<PAGE>
[LOGO OF MARKETWATCH]
ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1996
----------------------------------------------
CENTRAL FIDELITY NATIONAL BANK, INVESTMENT ADVISER
BISYS FUND SERVICES
Distributor
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
<TABLE>
<S> <C>
Letter to Shareholders........................ 3
Performance Report............................ 8
Statements of Assets and Liabilities.......... 13
Statements of Operations...................... 14
Statements of Changes in Net Assets........... 15
Schedules of Portfolio Investments............ 17
Notes to Financial Statements................. 24
Financial Highlights.......................... 29
Independent Auditors Report................... 32
</TABLE>
2
<PAGE>
MESSAGE FROM THE CHAIRMAN
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
DEAR SHAREHOLDERS:
We're very pleased to report that the year ended November 30, 1996, was a very
strong one for the financial markets and for the MarketWatch Funds. During the
period, the Dow Jones Industrial Average gained over 1400 points--and stocks
across the board participated in the market's climb. Bonds had a somewhat
rockier ride, but when all was said and done, they too posted positive returns
for the period.
Investors also continued to deposit record amounts in mutual funds. We're
pleased to report that many chose to invest in our family of mutual funds.
During the 12-month period ended November 30, 1996, total net assets under
management grew by 30%, rising from $244 million to $317 million.
THE EQUITY FUND SCORES
While it was a good period for most equity funds, it was very good indeed for
our growth and income fund--and the strong performance of our managers was
regularly recognized throughout the second half of 1996 in The Wall Street
Journal's Mutual Fund Scorecard.
A NEW MANAGER FOR THE INTERMEDIATE FIXED INCOME FUND
We're also pleased to report that Paul Baran, Chief Investment Officer of our
Investment Adviser, has taken over the management of the Intermediate Fixed
Income Fund. Mr. Baran has over 22 years of experience in investment
management, and brings a wealth of expertise to the management of the
Intermediate Fixed Income Fund portfolio. Prior to joining Central Fidelity
National Bank Investment Advisers, he was Vice President and Senior Portfolio
Manager at BancOklahoma Trust Company and Second Vice President at National
Bank of Detroit. A graduate of Ohio Wesleyan University in economics, Mr.
Baran, also holds an MBA in Finance from Wayne State University and is a
Chartered Financial Analyst.
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
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MarketWatch Funds November 30, 1996
A FINAL FEW WORDS TO THE WISE. . .
Although stocks have registered very strong gains over the past two years, we
believe that the market is due for a pause. While conditions are still
favorable for stocks, we urge our shareholders to keep this in mind. Investing
in the stock market requires a long-term horizon and the ability to withstand
price swings.
Normally, investors in stocks should have a time horizon of at least 10 years.
Over a 10-year period, the market will rise and fall--sometimes dramatically.
But history has shown that investors with the fortitude to persevere have
ultimately been rewarded with strong returns. Although past performance
cannot, of course, predict future returns, for many investors the long-term
track record is forgotten when prices are falling.
Given current conditions, we feel this advice is particularly timely. While,
in the short-term, we may see the stock market pause and catch its breath, we
believe that the long-term prospects are very bright. We would view any
correction in stock prices in the months ahead as a buying opportunity.
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
4
<PAGE>
MESSAGE FROM THE INVESTMENT ADVISER
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MarketWatch Funds November 30, 1996
DEAR SHAREHOLDERS:
And the beat goes on. . .as we go to press, the stock market is completing
another outstanding year. After taking some 99 years to reach 4000 on the Dow,
stocks surged through the 5000 level before the end of 1995 and roared past
6000 to flirt with 6500 as the current 12-month period ended. But this
enthusiasm was not all that surprising. Supporting the bull market was an
economy in better shape than we've seen in years--one growing moderately with
benign inflation.
Bond investors, however, found the good economic news on the economy somewhat
worrisome. And as evidence of continued strength surfaced throughout the first
half of 1996 and pushed stocks higher, fears of inflation rippled through the
fixed-income markets. During the second half of 1996, rates seesawed in
response to each new statistic and in anticipation of possible Federal Reserve
action. As a result, the environment in the bond markets throughout the year
was uncertain and, at times, very challenging.
STOP WORRYING--IT'S OKAY TO BE HAPPY
Yet, at no point during the period did solid evidence of sustained,
accelerated growth or spiraling inflation materialize--nor has it to date. In
fact, signs point to growth in the range of 2%-3% for 1996, with activity in
the second half of the year somewhat slower than in the first half. However,
two thirds of all economic activity is attributable to consumers, and
currently consumer confidence is at a 10-year high. Personal income growth is
positive. Job creation is still steady and favorable. In fact, during the last
three years over 10 million new jobs have been created--which represents 10
million consumers who are ready, willing and able to spend money.
Of course, some forecasters fear that consumer debt levels, now extremely
high, will lead to a recession. In the past, however, spending hasn't stopped
until Federal Reserve policy has become restrictive, credit is unavailable,
consumer confidence is eroding, and real personal income is declining. None of
these situations exists today. In fact, while Christmas spending may be
somewhat less robust than retailers had hoped, there's no indication that
consumers are zipping their wallets shut.
5
<PAGE>
MESSAGE FROM THE INVESTMENT ADVISER
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MarketWatch Funds November 30, 1996
BONDS: INFLATION IS KEY
Throughout most of this year, the biggest threat to the bond market, as well
as the economy and the stock market, has been the specter of higher inflation.
But the rate of inflation as measured by the Consumer Price Index is only
slightly higher than it was just a year ago. There are some supply problems
with certain commodities, but pressure is not building across the market--gold
and commodity futures are not exhibiting significant upward pressure.
In addition, if the economy expands more slowly in the second half of the year
than in the first, and if inflation remains subdued, interest rates have a
good chance of declining. Given these circumstances, we don't believe we'll
see any action on the part of the Federal Reserve anytime in the near future.
Moreover, should our forecast prove to be right, we believe that the stage may
be set for a reduction rather than an increase in rates. Until the directions
of economic growth and inflation become clearer, however, we expect to
approach the fixed-income market cautiously.
STOCKS: TOO MUCH OF A GOOD THING?
The biggest hurdle for the overall U.S. stock market in the months ahead is
one of valuation. The market continues to levitate at the highest price-to-
dividend ratio and the lowest dividend yield in its history. Nonetheless,
conditions are still favorable for stocks. The economy is still expanding,
corporate profits are rising and inflation is relatively benign. In addition,
the dollar appears to have bottomed and is now trending higher. A stronger
dollar should attract foreign investors into U.S. stocks. Finally, domestic
financial liquidity remains unusually positive as investors pour billions of
dollars into equities every month.
Nevertheless, conditions now call for a degree of caution. As we move forward,
we expect to see the economy slow, and, as it does, the rate of growth in
corporate earnings will slow as well. It is unlikely that slower earnings
growth will derail the overall market; however, we do expect to see the market
grow increasingly selective. Companies unable to meet expectations fall
further out of favor. Consequently, in
6
<PAGE>
MESSAGE FROM THE INVESTMENT ADVISER
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
the months ahead, we believe it will be far more critical to be in the right
stocks rather than just in the market. Moreover, we expect to see companies
that produce consistent visible earnings growth to be rewarded with
significant premium valuations vis-a-vis the rest of the market.
Sincerely,
/s/ Paul P. Baran
Paul P. Baran
Senior Vice President and
Chief Investment Officer
Central Fidelity National Bank
7
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
THE EQUITY FUND
In short, the year ended November 30, 1996, was a very good one for the stock
market--and an outstanding one for the Fund's investors. Week after week, the
market moved higher, and few sectors failed to participate in the rise. Even
technology stocks, which took a dramatic plunge in mid-summer, bounced back
within a month and moved higher throughout the fall. Slightly overweighted in
this sector, the Fund benefited handsomely from their advance. Intel and Sun
Microsystems, a new addition to the portfolio, were particularly strong
performers.
Moreover, holdings in other sectors across the market made equally impressive
contributions to performance. As a result, for the year ended November 30,
1996, we're very pleased to report that the Fund beat its benchmark handily,
posting a total return of 30.10% versus 27.84% for the S&P 500 Stock Index.
HIGHER AND HIGHER?
Clearly, the stock market may need to catch its breath after the fast dash
upward of the past year. Nevertheless, our indicators suggest that the
economic environment continues to be favorable. Consequently, while we are
more cautious about the immediate prospects for the market than we were a year
ago, we believe that any downturn should be viewed as a buying opportunity
rather than the start of a correction.
Moreover, long term, the prospects for the market overall are bright--very
bright indeed in certain areas. Companies whose business is truly
international, those that have a dominant position and proven niche in their
industries, those poised to serve the needs of aging baby boomers (financial
services and recreation companies, for example) and those in the
telecommunications industry should see strong growth in the years ahead.
As a result, we have focused our attention on these areas and will continue to
do so for the foreseeable future. As of November 30, 1996, the top five
holdings in the Fund's portfolio were Intel (2.96%), State Street Boston
(2.54%), Equifax (2.46%), Compaq (2.34%) and Federal Home Loan Mtg. Corp.
(2.33%).*
*The Fund's composition is subject to change.
8
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PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
Equity Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Equity Fund Equity Fund S&P 500
Date (Load) (No Load) Index
<S> <C> <C> <C>
01/29/93 $9,551 $10,000 $10,000
11/30/93 $9,878 $10,342 $10,787
11/30/94 $9,654 $10,108 $10,903
11/30/95 $12,897 $13,504 $14,926
11/30/96 $16,779 $17,568 $19,081
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------------------------
PERIOD SINCE
ENDED 1 YEAR 3 YEAR INCEPTION
11/30/96 (1/29/93)
<S> <C> <C> <C>
Load* 24.21% 17.50% 14.42%
No-Load 30.10% 19.32% 15.80%
*Reflects the maximum 4.50% sales charge.
- ---------------------------------------------------------------
</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.
The performance of the MarketWatch Equity Fund is measured against the S&P 500
index, which is generally representative of the stock market as a whole. The
index is unmanaged and does not reflect the deduction of expenses associated
with a mutual fund, such as investment management fees. The Fund's performance
reflects the deduction of fees for these value-added services.
THE INTERMEDIATE FIXED INCOME FUND AND THE FLEXIBLE INCOME FUND
With the direction of the economy up in the air, the bond market had a case of
the jitters throughout much of the year ended November 30, 1996. Positive
statistics on economic growth or employment precipitated rapid retreats, only
to be followed by advances on any sign of weakness in sales, manufacturing or
consumer confidence.
Moreover, while the lack of certainty in the marketplace caused rates to trade
within a relatively narrow range, the sheer speed of shifts in sentiment made
it impossible to catch every one. Consequently, in the fall, both Funds'
holdings in mortgage-backed securities (primarily income vehicles) were
reduced in favor of increasing our position in corporate bonds and Treasury
securities in an effort to improve the Funds' total returns.
Nonetheless, due to the volatility of the market in the first half, the Funds
underperformed their benchmark for the period. For the year ended November 30,
1996, the Intermediate Fixed Income Fund produced a total return of 4.46%, the
Flexible Income Fund, 4.10%.
BETTER DAYS AHEAD
As we move forward into 1997, the one thing that is clear is that the
direction of the economy--and of interest rates--is still unclear. Given this,
we expect the fixed-income markets to continue to be somewhat temperamental in
the months ahead. While we have adjusted our indicators in an effort to spot
changes more rapidly, we are well aware of the risks involved in chasing rates
as they move up and down.
9
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
Moreover, in recent months, the Funds' shift in allocation has produced solid
results. Consequently, in the months ahead, we expect to continue to focus our
efforts on seeking out securities that offer the potential to increase total
returns.
As of November 30, 1996, the average maturity of the Intermediate Fixed Income
Fund was 8.9 years; the Flexible Income Fund, 2.2 years. The average credit
quality of both portfolios was AA.*
Intermediate Fixed Income Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Intermediate Intermediate Lehman
Fixed Fixed Bros. Int.
Income Fund Income Fund Govt./Corp
Date (Load) (No Load) Index
<S> <C> <C> <C>
01/29/93 $9,551 $10,000 $10,000
11/30/93 $10,047 $10,519 $10,622
11/30/94 $9,694 $10,150 $10,428
11/30/95 $11,094 $11,616 $11,942
11/30/96 $11,589 $12,133 $12,637
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------------------------
PERIOD SINCE
ENDED 1 YEAR 3 YEAR INCEPTION
11/30/96 (1/29/93)
<S> <C> <C> <C>
Load* -0.20% 3.28% 3.91%
No-Load 4.46% 4.87% 5.16%
*Reflects the maximum 4.50% sales charge.
- ---------------------------------------------------------------
</TABLE>
The performance of the MarketWatch Intermediate Fixed Income Fund is measured
against the Lehman Brothers Intermediate Government/Corporate Index, an
unmanaged index generally representative of the performance of government and
corporate bonds with maturities of 1 to 10 years. The index does not reflect
the deduction of expenses associated with a mutual fund, such as investment
management fees. The Fund's performance reflects the deduction of fees for
these value-added services.
Flexible Income Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Merrill Lynch
Flexible Flexible Corp./Govt
Income Fund Income Fund 1-5 Yr. Bond
Date (Load) (No Load) Index
<S> <C> <C> <C>
01/29/93 $9,551 $10,000 $10,000
11/30/93 $9,816 $10,277 $10,508
11/30/94 $9,804 $10,265 $10,470
11/30/95 $10,656 $11,156 $11,767
11/30/96 $11,093 $11,614 $12,453
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------------------------
PERIOD SINCE
ENDED 1 YEAR 3 YEAR INCEPTION
11/30/96 (1/29/93)
<S> <C> <C> <C>
Load* -0.56% 2.58% 2.74%
No-Load 4.10% 4.16% 3.97%
*Reflects the maximum 4.50% sales charge.
- ---------------------------------------------------------------
</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.
The performance of the MarketWatch Flexible Income Fund is measured against
the Merrill Lynch 1-5 Year Government/Corporate Bond Index, an unmanaged index
generally representative of the performance of 1-5 year government and
corporate bonds. The index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. The Fund's
performance reflects the deduction of fees for these value-added services.
*The Fund's composition is subject to change.
THE VIRGINIA MUNICIPAL BOND FUND
Much like the taxable markets, the tax-free markets were jumpy as investors
reacted--and sometimes overreacted--to reports on the economy's growth, the
direction of interest rates and various tax-reform
10
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
proposals. In Virginia, however, taxpayers continued to chase after high-
quality issues--and supply, already tight, grew tighter still, which, in turn,
dampened volatility somewhat throughout the year ended November 30, 1996.
Lack of supply, however, also made it extremely difficult to respond quickly
to changes in the marketplace without compromising quality. As a result, the
Fund slightly underperformed its benchmark for the period, producing a total
return of 3.50% for the year ended November 30, 1996.
DEMAND TO GROW
Looking ahead, we feel our caution was not only prudent in the short term--it
may also prove to be profitable over the long term. With municipalities under
pressure from constituents to cut borrowing dramatically, supply is unlikely
to ease significantly in the near future. At the same time, high-quality
fixed-income securities are becoming more attractive to baby boomers as they
move toward retirement age. As a result, we expect demand for high-quality
securities, like those Virginia offers, to increase dramatically in the coming
years.
Given the environment in the marketplace, we expect to make no major changes
in the allocation or maturity structure of the portfolio in the near term. As
of November 30, 1996, the fund was well diversified, with over 25 different
issuers in the portfolio. All securities were rated A or better, and the
average maturity of the Fund was approximately 11.8 years.*
Virginia Municipal Bond Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Virginia Virginia
Municipal Municipal Lehaman Bros. Lehaman Bros.
Bond Fund Bond Fund Municipal Municipal
Date (Load) (No Load) Bond Index Bond Index 7 Yr.
<S> <C> <C> <C> <C>
02/01/93 $9,551 $10,000 $10,000 $10,000
11/30/93 $10,108 $10,584 $10,869 $10,687
11/30/94 $9,585 $10,036 $10,298 $10,423
11/30/95 $10,907 $11,420 $12,242 $12,011
11/30/96 $11,289 $11,820 $12,962 $12,640
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------------------------
PERIOD SINCE
ENDED 1 YEAR 3 YEAR INCEPTION
11/30/96 (2/1/93)
<S> <C> <C> <C>
Load* -1.13% 2.16% 3.21%
No-Load 3.50% 3.75% 4.46%
*Reflects the maximum 4.50% sales charge.
- ---------------------------------------------------------------
</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.
The performance of the MarketWatch Virginia Municipal Bond Fund is measured
against the Lehman Brothers Municipal Bond Index, an unmanaged index generally
representative of the performance of the municipal bond market as a whole, and
against the Lehman Brothers Municipal Bond 7-Year Index, an unmanaged index
representative of municipal bonds with remaining maturities of seven years.
The indices do not reflect the deduction of expenses associated with a mutual
fund, such as investment management fees. The Fund's performance reflects the
deduction of fees for these value-added services.
*The Fund's composition is subject to change.
11
<PAGE>
PERFORMANCE REPORT
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
THE MONEY MARKET FUND
It was a bumpy year for money market investors. Throughout much of the year,
sentiment shifted rapidly in response to each new growth and employment
number. Moreover, the markets hung on every word Federal Reserve members
uttered--as well as a good many they were widely expected to utter. Yet, no
easily identifiable trend emerged. As a result, while rates moved up and down
very swiftly, they did so within a relatively narrow trading range. And, when
all was said and done, short-term rates ended the year just about where they
began.
ALL SOUND, LITTLE FURY
Until the direction of the economy becomes very clear, interest rates should
continue to trade within a relatively narrow range. In fact, under current
conditions, our indicators suggest that the Fed's next action is just as
likely to be a cut in rates as a tightening. In line with this outlook, the
Fund has been positioned neutrally.
As of November 30, 1996, the average maturity of the Fund was 39 days, and its
assets were invested primarily in U.S. Treasury securities and repurchase
agreements collateralized by U.S. Treasury securities.
Performance data represent past performance and are not predictive of future
performance. The composition of the Fund's holdings is subject to change. 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
12
<PAGE>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
MarketWatch Funds November 30, 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 .. $ 8,506,763 $186,636,971 $42,770,964 $2,368,368 $70,338,808
Repurchase agreements... 5,246,574 1,004,225
----------- ------------ ----------- ---------- -----------
Total Investments, at
value (Total cost
$13,753,337;
$125,794,305;
$41,345,272;
$3,299,232;
$68,100,107)........... 13,753,337 186,636,971 42,770,964 3,372,593 70,338,808
Interest and dividends
receivable............. 24,454 421,095 546,914 56,039 1,096,256
Receivable for capital
shares sold............ 209,270
Prepaid expenses and
other assets........... 7,186 17,898 5,360 4,226 8,768
----------- ------------ ----------- ---------- -----------
Total Assets........... 13,784,977 187,285,234 43,323,238 3,432,858 71,443,832
----------- ------------ ----------- ---------- -----------
LIABILITIES:
Dividends payable....... 55,810
Payable for investments
purchased.............. 918,700 1,000,000
Accrued expenses and
other payables:
Investment advisory
fees.................. 109,143 17,433 1,396 22,350
Administration fees.... 563 7,568 1,772 143 2,869
Distribution and
services fees......... 36,513 8,845 811 14,289
Accounting and transfer
agent fees............ 4,665 23,923 8,094 4,892 9,378
Legal and audit fees... 2,653 23,334 5,347 2,346 9,174
Printing fees.......... 31 13,305 3,220 74 4,999
Other.................. 191 5,479 1,398 442 2,372
----------- ------------ ----------- ---------- -----------
Total Liabilities...... 63,913 1,137,965 46,109 10,104 1,065,431
----------- ------------ ----------- ---------- -----------
NET ASSETS:
Capital................. 13,721,563 122,326,944 44,969,757 4,104,643 70,571,814
Undistributed net
investment income...... 59,126 69,906 5,455 97,442
Net unrealized
appreciation from
investments............ 60,842,666 1,425,692 73,361 2,238,701
Accumulated
undistributed net
realized gains (losses)
from investment
transactions........... (499) 2,918,533 (3,188,226) (760,705) (2,529,556)
----------- ------------ ----------- ---------- -----------
Net Assets............. $13,721,064 $186,147,269 $43,277,129 $3,422,754 $70,378,401
=========== ============ =========== ========== ===========
Outstanding units of
beneficial interest
(shares)............... 13,721,563 11,342,771 4,347,264 346,536 6,930,862
=========== ============ =========== ========== ===========
Net asset value--
redemption price per
share.................. $ 1.00 $ 16.41 $ 9.96 $ 9.88 $ 10.15
=========== ============ =========== ========== ===========
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) $ 17.18 $ 10.43 $ 10.35 $ 10.63
=========== ============ =========== ========== ===========
</TABLE>
- ------
(a) Offering price and redemption price are the same for the Money Market Fund.
See notes to financial statements.
13
<PAGE>
Statements of Operations
- --------------------------------------------------------------------------------
MarketWatch Funds For The Year Ended November 30, 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............ $ 705,898 $2,554,825 $754,986 $3,474,650
Dividend income (a)........ 17,945 $ 3,462,279 63,883 27,361 53,461
--------- ----------- ---------- -------- ----------
Total Income............. 723,843 3,462,279 2,618,708 782,347 3,528,111
--------- ----------- ---------- -------- ----------
EXPENSES:
Investment advisory fees... 69,491 1,442,124 288,707 94,274 475,540
Administration fees........ 27,796 288,425 78,029 25,479 128,524
Distribution and services
fees...................... 34,746 360,076 97,485 31,968 160,544
Custodian and accounting
fees...................... 32,968 74,823 41,372 34,784 60,983
Legal and audit fees....... 8,883 85,448 22,542 9,039 35,208
Registration and filing
fees...................... 6,798 24,888 13,021 12,137 9,549
Trustees' fees and
expenses.................. 1,196 12,551 3,428 1,317 5,673
Transfer agent fees........ 15,721 101,887 26,799 15,253 31,984
Printing costs............. 5,049 28,088 5,320 1,063 13,160
Other...................... 720 3,087 1,719 355 3,221
--------- ----------- ---------- -------- ----------
Total expenses before
reimbursements/voluntary
reductions.............. 203,368 2,421,397 578,422 225,669 924,386
Expenses voluntarily
reduced................. (113,966) (443,801) (119,373) (45,329) (257,417)
Expenses reimbursed...... (44,927) (11,801) (32,313) (34,308) (1,569)
--------- ----------- ---------- -------- ----------
Total Expenses......... 44,475 1,965,795 426,736 146,032 665,400
--------- ----------- ---------- -------- ----------
Net Investment Income...... 679,368 1,496,484 2,191,972 636,315 2,862,711
--------- ----------- ---------- -------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gains (losses)
from investment
transactions.............. 2,918,533 (186,030) (130,225) (484,528)
Net change in unrealized
appreciation
(depreciation) from
investments............... 35,081,554 (171,875) (215,254) (26,190)
--------- ----------- ---------- -------- ----------
Net realized/unrealized
gains (losses) from
investments............... 38,000,087 (357,905) (345,479) (510,718)
--------- ----------- ---------- -------- ----------
Change in net assets
resulting from operations. $ 679,368 $39,496,571 $1,834,067 $290,836 $2,351,993
========= =========== ========== ======== ==========
</TABLE>
- ------
(a) Dividend income for the Money Market Fund, Intermediate Fixed Income Fund,
Flexible Income Fund and Virginia Municipal Bond Fund is from investments
in investment companies.
See notes to financial statements.
14
<PAGE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Intermediate Fixed
Money Market Fund Equity Fund Income Fund
-------------------------- -------------------------- --------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30, November 30, November 30,
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 679,368 $ 634,790 $ 1,496,484 $ 1,756,394 $ 2,191,972 $ 2,230,727
Net realized gains
(losses) from
investment
transactions.......... 2,918,533 2,036,767 (186,030) (121,909)
Net change in
unrealized
appreciation
(depreciation) from
investments........... 35,081,554 28,311,607 (171,875) 3,308,579
----------- ----------- ------------ ------------ ----------- ------------
Change in net assets
resulting from
operations............. 679,368 634,790 39,496,571 32,104,768 1,834,067 5,417,397
----------- ----------- ------------ ------------ ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................ (679,368) (634,790) (1,477,216) (1,756,394) (2,177,940) (2,230,727)
In excess of net
investment income..... (62,708) (16,139)
From net realized
gains................. (1,296,123)
----------- ----------- ------------ ------------ ----------- ------------
Change in net assets
from shareholder
distributions.......... (679,368) (634,790) (2,773,339) (1,819,102) (2,177,940) (2,246,866)
----------- ----------- ------------ ------------ ----------- ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 5,480,663 5,124,061 43,421,296 29,059,609 18,749,468 12,030,836
Dividends reinvested... 52,170 55,479 1,889,082 1,421,733 467,716 1,117,175
Cost of shares
redeemed.............. (5,256,611) (3,099,165) (15,370,717) (44,422,829) (11,392,112) (29,252,870)
----------- ----------- ------------ ------------ ----------- ------------
Change in net assets
from capital
transactions........... 276,222 2,080,375 29,939,661 (13,941,487) 7,825,072 (16,104,859)
----------- ----------- ------------ ------------ ----------- ------------
Change in net assets.... 276,222 2,080,375 66,662,893 16,344,179 7,481,199 (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.......... $13,721,064 $13,444,842 $186,147,269 $119,484,376 $43,277,129 $ 35,795,930
=========== =========== ============ ============ =========== ============
SHARE TRANSACTIONS:
Issued................. 5,480,663 5,124,061 3,015,102 2,522,626 1,897,219 1,232,724
Reinvested............. 52,170 55,479 138,705 126,366 47,695 115,696
Redeemed............... (5,256,611) (3,099,165) (1,090,354) (3,896,003) (1,153,262) (3,024,490)
----------- ----------- ------------ ------------ ----------- ------------
Change in shares........ 276,222 2,080,375 2,063,453 (1,247,011) 791,652 (1,676,070)
=========== =========== ============ ============ =========== ============
</TABLE>
See notes to financial statements.
15
<PAGE>
Statements of Changes in Net Assets, Continued
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Virginia Municipal
Flexible Income Fund Bond Fund
-------------------------- --------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income... $ 636,315 $ 1,006,511 $ 2,862,711 $ 1,922,766
Net realized gains
(losses) from
investment
transactions........... (130,225) (41,008) (484,528) 210,006
Net change in unrealized
appreciation
(depreciation) from
investments............ (215,254) 841,099 (26,190) 3,684,046
------------ ------------ ----------- -----------
Change in net assets
resulting from
operations.............. 290,836 1,806,602 2,351,993 5,816,818
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................. (658,242) (1,005,771) (2,839,431) (1,902,288)
------------ ------------ ----------- -----------
Change in net assets from
shareholder
distributions........... (658,242) (1,005,771) (2,839,431) (1,902,288)
------------ ------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 3,711,083 9,031,791 24,157,092 17,489,702
Dividends reinvested.... 411,138 892,055 330,581 296,036
Cost of shares redeemed. (21,195,976) (13,182,750) (7,663,274) (7,636,373)
------------ ------------ ----------- -----------
Change in net assets from
capital transactions.... (17,073,755) (3,258,904) 16,824,399 10,149,365
------------ ------------ ----------- -----------
Change in net assets..... (17,441,161) (2,458,073) 16,336,961 14,063,895
NET ASSETS:
Beginning of period..... 20,863,915 23,321,988 54,041,440 39,977,545
------------ ------------ ----------- -----------
End of period........... $ 3,422,754 $ 20,863,915 $70,378,401 $54,041,440
============ ============ =========== ===========
SHARE TRANSACTIONS:
Issued.................. 369,822 916,815 2,390,140 1,765,911
Reinvested.............. 41,481 90,656 33,003 30,088
Redeemed................ (2,145,374) (1,339,942) (762,211) (779,584)
------------ ------------ ----------- -----------
Change in shares......... (1,734,071) (332,471) 1,660,932 1,016,415
============ ============ =========== ===========
</TABLE>
See notes to financial statements.
16
<PAGE>
Schedule of Investments
- --------------------------------------------------------------------------------
MarketWatch Money Market Fund November 30, 1996
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. TREASURY BILLS (59.6%):
$ 500,000 12/19/96.............................................. $ 498,711
1,000,000 12/26/96.............................................. 996,584
1,500,000 1/2/97................................................ 1,493,427
1,250,000 1/9/97................................................ 1,242,904
1,000,000 1/23/97............................................... 992,690
1,000,000 1/30/97............................................... 991,783
750,000 4/3/97................................................ 737,047
1,250,000 4/10/97............................................... 1,227,092
-----------
Total U.S. Treasury Bills 8,180,238
-----------
INVESTMENT COMPANIES (2.4%):
326,525 Dreyfus Treasury Prime Cash Management Fund........... 326,525
-----------
Total Investment Companies 326,525
-----------
Total Investments, at value 8,506,763
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
--------- ---------------------------------------------------- -----------
<C> <S> <C>
REPURCHASE AGREEMENTS (38.2%):
$1,247,654 J.P. Morgan, 5.60%*, 12/2/96 (Collateralized by
$1,186,000 U.S. Treasury Notes, 3.13%, 5/15/33,
market value--$1,282,399).......................... $ 1,247,654
1,748,920 Morgan Stanley, 5.55%*, 12/2/96 (Collateralized by
$1,710,000 U.S. Treasury Notes, 7.88%, 1/15/98,
market value--$1,803,927).......................... 1,748,920
2,250,000 Lehman Brothers, 5.63%*, 12/2/96 (Collateralized by
$2,190,000 U.S. Treasury Notes, 6.88%, 5/15/06,
market value--$2,309,440) 2,250,000
-----------
Total Repurchase Agreements 5,246,574
-----------
Total (Cost--$13,753,337)(a) $13,753,337
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $13,721,064.
* Variable rate security. Interest rate is as of November 30, 1996.
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements.
17
<PAGE>
Schedule of Investments
- --------------------------------------------------------------------------------
MarketWatch Equity Fund November 30, 1996
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (99.7%):
Aircraft Engines & Engine Parts (1.6%):
40,000 Allied Signal, Inc. .................................. $ 2,930,000
------------
Airlines (1.0%):
85,000 Atlantic Southeast Airlines, Inc. .................... 1,933,750
------------
Automotive (1.9%):
62,000 General Motors........................................ 3,572,750
------------
Banking (2.5%):
70,000 State Street Boston Corp. ............................ 4,733,750
------------
Beverages (3.4%):
80,000 Anheuser-Busch Cos., Inc. ............................ 3,390,000
100,000 PepsiCo, Inc. ........................................ 2,987,500
------------
6,377,500
------------
Chemicals (4.5%):
34,000 Dow Chemical Co. ..................................... 2,847,500
30,000 E. I. du Pont de Nemours.............................. 2,827,500
45,000 PPG Industries........................................ 2,756,250
------------
8,431,250
------------
Computer Software (0.9%):
29,500 Sun Microsystems, Inc. (b)............................ 1,718,375
------------
Consumer Goods & Services (7.9%):
72,115 Circuit City.......................................... 2,406,838
30,000 Colgate Palmolive Co. ................................ 2,778,750
41,000 Gillette Co. ......................................... 3,023,750
70,000 Goodyear Tire Co. .................................... 3,395,000
175,000 Sturm, Ruger & Co., Inc. ............................. 3,128,125
------------
14,732,463
------------
Defense (3.8%):
42,000 Lockheed Martin Corp. ................................ 3,806,250
63,400 Raytheon Co. ......................................... 3,241,325
------------
7,047,575
------------
Electrical & Electronic (5.3%):
55,000 Compaq Computer Corp. (b)............................. 4,358,750
43,500 Intel Corp. .......................................... 5,519,063
------------
9,877,813
------------
Electrical Equipment (3.7%):
30,000 Emerson Electric Co. ................................. 2,943,750
37,550 General Electric Co. ................................. 3,905,200
------------
6,848,950
------------
</TABLE>
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Entertainment (3.1%):
115,000 Callaway Golf Co. .................................... $ 3,493,125
75,000 Carnival Corp. ....................................... 2,371,875
------------
5,865,000
------------
Financial Services (10.6%):
140,000 Equifax, Inc. ........................................ 4,585,000
38,000 Federal Home Loan Mortgage Corp. ..................... 4,341,500
50,000 Franklin Resources, Inc. ............................. 3,575,000
78,000 Green Tree Financial Corp. ........................... 3,266,250
86,665 Travelers, Inc. ...................................... 3,899,903
------------
19,667,653
------------
Food Processing (1.2%):
60,000 Heinz Co. ............................................ 2,272,500
------------
Food Products (3.0%):
40,000 Campbell Soup Co. .................................... 3,305,000
35,000 General Mills ........................................ 2,222,500
------------
5,527,500
------------
Household Products & Wares (1.5%):
25,000 Procter & Gamble Co. ................................. 2,718,750
------------
Insurance (1.9%):
50,000 Progressive Corp. .................................... 3,487,500
------------
Machinery & Equipment (2.0%):
56,000 Briggs & Stratton..................................... 2,317,000
25,000 Novellus Systems, Inc. (b)............................ 1,437,500
------------
3,754,500
------------
Manufacturing-Consumer Goods (2.4%):
66,406 Mattel, Inc. ......................................... 2,050,285
60,000 Millipore Corp. ...................................... 2,452,500
------------
4,502,785
------------
Office/Business Equipment & Supplies (1.2%):
40,000 Hewlett Packard....................................... 2,155,000
------------
Oil & Gas Exploration (9.0%):
45,000 Amoco Corp. .......................................... 3,493,125
51,000 Chevron Corp. ........................................ 3,417,000
37,500 Exxon Corp. .......................................... 3,548,437
25,000 Mobil Corp. .......................................... 3,025,000
33,000 Texaco, Inc. ......................................... 3,271,125
------------
16,754,687
------------
</TABLE>
18
<PAGE>
Schedule of Investments, Continued
- --------------------------------------------------------------------------------
MarketWatch Equity Fund November 30, 1996
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Paper Products (2.8%):
30,000 Georgia Pacific Corp. ................................ $ 2,182,500
70,000 International Paper Co. .............................. 2,975,000
------------
5,157,500
------------
Pharmaceuticals (7.4%):
60,000 Abbott Laboratories................................... 3,345,000
50,000 Johnson & Johnson..................................... 2,656,250
50,000 Merck & Co. .......................................... 4,150,000
50,000 Schering-Plough....................................... 3,562,500
------------
13,713,750
------------
Securities Brokers (1.9%):
60,000 Morgan Stanley Group.................................. 3,607,500
------------
Technology (1.3%):
48,000 Xerox................................................. 2,358,000
------------
Tobacco (3.2%):
32,850 Philip Morris, Inc. .................................. 3,387,656
80,000 UST, Inc. ............................................ 2,610,000
------------
5,997,656
------------
Transportation & Shipping (2.0%):
110,000 Illinois Central Corp. ............................... 3,726,250
------------
</TABLE>
<TABLE>
<CAPTION>
Security
Shares Description Market Value
------ ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Electric (3.4%):
50,000 Duke Power............................................ $ 2,318,750
20,000 FPL Group, Inc. ...................................... 922,500
90,000 General Public Utilities.............................. 3,026,250
------------
6,267,500
------------
Utilities--Telecommunications (5.3%):
80,000 ALLTEL Corp. ......................................... 2,550,000
20,000 Ameritech Corp. ...................................... 1,177,500
35,000 Bell Atlantic Corp. .................................. 2,200,625
35,000 Bell South ........................................... 1,413,125
25,000 GTE Corp. ............................................ 1,121,875
45,000 U.S. West, Inc........................................ 1,406,250
------------
9,869,375
------------
Total Common Stocks 185,607,582
------------
INVESTMENT COMPANIES (0.6%):
1,029,389 Dreyfus Government Cash Management Fund............... 1,029,389
------------
Total Investment Companies 1,029,389
------------
Total (Cost--$125,794,305)(a) $186,636,971
============
</TABLE>
- ------
Percentages indicated are based on net assets of $186,147,269.
(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.. $61,526,780
Unrealized depreciation.. (684,114)
-----------
Net unrealized
appreciation............ $60,842,666
===========
</TABLE>
(b) Non-income producing securities.
See notes to financial statements.
19
<PAGE>
Schedule of Investments
- --------------------------------------------------------------------------------
MarketWatch Intermediate Fixed Income Fund November 30, 1996
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------- -----------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATION (2.4%):
1,000,000 Chemical Master Credit Card Trust 1996-3, Class A,
7.09%, 2/15/09...................................... $ 1,048,950
-----------
Total Collateralized Mortgage Obligation 1,048,950
-----------
CORPORATE BONDS (17.5%):
Automotive (2.4%):
1,000,000 Ford Motor Co., 7.25%, 10/1/08....................... 1,038,750
-----------
Financial Services (4.7%):
1,000,000 Ford Motor Credit Co., 6.25%, 11/8/00................ 1,000,000
1,000,000 Pitney Bowes Credit Corp., 6.78%, 7/16/01............ 1,023,750
-----------
2,023,750
-----------
Industrial Goods & Services (10.4%):
1,000,000 Bristol-Myers Squibb, 6.80%, 11/15/26................ 996,250
2,500,000 Walt Disney Co., 6.75%, 3/30/06...................... 2,540,625
1,000,000 Wal-Mart Stores, 5.88%, 10/15/05..................... 958,750
-----------
4,495,625
-----------
Total Corporate Bonds 7,558,125
-----------
U.S. GOVERNMENT AGENCIES (12.2%):
Federal Farm Credit Bank:
1,000,000 8.65%, 10/1/99....................................... 1,071,920
Federal National Mortgage Assoc.:
1,000,000 8.15%, 5/11/98....................................... 1,033,670
1,000,000 8.70%, 6/10/99....................................... 1,065,910
1,000,000 8.40%, 10/25/04 Callable 10/25/99 @100............... 1,052,830
1,000,000 7.50%, 8/1/06........................................ 1,042,560
-----------
Total U.S. Government Agencies 5,266,890
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. TREASURY BILLS (2.2%):
$1,000,000 5/29/97............................................... $ 974,650
-----------
Total U.S. Treasury Bills 974,650
-----------
U.S. TREASURY BONDS (15.4%):
1,000,000 7.25%, 5/15/16........................................ 1,089,600
500,000 7.13%, 2/15/23........................................ 539,365
700,000 6.25%, 8/15/23........................................ 678,293
2,000,000 7.50%, 11/15/24....................................... 2,263,300
2,000,000 6.75%, 8/15/26........................................ 2,085,560
-----------
Total U.S. Treasury Bonds 6,656,118
-----------
U.S. TREASURY NOTES (48.6%):
2,500,000 6.00%, 9/30/98........................................ 2,519,500
2,500,000 5.88%, 10/31/98....................................... 2,512,575
4,000,000 6.00%, 8/15/99........................................ 4,032,240
1,500,000 7.75%, 11/30/99....................................... 1,582,260
2,000,000 7.75%, 1/31/00........................................ 2,115,140
1,000,000 6.13%, 7/31/00........................................ 1,011,470
3,000,000 6.25%, 10/31/01....................................... 3,049,770
2,000,000 6.25%, 2/15/03........................................ 2,034,420
1,000,000 7.25%, 8/15/04........................................ 1,076,070
1,000,000 7.88%, 11/15/04....................................... 1,115,850
-----------
Total U.S. Treasury Notes 21,049,295
-----------
INVESTMENT COMPANIES (0.5%):
205,513 Dreyfus Government Cash Management Fund............... 205,512
11,424 Dreyfus Treasury Cash Management Fund................. 11,424
-----------
Total Investment Companies 216,936
-----------
Total (Cost--$41,345,272)(a) $42,770,964
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $43,277,129.
(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... $1,454,912
Unrealized depreciation... (29,220)
----------
Net unrealized
appreciation............. $1,425,692
==========
</TABLE>
See notes to financial statements.
20
<PAGE>
Schedule of Investments
- --------------------------------------------------------------------------------
MarketWatch Flexible Income Fund November 30, 1996
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- -------------------------------------------------------- ----------
<C> <S> <C>
U.S. TREASURY NOTES (68.2%):
800,000 7.25%, 2/15/98.......................................... $ 816,064
500,000 7.75%, 1/31/00.......................................... 528,785
700,000 6.25%, 5/31/00.......................................... 710,717
250,000 7.88%, 11/15/04......................................... 278,963
----------
Total U.S. Treasury Notes 2,334,529
----------
INVESTMENT COMPANIES (1.0%):
33,839 Dreyfus Government Cash Management Fund................. 33,839
----------
Total Investment Companies 33,839
----------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ ----------
<C> <S> <C>
REPURCHASE AGREEMENTS (29.3%):
1,004,225 Lehman, 5.63%*, 12/2/96 (Collateralized by $975,000
U.S. Treasury Notes, 6.88%, 5/15/06, market value--
$1,028,175).......................................... $1,004,225
----------
Total Repurchase Agreements 1,004,225
----------
Total (Cost--$3,299,232)(a) $3,372,593
==========
</TABLE>
- ------
Percentages indicated are based on net assets of $3,422,754.
* Variable rate security. Interest rate is as of November 30, 1996.
(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...... $73,361
Unrealized depreciation...... --
-------
Net unrealized appreciation.. $73,361
=======
</TABLE>
See notes to financial statements.
21
<PAGE>
Schedule of Investments
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund November 30, 1996
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ -----------
<C> <S> <C>
MUNICIPAL BONDS (87.4%):
District of Columbia (2.7%):
2,000,000 Metropolitan Washington D.C., General Airport Revenue,
5.25%, 10/1/22....................................... $ 1,925,980
-----------
Virginia (84.7%):
500,000 Albemarle County, Service Authority, Water & Sewer
Revenue, 5.50%, 8/1/06 Callable 8/1/02 @ 102......... 520,580
2,000,000 Alexandria, Indusrial Development Authority, Pollution
Control Revenue, Potomac Electric Project, 5.38%,
2/15/24 (MBIA)....................................... 1,967,520
850,000 Arlington County, G.O., 6.00%, 6/1/04................. 933,853
1,000,000 Arlington County, 5.40%, 6/1/14 Callable 6/1/05 @
101.5................................................ 1,015,220
885,000 Arlington County, Industrial Development Authority,
Arlington Hospital, 6.30%, 9/1/00.................... 935,020
1,100,000 Arlington County, Hospital Revenue, 5.30%, 9/1/15
Callable 9/1/03 @ 102................................ 1,053,514
1,000,000 Ashland, Industrial Development Authority, 4.38%,
11/1/11.............................................. 1,002,170
2,000,000 Augusta County, Industrial Development Authority,
Hospital Revenue, 6.63%, 9/1/12 (AMBAC).............. 2,188,860
1,000,000 Capital Region Airport, Commercial Airport Revenue,
Richmond International Airport, 5.63%, 7/1/15
Callable 7/1/05 @ 102................................ 1,003,110
1,000,000 Chesapeake Bay Bridge & Tunnel, 5.25%, 7/1/19 Callable
1/15/05 @ 102........................................ 974,140
1,000,000 Chesapeake Bay Bridge & Tunnel, 6.38%, 7/1/22 Callable
7/1/01 @ 102 (MBIA).................................. 1,102,870
1,500,000 Chesapeake, Water & Sewer, Series A, G.O., 5.00%,
12/1/25.............................................. 1,406,325
885,000 Chesterfield County, G.O., 6.25%, 7/15/05 Callable
7/15/01 @ 102........................................ 961,853
600,000 Danville, G.O., 6.40%, 5/1/09 Callable 5/1/02 @ 102... 645,054
500,000 Danville, G.O., 6.40%, 5/1/10 Callable 5/1/02 @102.... 534,845
750,000 Fairfax County, Industrial Development Revenue
Authority, 5.25%, 8/15/19 Callable 8/15/16 @ 100..... 744,038
1,000,000 Fairfax County, Public Improvement, Series A, 5.50%,
6/1/15............................................... 1,014,230
1,000,000 Fairfax County, Water Authority, 3.70%, 4/1/97........ 1,000,490
2,000,000 Fairfax County, Water Authority, 6.00%, 4/1/22
Callable 4/1/07 @ 102................................ 2,081,280
1,000,000 Franklin, G.O., 6.40%, 1/15/12........................ 1,066,370
1,000,000 Hampton, G.O., 5.90%, 1/15/07......................... 1,085,440
1,000,000 Hanover County, 6.38%, 8/15/18........................ 1,134,780
1,000,000 Hanover County, Industrial Development Authority,
5.50%, 8/15/25....................................... 984,300
1,000,000 Hanover County, Industrial Authority, Bon Secours
Health System Projects, 5.50%, 8/15/25............... 984,300
1,000,000 Henrico County, 5.30%, 1/15/10........................ 1,015,770
1,000,000 James City County, G.O., 4.60%, 12/15/03.............. 1,011,380
1,000,000 James City County, 5.20%, 12/15/10 Callable 12/15/05 @
102.................................................. 1,006,490
725,000 Lynchburg, G.O., 6.88%, 4/1/01 Callable 4/1/00 @ 102.. 792,875
100,000 Newport News, 3.75%, 6/1/97........................... 100,106
1,000,000 Newport News, 5.20%, 1/15/18 Callable 7/15/06 @ 102... 975,160
1,000,000 Newport News, Series A, 5.70%, 7/1/16 Callable 7/15/05
@ 102................................................ 1,029,430
100,000 Norfolk, G.O., 4.50%, 2/1/97.......................... 100,162
100,000 Norfolk, 6.55%, 6/1/97................................ 101,506
1,000,000 Norfolk, Depaul Hospital, 6.50%, 12/1/07.............. 1,084,250
1,000,000 Norfolk, Industrial Development Authority, Sentara
Hospitals, Series A, 6.50%,
11/1/13 Callable 11/1/04 @ 102....................... 1,071,680
1,000,000 Norfolk, Water Revenue Bonds, 5.75%, 11/1/12.......... 1,035,230
1,000,000 Norfolk, Water Revenue Bonds, 5.38%, 11/1/23 Callable
11/1/03 @ 102........................................ 975,640
500,000 Norfolk, Water Revenue Bonds, 5.90%, 11/1/25.......... 514,575
1,420,000 Prince William County, G.O., 4.50%, 8/1/01............ 1,435,421
1,000,000 Prince William County, Industrial Development
Authority, Hospital Revenue, 5.63%, 4/1/12........... 995,340
1,000,000 Richmond, 5.00%, 1/15/21 Callable 1/15/06 @ 102....... 945,050
1,000,000 Richmond, Public Improvement, Series A, G.O., 6.25%,
1/15/21.............................................. 1,091,740
</TABLE>
22
<PAGE>
Schedule of Investments, Continued
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund November 30, 1996
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Virginia, continued:
$1,250,000 Roanoke, G.O., 6.30%, 8/1/07 Callable 8/1/01 @ 101.5. $ 1,342,025
500,000 Roanoke County, Water System Revenue Bonds, 5.00%,
7/1/21.............................................. 466,495
2,000,000 Roanoke, Industrial Development Authority, 5.25%,
7/1/25 Callable 7/1/03 @ 102........................ 1,914,380
300,000 Spotsylvania County, G.O., 5.50%, 7/15/05 Callable
7/15/02 @ 102....................................... 316,350
1,500,000 University of Virginia, University Revenues, 5.20%,
6/1/15.............................................. 1,472,040
100,000 Upper Occoquan Sewer Authority, Regional Sewer
Revenue, 4.60%, 7/1/97.............................. 100,633
1,000,000 Virginia Beach, G.O., 5.70%, 7/15/06................. 1,061,450
1,000,000 Virginia College Building Authority, Washington & Lee
University Project,
5.80%, 1/1/24....................................... 1,012,620
115,000 Virginia Education Loan Authority, Guaranteed,
Student Loan Program, Refunding
Series B, 4.50%, 9/1/97............................. 115,838
1,000,000 Virginia Housing Development Authority, 6.35%,
1/1/15.............................................. 1,046,960
1,000,000 Virginia Housing Development Authority, 6.40%,
7/1/17.............................................. 1,034,330
1,500,000 Virginia Polytechnic Institute & State University,
5.50%, 6/1/16....................................... 1,508,895
200,000 Virginia State Public School Authority, 4.00%,
1/1/97.............................................. 200,061
100,000 Virginia State Public School Authority, 4.80%,
8/1/97.............................................. 100,832
1,000,000 Virginia State Public School Authority, 6.25%, 1/1/04
Callable 1/1/02 @ 102............................... 1,092,310
1,100,000 Virginia State Public School Authority, 6.85%,
1/1/05.............................................. 1,125,091
300,000 Virginia State Public School Authority, 5.75%, 1/1/08
Callable 1/1/03 @ 102............................... 316,029
1,000,000 Virginia State Resource Authority, Appomattox River
Water Systems Revenue,
5.25%, 10/1/13 Callable 10/1/03 @ 102............... 992,310
1,000,000 Virginia State Resource Authority, Water & Sewer
Revenue, 5.60%, 10/1/25............................. 990,030
1,000,000 Virginia State University & College Improvements,
5.25%, 6/1/16....................................... 998,790
750,000 Washington County, Industrial Development Authority,
Johnston Memorial Hospital
Revenue, 6.00%, 7/1/14 Callable 7/1/05 @ 102........ 755,858
-----------
59,585,294
-----------
Total Municipal Bonds 61,511,274
-----------
U.S. TREASURY BILLS (9.9%):
1,000,000 12/12/96............................................. 998,422
6,000,000 12/19/96............................................. 5,983,723
-----------
Total U.S. Treasury Bills 6,982,145
-----------
INVESTMENT COMPANIES (2.6%):
1,845,390 Dreyfus Tax-Exempt Fund.............................. 1,845,389
-----------
Total Investment Companies 1,845,389
-----------
Total (Cost--$68,100,107) $70,338,808
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $70,378,401.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized
appreciation.. $2,296,936 AMBAC--Insured by AMBAC Indemnity Corporation
Unrealized
depreciation.. (58,235) GO--General Obligation
----------
Net unrealized
depreciation.. $2,238,701 MBIA--Insured by Municipal Bond Insurance Association
==========
</TABLE>
See notes to financial statements.
23
<PAGE>
Notes to Financial Statements
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 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.
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 and
the Flexible Income Fund each have 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 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
Continued
24
<PAGE>
Notes to Financial Statements, Continued
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
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 values 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. Permanent book and tax basis
differences have been reclassified among the components of net assets.
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
25
<PAGE>
Notes to Financial Statements, Continued
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
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 November 30, 1996 are as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
Equity Fund............................................ $47,926,907 $17,613,664
Intermediate Fixed Income Fund......................... $37,537,420 $30,566,643
Flexible Income Fund................................... $ 3,729,316 $19,940,975
Virginia Municipal Bond Fund........................... $33,231,849 $20,951,589
</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 year ended
November 30, 1996, BISYS received $518,741 from commissions earned on sales
of shares of the Company's variable net asset value funds of which $488,493
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
26
<PAGE>
Notes to Financial Statements, Continued
- --------------------------------------------------------------------------------
MarketWatch Funds November 30, 1996
Information regarding these transactions is as follows for the year ended
November 30, 1996:
<TABLE>
<CAPTION>
Intermediate
Money Market Equity Fixed Income
Fund Fund Fund
------------ -------- ------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee as a percentage of average daily
net assets................................. 0.50% 1.00% 0.74%
Voluntary fee reductions................... $69,491 $371,422 $99,835
ADMINISTRATION FEES:
Annual fee as a percentage of average daily
net assets................................. 0.20% 0.20% 0.20%
Voluntary fee reductions................... $6,949 $72,379 $19,538
DISTRIBUTION AND SERVICES FEES:
Annual fee as a percentage of average daily
net assets................................. 0.25% 0.25% 0.25%
Voluntary fee reductions................... $34,746
CUSTODIAN FEES:
Annual fee as a percentage of average daily
net assets................................. 0.02% 0.02% 0.02%
Voluntary fee reductions................... $2,780
TRANSFER AGENT AND MUTUAL FUND ACCOUNTANT
FEES:...................................... $45,909 $147,904 $60,372
REIMBURSED FEES:........................... $44,927 $11,801 $32,313
</TABLE>
<TABLE>
<CAPTION>
Virginia
Flexible Income Municipal Bond
Fund Fund
--------------- --------------
<S> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee as a percentage of average daily
net assets................................. 0.74% 0.74%
Voluntary fee reductions................... $39,031 $225,219
ADMINISTRATION FEES:
Annual fee as a percentage of average daily
net assets................................. 0.20% 0.20%
Voluntary fee reductions................... $6,298 $32,198
DISTRIBUTION AND SERVICES FEES:
Annual fee as a percentage of average daily
net assets................................ 0.25% 0.25%
Voluntary fee reductions...................
CUSTODIAN FEES:
Annual fee as a percentage of average daily
net assets................................. 0.02% 0.02%
Voluntary fee reductions...................
TRANSFER AGENT AND MUTUAL FUND ACCOUNTANT
FEES:...................................... $47,480 $80,124
REIMBURSED FEES:........................... $34,308 $1,569
</TABLE>
Continued
27
<PAGE>
Notes to Financial Statements, Continued
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 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.
6.ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Company designates the following eligible distributions for the dividends
received deduction for corporations:
<TABLE>
<CAPTION>
Dividend Dividend
Income Income Per Share
---------- ----------------
<S> <C> <C>
Equity Fund....................................... $3,462,279 $0.1500
</TABLE>
7.EXEMPT-INTEREST INCOME DESIGNATION (UNAUDITED):
The Company designates the following exempt-interest dividends from the
Virginia Municipal Bond Fund taxable year ended November 30, 1996:
<TABLE>
<S> <C>
Exempt-interest dividends.......................................... $2,512,033
Exempt-interest dividends per share................................ $0.3897
</TABLE>
8.FEDERAL INCOME TAXES:
For federal income tax purposes, the following Funds have capital loss
carryforwards as of November 30, 1996, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
Amount Expires
---------- -------
<S> <C> <C>
Money Market Fund.......................................... $ 499 2001
Intermediate Fixed Income Fund............................. $2,880,286 2001
121,910 2002
186,030 2003
----------
$3,188,226
==========
Flexible Income Fund....................................... $ 562,867 2002
67,613 2003
130,225 2004
----------
$ 760,705
==========
Virginia Municipal Bond Fund............................... $2,045,028 2002
484,527 2004
----------
$2,529,555
==========
</TABLE>
9.SUBSEQUENT EVENT:
At a special meeting of the MarketWatch Fund's Board of Trustees held
December 16, 1996, the Board approved the termination of the MarketWatch
Flexible Income Fund as of February 9, 1997.
28
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Money Market Fund
---------------------------------------------------
February 1,
Year Ended Year Ended Year Ended 1993 to
November 30, November 30, November 30, November 30,
1996 1995 1994 1993(a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income.... 0.049 0.052 0.034 0.020
------- ------- ------- -------
Total from Investment
Activities............... 0.049 0.052 0.034 0.020
------- ------- ------- -------
DISTRIBUTIONS:
From net investment
income................... (0.049) (0.052) (0.034) (0.020)
------- ------- ------- -------
Total Distributions..... (0.049) (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)........... 4.99% 5.32% 3.49% 2.01%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)............. $13,721 $13,445 $11,364 $16,041
Ratio of expenses to
average net assets....... 0.32% 0.32% 0.32% 0.63%(c)
Ratio of net investment
income to average net
assets................... 4.89% 5.19% 3.39% 2.37%(c)
Ratio of expenses to
average net assets*...... 1.12% 1.54% 1.65% 1.59%(c)
Ratio of net investment
income to average net
assets*.................. 4.09% 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.
29
<PAGE>
Financial Highlights
- -------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Intermediate Fixed
Equity Fund Income Fund
--------------------------------------------------- ---------------------------------------------------
January 29, January 29,
Year Ended Year Ended Year Ended 1993 to Year Ended Year Ended Year Ended 1993 to
November 30, November 30, November 30, November 30, November 30, November 30, November 30, November 30,
1996 1995 1994 1993(a) 1996 1995 1994 1993(a)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period......... $ 12.88 $ 9.80 $ 10.20 $ 10.00 $ 10.07 $ 9.31 $ 10.20 $ 10.00
--------- -------- -------- -------- ------- ------- ------- -------
INVESTMENT
ACTIVITIES:
Net investment
income......... 0.15 0.17 0.17 0.15 0.55 0.55 0.44 0.33
Net realized
and unrealized
gains (losses)
from
investments... 3.67 3.09 (0.40) 0.19 (0.11) 0.76 (0.79) 0.19
--------- -------- -------- -------- ------- ------- ------- -------
Total from
Investment
Activities..... 3.82 3.26 (0.23) 0.34 0.44 1.31 (0.35) 0.52
--------- -------- -------- -------- ------- ------- ------- -------
DISTRIBUTIONS:
From net
investment
income......... (0.15) (0.17) (0.17) (0.14) (0.55) (0.54) (0.43) (0.32)
In excess of
net investment
income......... (0.01) (0.01) (0.01)
From net
realized gains. (0.14)
In excess of
net realized
gains.......... (0.10)
--------- -------- -------- -------- ------- ------- ------- -------
Total
Distributions.. (0.29) (0.18) (0.17) (0.14) (0.55) (0.55) (0.54) (0.32)
--------- -------- -------- -------- ------- ------- ------- -------
Net Asset Value,
End of Period.. $ 16.41 $ 12.88 $ 9.80 $ 10.20 $ 9.96 $ 10.07 $ 9.31 $ 10.20
========= ======== ======== ======== ======= ======= ======= =======
Total Return
(excludes sales
charges)....... 30.10% 33.59% (2.26%) 3.42%(b) 4.46% 14.44% (3.51%) 5.19%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at
end of period
(000).......... $ 186,147 $119,484 $103,140 $107,859 $43,277 $35,796 $48,730 $64,674
Ratio of
expenses to
average
net assets.... 1.35% 1.35% 1.35% 1.33%(c) 1.09% 1.10% 1.09% 1.08%(c)
Ratio of net
investment
income
to average net
assets........ 1.04% 1.58% 1.75% 1.75%(c) 5.62% 5.60% 4.46% 3.92%(c)
Ratio of
expenses to
average
net assets*... 1.66% 1.71% 1.75% 1.72%(c) 1.40% 1.51% 1.49% 1.47%(c)
Ratio of net
investment
income
to average net
assets*....... 0.73% 1.22% 1.34% 1.36%(c) 5.31% 5.19% 4.07% 3.53%(c)
Portfolio
Turnover....... 12.33% 29.98% 30.33% 29.72% 83.76% 43.65% 55.36% 57.40%
Average
commission rate
paid (d)....... $0.063366 -- -- -- NA NA NA NA
</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. Calculation not required for
prior periods.
NA=Not Applicable
See notes to financial statements.
30
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Flexible Income Fund Virginia Municipal Bond Fund
--------------------------------------------------- --------------------------------------------------
January 29, February 1,
Year Ended Year Ended Year Ended 1993 to Year Ended Year Ended Year Ended 1993 to
November 30, November 30, November 30, November 30, November 30, November 30, November 30, November 30
1996 1995 1994 1993(a) 1996 1995 1994 1993(a)
------------ ------------ ------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $10.03 $ 9.66 $ 10.03 $ 10.00 $ 10.25 $ 9.40 $ 10.31 $ 10.00
------ ------- ------- ------- ------- ------- ------- -------
INVESTMENT
ACTIVITIES:
Net investment
income.......... 0.55 0.45 0.34 0.26 0.44 0.42 0.38 0.28
Net realized and
unrealized
gains (losses)
from
investments.... (0.15) 0.37 (0.36) 0.02 (0.10) 0.85 (0.90) 0.30
------ ------- ------- ------- ------- ------- ------- -------
Total from
Investment
Activities...... 0.40 0.82 (0.02) 0.28 0.34 1.27 (0.52) 0.58
------ ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
From net
investment
income.......... (0.55) (0.45) (0.34) (0.25) (0.44) (0.42) (0.38) (0.27)
In excess of net
realized gains.. (0.01) (0.01)
------ ------- ------- ------- ------- ------- ------- -------
Total
Distributions... (0.55) (0.45) (0.35) (0.25) (0.44) (0.42) (0.39) (0.27)
------ ------- ------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period... $ 9.88 $ 10.03 $ 9.66 $ 10.03 $ 10.15 $ 10.25 $ 9.40 $ 10.31
====== ======= ======= ======= ======= ======= ======= =======
Total Return
(excludes sales
charges)........ 4.10% 8.68% (0.12%) 2.77%(b) 3.50% 13.79% (5.17%) 5.84%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at
end of period
(000)........... $3,423 $20,864 $23,322 $29,132 $70,378 $54,041 $39,978 $33,652
Ratio of
expenses to
average
net assets..... 1.15% 1.15% 1.13% 1.12%(c) 1.04% 1.05% 1.04% 1.02%(c)
Ratio of net
investment
income
to average net
assets......... 4.99% 4.57% 3.47% 3.16%(c) 4.45% 4.33% 3.90% 3.65%(c)
Ratio of
expenses to
average
net assets*.... 1.51% 1.56% 1.58% 1.64%(c) 1.44% 1.51% 1.56% 1.66%(c)
Ratio of net
investment
income
to average net
assets*........ 4.63% 4.16% 3.01% 2.64%(c) 4.05% 3.87% 3.38% 3.01%(c)
Portfolio
Turnover........ 31.36% 64.14% 19.65% 64.40% 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.
31
<PAGE>
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The Shareholders and Board of Trustees of
the MarketWatch Funds:
We have audited the accompanying statements of assets and liabilities of the
MarketWatch Funds--Money Market Fund, Equity Fund, Intermediate Fixed Income
Fund, Flexible Income Fund, and the Virginia Municipal Bond Fund, including
the schedules of portfolio investments, as of November 30, 1996, and the
related statements of operations, statements of changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and the financial highlights are the responsibility of the
MarketWatch Funds' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of November 30, 1996, by examination and other appropriate audit
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the aforementioned funds comprising the MarketWatch Funds as of
November 30, 1996, the results of their operations, the changes in their net
assets and the financial highlights for each of the periods indicated herein,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 10, 1997
32
<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
1/97
[LOGO OF MARKETWATCH]
Annual Report
to Shareholders
November 30, 1996
---------------------------
Central Fidelity National Bank
Investment Adviser
BISYS Fund Services
