<PAGE>
LOGO
OF MARKETWATCH
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1997
----------------------------------------------
CENTRAL FIDELITY NATIONAL BANK, INVESTMENT ADVISER
BISYS FUND SERVICES
Distributor
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
<TABLE>
<S> <C>
Letter to Shareholders........................ 3
Performance Report............................ 6
Statements of Assets and Liabilities.......... 11
Statements of Operations...................... 12
Statements of Changes in Net Assets........... 13
Schedules of Portfolio Investments............ 15
Notes to Financial Statements................. 23
Financial Highlights.......................... 27
</TABLE>
2
<PAGE>
MESSAGE FROM THE CHAIRMAN
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
DEAR SHAREHOLDERS:
We're pleased to report that the six months ended May 31, 1997, were rewarding
ones for the financial markets and for our investors. While stocks did take a
brief and deep stumble when the Federal Reserve raised interest rates in
March, they bounced back quickly--and then, rocketed higher on news of strong
first-quarter profits. The same news, however, made the environment a bit more
challenging in the fixed- income markets. Despite the lack of hard evidence
that inflationary pressures were growing, fear of inflation kept investors on
edge and the markets relatively volatile. Nevertheless, while the ride was
rough at times, bonds also advanced over the period.
Throughout the period, too, the volatility of the markets seemed to have
little effect on investors, who continued to invest in mutual funds at a
breakneck pace. We're pleased to say that many chose to invest in the
MarketWatch Funds. During the six months ended May 31, 1997, assets under
management in the Equity Fund grew by 51%, increasing from $186 million to
$280 million. Assets under management in the MarketWatch Intermediate Fixed
Income Fund grew by 121%, from $43 million to $95 million over the same
period. Total assets under management grew by 59.6%. A substantial part of the
growth can be attributed to a $149 million investment in the MarketWatch Funds
from the Central Fidelity Bank's trust department. The growth of total assets
under management, excluding the trust department investment, was 12.4%.
WHERE DO WE GO FROM HERE?
Historically, the U.S. economy has run out of steam after four or five years
of expansion. This time, however, things appear to be very different. Moving
into the eighth year of this expansion, first-quarter GDP was reported at an
exceedingly strong 5.6% annual rate; the unemployment rate has fallen to a 23-
year low; and the inflationary environment is benign. All of which underscores
the optimistic message we've preached for the last several years: the
fundamentals of the economy are strong, and we believe that it will remain
strong for the foreseeable future.
SHARES OF THE FUNDS
. ARE NOT FDIC INSURED
. ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, CENTRAL
FIDELITY NATIONAL BANK
. ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
3
<PAGE>
MESSAGE FROM THE CHAIRMAN
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
This does not mean, however, that the business cycle has been repealed. One
day, the U.S. economy will again experience a recession. But chances of that
happening this year we feel are extraordinarily remote. And, as long as the
Federal Reserve does not become irrationally exuberant about raising interest
rates, we have a very good chance of getting through 1998 without a recession
as well.
Key to this economic outlook, of course, is the financial health of consumers,
who account for two-thirds of all economic activity--and clearly, consumers
are in very good shape indeed. Personal income is growing at a 3% annual rate.
Over 2.5 million jobs were created in the past year alone, and recent surveys
indicate that companies are planning to do more hiring this year. Finally,
consumer confidence is near an eight-year high--which was underscored by their
spending, which grew at a 6% annual rate in the first quarter.
UNFOUNDED WORRIES
At the same time, many are worried about consumer debt levels, which are high
and growing higher. Contrary to popular opinion, however, this debt burden in
itself will not cause the economy to falter or contract. It will simply cause
long-term growth to be slower than it would be without debt.
Inflation is also a concern to some. But here it is important to remember that
history proves economic growth alone does not cause inflation. Rather,
inflation results from too much money chasing too few goods. Given the Federal
Reserve's restrictive policies, we do not have too much money. In fact, over
the past six months, bank reserves have declined at the sharpest rate in
history. We also do not have too few goods--approximately 1.6% of first-
quarter GDP growth was due to inventory accumulation. Obviously, the U.S.
economy is having no problem producing goods to meet demand.
Moreover, as we saw in March, the Federal Reserve is adamant about containing
inflationary pressures. Given their willingness to make a pre-emptive move in
a non-inflationary environment, we believe Mr. Greenspan and his colleagues
will be successful in preventing a possible resurgence of inflation.
TURNING TO THE MARKETS
From a long-term perspective, all of this news is very good for the financial
markets and for investors. In the short-term, however, there are several
reasons for caution. After the spectacular advances of the past several
months, valuations in the stock market are high. At this point, a correction
would not be all that
4
<PAGE>
MESSAGE FROM THE CHAIRMAN
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
surprising--and could materialize very swiftly. But, because we are optimistic
about the long-term prospects for stocks, we believe that any moment of
weakness or sudden correction should be viewed as a buying opportunity rather
than the start of a bear market.
This is also time for caution in the fixed-income markets. Long term, our
economy is in a multi-year downward trend in interest rates and inflation.
But, in the short term, while there are few signs of inflation, commodity
prices have been rising, and this bears watching. Moreover, as we've noted,
the Federal Reserve is quite willing to stamp out any spark of inflationary
pressure by raising interest rates. Another rate hike would not be completely
out of character before even the Federal Reserve is forced to realize that
inflation is not a major threat to the economy's long-term prosperity.
Consequently, while we are very optimistic about both the stock and bond
markets' long-term prospects, they are just that; long-term prospects.
Historically, the markets have generated rewarding returns for people with
long-term time horizons (horizons of ten years or longer) who can weather the
markets' inherent volatility.
IN CLOSING . . .
Finally, we 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/ Walter B. Grimm
Walter B. Grimm
Chairman, MarketWatch Funds
/s/ Paul P. Baran
Paul P. Baran
Senior Vice President and Chief Investment Officer
Central Fidelity National Bank
5
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
THE MARKETWATCH EQUITY FUND
The six months ended May 31, 1997, were profitable ones for the market and for
the Fund--but the spectacular gains of the period did not come without some
pain and quite a bit of volatility. After storming out of the gate in January,
stocks dropped 10% in late March and early April when several highly visible
market leaders posted disappointing earnings.
PROFITING ON WEAKNESS
Within days, however, it became clear that these reports were not harbingers
of more disappointment to come. Overall, in fact, news on the corporate
earnings front was quite good. Moreover, evidence of inflationary pressure
continued to elude even the sharpest eyes. Stocks quickly rebounded--and
rocketed to new highs.
Given our optimistic outlook for the market long term, we moved quickly in
March and April to capitalize on several attractive buying opportunities the
correction created. When the market snapped back, the Fund benefited
handsomely. As a result, we're pleased to report that the Fund performed very
strongly during the period.
CONSERVATIVELY BULLISH
After eight moves of more than 100 points in the Dow in the weeks just past,
we are approaching the market more cautiously. Yet we remain optimistic. The
economy is fundamentally sound, with little inflationary pressure. Corporate
earnings are strong and should continue to be in the near future. Still, given
the heady levels of stock prices, a sudden drop would not be all that
surprising. We would view such a decline as a buying opportunity. If one
should materialize in the months ahead, we will once again move quickly to
take advantage of the situation.
In selecting investments for the Fund, we continue to focus on companies with
businesses truly international in scope, domestic companies with a dominant
position in a proven niche, and financial and recreational companies serving
the aging baby-boomer population. In addition, given its long-term growth
prospects, we continue to maintain a healthy position in the
telecommunications sector.
As of May 31, 1997, the Fund's top five holdings were Intel (3.2%), Compaq
(2.5%), General Electric (2.4%), Schering Plough (2.3%) and Philip Morris
(2.2%)./1/
/1/The Fund's composition is subject to change.
6
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
Equity Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Equity Equity
Fund Fund
Date (Load) (No Load)
<S> <C> <C>
1/29/93 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
11/30/96 16,779 17,563
5/31/97 18,973 19,865
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
Period Since
Ended 6 Month 1 Year 3 Year Inception
5/31/97 (1/29/93)
<S> <C> <C> <C> <C>
Load* 8.01% 23.81% 22.79% 15.90%
No Load 13.07% 29.66% 24.68% 17.14%
<CAPTION>
Period Since
Ended 1 Year 3 Year Inception
6/30/97 (1/29/93)
<S> <C> <C> <C>
Load* 28.05% 25.63% 16.83%
No Load 34.11% 27.56% 18.05%
</TABLE>
*Reflects the maximum 4.50% sales charge.
- -----------------------------------------------------
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 MARKETWATCH INTERMEDIATE FIXED INCOME FUND
The fixed-income markets were choppy during the six months ended May 31, 1997.
Evidence that the expansion of the economy was causing inflationary pressures
to increase were in short supply but the growth of the economy alone was
enough to keep investors on edge, anticipating that the Federal Reserve would
move shortly to increase rates. And act it did in early spring with a rate
increase.
Conservatively positioned with maturities near or at the industry average
throughout much of the period, the Fund's performance was not dramatically
impacted. For the six months ended May 31, 1997, the Fund posted returns in
line with its industry benchmark.
DON'T FIGHT THE FED
Currently, indicators in the CFNB Liquidity Composite suggest that we may see
rates trend slightly higher in the months ahead. At the same time, however,
it's important for investors to remember that the United States is in a multi-
year secular downtrend in both interest rates and inflation. By the end of the
decade, we expect interest rates at much lower levels. Moreover, contrary to
conventional wisdom, economic growth does not cause inflation--too much money
chasing too few goods does. That is not the case today.
Nevertheless, it appears that Mr. Greenspan is determined to quell whatever
inflationary pressures might exist, and we may see the Federal Reserve move
again soon. Later in the year, as stronger evidence of slower growth
materializes, we expect that the Federal Reserve will acknowledge that
inflation is not problematic.
7
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
In the interim, however, the markets may be somewhat volatile--and, given the
circumstances, this is not a time to make any large bet on the direction of
interest rates. As a result, we continue to approach the fixed-income markets
cautiously, and we expect to hold the portfolio's average maturity at or very
near the industry's benchmark.
As of May 31, 1997, the average maturity of the MarketWatch Intermediate Fixed
Income Fund was 9.1 years. The average credit quality of the portfolio was
AAA./1/
/1/The Fund's composition is subject to change.
Intermediate Fixed Income Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Intermediate Intermediate
Fixed Fixed
Income Fund Income Fund
Date (Load) (No Load)
<S> <C> <C>
1/29/93 9,551 10,000
11/30/93 10,047 10,519
11/30/94 9,694 10,150
11/30/95 11,094 11,616
11/30/96 11,589 12,133
5/31/97 11,548 19,090
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
Period Since
Ended 6 Month 1 Year 3 Year Inception
5/31/97 (1/29/93)
<S> <C> <C> <C> <C>
Load* -4.85% 1.54% 4.51% 3.37%
No Load -0.36% 6.30% 6.14% 4.47%
<CAPTION>
Period Since
Ended 1 Year 3 Year Inception
6/30/97 (1/29/93)
<S> <C> <C> <C>
Load* 1.67% 4.95% 3.58%
No Load 6.41% 6.59% 4.66%
</TABLE>
*Reflects the maximum 4.50% sales charge.
- -----------------------------------------------------
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 MARKETWATCH VIRGINIA MUNICIPAL BOND FUND
Like all sectors of the fixed-income market during the six months ended May
31, 1997, the municipal markets were jumpy as investors anticipated an
increase in interest rates. Unlike other sectors, however, the continued tight
supply of securities--particularly high-quality securities--dampened
volatility. As a result, the period was a relatively quiet one in the
municipal markets, and prices did not move significantly in either direction.
Throughout the period, the Fund was positioned conservatively with its average
maturities closely aligned with industry averages. Moreover, whenever
opportunities arose to enhance yields, without compromising quality, we moved
as quickly as possible to capitalize on them. As a result, we're pleased to
report that, in what was a relatively lackluster period in the municipal
markets, the MarketWatch Virginia Municipal Bond Fund posted a positive return
and performed in line with its peers.
8
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
GROWING DEMAND, DWINDLING SUPPLY
We expect to see a lack of supply continue to dampen volatility in the
municipal markets for some time to come. Given taxpayers' resistance,
municipalities are reluctant to suggest new issues. Moreover, as baby boomers
move closer to retirement age, their interest in municipal securities--
particularly high-quality issues like those from Virginia--can only be
expected to increase.
Consequently, while the tax-free securities may not offer investors the same
level of excitement that the taxable issues can provide, we are optimistic
about their prospects in the months ahead. As interest rates rise and fall,
prices in the municipal market should remain relatively stable.
As a result, we anticipate no major changes in the portfolio's credit or
maturity structure in the near term. At the period's end, the MarketWatch
Virginia Municipal Bond Fund was well diversified, with no more than 10% of
its assets invested in securities issued by one county. All securities held
were rated A or better. The average maturity of the portfolio's holdings was
8.52 years./1/
/1/The Fund's composition is subject to change.
Virginia Municipal Bond Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Virginia Virginia
Municipal Municipal
Bond Fund Bond Fund
Date (Load) (No Load)
<S> <C> <C>
2/1/93 9,551 10,000
11/30/93 10,108 10,584
11/30/94 9,585 10,036
11/30/95 10,907 11,420
11/30/96 11,289 11,820
5/31/97 11,405 11,942
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
Period Since
Ended 6 Month 1 Year 3 Year Inception
5/31/97 (2/1/93)
<S> <C> <C> <C> <C>
Load* -3.53% 1.85% 3.63% 3.08%
No Load 1.03% 6.61% 5.23% 4.18%
<CAPTION>
Period Since
Ended 1 Year 3 Year Inception
6/30/97 (2/1/93)
<S> <C> <C> <C>
Load* 1.78% 4.16% 3.24%
No Load 6.61% 5.79% 4.32%
</TABLE>
*Reflects the maximum 4.50% sales charge.
- -----------------------------------------------------
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. Income may be subject to the
Federal AMT.
THE MARKETWATCH MONEY MARKET FUND
Uncertainty dominated the atmosphere in the money markets during the six
months ended May 31, 1997, as statistics indicated that the economy was
growing at a pace somewhat faster than the Federal Reserve deemed optimal. As
a result, investors spent much of the period on edge, waiting for a rate hike.
But when the Federal Reserve did move in the spring, the hike was small--and
only sparked more speculation about what the Federal Reserve might do next.
9
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
During the period, however, our indicators did not signal that inflation was
about to ignite, or that the economy was superheating. As a result, we made no
attempt to predict Federal Reserve action. Nor did we try to anticipate each
twist and turn in the direction of interest rates. The portfolio was neutrally
positioned, with the average maturity of the portfolio ranging between 30 and
40 days throughout the period. At the end of the period, the average maturity
of the portfolio's holdings was 36 days./1/
We believe the markets will continue to be rather choppy until evidence solid
enough to convince even the Federal Reserve that the economy is slowing
appears sometime later this year. Consequently, we expect to maintain a
neutral positioning for the foreseeable future.
/1/The Fund's composition is subject to change.
Performance data represents past performance and is not indicative of future
performance. An investment in the MarketWatch Money Market Fund is neither
insured 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
FIDELITY NATIONAL BANK
. ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
10
<PAGE>
Statements of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
<TABLE>
<CAPTION>
Intermediate Virginia
Money Market Equity Fixed Income Municipal Bond
Fund Fund Fund Fund
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value... $ 9,616,222 $279,136,313 $94,472,474 $113,295,535
Repurchase agreements,
at cost................ 5,907,336 -- -- --
----------- ------------ ----------- ------------
Total Investments, at
value (Total cost
$15,523,558;
$171,712,954;
$93,347,304;
$110,270,130).......... 15,523,558 279,136,313 94,472,474 113,295,535
Interest and dividends
receivable............. 28,564 583,813 1,155,183 2,024,550
Receivable for capital
shares sold............ 44,086 145,407 57,411 --
Prepaid expenses and
other assets........... 9,916 10,964 3,569 5,789
----------- ------------ ----------- ------------
Total Assets.......... 15,606,124 279,876,497 95,688,637 115,325,874
----------- ------------ ----------- ------------
LIABILITIES:
Dividends payable....... 64,236 -- -- --
Accrued expenses and
other payables:
Investment advisory
fees.................. -- 173,278 39,509 38,499
Administration fees.... 255 4,597 1,564 1,889
Distribution and
services fees......... -- 57,943 20,273 24,290
Accounting and transfer
agent fees............ 2,851 24,587 8,223 8,348
Legal and audit fees... 2,749 23,048 7,530 9,878
Printing fees.......... 875 18,744 6,577 9,161
Other.................. 95 6,444 2,359 2,859
----------- ------------ ----------- ------------
Total Liabilities..... 71,061 308,641 86,035 94,924
----------- ------------ ----------- ------------
NET ASSETS:
Capital................. 15,535,562 165,836,564 97,890,744 114,590,192
Undistributed net
investment income...... -- 80,879 236,324 228,886
Net unrealized
appreciation
(depreciation) from
investments............ -- 107,423,359 1,125,170 3,025,405
Accumulated
undistributed net
realized gains (losses)
from investment
transactions........... (499) 6,227,054 (3,649,636) (2,613,533)
----------- ------------ ----------- ------------
Net Assets............ $15,535,063 $279,567,856 $95,602,602 $115,230,950
=========== ============ =========== ============
Outstanding units of
beneficial interest
(shares)............... 15,535,562 15,375,257 9,902,706 11,485,983
=========== ============ =========== ============
Net asset value--
redemption price per
share ................. $ 1.00 $ 18.18 $ 9.65 $ 10.03
=========== ============ =========== ============
Maximum Sales Charge.... 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) $ 19.04 $ 10.10 $ 10.50
=========== ============ =========== ============
</TABLE>
- ------
(a) Offering price and redemption price are the same for the Money Market Fund.
See notes to financial statements.
11
<PAGE>
Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Funds For The Six Months Ended May 31, 1997
<TABLE>
<CAPTION>
Intermediate Virginia
Money Market Equity Fixed Income Municipal Bond
Fund Fund Fund Fund
------------ ----------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income............ $362,139 $ -- $3,394,428 $3,729,341
Dividend income (a)........ 11,738 2,684,338 45,648 38,204
-------- ----------- ---------- ----------
Total Income............. 373,877 2,684,338 3,440,076 3,767,545
-------- ----------- ---------- ----------
EXPENSES:
Investment advisory fees... 35,753 1,218,252 330,161 402,111
Administration fees........ 14,302 244,805 90,952 111,010
Distribution and services
fees...................... 17,877 306,007 113,690 138,763
Custodian and accounting
fees...................... 16,554 62,951 26,993 38,641
Legal and audit fees....... 3,079 43,392 15,739 19,313
Registration and filing
fees...................... 2,706 6,928 3,260 7,042
Trustees' fees and
expenses.................. 467 6,774 2,252 2,941
Transfer agent fees........ 7,372 52,407 13,600 14,689
Printing costs............. 3,969 20,998 8,166 11,143
Other...................... 418 4,683 1,239 2,099
-------- ----------- ---------- ----------
Total Expenses before
reimbursements/voluntary
reductions.............. 102,497 1,967,197 606,052 747,752
Expenses voluntarily
reduced................. (58,636) (365,764) (129,817) (212,506)
Expenses reimbursed...... (20,979) (1,651) (721) --
-------- ----------- ---------- ----------
Total Expenses......... 22,882 1,599,782 475,514 535,246
-------- ----------- ---------- ----------
Net Investment Income...... 350,995 1,084,556 2,964,562 3,232,299
-------- ----------- ---------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gains (losses)
from investment
transactions.............. -- 6,227,054 (461,410) (83,977)
Net change in unrealized
appreciation
(depreciation) from
investments............... -- 46,580,693 (300,522) 786,704
-------- ----------- ---------- ----------
Net realized/unrealized
gains (losses) from
investments............... -- 52,807,747 (761,932) 702,727
-------- ----------- ---------- ----------
Change in net assets
resulting from operations. $350,995 $53,892,303 $2,202,630 $3,935,026
======== =========== ========== ==========
</TABLE>
- ------
(a) Dividend income for the Money Market Fund, Intermediate Fixed Income Fund
and Virginia Municipal Bond Fund is from investments in investment
companies.
See notes to financial statements.
12
<PAGE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
<TABLE>
<CAPTION>
Money Market Fund Equity Fund
-------------------------- --------------------------
For the Six Year Ended For the Six Year Ended
Months Ended November 30, Months Ended November 30,
May 31, 1997 1996 May 31, 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income... $ 350,995 $ 679,368 $ 1,084,556 $ 1,496,484
Net realized gains
(losses) from
investment
transactions........... -- -- 6,227,054 2,918,533
Net change in unrealized
appreciation
(depreciation) from
investments............ -- -- 46,580,693 35,081,554
----------- ----------- ------------ ------------
Change in net assets
resulting from
operations.............. 350,995 679,368 53,892,303 39,496,571
----------- ----------- ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................. (350,995) (679,368) (1,062,803) (1,477,216)
From net realized gains. -- -- (2,918,533) (1,296,123)
----------- ----------- ------------ ------------
Change in net assets from
shareholder
distributions........... (350,995) (679,368) (3,981,336) (2,773,339)
----------- ----------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 2,850,881 5,480,663 58,077,989 43,421,296
Dividends reinvested.... 29,810 52,170 2,336,234 1,889,082
Cost of shares redeemed. (1,066,692) (5,256,611) (16,904,603) (15,370,717)
----------- ----------- ------------ ------------
Change in net assets from
capital transactions.... 1,813,999 276,222 43,509,620 29,939,661
----------- ----------- ------------ ------------
Change in net assets..... 1,813,999 276,222 93,420,587 66,662,893
NET ASSETS:
Beginning of period..... 13,721,064 13,444,842 186,147,269 119,484,376
----------- ----------- ------------ ------------
End of period........... $15,535,063 $13,721,064 $279,567,856 $186,147,269
=========== =========== ============ ============
SHARE TRANSACTIONS:
Issued.................. 2,850,881 5,480,663 4,889,527 3,015,102
Reinvested.............. 29,810 52,170 148,716 138,705
Redeemed................ (1,066,692) (5,256,611) (1,005,757) (1,090,354)
----------- ----------- ------------ ------------
Change in shares......... 1,813,999 276,222 4,032,486 2,063,453
=========== =========== ============ ============
</TABLE>
See notes to financial statements.
13
<PAGE>
Statements of Changes in Net Assets, Continued
- --------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
<TABLE>
<CAPTION>
Intermediate Fixed Virginia Municipal
Income Fund Bond Fund
-------------------------- --------------------------
For the Six Year Ended For the Six Year Ended
Months Ended November 30, Months Ended November 30,
May 31, 1997 1996 May 31, 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income... $ 2,964,562 $ 2,191,972 $ 3,232,299 $ 2,862,711
Net realized gains
(losses) from
investment
transactions........... (461,410) (186,030) (83,977) (484,528)
Net change in unrealized
appreciation
(depreciation) from
investments............ (300,522) (171,875) 786,704 (26,190)
----------- ------------ ------------ -----------
Change in net assets
resulting from
operations.............. 2,202,630 1,834,067 3,935,026 2,351,993
----------- ------------ ------------ -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................. (2,798,144) (2,177,940) (3,100,855) (2,839,431)
----------- ------------ ------------ -----------
Change in net assets from
shareholder
distributions........... (2,798,144) (2,177,940) (3,100,855) (2,839,431)
----------- ------------ ------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 62,548,859 18,749,468 52,303,716 24,157,092
Dividends reinvested.... 179,993 467,716 177,405 330,581
Cost of shares redeemed. (9,807,865) (11,392,112) (8,462,743) (7,663,274)
----------- ------------ ------------ -----------
Change in net assets from
capital transactions.... 52,920,987 7,825,072 44,018,378 16,824,399
----------- ------------ ------------ -----------
Change in net assets..... 52,325,473 7,481,199 44,852,549 16,336,961
NET ASSETS:
Beginning of period..... 43,277,129 35,795,930 70,378,401 54,041,440
----------- ------------ ------------ -----------
End of period........... $95,602,602 $ 43,277,129 $115,230,950 $70,378,401
=========== ============ ============ ===========
SHARE TRANSACTIONS:
Issued.................. 6,552,267 1,897,219 5,388,761 2,390,140
Reinvested.............. 18,648 47,695 17,806 33,003
Redeemed................ (1,015,473) (1,153,262) (851,446) (762,211)
----------- ------------ ------------ -----------
Change in shares......... 5,555,442 791,652 4,555,121 1,660,932
=========== ============ ============ ===========
</TABLE>
See notes to financial statements.
14
<PAGE>
Schedule of Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Money Market Fund May 31, 1997
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. TREASURY BILLS (59.2%):
$1,000,000 6/5/97................................................ $ 999,431
1,250,000 6/12/97............................................... 1,248,052
1,025,000 6/19/97............................................... 1,022,417
1,250,000 6/26/97............................................... 1,245,489
1,250,000 7/3/97................................................ 1,244,350
1,250,000 7/24/97............................................... 1,240,578
1,000,000 9/18/97............................................... 983,998
1,250,000 11/28/97.............................................. 1,217,344
-----------
Total U.S. Treasury Bills 9,201,659
-----------
INVESTMENT COMPANIES (2.7%):
414,563 Dreyfus Treasury Prime Cash Management Fund........... 414,563
-----------
Total Investment Companies 414,563
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- ---------------------------------------------------- -----------
<C> <S> <C>
REPURCHASE AGREEMENTS (38.0%):
$1,867,490 J.P. Morgan, 5.53%*, 6/2/97 (Collateralized by
$1,962,000 U.S. Treasury Bills, 0.00%, 11/20/97,
market value-- $1,912,642)......................... $ 1,867,490
2,990,926 Lehman Brothers, 5.40%*, 6/2/97 (Collateralized by
$2,895,000 U.S. Treasury Bonds, 7.88%, 11/15/07,
market value-- $3,066,239)......................... 2,990,926
1,048,920 Morgan Stanley, 5.40%*, 6/2/97 (Collateralized by
$1,050,000 U.S. Treasury Notes, 6.00%, 5/31/98,
market value-- $1,081,942)......................... 1,048,920
-----------
Total Repurchase Agreements 5,907,336
-----------
Total (Cost--$15,523,558)(a) $15,523,558
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $15,535,063.
* Variable rate security. Interest rate is as of May 31, 1997
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements.
15
<PAGE>
Schedule of Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Equity Fund May 31, 1997
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (99.3%):
Aircraft Engines & Engine Parts (1.6%):
57,000 Allied Signal, Inc. .................................. $ 4,374,750
------------
Airlines (1.0%):
110,000 Atlantic Southeast Airlines, Inc. .................... 2,873,750
------------
Apparel Manufacturing (0.3%):
20,000 Tommy Hilfiger Corp. (b).............................. 890,000
------------
Automotive (1.8%):
90,000 General Motors........................................ 5,152,500
------------
Banking (3.7%):
50,000 Banc One Corp. ....................................... 2,162,500
34,000 Bank of New York Co., Inc. ........................... 1,449,250
50,000 Norwest Corp. ........................................ 2,675,000
90,000 State Street Boston Corp. ............................ 4,016,250
------------
10,303,000
------------
Beverages (3.5%):
110,000 Anheuser-Busch Cos., Inc. ............................ 4,716,250
140,000 PepsiCo, Inc. ........................................ 5,145,000
------------
9,861,250
------------
Chemicals (3.5%):
34,000 Dow Chemical Co. ..................................... 2,834,750
38,000 E. I. du Pont de Nemours.............................. 4,137,250
50,000 PPG Industries........................................ 2,906,250
------------
9,878,250
------------
Computer Software (1.2%):
105,000 Sun Microsystems, Inc. (b)............................ 3,386,250
------------
Computers (1.1%):
45,000 Gateway 2000, Inc. (b)................................ 2,986,875
------------
Construction (1.6%):
45,900 Caterpillar........................................... 4,480,987
------------
Consumer Goods & Services (4.9%):
84,000 Colgate Palmolive Co. ................................ 5,208,000
85,000 Goodyear Tire Co. .................................... 4,972,500
180,000 Sturm, Ruger & Co., Inc. ............................. 3,397,500
------------
13,578,000
------------
Defense (3.6%):
61,000 Lockheed Martin Corp. ................................ 5,711,125
89,600 Raytheon Co. ......................................... 4,278,400
------------
9,989,525
------------
</TABLE>
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Electrical & Electronic (5.7%):
65,000 Compaq Computer Corp. (b)............................. $ 7,036,250
58,500 Intel Corp. .......................................... 8,862,750
------------
15,899,000
------------
Electrical Equipment (2.4%):
109,700 General Electric Co. ................................. 6,623,138
------------
Entertainment (3.1%):
170,000 Callaway Golf Co. .................................... 5,482,500
85,000 Carnival Corp. ....................................... 3,230,000
------------
8,712,500
------------
Financial Services (10.0%):
180,000 Equifax, Inc. ........................................ 5,625,000
184,000 Federal Home Loan Mortgage Corp. ..................... 6,072,000
90,000 Franklin Resources, Inc. ............................. 5,827,500
130,000 Green Tree Financial Corp. ........................... 4,550,000
106,664 Travelers, Inc. ...................................... 5,853,187
------------
27,927,687
------------
Food Processing (1.2%):
80,000 Heinz Co. ............................................ 3,440,000
------------
Food Products (3.2%):
115,000 Campbell Soup Co. .................................... 5,290,000
60,000 General Mills ........................................ 3,795,000
------------
9,085,000
------------
Household Products & Wares (1.7%):
35,000 Procter & Gamble Co. ................................. 4,825,625
------------
Insurance (1.9%):
66,300 Progressive Corp. .................................... 5,245,988
------------
Machinery & Equipment (2.4%):
80,000 Briggs & Stratton..................................... 4,130,000
30,000 Novellus Systems, Inc. (b)............................ 2,456,250
------------
6,586,250
------------
Manufacturing--Consumer Goods (2.2%):
107,656 Mattel, Inc. ......................................... 3,216,223
65,000 Millipore Corp. ...................................... 2,803,125
------------
6,019,348
------------
Metals & Mining (0.7%):
25,000 Phelps Dodge Corp. ................................... 2,090,625
------------
</TABLE>
16
<PAGE>
Schedule of Investments, Continued (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Equity Fund May 31, 1997
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Office/Business Equipment & Supplies (0.7%):
40,000 Hewlett Packard....................................... $ 2,060,000
------------
Oil & Gas Exploration (9.2%):
50,000 Amoco Corp. .......................................... 4,468,750
72,000 Chevron Corp. ........................................ 5,040,000
105,000 Exxon Corp. .......................................... 6,221,250
37,000 Mobil Corp. .......................................... 5,175,375
45,600 Texaco, Inc. ......................................... 4,976,100
------------
25,881,475
------------
Paper Products (2.3%):
30,000 Georgia Pacific Corp. ................................ 2,647,500
80,000 International Paper Co. .............................. 3,840,000
------------
6,487,500
------------
Pharmaceuticals (7.6%):
89,000 Abbott Laboratories................................... 5,607,000
70,000 Johnson & Johnson..................................... 4,191,250
57,000 Merck & Co............................................ 5,122,875
70,600 Schering-Plough....................................... 6,406,950
------------
21,328,075
------------
Retail Stores (0.8%):
65,000 The Gap, Inc. ........................................ 2,226,250
------------
Securities Brokers (2.0%):
82,000 Morgan Stanley Group.................................. 5,535,000
------------
Technology (1.2%):
48,000 Xerox................................................. 3,252,000
------------
</TABLE>
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ---------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Tobacco (3.4%):
141,750 Philip Morris, Inc. ................................ $ 6,237,000
110,000 UST, Inc. .......................................... 3,135,000
------------
9,372,000
------------
Transportation & Shipping (2.0%):
155,000 Illinois Central Corp. ............................. 5,599,375
------------
Utilities--Electric (2.6%):
50,000 Duke Power.......................................... 2,250,000
40,000 FPL Group, Inc. .................................... 1,860,000
90,000 General Public Utilities Corp. ..................... 3,150,000
------------
7,260,000
------------
Utilities--Telecommunications (5.2%):
106,000 ALLTEL Corp. ....................................... 3,484,750
33,000 Ameritech Corp. .................................... 2,161,500
35,000 Bell Atlantic Corp. ................................ 2,450,000
40,000 Bell South..................... .................... 1,815,000
50,000 GTE Corp. .......................................... 2,206,250
64,000 U.S. West, Inc. .................................... 2,344,000
------------
14,461,500
------------
Total Common Stocks 277,673,473
------------
INVESTMENT COMPANIES (0.5%):
1,462,840 Dreyfus Government Cash Management Fund............. 1,462,840
------------
Total Investment Companies 1,462,840
------------
Total (Cost--$171,712,954)(a) $279,136,313
============
</TABLE>
- ------
Percentages indicated are based on net assets of $279,567,856.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation (depreciation) of securities as follows
<TABLE>
<S> <C>
Unrealized
appreciation.......... $ 108,061,308
Unrealized
depreciation.......... (637,949)
-------------
Net unrealized
appreciation.......... $ 107,423,359
=============
</TABLE>
(b) Non-income producing security.
See notes to financial statements.
17
<PAGE>
Schedule of Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Intermediate Fixed Income Fund May 31, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS (24.0%):
Automotive (1.0%):
$1,000,000 Ford Motor Co., 7.25%, 10/1/08........................ $ 993,750
-----------
Banking (4.1%):
1,000,000 J.P. Morgan & Co., 7.63%, 9/15/04..................... 1,032,500
1,000,000 State Street Boston Corp., 5.95%, 9/15/03............. 952,500
2,000,000 Wachovia Corp., 6.63%, 11/15/06....................... 1,917,500
-----------
3,902,500
-----------
Financial Services (8.7%):
500,000 Ford Motor Credit Co.,
5.63%, 1/15/99....................................... 494,375
2,350,000 Ford Motor Credit Co.,
6.25%, 11/8/00....................................... 2,311,812
500,000 Household International,
6.00%, 3/15/99....................................... 495,625
1,000,000 Lehman Brothers Holdings,
6.89%, 10/10/00...................................... 998,750
1,000,000 Lehman Brothers Holdings,
7.38%, 5/15/04....................................... 1,002,500
1,000,000 Pitney Bowes Credit Corp.,
6.78%, 7/16/01....................................... 997,500
1,000,000 Salomon, Inc., 7.30%, 5/15/02......................... 1,001,250
1,000,000 Smith Barney, 6.63%, 11/15/03......................... 970,000
-----------
8,271,812
-----------
Industrial Goods & Services (8.1%):
1,000,000 Bristol-Myers Squibb,
6.80%, 11/15/26...................................... 931,250
1,000,000 Chesapeake Corp., 7.20%, 3/15/05...................... 977,500
500,000 Coca-Cola, Inc., 6.50%, 11/15/97...................... 501,475
1,000,000 Philip Morris, Inc., 7.65%, 7/1/08.................... 1,006,250
1,000,000 Sears Roebuck Acceptance Corp., 6.95%, 5/15/02........ 997,500
2,500,000 Walt Disney Co., 6.75%, 3/30/06....................... 2,440,625
1,000,000 Wal-Mart Stores, 5.88%, 10/15/05...................... 926,250
-----------
7,780,850
-----------
Railroads (2.1%):
1,000,000 Burlington Northern,
7.46%, 9/24/11....................................... 1,013,750
1,000,000 CSX Corp., 7.05%, 5/1/02.............................. 995,000
-----------
2,008,750
-----------
Total Corporate Bonds 22,957,662
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (9.2%):
Federal Farm Credit Bank:
$1,000,000 8.65%, 10/1/99........................................ $ 1,052,250
Federal Home Loan Bank:
1,000,000 5.37%, 9/22/97........................................ 1,000,240
Federal National Mortgage Assoc.:
1,000,000 9.55%, 12/10/97....................................... 1,018,990
2,000,000 8.15%, 5/11/98........................................ 2,039,560
1,000,000 8.70%, 6/10/99........................................ 1,046,790
2,625,000 6.35%, 6/10/05........................................ 2,532,259
150,000 6.55%, 9/12/05........................................ 146,430
-----------
Total U.S. Government Agencies 8,836,519
-----------
U.S. TREASURY BONDS (19.5%):
1,000,000 7.25%, 5/15/16........................................ 1,028,510
2,100,000 7.13%, 2/15/23........................................ 2,129,442
6,400,000 7.50%, 11/15/24....................................... 6,798,003
9,000,000 6.63%, 2/15/27........................................ 8,671,140
-----------
Total U.S. Treasury Bonds 18,627,095
-----------
U.S. TREASURY NOTES (43.7%):
1,000,000 6.00%, 8/31/97........................................ 1,001,650
500,000 7.25%, 2/15/98........................................ 504,785
5,500,000 7.13%, 10/15/98....................................... 5,575,240
1,000,000 6.38%, 1/15/99........................................ 1,004,540
3,000,000 6.38%, 4/30/99........................................ 3,009,060
9,500,000 9.13%, 5/15/99........................................ 9,999,510
2,500,000 7.75%, 11/30/99....................................... 2,581,275
2,300,000 7.75%, 1/31/00........................................ 2,377,464
1,000,000 7.13%, 2/29/00........................................ 1,018,830
500,000 6.25%, 5/31/00........................................ 498,245
3,200,000 6.25%, 8/31/00........................................ 3,185,696
1,000,000 7.88%, 8/15/01........................................ 1,050,190
1,500,000 7.50%, 11/15/01....................................... 1,556,745
2,000,000 6.63%, 4/30/02........................................ 2,007,260
1,000,000 7.50%, 5/15/02........................................ 1,041,530
1,000,000 7.25%, 8/15/04........................................ 1,035,420
3,100,000 7.88%, 11/15/04....................................... 3,323,882
1,000,000 6.50%, 10/15/06....................................... 986,875
-----------
Total U.S. Treasury Notes 41,758,197
-----------
</TABLE>
18
<PAGE>
Schedule of Investments, Continued (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Intermediate Fixed Income Fund May 31, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------- -----------
<C> <S> <C>
INVESTMENT COMPANIES (2.4%):
$ 2,288,486 Dreyfus Government Cash
Management Fund..................................... $ 2,288,486
4,515 Dreyfus Treasury Cash
Management Fund..................................... 4,515
-----------
Total Investment Companies 2,293,001
-----------
Total (Cost--$93,347,304)(a) $94,472,474
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $95,602,602.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation (depreciation) of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.. $ 1,586,240
Unrealized depreciation.. (461,070)
-----------
Net unrealized
appreciation............ $ 1,125,170
===========
</TABLE>
See notes to financial statements.
19
<PAGE>
Schedule of Investments (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund May 31, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS (92.2%):
Virginia
$ 500,000 Albemarle County, Service Authority, Water & Sewer
Revenue, 5.50%, 8/1/06 Callable 8/1/02 @102.......... $ 515,175
500,000 Alexandria, Industrial Development Authority,
Pollution Control Revenue, Potomac Electric Project,
5.38%, 2/15/24 (MBIA)................................ 471,920
850,000 Arlington County, G.O., 6.00%, 6/1/04................. 913,716
2,000,000 Arlington County, 5.40%, 6/1/14 Callable 6/1/05 @
101.5................................................ 1,998,680
1,000,000 Arlington County, 5.40%, 6/1/15....................... 998,170
1,100,000 Arlington County, Hospital Revenue, 5.30%, 9/1/15
Callable 9/1/03 @ 102................................ 1,151,770
1,000,000 Ashland, Industrial Development Authority, 4.38%,
11/1/11.............................................. 1,003,960
2,000,000 Augusta County, Industrial Development Authority,
Hospital Revenue, 6.63%, 9/1/12 (AMBAC).............. 2,155,360
1,000,000 Chesapeake Bay Bridge & Tunnel, 6.38%, 7/1/22 Callable
7/1/01 @ 102 (MBIA).................................. 1,084,340
6,000,000 Chesapeake, Water & Sewer, Series A, G.O., 5.00%,
12/1/25.............................................. 5,530,320
200,000 Chesterfield County, 7.20%, 6/15/97................... 200,299
885,000 Chesterfield County, 6.25%, 7/15/05 Callable 7/15/01 @
102.................................................. 947,348
700,000 Chesterfield County, G.O., 5.50%, 7/15/05 Callable
7/15/02 @101.5....................................... 729,659
1,000,000 Chesterfield County, G.O., 5.60%, 7/15/06............. 1,045,280
600,000 Danville, G.O., 6.40%, 5/1/09 Callable 5/1/02 @ 102... 639,378
500,000 Danville, G.O., 6.40%, 5/1/10 Callable 5/1/02 @ 102... 530,800
1,000,000 Fairfax County, 6.00%, 5/1/07......................... 1,042,090
1,000,000 Fairfax County, Industrial Development Revenue
Authority, 5.00%, 8/15/13............................ 956,040
2,250,000 Fairfax County, Industrial Development Revenue
Authority, 5.25%, 8/15/19 Callable 8/15/16 @ 100..... 2,132,490
1,000,000 Fairfax County, Public Improvement, Series A, 5.50%,
6/1/15............................................... 1,003,210
1,000,000 Fairfax County, Sewer Revenue, 5.30%, 11/15/06........ 904,700
500,000 Fairfax County, Water Authority, 5.00%, 4/1/16........ 465,870
2,000,000 Fairfax County, Water Authority, 6.00%, 4/1/22
Callable 4/1/07 @102................................. 2,066,620
1,000,000 Franklin, G.O., 6.40%, 1/15/12........................ 1,056,140
1,000,000 Hampton, G.O. 5.90%, 1/15/07.......................... 1,071,190
2,000,000 Hampton, Hospital Facilities Revenue, 5.38%, 11/1/15.. 1,946,360
1,000,000 Hanover County, Memorial Regional Medical Center,
6.38%, 8/15/18....................................... 1,098,020
1,000,000 Hanover County, Industrial Authority, Bon Secours
Health Systems Projects, 5.50%, 8/15/25.............. 959,830
1,000,000 Hanover County, Industrial Development Authority,
5.50%, 8/15/25....................................... 959,830
2,000,000 Henrico County, 5.30%, 1/15/10........................ 2,006,840
1,000,000 Henrico County, Water & Sewer, 6.25%, 5/1/13 Callable
5/1/02 @ 100......................................... 1,040,310
1,000,000 James City County, G.O., 4.60%, 12/15/03.............. 989,970
1,000,000 James City County, 5.20%, 12/15/10 Callable 12/15/05 @
102.................................................. 995,550
1,000,000 Loudon County, Sanitation Authority, 6.20%, 1/1/06.... 1,076,030
725,000 Lynchburg, G.O., 6.88%, 4/1/01 Callable 4/1/00 @102... 783,696
600,000 Lynchburg, G.O., 5.60%, 3/1/07 Callable 3/1/01 @ 102.. 623,568
100,000 Newport News, 3.75%, 6/1/97........................... 100,000
700,000 Newport News, 5.80%, 7/1/06 Callable 7/1/99 @102...... 723,107
1,000,000 Newport News, 5.20%, 1/15/18 Callable 1/15/06 @ 102... 951,370
1,000,000 Newport News, Series A, 6.00%, 6/1/06................. 1,055,220
1,000,000 Newport News, Series A, 6.00%, 6/1/07................. 1,054,910
1,000,000 Newport News, Series A, 5.70%, 7/1/16 Callable 7/15/05
@ 102................................................ 1,013,720
100,000 Norfolk, 6.55%, 6/1/97................................ 100,007
1,000,000 Norfolk, Depaul Hospital, 6.50%, 12/1/07.............. 1,074,110
1,000,000 Norfolk, Industrial Development Authority, Childrens
Hospital Kings Group, 6.50%, 6/1/21.................. 1,061,600
</TABLE>
20
<PAGE>
Schedule of Investments, Continued (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund May 31, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ---------------------------------------------------- -------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Virginia, continued:
$2,500,000 Norfolk, Industrial Development Authority, Sentara
Hospitals, Series A,
6.50%, 11/1/13 Callable 11/1/04 @ 102.............. $ 2,660,950
1,900,000 Norfolk, Industrial Development Authority, Sentara
Hospitals, Series A, 5.50%, 11/1/17................ 1,858,884
1,000,000 Norfolk, Refinements & Improvements, 5.25%, 2/1/06.. 1,022,720
2,000,000 Norfolk, Refinements & Improvements, 5.50%, 2/1/08.. 2,055,220
1,000,000 Norfolk, Refinements & Improvements, Series A,
5.90%, 2/1/06...................................... 1,049,410
1,000,000 Norfolk, Refinements & Improvements, Series A,
6.00%, 2/1/08...................................... 1,046,250
2,000,000 Norfolk, Water Revenue Bonds, 5.75%, 11/1/12........ 2,051,920
500,000 Norfolk, Water Revenue Bonds, 5.90%, 11/1/25........ 508,140
1,000,000 Portsmouth, Public Improvement, 6.10%, 11/1/03...... 1,069,040
1,420,000 Prince William County, G.O., 4.50%, 8/1/01.......... 1,416,720
1,000,000 Prince William County, Improvements & Refinements,
Series A, G.O., 5.90%, 12/1/03..................... 1,054,670
1,000,000 Prince William County, Industrial Development
Authority, Hospital Revenue, 5.63%, 4/1/12......... 983,630
1,000,000 Richmond, G.O., 5.00%, 1/15/21 Callable 1/15/06 @
102................................................ 916,950
1,000,000 Richmond, Public Improvement, Series A, G.O., 6.25%,
1/15/21............................................ 1,074,540
1,500,000 Richmond, Public Improvement, Series B, G.O., 5.50%,
7/15/23............................................ 1,453,440
1,250,000 Roanoke, G.O., 6.30%, 8/1/07 Callable 8/1/01 @101.5. 1,326,988
3,475,000 Roanoke, G.O., 5.25%, 8/1/24........................ 3,296,698
500,000 Roanoke County, Water Systems Revenue Bonds, 5.00%,
7/1/21............................................. 450,805
2,000,000 Roanoke Industrial Development Authority, 5.25%
7/1/25 Callable 7/1/03 @ 102....................... 1,840,540
1,000,000 Roanoke Refinements & Improvements, Series B, G.O.
6.20%, 8/1/05...................................... 1,057,740
1,000,000 Salem, G.O., 6.50%, 6/1/02.......................... 1,032,740
1,000,000 Spotsylvania County, G.O., 5.50%, 7/15/05 Callable
7/15/02 @102....................................... 1,040,440
1,000,000 Spotsylvania County, Public Improvement, 5.70%,
7/15/07............................................ 1,047,230
1,500,000 University of Virginia, University Revenues, 5.20%,
6/1/15............................................. 1,447,320
100,000 Upper Occoquan Sewer Authority, Regional Sewer
Revenue, 4.60%, 7/1/97............................. 100,075
1,000,000 Virginia Beach, 5.80%, 7/15/07...................... 1,049,840
1,000,000 Virginia Beach, G.O. 5.70%, 7/15/06................. 1,046,950
1,000,000 Virginia Beach, G.O., 6.20%, 9/1/14 Callable 9/1/04
@ 102.............................................. 1,053,840
1,000,000 Virginia Beach, Series C, 6.10%, 8/1/02............. 1,066,820
1,000,000 Virginia College Building Authority, Washington &
Lee University Project, 5.80%, 1/1/24.............. 1,003,290
115,000 Virginia Education Loan Authority, Guaranteed
Student Loan Program,
Refunding Series B, 4.50%, 9/1/97.................. 115,230
1,000,000 Virginia Housing Development Authority, 6.35%,
1/1/15............................................. 1,037,380
1,000,000 Virginia Housing Development Authority, 6.40%,
7/1/17............................................. 1,033,240
1,500,000 Virginia Polytechnic Institute & State University,
5.50%, 6/1/16...................................... 1,480,860
300,000 Virginia Public School Authority, 5.75%, 1/1/08
Callable 1/1/03 @ 102.............................. 312,126
1,000,000 Virginia State Higher Education, Series C, 6.00%,
6/1/06............................................. 1,051,000
1,000,000 Virginia State Housing Development Authority, 6.40%,
7/1/17............................................. 1,033,240
1,000,000 Virginia State Housing Development Authority, 6.55%,
1/1/11............................................. 1,060,270
500,000 Virginia State Housing Development Authority, 7.00%,
7/1/99............................................. 516,350
500,000 Virginia State Housing Development Authority, Series
B, 7.10%, 7/1/00................................... 522,000
500,000 Virginia State Housing Development Authority, Series
H, 6.10%, 1/1/07................................... 512,135
500,000 Virginia State Housing Development Authority, Series
H, 6.20%, 1/1/08................................... 513,040
500,000 Virginia State Housing Development Authority, Series
H, 6.30%, 1/1/09................................... 514,675
400,000 Virginia State Housing Development Authority, Series
I, 7.00%, 5/1/01................................... 415,864
</TABLE>
21
<PAGE>
Schedule of Investments, Continued (Unaudited)
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund May 31, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Virginia, continued:
1,000,000 Virginia State Public Facilities, Series A, 5.50%,
6/1/06............................................... $ 1,043,360
100,000 Virginia State Public School Authority, 4.80%, 8/1/97. 100,174
1,000,000 Virginia State Public School Authority, 6.25%, 1/1/04,
Callable 1/1/02 @ 102................................ 1,075,090
1,000,000 Virginia State Resource Authority Water & Sewer
Revenue, 5.60%, 10/1/25.............................. 972,250
1,000,000 Virginia State Resource Authority, Appomattox River
Water Systems Revenue, 5.25%, 10/1/13
Callable 10/1/03 @ 102............................... 969,010
1,000,000 Virginia State University & College Improvements,
5.25%, 6/1/16........................................ 978,830
750,000 Washington County, Industrial Development Authority,
Johnston Memorial Hospital Revenue,
6.00%, 7/1/14 Callable 7/1/05 @ 102.................. 756,728
2,000,000 Williamsburg, Industrial Development Authority, 5.75%,
10/1/22.............................................. 1,900,220
------------
Total Municipal Bonds 106,225,445
------------
U.S. TREASURY BILLS (5.2%):
6,000,000 6/5/97................................................ 5,995,741
------------
Total U.S. Treasury Bills 5,995,741
------------
INVESTMENT COMPANIES (0.9%):
1,074,349 Dreyfus Tax-Exempt Fund............................... 1,074,349
------------
Total Investment Companies 1,074,349
------------
Total (Cost--$110,270,130)(a) $113,295,535
============
</TABLE>
- ------
Percentages indicated are based on net assets of $115,230,950.
(a)Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation (depreciation) of securities as follows:
<TABLE> AMBAC--AMBAC Indemnity Corporation
<S> <C> GO--General Obligation
Unrealized MBIA--Insured by Municipal Bond
appreciation...... $ 3,224,659 Insurance Association
Unrealized
depreciation...... (199,254)
-----------
Net unrealized
appreciation...... $ 3,025,405
===========
</TABLE>
See notes to financial statements.
22
<PAGE>
Notes to Financial Statements (Unaudited)
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
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, 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. At a special meeting of the
Company's Board of Trustees held December 16, 1996, the Board approved the
termination of the MarketWatch Flexible Income Fund as of February 9, 1997.
The investment objective of the Money Market Fund is to seek current income
consistent with maintaining liquidity and stability of principal. The
investment objective of the Equity Fund is to seek total return through
growth of capital and current income. The Intermediate Fixed Income Fund has
an investment objective to seek current income consistent with preservation
of capital. The Virginia Municipal Bond Fund's investment objective is to
seek as high a level of current income that is exempt from federal income tax
and Virginia income tax as is consistent with the preservation of capital.
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 when 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, 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
Continued
23
<PAGE>
Notes to Financial Statements, Continued (Unaudited)
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
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 procedures approved by the Board of Trustees. The differences
between the cost and market value of investments held by the variable net
asset value funds are reflected as either unrealized appreciation or
depreciation.
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.
Continued
24
<PAGE>
Notes to Financial Statements, Continued (Unaudited)
- -------------------------------------------------------------------------------
MarketWatch Funds May 31, 1997
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.
3.PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six months ended May 31, 1997 are as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
Equity Fund.......................................... $53,368,883 $14,110,690
Intermediate Fixed Income Fund....................... $99,920,769 $48,505,769
Virginia Municipal Bond Fund......................... $54,470,954 $ 9,156,734
</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 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, 1997, BISYS received $478,788 from commissions earned on sales
of shares of the Company's variable net asset value funds of which $452,144
was reallowed to affiliated parties of the Funds. 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, 1997
Information regarding these transactions is as follows for the six months
ended May 31, 1997:
<TABLE>
<CAPTION>
Intermediate Virginia
Money Fixed Municipal
Market Equity Income Bond
Fund Fund Fund Fund
------- -------- ------------ ---------
<S> <C> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee as a percentage of average
daily net assets.................... 0.50% 1.00% 0.74% 0.74%
Voluntary fee reductions............. $35,753 $304,563 $107,079 $184,754
ADMINISTRATIVE FEES:
Annual fee as a percentage of average
daily net assets.................... 0.20% 0.20% 0.20% 0.20%
Voluntary fee reductions............. $3,576 $61,201 $22,738 $27,752
DISTRIBUTION AND SERVICE FEES:
Annual fee as a percentage of average
daily net assets.................... 0.25% 0.25% 0.25% 0.25%
Voluntary fee reductions............. $17,877 -- -- --
CUSTODIAN FEES:
Annual fee as a percentage of average
daily net assets.................... 0.02% 0.02% 0.02% 0.02%
Voluntary fee reductions............. $1,430 -- -- --
REIMBURSED FEES: .................... $20,979 $1,651 $721 --
TRANSFER AGENT AND MUTUAL FUND
ACCOUNTANT FEES: ................... $22,496 $90,878 $31,498 $42,229
</TABLE>
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 Virginia Municipal Bond
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.
26
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Money Market Fund
------------------------------------------------------------------
For the Six February 1,
Months Ended Year Ended Year Ended Year Ended 1993 to
May 31, November 30, November 30, November 30, November 30,
1997 1996 1995 1994 1993(a)
------------ ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
INVESTMENT
ACTIVITIES
Net investment
income......... 0.024 0.049 0.052 0.034 0.020
Net realized and
unrealized
gains (losses)
from
investments.... -- -- -- -- --
------- ------- ------- ------- -------
Total from
Investment
Activities..... 0.024 0.049 0.052 0.034 0.020
------- ------- ------- ------- -------
DISTRIBUTIONS
From net
investment
income......... (0.024) (0.049) (0.052) (0.034) (0.020)
In excess of net
investment
income......... -- -- -- -- --
From net
realized gains. -- -- -- -- --
------- ------- ------- ------- -------
Total
Distributions.. (0.024) (0.049) (0.052) (0.034) (0.020)
------- ------- ------- ------- -------
Net Asset Value,
End of Period... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return
(excludes sales
charges)........ 2.47%(b) 4.99% 5.32% 3.49% 2.01%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of
period (000)... $15,535 $13,721 $13,445 $11,364 $16,041
Ratio of
expenses to
average net
assets......... 0.32%(c) 0.32% 0.32% 0.32% 0.63%(c)
Ratio of net
investment
income to
average net
assets......... 4.90%(c) 4.89% 5.19% 3.39% 2.37%(c)
Ratio of
expenses to
average net
assets*........ 1.14%(c) 1.12% 1.54% 1.65% 1.59%(c)
Ratio of net
investment
income to
average net
assets*........ 4.08%(c) 4.09% 3.97% 2.06% 1.40%(c)
Portfolio
Turnover....... N/A N/A N/A N/A N/A
Average
commission rate
paid (d)....... N/A N/A N/A N/A N/A
<CAPTION>
Equity Fund
--------------------------------------------------------------------
For the Six January 29,
Months Ended Year Ended Year Ended Year Ended 1993 to
May 31, November 30, November 30, November 30, November 30,
1997 1996 1995 1994 1993(a)
-------------- ------------ ------------ ------------ --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 16.41 $ 12.88 $ 9.80 $ 10.20 $ 10.00
-------------- ------------ ------------ ------------ --------------
INVESTMENT
ACTIVITIES
Net investment
income......... 0.07 0.15 0.17 0.17 0.15
Net realized and
unrealized
gains (losses)
from
investments.... 2.02 3.67 3.09 (0.40) 0.19
-------------- ------------ ------------ ------------ --------------
Total from
Investment
Activities..... 2.09 3.82 3.26 (0.23) 0.34
-------------- ------------ ------------ ------------ --------------
DISTRIBUTIONS
From net
investment
income......... (0.07) (0.15) (0.17) (0.17) (0.14)
In excess of net
investment
income......... -- -- (0.01) -- --
From net
realized gains. (0.25) (0.14) -- -- --
-------------- ------------ ------------ ------------ --------------
Total
Distributions.. (0.32) (0.29) (0.18) (0.17) (0.14)
-------------- ------------ ------------ ------------ --------------
Net Asset Value,
End of Period... 18.18 $ 16.41 $ 12.88 $ 9.80 $ 10.20
============== ============ ============ ============ ==============
Total Return
(excludes sales
charges)........ 13.07%(b) 30.10% 33.59% (2.26%) 3.42%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of
period (000)... $279,568 $186,147 $119,484 $103,140 $107,859
Ratio of
expenses to
average net
assets......... 1.31%(c) 1.35% 1.35% 1.35% 1.33%(c)
Ratio of net
investment
income to
average net
assets......... 0.89%(c) 1.04% 1.58% 1.75% 1.75%(c)
Ratio of
expenses to
average net
assets*........ 1.61%(c) 1.66% 1.71% 1.75% 1.72%(c)
Ratio of net
investment
income to
average net
assets*........ 0.59%(c) 0.73% 1.22% 1.34% 1.36%(c)
Portfolio
Turnover....... 5.81% 12.33% 29.98% 30.33% 29.72%
Average
commission rate
paid (d)....... $ 0.0600 $ 0.0634 -- -- --
</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 the total number of portfolio shares purchased and
sold for which commissions were charged. Calculation not required for prior
periods.
N/A = not applicable
See notes to financial statements.
27
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Intermediate Fixed Income Fund
-------------------------------------------------------------------
For the Six January 29,
Months Ended Year Ended Year Ended Year Ended 1993 to
May 31, November 30, November 30, November 30, November 30,
1997 1996 1995 1994 1993(a)
------------ ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 9.96 $ 10.07 $ 9.31 $ 10.20 $ 10.00
------- ------- ------- ------- -------
INVESTMENT
ACTIVITIES
Net investment
income......... 0.27 0.55 0.55 0.44 0.33
Net realized and
unrealized
gains (losses)
from
investments.... (0.32) (0.11) 0.76 (0.79) 0.19
------- ------- ------- ------- -------
Total from
Investment
Activities..... (0.05) 0.44 1.31 (0.35) 0.52
------- ------- ------- ------- -------
DISTRIBUTIONS
From net
investment
income......... (0.26) (0.55) (0.54) (0.43) (0.32)
In excess of net
investment
income......... -- -- (0.01) (0.01) --
In excess of net
realized gains. -- -- -- (0.10) --
------- ------- ------- ------- -------
Total
Distributions.. (0.26) (0.55) (0.55) (0.54) (0.32)
------- ------- ------- ------- -------
Net Asset Value,
End of Period... $ 9.65 $ 9.96 $ 10.07 $ 9.31 $ 10.20
======= ======= ======= ======= =======
Total Return
(excludes sales
charges)........ (0.36)%(b) 4.46% 14.44% (3.51%) 5.19%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of
period (000)... $95,603 $43,277 $35,796 $48,730 $64,674
Ratio of
expenses to
average net
assets......... 1.05%(c) 1.09% 1.10% 1.09% 1.08%(c)
Ratio of net
investment
income to
average net
assets......... 6.52%(c) 5.62% 5.60% 4.46% 3.92%(c)
Ratio of
expenses to
average net
assets*........ 1.34%(c) 1.40% 1.51% 1.49% 1.47%(c)
Ratio of net
investment
income to
average net
assets*........ 6.23%(c) 5.31% 5.19% 4.07% 3.53%(c)
Portfolio
Turnover....... 56.47% 83.76% 43.65% 55.36% 57.40%
<CAPTION>
Virginia Municipal Bond Fund
--------------------------------------------------------------------
For the Six February 1,
Months Ended Year Ended Year Ended Year Ended 1993 to
May 31, November 30, November 30, November 30, November 30,
1997 1996 1995 1994 1993(a)
-------------- ------------ ------------ ------------ --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 10.15 $ 10.25 $ 9.40 $ 10.31 $ 10.00
-------------- ------------ ------------ ------------ --------------
INVESTMENT
ACTIVITIES
Net investment
income......... 0.23 0.44 0.42 0.38 0.28
Net realized and
unrealized
gains (losses)
from
investments.... (0.13) (0.10) 0.85 (0.90) 0.30
-------------- ------------ ------------ ------------ --------------
Total from
Investment
Activities..... 0.10 0.34 1.27 (0.52) 0.58
-------------- ------------ ------------ ------------ --------------
DISTRIBUTIONS
From net
investment
income......... (0.22) (0.44) (0.42) (0.38) (0.27)
In excess of net
investment
income......... -- -- -- (0.01) --
In excess of net
realized gains. -- -- -- -- --
-------------- ------------ ------------ ------------ --------------
Total
Distributions.. (0.22) (0.44) (0.42) (0.39) (0.27)
-------------- ------------ ------------ ------------ --------------
Net Asset Value,
End of Period... $ 10.03 $ 10.15 $ 10.25 $ 9.40 $ 10.31
============== ============ ============ ============ ==============
Total Return
(excludes sales
charges)........ 1.03%(b) 3.50% 13.79% (5.17%) 5.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of
period (000)... $115,231 $70,378 $54,041 $39,978 $33,652
Ratio of
expenses to
average net
assets......... 0.96%(c) 1.04% 1.05% 1.04% 1.02%(c)
Ratio of net
investment
income to
average net
assets......... 5.82%(c) 4.45% 4.33% 3.90% 3.65%(c)
Ratio of
expenses to
average net
assets*........ 1.34%(c) 1.44% 1.51% 1.56% 1.66%(c)
Ratio of net
investment
income to
average net
assets*........ 5.44%(c) 4.05% 3.87% 3.38% 3.01%(c)
Portfolio
Turnover....... 9.12% 36.99% 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.
28
<PAGE>
Investment Adviser 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
7/97
LOGO
OF MARKETWATCH
Semi-Annual Report
to Shareholders
May 31, 1997
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Central Fidelity National Bank
Investment Adviser
BISYS Fund Services
