---------- -------- -----------
REALIZED/UNREALIZED
GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains
(losses) from
investment
transactions........... 2,211,254 (177,084) (153,130) (246,202)
Net change in unrealized
appreciation
(depreciation) from
investments............ 13,767,881 (1,726,953) (309,906) (2,464,046)
--------- ----------- ---------- -------- -----------
Net realized/unrealized
gains (losses) from
investments............ 15,979,135 (1,904,037) (463,036) (2,710,248)
--------- ----------- ---------- -------- -----------
Change in net assets
resulting from
operations............. $ 347,728 $16,734,925 $ (855,350) $(16,287) $(1,360,644)
========= =========== ========== ======== ===========
</TABLE>
See notes to financial statements.
13
<PAGE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Intermediate Fixed
Money Market Fund Equity Fund Income Fund
-------------------------- -------------------------- --------------------------
For the Six Year Ended For the Six Year Ended For the Six Year Ended
Months Ended November 30, Months Ended November 30, Months Ended November 30,
May 31, 1996 1995 May 31, 1996 1995 May 31, 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 347,728 $ 634,790 $ 755,790 $ 1,756,394 $ 1,048,687 $ 2,230,727
Net realized gains
(losses) from
investment
transactions.......... 2,211,254 2,036,767 (177,084) (121,909)
Net change in
unrealized
appreciation
(depreciation) from
investments........... 13,767,881 28,311,607 (1,726,953) 3,308,579
----------- ----------- ------------ ------------ ----------- ------------
Change in net assets
resulting from
operations............. 347,728 634,790 16,734,925 32,104,768 (855,350) 5,417,397
----------- ----------- ------------ ------------ ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................ (347,728) (634,790) (718,392) (1,756,394) (1,009,302) (2,230,727)
In excess of net
investment income..... (62,708) (16,139)
From net realized
gains................. (1,296,124)
----------- ----------- ------------ ------------ ----------- ------------
Change in net assets
from shareholder
distributions.......... (347,728) (634,790) (2,014,516) (1,819,102) (1,009,302) (2,246,866)
----------- ----------- ------------ ------------ ----------- ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 3,572,632 5,124,061 17,199,626 29,059,609 11,782,335 12,030,836
Dividends reinvested... 26,501 55,479 1,399,716 1,421,733 262,261 1,117,175
Cost of shares
redeemed.............. (3,927,103) (3,099,165) (8,771,249) (44,422,829) (6,747,443) (29,252,870)
----------- ----------- ------------ ------------ ----------- ------------
Change in net assets
from capital
transactions........... (327,970) 2,080,375 9,828,093 (13,941,487) 5,297,153 (16,104,859)
----------- ----------- ------------ ------------ ----------- ------------
Change in net assets.... (327,970) 2,080,375 24,548,502 16,344,179 3,432,501 (12,934,328)
NET ASSETS:
Beginning of period.... 13,444,842 11,364,467 119,484,376 103,140,197 35,795,930 48,730,258
----------- ----------- ------------ ------------ ----------- ------------
End of period.......... $13,116,872 $13,444,842 $144,032,878 $119,484,376 $39,228,431 $ 35,795,930
=========== =========== ============ ============ =========== ============
SHARE TRANSACTIONS:
Issued................. 3,572,632 5,124,061 1,276,007 2,522,626 1,180,582 1,232,724
Reinvested............. 26,501 55,479 106,072 126,366 26,502 115,696
Redeemed............... (3,927,103) (3,099,165) (645,572) (3,896,003) (674,390) (3,024,490)
----------- ----------- ------------ ------------ ----------- ------------
Change in shares........ (327,970) 2,080,375 736,507 (1,247,011) 532,694 (1,676,070)
=========== =========== ============ ============ =========== ============
</TABLE>
See notes to financial statements.
14
<PAGE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Virginia Municipal
Flexible Income Fund Bond Fund
-------------------------- --------------------------
For the Six Year Ended For the Six Year Ended
Months Ended November 30, Months Ended November 30,
May 31, 1996 1995 May 31, 1996 1995
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income... $ 446,749 $ 1,006,511 $ 1,349,604 $ 1,922,766
Net realized gains
(losses) from
investment
transactions........... (153,130) (41,008) (246,202) 210,006
Net change in unrealized
appreciation
(depreciation) from
investments............ (309,906) 841,099 (2,464,046) 3,684,046
------------ ------------ ----------- -----------
Change in net assets
resulting from
operations.............. (16,287) 1,806,602 (1,360,644) 5,816,818
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................. (445,994) (1,005,771) (1,299,219) (1,902,288)
From net realized gains. (2,893)
------------ ------------ ----------- -----------
Change in net assets from
shareholder
distributions........... (445,994) (1,005,771) (1,302,112) (1,902,288)
------------ ------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 3,638,604 9,031,791 17,775,874 17,489,702
Dividends reinvested.... 332,144 892,055 160,538 296,036
Cost of shares redeemed. (15,276,789) (13,182,750) (5,028,326) (7,636,373)
------------ ------------ ----------- -----------
Change in net assets from
capital transactions.... (11,306,041) (3,258,904) 12,908,086 10,149,365
------------ ------------ ----------- -----------
Change in net assets..... (11,768,322) (2,458,073) 10,245,330 14,063,895
NET ASSETS:
Beginning of period..... 20,863,915 23,321,988 54,041,440 39,977,545
------------ ------------ ----------- -----------
End of period........... $ 9,095,593 $ 20,863,915 $64,286,770 $54,041,440
============ ============ =========== ===========
SHARE TRANSACTIONS:
Issued.................. 362,401 916,815 1,747,707 1,765,911
Reinvested.............. 33,412 90,656 15,939 30,088
Redeemed................ (1,544,114) (1,339,942) (498,513) (779,584)
------------ ------------ ----------- -----------
Change in shares......... (1,148,301) (332,471) 1,265,133 1,016,415
============ ============ =========== ===========
</TABLE>
See notes to financial statements.
15
<PAGE>
Schedule of Portfolio Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Money Market Fund May 31, 1996
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. TREASURY BILLS (66.3%):
$1,000,000 6/6/96................................................ $ 999,319
1,500,000 6/27/96............................................... 1,494,670
1,250,000 7/5/96................................................ 1,244,115
1,000,000 7/11/96............................................... 994,478
1,000,000 7/25/96............................................... 992,575
1,000,000 8/8/96................................................ 990,518
750,000 8/15/96............................................... 742,273
1,250,000 10/17/96.............................................. 1,225,754
-----------
Total U.S. Treasury Bills 8,683,702
-----------
INVESTMENT COMPANIES (1.7%):
220,123 Dreyfus Treasury Prime Cash Management Fund........... 220,124
-----------
Total Investment Companies 220,124
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- ---------------------------------------------------- -----------
<C> <S> <C>
REPURCHASE AGREEMENTS (32.2%):
$2,250,000 J.P. Morgan, 5.27%*, 6/1/96 (Collateralized by
$2,215,000 U.S. Treasury Notes, 7.75%, 11/30/99,
market value--$2,304,069).......................... $ 2,250,000
1,992,605 Morgan Stanley, 5.22%*, 6/1/96 (Collateralized by
$2,269,000 U.S. Treausry Bonds, 6.25%, 8/15/23
market value--$2,085,664).......................... 1,992,605
-----------
Total Repurchase Agreements 4,242,605
-----------
Total (Cost--$13,146,431)(a) $13,146,431
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $13,116,872.
* Variable rate security. Interest rate is as of May 31, 1996.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
16
<PAGE>
Schedule of Portfolio Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Equity Fund May 31, 1996
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (98.7%):
Aircraft Engines & Engine Parts (1.5%):
40,000 Allied Signal, Inc. .................................. $ 2,190,000
------------
Airlines (0.7%):
40,000 Atlantic Southeast Airlines, Inc. .................... 1,060,000
------------
Automotive (1.3%):
35,000 General Motors........................................ 1,929,375
------------
Banking (2.5%):
70,000 State Street Boston Corp. ............................ 3,648,750
------------
Beverages (4.0%):
40,000 Anheuser-Busch Cos., Inc. ............................ 2,850,000
90,000 PepsiCo, Inc. ........................................ 2,992,500
------------
5,842,500
------------
Chemicals (4.3%):
25,000 Dow Chemical Co. ..................................... 2,090,625
25,000 E. I. du Pont de Nemours.............................. 1,993,750
40,000 PPG Industries........................................ 2,070,000
------------
6,154,375
------------
Consumer Goods & Services (9.5%):
83,000 Circuit City.......................................... 2,707,875
30,000 Colgate Palmolive Co. ................................ 2,362,500
51,000 Gillette Co. ......................................... 3,015,375
45,000 Goodyear Tire Co. .................................... 2,272,500
65,000 Sturm, Ruger & Co., Inc. ............................. 3,225,625
------------
13,583,875
------------
Defense (4.7%):
42,000 Lockheed Martin Corp. ................................ 3,522,750
58,400 Raytheon Co. ......................................... 3,109,800
------------
6,632,550
------------
Electrical & Electronic (4.1%):
55,000 Compaq Computer Corp. (b)............................. 2,674,375
43,500 Intel Corp. .......................................... 3,284,250
------------
5,958,625
------------
Electrical Equipment (3.9%):
30,000 Emerson Electric Co. ................................. 2,568,750
37,550 General Electric Co. ................................. 3,107,263
------------
5,676,013
------------
Entertainment (3.1%):
100,000 Callaway Golf Co. .................................... 3,012,500
50,000 Carnival Corp. ....................................... 1,487,500
------------
4,500,000
------------
</TABLE>
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ -------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Financial Services (9.6%):
140,000 Equifax, Inc. .......................................... $ 3,465,000
33,000 Federal Home Loan Mortgage Corp. ....................... 2,726,625
50,000 Franklin Resources, Inc. ............................... 2,931,250
68,000 Green Tree Financial Corp. ............................. 2,227,000
60,000 Travelers, Inc. ........................................ 2,490,000
------------
13,839,875
------------
Food Products (2.6%):
40,000 Campbell Soup Co. ...................................... 2,580,000
20,000 General Mills .......................................... 1,147,500
------------
3,727,500
------------
Health Care (0.9%):
25,000 U.S. Healthcare......................................... 1,356,250
------------
Household Products & Wares (1.5%):
25,000 Procter & Gamble Co. ................................... 2,196,875
------------
Insurance (1.6%):
50,000 Progressive Corp. ...................................... 2,312,500
------------
Machinery & Equipment (1.7%):
56,000 Briggs & Stratton....................................... 2,408,000
------------
Manufacturing-Consumer Goods (1.3%):
66,406 Mattel, Inc. ........................................... 1,809,564
------------
Oil & Gas Exploration (8.6%):
30,000 Amoco Corp. ............................................ 2,175,000
46,000 Chevron Corp. .......................................... 2,748,500
27,500 Exxon Corp. ............................................ 2,330,625
25,000 Mobil Corp. ............................................ 2,821,875
28,000 Texaco, Inc. ........................................... 2,345,000
------------
12,421,000
------------
Paper Products (3.3%):
30,000 Georgia Pacific Corp. .................................. 2,167,500
65,000 International Paper Co. ................................ 2,591,875
------------
4,759,375
------------
Pharmaceuticals (7.8%):
60,000 Abbott Laboratories..................................... 2,587,500
25,000 Johnson & Johnson....................................... 2,434,375
50,000 Merck & Co. ............................................ 3,231,250
50,000 Schering-Plough......................................... 2,931,250
------------
11,184,375
------------
Real Estate (1.2%):
115,000 United Dominion Realty Trust............................ 1,681,875
------------
</TABLE>
17
<PAGE>
Schedule of Portfolio Investments, Continued
- --------------------------------------------------------------------------------
MarketWatch Equity Fund May 31, 1996
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Securities Brokers (1.9%):
55,000 Morgan Stanley Group.................................. 2,722,500
------------
Technology (1.8%):
16,000 Xerox................................................. 2,518,000
------------
Tobacco (3.5%):
27,850 Philip Morris, Inc. .................................. 2,767,593
70,000 UST, Inc. ............................................ 2,310,000
------------
5,077,593
------------
Transportation & Shipping (2.2%):
105,000 Illinois Central Corp. ............................... 3,136,875
------------
Utilities--Electric (2.1%):
25,000 Duke Power............................................ 1,206,250
55,000 General Public Utilities.............................. 1,842,500
------------
3,048,750
------------
Utilities--Telecommunications (7.5%):
36,000 A T & T Corp. ........................................ 2,245,500
80,000 ALLTEL Corp. ......................................... 2,520,000
20,000 Ameritech Corp. ...................................... 1,130,000
35,000 Bell Atlantic Corp. .................................. 2,183,125
30,000 Bell South ........................................... 1,218,750
45,000 U.S. West, Inc........................................ 1,468,125
------------
10,765,500
------------
Total Common Stocks 142,142,470
------------
</TABLE>
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
INVESTMENT COMPANIES (1.1%):
1,541,649 Dreyfus Government Cash Management Fund............... $ 1,541,649
------------
Total Investment Companies 1,541,649
------------
Total (Cost--$104,155,126)(a) $143,684,119
============
</TABLE>
- ------
Percentages indicated are based on net assets of $144,032,878.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.. $39,811,040
Unrealized depreciation.. (282,047)
-----------
Net unrealized
appreciation............ $39,528,993
===========
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
18
<PAGE>
Schedule of Portfolio Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Intermediate Fixed Income Fund May 31, 1996
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ -----------
<C> <S> <C>
ASSET BACKED SECURITIES (2.6%):
$1,000,000 Chemical Master Trust 1996-3, 7.09%, 2/15/09.......... $ 996,250
-----------
Total Asset Backed Securities 996,250
-----------
CORPORATE BONDS (10.9%):
Financial Services (2.5%):
1,000,000 Ford Motor Credit Co., 6.25%, 11/8/00................. 968,750
-----------
Entertainment (6.1%):
2,500,000 Walt Disney Co., 6.75%, 3/30/06....................... 2,403,125
-----------
Industrial Goods & Services (2.3%):
1,000,000 Wal-Mart Stores, 5.88%, 10/15/05...................... 905,000
-----------
Total Corporate Bonds 4,276,875
-----------
U.S. GOVERNMENT AGENCIES (39.0%):
Federal Farm Credit Bank:
1,000,000 8.65%, 10/1/99........................................ 1,058,370
Federal Home Loan Mortgage Corp.:
1,000,000 8.15%, 5/11/98........................................ 1,031,170
1,000,000 8.70%, 6/10/99........................................ 1,056,610
2,000,000 8.05%, 7/14/04, Callable 7/14/97 @ 100%............... 2,007,900
1,000,000 8.25%, 10/12/04....................................... 1,023,520
1,000,000 8.40%, 10/25/04....................................... 1,022,210
1,641,997 6.50%, 12/1/08, Pool #E20072.......................... 1,585,611
508,895 8.00%, 4/1/10......................................... 517,862
1,464,560 8.00%, 5/1/10, Series E00373.......................... 1,490,409
1,661,384 7.00%, 12/1/23, Pool #C8002........................... 1,590,726
2,861,085 8.50%, 9/1/24......................................... 2,924,143
-----------
Total U.S. Government Agencies 15,308,531
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------- -----------
<C> <S> <C>
U.S. TREASURY BONDS (8.2%):
$ 500,000 7.13%, 2/15/23....................................... $ 497,530
700,000 6.25%, 8/15/23....................................... 624,379
2,000,000 7.50%, 11/15/24...................................... 2,088,280
-----------
Total U.S. Treasury Bonds 3,210,189
-----------
U.S. TREASURY NOTES (29.2%):
500,000 7.75%, 11/30/99...................................... 518,130
2,000,000 7.75%, 1/31/00....................................... 2,074,100
1,000,000 6.13%, 7/31/00....................................... 981,500
1,000,000 5.63%, 2/28/01....................................... 958,570
2,000,000 6.25%, 2/15/03....................................... 1,945,300
1,000,000 7.25%, 8/15/04....................................... 1,024,620
1,000,000 7.88%, 11/15/04...................................... 1,063,600
2,500,000 6.50%, 8/15/05....................................... 2,435,750
500,000 5.88%, 11/15/05...................................... 465,815
-----------
Total U.S. Treasury Notes 11,467,385
-----------
INVESTMENT COMPANIES (7.6%):
1,531,998 Dreyfus Government Cash Management Fund.............. 1,531,998
1,460,510 Dreyfus Treasury Cash Management Fund................ 1,460,510
-----------
Total Investment Companies 2,992,508
-----------
REPURCHASE AGREEMENTS (3.8%):
1,498,416 SEI--J.P. Morgan, 5.27%*, 6/1/96 (Collateralized by
$1,480,000 U.S. Treasury Notes, 7.50%, 10/31/99,
market value--$1,536,361)........................... 1,498,416
-----------
Total Repurchase Agreements 1,498,416
-----------
Total (Cost--$39,879,540)(a) $39,750,154
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $39,228,431.
* Variable rate security. Interest rate is as of May 31, 1996.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation... $ 516,736
Unrealized depreciation... (646,122)
---------
Net unrealized
depreciation............. $(129,386)
=========
</TABLE>
See notes to financial statements.
19
<PAGE>
Schedule of Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Flexible Income Fund May 31, 1996
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------- ----------
<C> <S> <C>
CORPORATE BONDS (25.0%):
Financial Services (5.4%):
$ 500,000 American Express Credit Corp., 6.50%, 8/1/00........... $ 491,250
----------
Industrial Goods & Services (19.6%):
500,000 Coca-Cola Enterprises, 6.50%, 11/15/97................. 502,500
250,000 Heinz (H.J.) Co., 5.50%, 9/15/97....................... 248,124
1,000,000 PepsiCo, Inc., 7.63%, 12/18/98......................... 1,022,500
----------
1,773,124
----------
Total Corporate Bonds 2,264,374
----------
U.S. GOVERNMENT AGENCIES (12.2%):
Federal Home Loan Mortgage Corp.:
934,266 8.00%, 6/1/97 Pool #M90110............................. 938,545
165,378 5.00%, 10/15/00 Series 1587B........................... 164,915
----------
Total U.S. Government Agencies 1,103,460
----------
U.S. TREASURY NOTES (58.4%):
500,000 6.88%, 2/28/97......................................... 504,180
1,000,000 7.25%, 2/15/98......................................... 1,016,230
500,000 7.75%, 1/31/00......................................... 518,525
1,000,000 7.13%, 2/29/00......................................... 1,016,990
1,000,000 6.25%, 5/31/00......................................... 987,180
1,000,000 6.13%, 7/31/00......................................... 981,500
250,000 7.88%, 11/15/04........................................ 265,900
----------
Total U.S. Treasury Notes 5,290,505
----------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- ----------
<C> <S> <C>
INVESTMENT COMPANIES (3.3%):
285,097 Dreyfus Government Cash Management Fund................. $ 285,097
16,365 Dreyfus Treasury Cash Management Fund................... 16,365
----------
Total Investment Companies 301,462
----------
Total (Cost--$8,981,092)(a) $8,959,801
----------
</TABLE>
- ------
Percentages indicated are based on net assets of $9,059,593.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.... $ 61,055
Unrealized depreciation.... (82,346)
--------
Net unrealized
depreciation.............. $(21,291)
========
</TABLE>
See notes to financial statements.
20
<PAGE>
Schedule of Portfolio Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund May 31, 1996
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS (84.7%):
District of Columbia (4.2%):
$3,000,000 Metropolitan Washington D.C., General Airport
Revenue, 5.25%, 10/1/22............................. $ 2,703,810
-----------
Virginia (80.5%):
500,000 Albemarle County, Service Authority, Water & Sewer
Revenue, 5.50%, 8/1/06.............................. 503,884
850,000 Arlington County, 6.00%, 6/1/04...................... 909,525
1,000,000 Arlington County, 5.40%, 6/1/14...................... 965,200
1,000,000 Arlington County, 5.30%, 9/1/15...................... 916,350
885,000 Arlington County, Industrial Development Authority,
Arlington Hospital, 6.30%, 9/1/00................... 923,321
2,000,000 Augusta County, Industrial Development Authority,
Hospital Revenue, 6.63%, 9/1/12..................... 2,136,940
1,000,000 Richmond International Airport, 5.63%, 7/1/15........ 959,310
1,000,000 Chesapeake Bay Bridge & Tunnel, 6.38%, 7/1/22........ 1,085,960
1,000,000 Chesapeake Bay Bridge & Tunnel, 5.25%, 7/1/19........ 906,880
1,880,000 Chesapeake Public Improvement, General Obligation,
5.00%, 5/1/02....................................... 1,899,082
885,000 Chesterfield County, 6.25%, 7/15/05.................. 946,888
1,000,000 Chesterfield County, 5.25%, 3/1/11................... 966,060
600,000 Danville, 6.40%, 5/1/09.............................. 631,578
500,000 Danville, 6.40%, 5/1/10.............................. 524,255
1,000,000 Fairfax County, Public Improvement, Series A, 5.50%,
6/1/15.............................................. 967,960
500,000 Fairfax County Industrial Development Revenue, 7.88%,
10/1/17............................................. 521,755
750,000 Fairfax County Industrial Development, Revenue
Authority, 5.25%, 8/15/19........................... 679,088
2,000,000 Fairfax County Water Authority, 6.00%, 4/1/22........ 1,981,660
1,000,000 Fairfax County Water Authority, 3.70%, 4/1/97........ 1,000,360
1,000,000 Franklin, 6.40%, 1/15/12............................. 1,040,200
1,000,000 Hampton, 5.90%, 1/15/07.............................. 1,044,880
1,000,000 Hanover County, 6.38%, 8/15/18....................... 1,075,090
1,000,000 Hanover County, Industrial Authority, Bon Secours
Health System Projects, 5.50%, 8/15/25.............. 931,390
1,000,000 Henrico County, 5.30%, 1/15/10 OID @ 98.354.......... 977,940
1,000,000 James City County, 4.60%, 12/15/03................... 977,560
1,000,000 James City County, 5.20%, 12/15/10................... 957,290
725,000 Lynchburg, 6.88%, 4/1/01............................. 790,866
1,000,000 Newport News, 5.70%, 7/1/16.......................... 985,840
1,000,000 Newport News, 5.20%, 1/15/18......................... 915,370
1,000 Norfolk, 4.50%, 2/1/97, General Obligation........... 100,572
1,000,000 Norfolk, Depaul Hospital, 6.50%, 12/1/07............. 1,062,990
1,000,000 Norfolk, Industrial Development Authority, Sentara
Hospitals, Series A, 6.50%, 11/1/13................. 1,046,130
1,000,000 Norfolk, Water Revenue, 5.75%, 11/1/12............... 998,890
1,000,000 Norfolk, Water Revenue, 5.38%, 11/1/23............... 916,890
500,000 Norfolk, Water Revenue, 5.90%, 11/1/25............... 490,395
200,000 Prince William County Lease Partnership,
Certificates, 7.40%, 8/1/99......................... 205,184
200,000 Prince William County Lease Partnership, 7.45%,
8/1/00.............................................. 205,200
200,000 Prince William County Lease Partnership, 7.50%,
8/1/01.............................................. 205,218
150,000 Richmond, 6.00%, 7/15/98, General Obligation......... 151,917
1,000,000 Richmond, Public Improvement, Series A, 6.25%,
1/15/21............................................. 1,077,200
500,000 Roanoke County, Water System Revenue Bonds, 5.00%,
7/1/21.............................................. 435,555
1,250,000 Roanoke, 6.30%, 8/1/07............................... 1,320,050
2,000,000 Roanoke, Individual Developmental Authority, 5.25%,
7/1/25.............................................. 1,787,160
300,000 Spotsylvania County, 5.50%, 7/15/05.................. 306,672
</TABLE>
21
<PAGE>
Schedule of Portfolio Investments, Continued
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund November 30, 1995
<TABLE>
<CAPTION>
Principal Security Market
Amount Description Value
--------- --------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
MUNICIPAL BONDS, CONTINUED:
Virginia, continued:
$1,500,000 University of Virginia Revenues, 5.20%, 6/1/15............................................... $ 1,384,215
100,000 Upper Occoquan Sewer Authority Regional Sewer Revenue, 4.60%, 7/1/97......................... 100,876
1,000,000 Virginia Beach, 5.70%, 7/15/06............................................................... 1,031,380
1,000,000 Virginia College Building Authority, Washington & Lee University Project, 5.80%, 1/1/24...... 962,710
115,000 Virginia Education Loan Authority Guarantee, Student Loan Program, Refunding Series B, 4.50%,
9/1/97...................................................................................... 115,913
1,000,000 Virginia State University & College, Improvements, 5.25%, 6/1/16............................. 946,710
1,000,000 Virginia Housing Development Authority, 6.35%, 1/1/15........................................ 1,022,150
1,000,000 Virginia Housing Development Authority, 6.40%, 7/1/17........................................ 1,003,860
100,000 Virginia Public School Authority, 6.30%, 8/1/96.............................................. 100,433
1,100,000 Virginia Public School Authority, 6.85%, 1/1/05.............................................. 1,141,580
300,000 Virginia Public School Authority, 5.75%, 1/1/08.............................................. 306,090
100,000 Virginia State Housing Development Authority, Common Wealth Mortgage, 4.50%, 7/1/96.......... 100,064
200,000 Virginia State Public Schools Authority, 4.00%, 1/1/97....................................... 200,390
100,000 Virginia State Public Schools Authority, 4.80%, 8/1/97....................................... 101,201
1,000,000 Virginia State Public Schools Authority, 6.25%, 1/1/04....................................... 1,072,840
1,000,000 Virginia State Public Schools Authority, Series A, Education Revenue Bonds, 8.00%, 1/1/99.... 1,085,170
1,000,000 Virginia State Resource Authority, 5.25%, 10/1/13............................................ 929,960
750,000 Washington County, Industrial Authority Johnston, Memorial Hospital Revenue Bond,
6.00%, 7/1/14............................................................................... 731,393
-----------
51,771,440
-----------
Total Municipal Bonds 54,475,250
-----------
U.S. TREASURY BILLS (3.9%):
2,500,000 6/20/96...................................................................................... 2,492,986
-----------
Total U.S. Treasury Bills 2,492,986
-----------
U.S. TREASURY BONDS (6.7%):
3,500,000 6.88%, 8/15/25............................................................................... 3,417,610
1,000,000 6.00%, 2/15/26............................................................................... 876,010
-----------
Total U.S. Treasury Bonds 4,293,620
-----------
INVESTMENT COMPANIES (3.0%):
1,930,460 Dreyfus Tax-Exempt Fund...................................................................... 1,930,460
-----------
Total Investment Companies 1,930,460
-----------
Total (Cost--$63,391,471)(a) $63,192,316
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $64,286,770.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation... $ 651,365
Unrealized depreciation... (850,520)
---------
Net unrealized
depreciation............. $(199,155)
=========
</TABLE>
See notes to financial statements.
22
<PAGE>
Notes to Financial Statements (Unaudited)
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
1. ORGANIZATION:
The MarketWatch Funds (the "Company") was organized on June 4, 1992, and is
registered under the Investment Company Act of 1940, (the "1940 Act"), as
amended, as an open-end management investment company established as a
Massachusetts business trust. Between the date of organization and the date
of commencement of operations, the Company had no operations other than
incurring organizational expenses and the sale of initial units of beneficial
interest ("shares").
The Company is authorized to issue an unlimited number of shares with $0.001
par value. The Company offers shares of the Money Market Fund, the Equity
Fund, the Intermediate Fixed Income Fund, the Flexible Income Fund and the
Virginia Municipal Bond Fund (individually a "Fund," collectively the
"Funds"). Sales of shares may be made to customers of Central Fidelity
National Bank and its affiliates, to all accounts of correspondent banks of
Central Fidelity National Bank and to the general public. Central Fidelity
National Bank serves as investment adviser and custodian to each of the
Funds.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Company in the preparation of its 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 of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments of the Money Market Fund are valued at either amortized cost,
which approximates market value, or at original cost, which combined with
accrued interest, approximates market value. Under the amortized cost method,
discount or premium is amortized on a constant basis to the maturity of the
security. In addition, the Money Market Fund may not (a) purchase any
instrument with a remaining maturity greater than thirteen months, unless
such instrument is subject to a demand feature, or (b) maintain a dollar-
weighted average portfolio maturity which exceeds 90 days.
Investments in common stocks, corporate bonds, commercial paper, municipal
bonds and U.S. Government securities of the Equity Fund, the Intermediate
Fixed Income Fund, the Flexible Income Fund and the Virginia Municipal Bond
Fund (collectively, "the variable net asset value funds") are valued at their
market values determined on the basis of the latest available bid prices in
the principal market (closing sales prices if the principal market is an
exchange) in which such securities are normally traded. Investments in
investment companies are valued at their respective net asset values as
reported by such companies. Securities, including restricted securities, for
which market quotations are not readily available, are valued at fair market
value under the supervision of the Company's Board of Trustees. The
differences between the cost and market values of investments held by the
variable net asset value funds are reflected as either unrealized
appreciation or depreciation.
Continued
23
<PAGE>
Notes to Financial Statements, Continued (Unaudited)
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the accrual
basis and includes, where applicable, the pro rata amortization of premium
and/or discount. Paydowns of mortgage-backed securities are applied to
principal and interest when received. Amortization of premium and discount is
accrued daily. Dividend income is recorded on the ex-dividend date. Gains or
losses realized on sales of securities are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from member banks of the Federal
Deposit Insurance Corporation and from registered broker/dealers who Central
Fidelity National Bank, investment adviser to the Funds, deems creditworthy
under guidelines approved by the Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price generally equals the price paid by a Fund plus
interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The
seller, under a repurchase agreement, is required to maintain the value of
collateral held pursuant to the agreement at not less than 102% of the
repurchase price (including accrued interest). Securities subject to
repurchase agreements are held by the Funds' custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans by a Fund under the 1940 Act.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly and
distributable net realized capital gains, if any, are declared and
distributed at least annually for the Money Market Fund. Dividends from net
investment income are declared and paid monthly and distributable net
realized capital gains, if any, are declared and distributed at least
annually for the variable net asset value funds.
Dividends from net investment income and from net realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due
to differing treatments for mortgage-backed securities, expiring capital loss
carryforwards and deferrals of certain losses.
FEDERAL INCOME TAXES:
It is the policy of each of the Funds to continue to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of net investment income and net
realized capital gains sufficient to relieve it from all, or substantially
all, Federal income taxes.
OTHER:
Expenses that are directly related to one of the Funds are charged directly
to that Fund. Other operating expenses for the Company are prorated to the
Funds on the basis of relative net assets or other appropriate basis.
Continued
24
<PAGE>
Notes to Financial Statements, Continued (Unaudited)
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six months ended May 31, 1996 are as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
Equity Fund............................................ $20,597,378 $11,728,355
Intermediate Fixed Income Fund......................... $16,483,129 $14,320,146
Flexible Income Fund................................... $ 3,729,316 $13,510,787
Virginia Municipal Bond Fund........................... $16,734,335 $11,105,304
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to each Fund by Central Fidelity
National Bank. Under the terms of the investment advisory agreement, Central
Fidelity National Bank is entitled to receive fees based on a percentage of
the average net assets of each of the Funds.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services Ohio, Inc. ("BISYS
Ohio"), and BISYS are subsidiaries of The BISYS Group, Inc.
Certain officers and trustees of the Company are affiliated with BISYS, which
serves the Company as manager and administrator. Such officers and trustees
are paid no fees directly by the Company for serving as officers and trustees
of the Company. Under the terms of the Management and Administration
Agreement between BISYS and the Company, BISYS' fees are computed daily as a
percentage of the average net assets of each of the Funds. BISYS also serves
as distributor of the Funds' shares and is entitled to receive commissions on
sales of shares of the variable net asset value funds. For the six months
ended May 31, 1996, BISYS received $244,555 from commissions earned on sales
of shares of the Company's variable net asset value funds of which $230,342
was allowed to James Mitchell & Co., a broker dealer of the Company's shares.
BISYS Ohio serves the Company as Transfer Agent and Mutual Fund Accountant,
and as such, is entitled to receive fees based on the number of shareholders
and as a percentage of average net assets, respectively.
The Company has adopted a Distribution and Services Plan in accordance with
Rule 12b-1 under the 1940 Act, pursuant to which the Company is authorized to
pay or reimburse BISYS, as distributor, a periodic amount, calculated at an
annual rate not to exceed 0.25% of the average daily net asset value of each
Fund. These fees are used by BISYS to pay financial institutions, including
the investment adviser, broker/dealers and other institutions, or to
reimburse BISYS or its affiliates, for administration, distribution and
shareholder services in connection with the distribution of Fund shares.
Fees may be voluntarily reduced or reimbursed to assist the Funds in
maintaining competitive expense ratios.
Continued
25
<PAGE>
Notes to Financial Statements, Continued (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
Information regarding these transactions is as follows for the six months
ended May 31, 1996:
<TABLE>
<CAPTION>
Intermediate
Money Market Equity Fixed Income
Fund Fund Fund
------------ -------- ------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........ 0.50% 1.00% 0.74%
Voluntary fee reductions................... $35,759 $171,081 $48,736
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........ 0.20% 0.20% 0.20%
Voluntary fee reductions................... $3,576 $33,130 $9,432
DISTRIBUTION AND SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........ 0.25% 0.25% 0.25%
Voluntary fee reductions................... $17,880
TRANSFER AGENT AND MUTUAL FUND ACCOUNTANT
FEES:...................................... $24,252 $62,565 $29,862
REIMBURSED FEES:........................... $22,450 $2,567 $18,507
</TABLE>
<TABLE>
<CAPTION>
Virginia
Flexible Income Municipal Bond
Fund Fund
--------------- --------------
<S> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)............ 0.74% 0.74%
Voluntary fee reductions....................... $28,072 $107,098
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)............ 0.20% 0.20%
Voluntary fee reductions....................... $4,516 $15,325
DISTRIBUTION AND SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)............ 0.25% 0.25%
Voluntary fee reductions....................... $8,666
TRANSFER AGENT AND MUTUAL FUND ACCOUNTANT
FEES:.......................................... $24,117 $37,412
REIMBURSED FEES:............................... $11,503 $1,569
</TABLE>
Continued
26
<PAGE>
Notes to Financial Statements, Continued (Unaudited)
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1996
5. CONCENTRATION OF CREDIT RISK:
The Virginia Municipal Bond Fund invests a substantial portion of its assets
in debt obligations issued by the State of Virginia and its political
subdivisions, agencies and public authorities. The Fund is more susceptible
to factors adversely affecting issuers of Virginia Municipal securities than
a fund that is not concentrated in these issuers to the same extent.
27
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Money Market Fund
----------------------------------------------------
For the
Six Months February 1,
Ended Year Ended Year Ended 1993 to
May 31, November 30, November 30, November 30,
1996 1995 1994 1993(a)
----------- ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income... 0.024 0.052 0.034 0.020
------- ------- ------- -------
Total from Investment
Activities.............. 0.024 0.052 0.034 0.020
------- ------- ------- -------
DISTRIBUTIONS:
From net investment
income.................. (0.024) (0.052) (0.034) (0.020)
------- ------- ------- -------
Total Distributions.... (0.024) (0.052) (0.034) (0.020)
------- ------- ------- -------
Net Asset Value, End of
Period.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= =======
Total Return (excludes
sales charges).......... 2.46%(b) 5.32% 3.49% 2.01%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)............ $13,117 $13,445 $11,364 $16,041
Ratio of expenses to
average net assets...... 0.32%(c) 0.32% 0.32% 0.63%(c)
Ratio of net investment
income to average net
assets.................. 4.86%(c) 5.19% 3.39% 2.37%(c)
Ratio of expenses to
average net assets*..... 1.12%(c) 1.54% 1.65% 1.59%(c)
Ratio of net investment
income to average net
assets*................. 4.06%(c) 3.97% 2.06% 1.40%(c)
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. In addition,
certain fees were voluntarily reimbursed. If such voluntary fee reductions
and reimbursements had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
28
<PAGE>
Financial Highlights
- -------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Equity Fund
-----------------------------------------------------
For the
Six Months January 29,
Ended Year Ended Year Ended 1993 to
May 31 November 30, November 30, November 30,
1996 1995 1994 1993(a)
----------- ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $ 12.88 $ 9.80 $ 10.20 $ 10.00
-------- -------- -------- --------
INVESTMENT
ACTIVITIES:
Net investment
income........... 0.08 0.17 0.17 0.15
Net realized and
unrealized gains
(losses) from
investments..... 1.63 3.09 (0.40) 0.19
-------- -------- -------- --------
Total from
Investment
Activities....... 1.71 3.26 (0.23) 0.34
-------- -------- -------- --------
DISTRIBUTIONS:
From net
investment
income........... (0.07) (0.17) (0.17) (0.14)
In excess of net
investment
income........... (0.01)
From net realized
gains............ (0.14)
In excess of net
realized gains...
-------- -------- -------- --------
Total
Distributions.... (0.21) (0.18) (0.17) (0.14)
-------- -------- -------- --------
Net Asset Value,
End of Period.... $ 14.38 $ 12.88 $ 9.80 $ 10.20
======== ======== ======== ========
Total Return
(excludes sales
charges)......... 13.46%(b) 33.59% (2.26%) 3.42%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end
of period (000).. $144,033 $119,484 $103,140 $107,859
Ratio of expenses
to average
net assets...... 1.36%(c) 1.35% 1.35% 1.33%(c)
Ratio of net
investment
income
to average net
assets.......... 1.14%(c) 1.58% 1.75% 1.75%(c)
Ratio of expenses
to average
net assets*..... 1.67%(c) 1.71% 1.75% 1.72%(c)
Ratio of net
investment
income
to average net
assets*......... 0.83%(c) 1.22% 1.34% 1.36%(c)
Portfolio
Turnover......... 9.01% 29.98% 30.33% 29.72%
Average
commission rate
paid (d)......... $0.06565
<CAPTION>
Intermediate Fixed
Income Fund
-------------------------------------------------------
For the
Six Months January 29,
Ended Year Ended Year Ended 1993 to
May 31, November 30, November 30, November 30,
1996 1995 1994 1993(a)
-------------- ------------ ------------ --------------
(Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $ 10.07 $ 9.31 $ 10.20 $ 10.00
-------------- ------------ ------------ --------------
INVESTMENT
ACTIVITIES:
Net investment
income........... 0.27 0.55 0.44 0.33
Net realized and
unrealized gains
(losses) from
investments..... (0.48) 0.76 (0.79) 0.19
-------------- ------------ ------------ --------------
Total from
Investment
Activities....... (0.21) 1.31 (0.35) 0.52
-------------- ------------ ------------ --------------
DISTRIBUTIONS:
From net
investment
income........... (0.26) (0.54) (0.43) (0.32)
In excess of net
investment
income........... (0.01)
From net realized
gains............ (0.01)
In excess of net
realized gains... (0.10)
-------------- ------------ ------------ --------------
Total
Distributions.... (0.26) (0.55) (0.54) (0.32)
-------------- ------------ ------------ --------------
Net Asset Value,
End of Period.... $ 9.60 $ 10.07 $ 9.31 $ 10.20
============== ============ ============ ==============
Total Return
(excludes sales
charges)......... (2.09%)(b) 14.44% (3.51%) 5.19%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end
of period (000).. $39,228 $35,796 $48,730 $64,674
Ratio of expenses
to average
net assets...... 1.09%(c) 1.10% 1.09% 1.08%(c)
Ratio of net
investment
income
to average net
assets.......... 5.57%(c) 5.60% 4.46% 3.92%(c)
Ratio of expenses
to average
net assets*..... 1.40%(c) 1.51% 1.49% 1.47%(c)
Ratio of net
investment
income
to average net
assets*......... 5.26%(c) 5.19% 4.07% 3.53%(c)
Portfolio
Turnover......... 40.45% 43.65% 55.36% 57.40%
Average
commission rate
paid (d).........
</TABLE>
- -----
* During the period, certain fees were voluntarily reduced. In addition,
certain fees were voluntarily reimbursed. If such voluntary fee reductions
and reimbursements had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and
sold for which commissions were charged.
See notes to financial statements.
29
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Flexible Income Fund
-----------------------------------------------------
For the
Six Months January 29,
Ended Year Ended Year Ended 1993 to
May 31 November 30, November 30, November 30,
1996 1995 1994 1993(a)
----------- ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............ $10.03 $ 9.66 $ 10.03 $ 10.00
------ ------- ------- -------
INVESTMENT
ACTIVITIES:
Net investment
income............ 0.26 0.45 0.34 0.26
Net realized and
unrealized gains
(losses) from
investments...... (0.29) 0.37 (0.36) 0.02
------ ------- ------- -------
Total from
Investment
Activities........ (0.03) 0.82 (0.02) 0.28
------ ------- ------- -------
DISTRIBUTIONS:
From net
investment income. (0.24) (0.45) (0.34) (0.25)
In excess of net
realized gains.... (0.01)
------ ------- ------- -------
Total
Distributions..... (0.24) (0.45) (0.35) (0.25)
------ ------- ------- -------
Net Asset Value,
End of Period..... $ 9.76 $ 10.03 $ 9.66 $ 10.03
====== ======= ======= =======
Total Return
(excludes sales
charges).......... (0.28%)(b) 8.68% (0.12%) 2.77%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end
of period (000)... $9,096 $20,864 $23,322 $29,132
Ratio of expenses
to average
net assets....... 1.14%(c) 1.15% 1.13% 1.12%(c)
Ratio of net
investment income
to average net
assets........... 4.89%(c) 4.57% 3.47% 3.16%(c)
Ratio of expenses
to average
net assets*...... 1.50%(c) 1.56% 1.58% 1.64%(c)
Ratio of net
investment income
to average net
assets*.......... 4.53%(c) 4.16% 3.01% 2.64%(c)
Portfolio
Turnover.......... 22.04% 64.14% 19.65% 64.40%
<CAPTION>
Virginia Municipal Bond Fund
------------------------------------------------------
For the
Six Months February 1,
Ended Year Ended Year Ended 1993 to
May 31, November 30, November 30, November 30
1996 1995 1994 1993(a)
-------------- ------------ ------------ -------------
(Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............ $ 10.25 $ 9.40 $ 10.31 $ 10.00
-------------- ------------ ------------ -------------
INVESTMENT
ACTIVITIES:
Net investment
income............ 0.22 0.42 0.38 0.28
Net realized and
unrealized gains
(losses) from
investments...... (0.41) 0.85 (0.90) 0.30
-------------- ------------ ------------ -------------
Total from
Investment
Activities........ (0.19) 1.27 (0.52) 0.58
-------------- ------------ ------------ -------------
DISTRIBUTIONS:
From net
investment income. (0.22) (0.42) (0.38) (0.27)
In excess of net
realized gains.... (0.01)
-------------- ------------ ------------ -------------
Total
Distributions..... (0.22) (0.42) (0.39) (0.27)
-------------- ------------ ------------ -------------
Net Asset Value,
End of Period..... $ 9.84 $ 10.25 $ 9.40 $ 10.31
============== ============ ============ =============
Total Return
(excludes sales
charges).......... (1.91%)(b) 13.79% (5.17%) 5.84%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end
of period (000)... $64,287 $54,041 $39,978 $33,652
Ratio of expenses
to average
net assets....... 1.04%(c) 1.05% 1.04% 1.02%(c)
Ratio of net
investment income
to average net
assets........... 4.42%(c) 4.33% 3.90% 3.65%(c)
Ratio of expenses
to average
net assets*...... 1.47%(c) 1.51% 1.56% 1.66%(c)
Ratio of net
investment income
to average net
assets*.......... 3.99%(c) 3.87% 3.38% 3.01%(c)
Portfolio
Turnover.......... 19.71% 77.50% 87.36% 86.08%
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced. In addition,
certain fees were voluntarily reimbursed. If such voluntary fee reductions
and reimbursements had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
30
<PAGE>
Investment Advisor and Custodian
Central Fidelity National Bank
1021 East Cary Street
Richmond, Virginia 23219
Manager, Administrator and Distributor
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
Legal Counsel
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
Philadelphia, Pennsylvania 19107
Auditors
KPMG Peat Marwick LLP
Two Nationwide Plaza
Suite 1600
Columbus, Ohio 43215
[LOGO of MarketWatch]
Semi-Annual Report
to Shareholders
May 31, 1996
--------------------------
Central Fidelity National Bank
Investment Adviser
BISYS Fund Services
