<PAGE>
[LOGO OF MARKETWATCH APPEARS HERE]
ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1997
----------------------------------------------
CENTRAL FIDELITY NATIONAL BANK, INVESTMENT ADVISER
BISYS FUND SERVICES
DISTRIBUTOR
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
<TABLE>
<S> <C>
Letter to Shareholders........................ 3
Performance Report............................ 7
Statements of Assets and Liabilities.......... 12
Statements of Operations...................... 13
Statements of Changes in Net Assets........... 14
Schedules of Portfolio Investments............ 16
Notes to Financial Statements................. 24
Financial Highlights.......................... 30
Independent Auditors' Report.................. 32
</TABLE>
2
<PAGE>
Message From The Chairman
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
DEAR SHAREHOLDERS:
We're pleased to report that the year ended November 30, 1997, was a
successful one for the MarketWatch Funds. As both the stock and bond markets
prospered, so did our funds--all produced solid gains over the course of the
period. The performance of the MarketWatch Equity Fund was particularly
strong. As a result, the Fund received a four star rating from Morningstar*
among 2,242 domestic equity funds, for the three-year period ending December
31, 1997, and Lipper Analytical Services ranked it 47th out of 400 growth and
income funds for its three-year performance, for the period ending December
31, 1997.**
During the period, investors continued to invest in mutual funds in record
amounts. Many chose to do so with the MarketWatch Funds. Assets under
management increased 79%, from $314 million to $564 million over the course of
the year.
A CHANGE IN MANAGEMENT
We're also pleased to report that on December 5, 1997, the shareholders of the
MarketWatch Funds approved the change in investment adviser from Central
Fidelity National Bank to Wachovia Bank, N.A. This change was recommended by
the MarketWatch Board of Trustees to become effective upon the completion of
the merger of the parent companies of Central Fidelity National Bank and
Wachovia Bank, N.A. That merger was completed on December 15, 1997.
*Morningstar proprietary ratings reflect historical risk-adjusted performance
and are subject to change every month. Funds with at least three years of
performance history are assigned ratings from one star (lowest) to five stars
(highest). Morningstar ratings are calculated from the fund's three-, five-
and ten-year average annual returns (when available) and a risk factor that
reflects the fund's performance relative to three-month Treasury Bill monthly
returns. The Fund's returns are adjusted for fees and sales loads. Ten
percent of the funds in an investment category receive five stars; 22.5%
receive four stars; 35% receive three stars; 22.5% receive two stars; and the
bottom 10% receive one star.
**Lipper Analytical Services, 1997. The rating is based on total return and
does not include the effect of sales charge. For the one year period the Fund
ranked 80 out of 611 growth and income funds.
SHARES OF THE FUNDS
. ARE NOT FDIC INSURED
. ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, CENTRAL
FIDELITY NATIONAL BANK OR WACHOVIA BANK, N.A.
. ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
3
<PAGE>
Message From The Chairman
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
With a century of experience in financial services and investment management,
Wachovia ranks 18th in the nation among bank holding companies. Headquartered
in Winston-Salem, North Carolina, the company currently manages over $30
billion in assets for individuals, corporations and some of the largest
pension funds in the country.
Investment decisions for mutual funds managed by Wachovia are made by a team
of experienced portfolio managers and investment analysts. They work closely
with a range of outside professionals and data sources that provide real-time
information to complement their hands-on work.
IN CLOSING . . .
Finally, we thank you for placing your confidence in us over the years. Once
again, if you have any questions, or require any assistance, please do not
hesitate to call the Wachovia Funds Service Center at 1-800-994-4414.
Sincerely,
/s/ Walter B. Grimm
Walter B. Grimm
Chairman, MarketWatch Funds
For more complete information, including charges and expenses, call 1-800-994-
4414 for a prospectus, which you should read carefully before you invest or
send money.
The MarketWatch Funds are distributed by BISYS Fund Services.
4
<PAGE>
Message From The Investment Adviser
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
DEAR SHAREHOLDERS:
The last several months have been tumultuous ones for equity investors. In
October, months of rumors and tremors in Asian markets mushroomed into a
financial earthquake as stocks in Hong Kong plummeted. Within hours, the Dow
Jones Industrial Average plunged 554 points, the largest point decline on
record. But then within weeks, the tables turned. Seeing buying opportunities,
investors seized the moment--and in record leaps, stocks rebounded.
As we move toward the end of the year, the U.S. market has clearly regained
its balance, but investors are still watching Asia nervously. Many are
apprehensive about the impact of slowdowns in Asia on corporate earnings of
U.S. multinational corporations. But will the impact be as major as they fear?
MISPLACED ANXIETY
In reality, trade with Asia is only a very small part of our domestic economy.
To be sure, the earnings of some multinationals may decline in the coming
months. But it is unlikely that this alone will trigger a recession in the
United States for one reason: amidst all the concern about Asia, American
consumers are still in a spending mood. In fact, American consumers are in the
best shape they've been in for decades--and they are responsible for some two
thirds of our economy's activity.
Just how well-off are they? Inflation-adjusted personal income is growing 3%
annually. Jobs are being created in record numbers, and unemployment is at a
24 year low. Consequently, it's no surprise that consumer confidence has hit
30-year highs in recent months. Of course, there are some who are expressing
concern about the high levels of consumer indebtedness relative to disposable
income.
HIGH SPIRITS AND HIGH DEBT LEVELS
While there's no question that the heavy indebtedness would exacerbate a
downturn, it is erroneous to conclude that this current debt burden alone
could cause a recession. If income continues to rise and jobs are being
created, accumulated debt will prevent the economy from overheating. In short,
growth will simply be slower than it would be if the debt did not exist.
This situation, of course, does much to calm the inflation hawks. Nonetheless,
the truth remains that the rate of economic growth has little to do with
inflation. Inflation is a monetary phenomenon that results from too much money
chasing too few goods. Presently, the economy is having no difficulty
producing a surplus of goods. Moreover, given the Federal Reserve's
restrictive policies of the past, we do not have too much
5
<PAGE>
Message From The Investment Adviser
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
money. Consequently, as the economy slows to a more sustainable pace in the
months ahead, we don't expect to see the balance between goods and the supply
of money chasing them tip precariously. Inflation should remain benign. Given
this, the Federal Reserve is unlikely to act. Interest rates may, instead,
slip lower.
FIXED INCOME FOCUS TO SHIFT
Now, if interest rates fall, bond prices will rise, and simultaneously, income
will fall. Consequently, while bonds should still produce positive returns,
capital appreciation, rather than yield enhancement, should become critical to
success. In the immediate future, however, our indicators suggest that
interest rates will trade within a broad range in the coming months.
Looking out longer term, however, the fact remains: with benign inflation and
with our economy growing at a more modest 2%-3% a year, interest rates will
more than likely continue their multi-year downward trend. Very simply, while
they may bounce their way there, we are likely to see interest rates at much
lower levels in the years ahead.
HIGHER AND HIGHER?
At the same time, lower interest rates should propel equities higher in the
coming years. Combined with a growing economy and benign inflation, the
environment will certainly be favorable. Of course, there will be dips along
the way. In fact, in the coming months, we would expect that news from abroad
will periodically rock the markets.
Nonetheless, looking out longer term, we are very optimistic about the
prospects for stocks, particularly those of larger capitalization, high-
quality companies. These are the organizations with the resources and
capabilities to take full advantage of a global marketplace that is only now
beginning to materialize. So, while the ride may be a bit bumpy at times, we
expect it to be one well worth taking.
Sincerely,
/s/ Paul P. Baran
Paul P. Baran
Senior Vice President and Chief Investment Officer
Central Fidelity National Bank
6
<PAGE>
Performance Report
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
THE MARKETWATCH EQUITY FUND
Despite their dramatic swings up and down throughout the year, holdings in the
technology stocks powered the portfolio's outstanding performance during the
year ended November 30, 1997. Holdings in the financial services sector such
as Franklin Resources (2.4% of the portfolio's assets), Travelers (2.4%),
Freddie Mac (2.2%) and Norwest (1.1%)* also made substantial contributions to
performance.
As a result, the Fund matched its benchmark and outperformed the majority of
its peers for the year ended November 30, 1997. For the period, both the Fund
(without the sales charge)+ and the S&P 500 posted a total return of 28.50%.
HOLD OR FOLD?
After another year of astonishing performance from stocks, even the most
optimistic investors are now wondering how much longer the bull market will
run. The answer is: possibly a good deal farther. The economy is fundamentally
sound with little inflation. Corporate earnings are solid--and while they may
not reach the stratospheric levels we've seen recently, they are still far
above levels considered very respectable just two short years ago.
Of course, it is unrealistic to expect the market to continue producing the
kind of returns we've grown accustomed to year after year. Moreover,
corrections are inevitable--sentiment alone, as we saw this Fall, can trigger
sell-offs. But, as nerve-wracking as these events may be, ten years from
today, stocks will more than likely cost more than they do today--possibly a
good deal more. Long-term investors should view any corrections as buying
opportunities.
At the period's end, the Fund remained fully invested, with its assets
concentrated in high-quality, high capitalization stocks. The largest five
holdings in the Fund's portfolio were Intel (2.9% of the portfolio's assets),
Schering Plough (2.6%), E.I. Du Pont de Nemours (2.5%), Franklin Resources,
Inc. (2.4%) and Travelers, Inc. (2.4%).*
*The Fund's composition is subject to change.
7
<PAGE>
Performance Report
- --------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
Equity Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Equity Fund (Load) Equity Fund (No Load) S&P 500 Index
<S> <C> <C> <C>
1/29/93 9,551 449 0
11/30/93 9,878 464 445
11/30/94 9,654 454 785
11/30/95 12,897 607 1,422
11/30/96 16,779 789 1,513
11/30/97 21,561 1,014 2,958
</TABLE>
Average Annual Total Return
- ----------------------------------------------
<TABLE>
<CATPION>
Period Since
Ended 1 Year 3 Year Inception
11/30/97 (1/29/93)
<S> <C> <C> <C>
Load* 22.74% 28.73% 17.20%
No-Load 28.50% 30.71% 18.32%
</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 costs.
The performance of the MarketWatch Equity Fund is measured against the S&P 500
index, which is generally respresentative 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 MARKETWATCH INTERMEDIATE FIXED INCOME FUND
Though the equity market's rise dominated the headlines and the airwaves, the
year ended November 30, 1997, was a good one for fixed income securities as
well. Fear of inflation made investors somewhat edgy during the first half of
the period. But unemployment kept falling, and the economy kept rolling along--
and pressure didn't build. By Fall, even the most ardent inflation hawks were
forced to admit prices weren't about to rise dramatically.
Throughout the period, our indicators suggested that inflation was hardly
likely to spiral out of control or even generate many sparks. Given the power
of market sentiment, we continued to approach the market cautiously. Maturities
were gradually extended, and selective corporate issues were added. The solid
performance of the Fund, however, was due primarily to its core holdings in
Treasury securities. They performed strongly as rates began trending downward
in the Fall.
Consequently, the Fund performed in line with its peers. For the year ended
November 30, 1997, it produced a total return of 6.32% (without the sales
charge)+ versus the Fund's benchmark, Lehman Brothers Intermediate
Government/Corporate Bond Index, which produced a return of 6.33% for the same
period.
8
<PAGE>
Performance Report
- --------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
LOWER YIELDS, HIGHER PRICES
Too many dollars chasing too few goods--that's what has caused inflation in the
past. As investors have realized this in recent months, fear of inflation has
evaporated. In turn, interest rates have begun to slip as well and may fall
farther in the year ahead.
Historically, in a falling rate environment, prices have risen, and bonds have
produced positive returns--but income has fallen. Consequently, while we are
optimistic about the prospects for the markets in the months ahead, security
selection will be more critical to success than ever. Capital appreciation, as
opposed to yield enhancement, will become more and more important.
As of November 30, 1997, the average maturity of the Fund's holdings was ten
years. The majority of the portfolio's securities had credit quality ratings of
AAA.
*The Fund's composition is subject to change.
Intermediate Fixed Income Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Intermediate Fixed Intermediate Fixed Lehman Bros.
Income Fund (Load) Income Fund (No Load) Int. Govt./Corp.
<S> <C> <C> <C>
1/29/93 9,551 449 0
11/30/93 10,047 472 103
11/30/94 9,694 456 278
11/30/95 11,094 522 326
11/30/96 11,589 544 504
11/30/97 12,321 579 537
</TABLE>
Average Annual Total Return
- ----------------------------------------------
<TABLE>
<CATPION>
Period Since
Ended 1 Year 3 Year Inception
11/30/97 (1/29/93)
<S> <C> <C> <C>
Load* 1.52% 6.67% 4.41%
No-Load 6.32% 8.32% 5.40%
</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 costs.
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.
THE MARKETWATCH VIRGINIA MUNICIPAL BOND FUND
Supply of high-quality securities was tight in the Virginia market during the
year ended November 30, 1997. While there was some issuance during the period,
officials focused on raising capital for prison construction with lease revenue
securities. General obligation bonds were hard to find. As a result, the year
was a relatively quiet one.
9
<PAGE>
Performance Report
- --------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
Given the circumstances, we focused our efforts on enhancing yield. But, as we
refused to compromise quality, it was often difficult to respond as quickly as
we might have liked to changes in the environment. As a result, the Fund posted
a return of 5.97% (without the sales charge)+ for the year ended November 30,
1997, as compared to the Fund's benchmarks, the Lehman Brothers Municipal Bond
Index of 7.17% and the Lehman Brothers Municipal Bond 7-Year Index of 6.04%
over the same period.
NO CUTBACK LASTS FOREVER
With taxpayers reluctant to authorize new issues, rehabilitations, renovations
and major capital improvements have now been sitting quietly on the back burner
in Virginia for some time now. At some point, these projects must be done--and
that point, for many of them, is now looming. Moreover, municipalities can be
expected to take advantage of declining interest rates.
At the same time, there is every reason to believe that the demand for these
securities will remain very strong. So, while some volatility should be
expected, we anticipate that the year ahead will be a good one for the Virginia
municipal market and the Fund.
As of November 30, 1997, all securities in the Fund's portfolio were rated A or
better; the average maturity of the portfolio was nine years. As of the same
date, the portfolio was widely diversified, with no more than 15% of its assets
invested in any one county's issues.*
*The Fund's composition is subject to change.
Virginia Municipal Bond Fund
Value of a $10,000 Investment
<TABLE>
<CAPTION>
Virginia Municipal Virginia Municipal Lehman Bros. Lehman Bros. Municipal
Bond Fund (Load) Bond Fund (No Load) Municipal Bond Index Bond 7-Yr. Index
<S> <C> <C> <C> <C>
2/1/93 9,551 449 0 0
11/30/93 10,108 476 103 182
11/30/94 9,585 451 262 125
11/30/95 10,907 513 822 -231
11/30/96 11,289 531 1,142 -322
11/30/97 11,962 563 1,929 -488
</TABLE>
Average Annual Total Return
- ----------------------------------------------
<TABLE>
<CAPTION>
Period Since
Ended 1 Year 3 Year Inception
11/30/97 (2/1/93)
<S> <C> <C> <C>
Load* 1.18% 6.03% 3.78%
No-Load 5.97% 7.66% 4.77%
</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 costs.
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 bond 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 less for these valued-added services.
10
<PAGE>
Performance Report
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
THE MARKETWATCH MONEY MARKET FUND
Much to investors' surprise, surging economic growth did not cause increased
inflation during the year ended November 30, 1997. Nonetheless, in the first
half of the period, investors had a hard time believing productivity gains and
increased global competition successfully dampen pressure. In the second half,
however, as the economy and employment continued to climb and significant
inflationary pressures failed to materialize, investors relaxed. And, as our
indicators suggested they would, rates began to trend downward.
Much as we expected, however, the markets remained somewhat choppy as rumors
continued to influence market sentiment. Given that such ups and downs are
impossible to call with any accuracy, we did not attempt to chase rates.
Throughout the period, the portfolio was positioned neutrally, with average
maturities ranging between 30 and 40 days. As of November 30, 1997, the
portfolio's average maturity was 36 days.*
*The Fund's composition is subject to change.
Performance data represent past performance and are not predictive 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 1-800-994-
4414 for a prospectus, which you should read carefully before you invest or
send money.
The MarketWatch Funds are distributed by BISYS Fund Services.
11
<PAGE>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
MarketWatch Funds November 30, 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... $10,456,742 $338,385,151 $95,559,304 $109,277,311
Repurchase agreements... 6,779,454 -- -- --
----------- ------------ ----------- ------------
Total Investments, at
value (Cost
$17,236,196;
$203,999,761;
$91,281,904;
$103,651,723
respectively).......... 17,236,196 338,385,151 95,559,304 109,277,311
Interest and dividends
receivable.............. 33,438 725,114 1,164,756 1,997,784
Receivable for capital
shares issued........... 8,218 30,621 1,693 --
Prepaid expenses and
other assets............ 4,893 14,965 5,468 4,060
----------- ------------ ----------- ------------
Total Assets.......... 17,282,745 339,155,851 96,731,221 111,279,155
----------- ------------ ----------- ------------
LIABILITIES:
Dividends payable....... 71,412 -- -- --
Payable for capital
shares redeemed......... 1,985 39,829 5,689 12,000
Accrued expenses and
other payables:
Investment advisory
fees................... -- 202,401 38,770 35,972
Administration fees.... 2,340 44,718 13,062 15,071
Distribution fees...... -- 67,858 19,790 22,835
Fund accounting and
transfer agent fees.... 4,585 9,210 5,988 9,381
Custodian fees......... -- 5,429 1,583 1,826
Printing fees.......... 3,264 24,839 9,304 8,020
Legal and audit fees... 1,673 30,750 9,146 9,073
Other.................. 1,011 7,188 2,264 5,004
----------- ------------ ----------- ------------
Total Liabilities..... 86,270 432,222 105,596 119,182
----------- ------------ ----------- ------------
NET ASSETS:
Capital................. 17,196,974 187,623,756 95,281,309 107,614,565
Accumulated
undistributed net
investment income...... -- 115,684 246,400 248,239
Accumulated
undistributed net
realized gains (losses)
from investment
transactions........... (499) 16,598,799 (3,179,484) (2,328,419)
Net unrealized
appreciation
(depreciation) from
investments............ -- 134,385,390 4,277,400 5,625,588
----------- ------------ ----------- ------------
Net Assets............ $17,196,475 338,723,629 96,625,625 111,159,973
=========== ============ =========== ============
Outstanding units of
beneficial interest
(shares)................ 17,196,973 16,441,990 9,635,774 10,802,057
=========== ============ =========== ============
Net asset value--
redemption price per
share................... $ 1.00 $ 20.60 $ 10.03 $ 10.29
=========== ============ =========== ============
Maximum Sales Charge.... 4.50% 4.50% 4.50%
------------ ----------- ------------
Maximum Offering Price
Per Share (100%/(100%--
Maximum Sales Charge)
of net asset value
adjusted to the nearest
cent) per share........ $ 1.00(a) $ 21.57 $ 10.50 $ 10.77
=========== ============ =========== ============
</TABLE>
- ------
(a) Offering price and redemption price are the same for the Money Market Fund.
See notes to financial statements.
12
<PAGE>
Statements of Operations
- --------------------------------------------------------------------------------
MarketWatch Funds For The Year Ended November 30, 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............. $791,965 $ -- $6,069,898 $6,055,488
Dividend income (a)......... 26,677 5,652,840 84,882 70,348
-------- ----------- ---------- ----------
Total income.............. 818,642 5,652,840 6,154,780 6,125,836
-------- ----------- ---------- ----------
EXPENSES:
Investment advisory fees.... 77,627 2,823,407 695,276 829,245
Administration fees......... 31,030 564,682 187,913 224,120
Distribution fees........... 38,787 705,852 234,890 280,150
Custodian fees.............. 3,103 56,467 18,791 22,412
Accounting fees............. 30,168 88,165 36,759 58,080
Legal fees.................. 3,348 59,940 21,901 24,041
Audit fees.................. 1,189 25,787 7,692 9,128
Trustees' fees and expenses. 726 11,761 3,987 4,932
Transfer agent fees......... 21,700 119,351 27,040 32,217
Registration and filing
fees........................ 5,430 13,161 6,627 13,908
Printing costs.............. 7,338 44,867 17,136 17,282
Other....................... 1,413 18,841 5,205 7,576
-------- ----------- ---------- ----------
Total expenses before
voluntary fee
reductions/reimbursements. 221,859 4,532,281 1,263,217 1,523,091
Expenses voluntarily
reduced.................. (127,274) (856,708) (280,356) (445,393)
Expenses reimbursed....... (44,937) (1,651) (721) --
-------- ----------- ---------- ----------
Net expenses............ 49,648 3,673,922 982,140 1,077,698
-------- ----------- ---------- ----------
Net investment income....... 768,994 1,978,918 5,172,640 5,048,138
-------- ----------- ---------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gains (losses)
from investment
transactions............... -- 16,598,799 8,742 202,630
Net change in unrealized
appreciation/
(depreciation) from
investments................ -- 52,298,822 1,259,312 1,718,079
-------- ----------- ---------- ----------
Net realized/unrealized
gains (losses) from
investments................ -- 68,897,621 1,268,054 1,920,709
-------- ----------- ---------- ----------
Change in net assets
resulting from operations.. $768,994 $70,876,539 $6,440,694 $6,968,847
======== =========== ========== ==========
</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.
13
<PAGE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Money Market Fund Equity Fund
-------------------------- --------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment
income/(loss)........... $ 768,994 $ 679,368 $ 1,978,918 $ 1,496,484
Net realized gains
(losses) from
investment
transactions........... -- -- 16,598,799 2,918,533
Net change in unrealized
appreciation
(depreciation) from
investments............ -- -- 52,298,822 35,081,554
----------- ----------- ------------ ------------
Change in net assets
resulting from
operations.............. 768,994 679,368 70,876,539 39,496,571
----------- ----------- ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income.................. (768,994) (679,368) (1,922,360) (1,477,216)
From net realized gains. -- -- (2,918,533) (1,296,123)
----------- ----------- ------------ ------------
Change in net assets from
shareholder
distributions........... (768,994) (679,368) (4,840,893) (2,773,339)
----------- ----------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued.................. 6,400,182 5,480,663 115,596,820 43,421,296
Dividends reinvested.... 105,920 52,170 2,817,198 1,889,082
Cost of shares redeemed. (3,030,691) (5,256,611) (31,873,304) (15,370,717)
----------- ----------- ------------ ------------
Change in net assets from
capital transactions.... 3,475,411 276,222 86,540,714 29,939,661
----------- ----------- ------------ ------------
Change in net assets..... 3,475,411 276,222 152,576,360 66,662,893
NET ASSETS:
Beginning of period..... 13,721,064 13,444,842 186,147,269 119,484,376
----------- ----------- ------------ ------------
End of period........... $17,196,475 $13,721,064 $338,723,629 $186,147,269
=========== =========== ============ ============
SHARE TRANSACTIONS:
Issued.................. 6,400,182 5,480,663 6,682,176 3,015,102
Reinvested.............. 105,920 52,170 172,539 138,705
Redeemed................ (3,030,691) (5,256,611) (1,755,496) (1,090,354)
----------- ----------- ------------ ------------
Change in shares......... 3,475,411 276,222 5,099,219 2,063,453
=========== =========== ============ ============
</TABLE>
See notes to financial statements.
14
<PAGE>
Statements of Changes in Net Assets, Continued
- --------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Intermediate Fixed Virginia Municipal
Income Fund Bond Fund
-------------------------- --------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment
income/(loss).......... $ 5,172,640 $ 2,191,972 $ 5,048,138 $ 2,862,711
Net realized gains
(losses) from
investment
transactions.......... 8,742 (186,030) 202,630 (484,528)
Net change in
unrealized
appreciation
(depreciation) from
investments........... 1,259,312 (171,875) 1,718,079 (26,190)
------------ ------------ ------------ -----------
Change in net assets
resulting from
operations............. 6,440,694 1,834,067 6,968,847 2,351,993
------------ ------------ ------------ -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................. (4,996,146) (2,177,940) (4,898,834) (2,839,431)
From net realized
gains.................. -- -- -- --
------------ ------------ ------------ -----------
Change in net assets
from shareholder
distributions.......... (4,996,146) (2,177,940) (4,898,834) (2,839,431)
------------ ------------ ------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 73,017,952 18,749,468 58,796,406 24,157,092
Dividends reinvested... 415,495 467,716 360,850 330,581
Cost of shares
redeemed............... (21,529,499) (11,392,112) (20,445,697) (7,663,274)
------------ ------------ ------------ -----------
Change in net assets
from capital
transactions........... 51,903,948 7,825,072 38,711,559 16,824,399
------------ ------------ ------------ -----------
Change in net assets.... 53,348,496 7,481,199 40,781,572 16,336,961
NET ASSETS:
Beginning of period.... 43,277,129 35,795,930 70,378,401 54,041,440
------------ ------------ ------------ -----------
End of period.......... $ 96,625,625 $ 43,277,129 $111,159,973 $70,378,401
============ ============ ============ ===========
SHARE TRANSACTIONS:
Issued................. 7,451,883 1,897,219 5,861,134 2,390,140
Reinvested............. 42,532 47,695 35,790 33,003
Redeemed............... (2,205,905) (1,153,262) (2,025,729) (762,211)
------------ ------------ ------------ -----------
Change in shares........ 5,288,510 791,652 3,871,195 1,660,932
============ ============ ============ ===========
</TABLE>
See notes to financial statements.
15
<PAGE>
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
MarketWatch Money Market Fund November 30, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Amortized
Amount Description Cost
---------- ------------------------------------------------------- ----------
<C> <S> <C>
U.S. TREASURY BILLS (57.7%):
$1,250,000 12/4/97................................................ $1,249,479
1,250,000 12/11/97............................................... 1,248,224
1,250,000 1/8/98................................................. 1,243,284
1,250,000 1/22/98................................................ 1,240,602
1,250,000 2/5/98................................................. 1,238,335
1,250,000 2/19/98................................................ 1,235,806
1,250,000 3/5/98................................................. 1,233,583
1,250,000 3/19/98................................................ 1,231,250
----------
Total U.S. Treasury Bills 9,920,563
----------
INVESTMENT COMPANIES (3.1%):
536,179 Dreyfus Treasury Prime Cash Management Fund............ 536,179
----------
Total Investment Companies 536,179
----------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Amortized
Amount Description Cost
---------- ---------------------------------------------------- -----------
<C> <S> <C>
REPURCHASE AGREEMENTS (39.4%):
$2,730,534 J.P. Morgan, 5.65%*, 12/1/97 (Collateralized by
$2,764,000 U.S. Treasury Bonds, 6.125%, 11/15/27,
market value--$2,796,984).......................... $ 2,730,534
3,000,000 Lehman Brothers, 5.60%*, 12/1/97 Collateralized by
$3,025,000 U.S. Treasury Notes, 3.375%, 1/15/07,
market value--$3,073,885).......................... .3,000,000
1,048,920 Morgan Stanley, 5.63%*, 12/1/97 (Collateralized by
$870,000 U.S. Treasury Bonds, 10.00%, 5/15/10,
market value--$1,080,184).......................... 1,048,920
-----------
Total Repurchase Agreements 6,779,454
-----------
Total (Cost--$17,236,196)(a) $17,236,196
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $17,196,475.
* Variable rate securities. Interest rate is as of November 30, 1997.
(a) Cost for federal securities income tax and financial reporting purposes are
the same.
See notes to financial statements.
16
<PAGE>
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
MarketWatch Equity Fund November 30, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (99.7%):
Aircraft Engines & Engine Parts (1.3%):
119,000 Allied Signal, Inc.................................... $ 4,417,875
------------
Airlines (1.0%):
110,000 ASA Holdings, Inc..................................... 3,258,750
------------
Apparel Manufacturing (1.4%):
125,000 Tommy Hilfiger Corp. (b).............................. 4,906,250
------------
Automotive (1.9%):
105,000 General Motors Corp................................... 6,405,000
------------
Banking (1.7%):
50,000 Banc One Corp......................................... 2,568,750
62,000 Bank Of New York Co., Inc............................. 3,332,500
------------
5,901,250
------------
Beverages (3.2%):
130,000 Anheuser-Busch Cos., Inc.............................. 5,614,375
140,000 PepsiCo, Inc.......................................... 5,162,500
------------
10,776,875
------------
Chemicals (5.6%):
34,000 Dow Chemical Co....................................... 3,357,500
140,000 E.I. du Pont de Nemours & Co.......................... 8,478,750
95,000 PPG Industries, Inc................................... 5,504,063
35,000 Union Carbide Corporation............................. 1,544,375
------------
18,884,688
------------
Computer Software (1.4%):
130,000 Sun Microsystems, Inc. (b)............................ 4,680,000
------------
Computers (3.1%):
120,000 Compaq Computer Corp.................................. 7,492,500
110,000 Gateway 2000, Inc. (b)................................ 3,141,875
------------
10,634,375
------------
Consumer Goods & Services (6.3%):
89,000 Colgate-Palmolive Co.................................. 5,946,312
85,000 Goodyear Tire & Rubber Co............................. 5,158,438
35,000 Nike, Inc............................................. 1,704,063
70,000 Procter & Gamble Co................................... 5,341,875
180,000 Sturm, Ruger & Co., Inc............................... 3,262,500
------------
21,413,188
------------
Defense (3.2%):
61,000 Lockheed Martin Corp.................................. 5,951,313
89,600 Raytheon Co........................................... 5,012,000
------------
10,963,313
------------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Electrical & Electronic (2.9%):
125,000 Intel Corp............................................ $ 9,703,125
------------
Electrical Equipment (2.1%):
94,700 General Electric Co................................... 6,984,125
------------
Entertainment (1.7%):
180,000 Callaway Golf Co...................................... 5,737,500
------------
Financial Services (11.4%):
190,000 Equifax, Inc.......................................... 6,483,750
90,000 Franklin Resources, Inc............................... 8,088,749
184,000 Freddie Mac........................................... 7,590,000
135,000 Green Tree Financial Corp............................. 4,134,375
100,000 Norwest Corp.......................................... 3,743,750
159,996 Travelers Group, Inc.................................. 8,079,798
------------
38,120,422
------------
Food Products (5.0%):
115,000 Campbell Soup Co...................................... 6,440,000
75,000 General Mills, Inc.................................... 5,550,000
100,000 Heinz (H.J.) Co....................................... 5,006,250
------------
16,996,250
------------
Insurance (1.8%):
61,300 Progressive Corp...................................... 6,252,600
------------
Machinery & Equipment (3.5%):
80,000 Briggs & Stratton Corp................................ 4,090,000
116,800 Caterpillar, Inc...................................... 5,599,100
60,000 Novellus Systems, Inc. (b)............................ 2,257,500
------------
11,946,600
------------
Metals & Mining (0.5%):
25,000 Phelps Dodge Corp..................................... 1,656,250
------------
Office/Business Equipment & Services (0.9%):
50,000 Hewlett-Packard Co.................................... 3,053,125
------------
Oil & Gas Exploration (8.6%):
50,000 Amoco Corp............................................ 4,500,000
82,000 Chevron Corp.......................................... 6,575,375
125,000 Exxon Corp............................................ 7,624,999
74,000 Mobil Corp............................................ 5,323,375
91,200 Texaco, Inc........................................... 5,152,800
------------
29,176,549
------------
Paper Products (1.5%):
16,000 Georgia Pacific Corp.................................. 1,366,000
</TABLE>
See notes to financial statements.
17
<PAGE>
Schedule of Portfolio Investments, Continued
- --------------------------------------------------------------------------------
MarketWatch Equity Fund November 30, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Paper Products, continued:
80,000 International Paper Co................................ $ 3,795,000
------------
5,161,000
------------
Pharmaceuticals (7.5%):
94,000 Abbott Laboratories................................... 6,110,000
75,000 Johnson & Johnson..................................... 4,720,313
62,000 Merck & Co., Inc...................................... 5,862,875
141,200 Schering-Plough Corp.................................. 8,851,474
------------
25,544,662
------------
Retail Stores (1.0%):
75,000 Sears, Roebuck & Co................................... 3,435,938
------------
Securities Brokers (3.5%):
25,000 Merrill Lynch & Co., Inc.............................. 1,754,688
135,300 Morgan Stanley Group.................................. 7,348,480
82,500 Paine Webber Group.................................... 2,774,063
------------
11,877,231
------------
Technology (1.2%):
53,000 Xerox Corp............................................ 4,117,438
------------
Tobacco (3.0%):
151,750 Philip Morris Companies Inc........................... 6,601,125
110,000 UST, Inc.............................................. 3,396,250
------------
9,997,375
------------
Toys (1.3%):
107,656 Mattel, Inc........................................... 4,312,969
------------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Transportation & Shipping (1.8%):
165,000 Illinois Central Corp................................. $ 5,950,313
------------
Utilities--Electric (2.7%):
55,000 Duke Energy Corp...................................... 2,860,000
50,000 FPL Group, Inc........................................ 2,796,875
90,000 GPU, Inc.............................................. 3,555,000
------------
9,211,875
------------
Utilities--Telecommunications (7.7%):
106,000 Alltel Corp........................................... 4,213,499
33,000 Ameritech Corp........................................ 2,543,063
95,000 AT&T Corp............................................. 5,308,124
35,000 Bell Atlantic Corp.................................... 3,123,750
40,000 BellSouth Corp........................................ 2,190,000
50,000 GTE Corp.............................................. 2,528,125
45,000 SBC Communications, Inc............................... 3,276,563
64,000 U S WEST Communications Group......................... 2,892,000
------------
26,075,124
------------
Total Common Stocks 337,552,035
------------
INVESTMENT COMPANIES (0.2%):
833,116 Dreyfus Government Cash Management Fund............... 833,116
------------
Total Investment Companies 833,116
------------
Total (Cost--$203,999,761)(a) $338,385,151
============
</TABLE>
- ------
Percentages indicated are based on net assets of $338,723,629.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securites as follows:
<TABLE>
<S> <C>
Unrealized appreciation. $136,249,636
Unrealized depreciation. (1,864,246)
------------
Net unrealized
appreciation............ $134,385,390
============
</TABLE>
(b) Non-income producing securities.
See notes to financial statements.
18
<PAGE>
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
MarketWatch Intermediate Fixed Income Fund November 30, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS (31.4%):
Automotive (1.1%):
$1,000,000 Ford Motor Co., 7.25%, 10/1/08........................ $ 1,053,750
-----------
Banking (5.2%):
1,000,000 J.P. Morgan & Co., 7.63%, 9/15/04..................... 1,063,750
1,000,000 Morgan Guaranty, 5.75%, 10/8/99....................... 993,750
1,000,000 State Street Boston Corp., 5.95%, 9/15/03............. 973,750
2,000,000 Wachovia Corp., 6.63%, 11/15/06....................... 2,005,000
-----------
5,036,250
-----------
Financial Services (10.9%):
1,000,000 Cigna Corp., 7.40%, 5/15/07........................... 1,046,795
500,000 Ford Motor Credit Co., 5.63%, 1/15/99................. 498,125
2,350,000 Ford Motor Credit Co., 6.25%, 11/8/00................. 2,350,000
500,000 Household International, 6.00%, 3/15/99............... 499,375
1,000,000 Lehman Brothers Holdings, 6.89%, 10/10/00............. 1,012,500
1,000,000 Lehman Brothers Holdings, 7.38%, 5/15/04.............. 1,032,500
1,000,000 Merrill Lynch & Co., Inc., 6.55%, 8/1/04.............. 1,007,500
1,000,000 Pitney Bowes Credit Corp., 6.78%, 7/16/01............. 1,017,500
1,000,000 Salomon, Inc., 7.30%, 5/15/02......................... 1,030,000
1,000,000 Smith Barney, 6.63%, 11/15/03......................... 1,001,250
-----------
10,495,545
-----------
Industrial Goods & Services (12.0%):
1,000,000 Bristol-Myers Squibb, 6.80%, 11/15/26................. 1,026,250
1,000,000 Chesapeake Corp., 7.20%, 3/15/05...................... 1,020,000
1,000,000 Heinz (H.J.) Company, 6.75%, 10/15/99................. 1,011,250
1,000,000 John Deere Capital Corp., 6.30%, 6/1/99............... 1,003,750
1,000,000 Monsanto Co., 6.00%, 7/1/00........................... 997,500
1,000,000 Philip Morris, Inc., 7.65%, 7/1/08.................... 1,058,750
1,000,000 Raytheon Co., 6.45%, 8/15/02.......................... 1,002,500
1,000,000 Sears Roebuck Acceptance Corp., 6.95%, 5/15/02........ 1,021,250
1,000,000 Wal-Mart Stores, 5.88%, 10/15/05...................... 973,750
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Industrial Goods & Services, continued:
$2,500,000 Walt Disney Co., 6.75%, 3/30/06....................... $ 2,562,500
-----------
11,677,500
-----------
Railroads (2.2%):
1,000,000 Burlington Northern, 7.46%, 9/24/11................... 1,081,250
1,000,000 CSX Corp., 7.05%, 5/1/02.............................. 1,017,500
-----------
2,098,750
-----------
Total Corporate Bonds 30,361,795
-----------
U.S. GOVERNMENT AGENCIES (8.2%):
Federal Farm Credit Bank (1.1%):
1,000,000 8.65%, 10/1/99........................................ 1,046,090
-----------
Federal National Mortgage Assoc. (7.1%):
1,000,000 9.55%, 12/10/97....................................... 1,000,880
2,000,000 8.15%, 5/11/98........................................ 2,021,360
1,000,000 8.70%, 6/10/99........................................ 1,040,230
2,625,000 6.35%, 6/10/05........................................ 2,654,453
150,000 6.55%, 9/12/05........................................ 153,552
-----------
6,870,475
-----------
Total U.S. Government Agencies 7,916,565
-----------
U.S. TREASURY BONDS (22.6%):
3,000,000 7.25%, 5/15/16........................................ 3,376,920
2,100,000 7.13%, 2/15/23........................................ 2,364,831
6,400,000 7.50%, 11/15/24....................................... 7,554,560
8,000,000 6.63%, 2/15/27........................................ 8,574,800
-----------
Total U.S. Treasury Bonds 21,871,111
-----------
U.S. TREASURY NOTES (33.5%):
9,500,000 9.13%, 5/15/99........................................ 9,933,010
2,500,000 7.75%, 11/30/99....................................... 2,591,125
2,300,000 7.75%, 1/31/00........................................ 2,389,309
1,000,000 7.13%, 2/29/00........................................ 1,027,380
2,000,000 6.25%, 8/31/00........................................ 2,021,320
1,000,000 7.88%, 8/15/01........................................ 1,065,760
1,500,000 7.50%, 11/15/01....................................... 1,585,110
1,000,000 6.63%, 4/30/02........................................ 1,028,660
1,000,000 7.50%, 5/15/02........................................ 1,063,620
3,100,000 7.88%, 11/15/04....................................... 3,448,657
6,000,000 6.13%, 8/15/07........................................ 6,116,340
-----------
Total U.S. Treasury Notes 32,270,291
-----------
</TABLE>
See notes to financial statements.
19
<PAGE>
Schedule of Portfolio Investments, Continued
- --------------------------------------------------------------------------------
MarketWatch Intermediate Fixed Income Fund November 30, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ------------------------------------------------------- -----------
<C> <S> <C>
INVESTMENT COMPANIES (3.2%):
3,136,093 Dreyfus Government Cash Management Fund................ $ 3,136,093
3,449 Dreyfus Treasury Cash Management Fund.................. 3,449
-----------
Total Investment Companies 3,139,542
-----------
Total (Cost--$91,281,904)(a) $95,559,304
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $96,625,625.
(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... $4,295,904
Unrealized depreciation... (18,504)
----------
Net unrealized
appreciation.............. $4,277,400
==========
</TABLE>
See notes to financial statements.
20
<PAGE>
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund November 30, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- ---------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS (97.3%):
$ 500,000 Albemarle County, Service Authority, Water & Sewer
Revenue, 5.50%, 8/1/06 Callable 8/1/02 @ 102....... $ 525,870
500,000 Alexandria, Industrial Development Authority,
Pollution Control Revenue, Potomac Electric
Project, 5.38%, 2/15/24 Callable 2/15/04 (MBIA).... 495,445
2,080,000 Arlington County Industrial Development Authority,
5.45%, 7/1/27 Callable on 7/1/07 @ 102............. 2,112,053
850,000 Arlington County, G.O., 6.00%, 6/1/04............... 929,764
2,000,000 Arlington County, G.O., 5.40%, 6/1/14 Callable
6/1/05 @ 101.5..................................... 2,050,520
1,000,000 Arlington County, G.O., 5.40%, 6/1/15 Callable
6/1/05 @ 101.5..................................... 1,023,740
1,100,000 Arlington County, Hospital Revenue, 5.30%, 9/1/15
Prerefunded 9/1/03 @ 102........................... 1,167,375
1,000,000 Ashland, Industrial Development Authority, 4.38%,
11/1/11............................................ 1,010,740
2,000,000 Augusta County, Industrial Development Authority,
Hospital Revenue, 6.63%, 9/1/12
Callable 9/1/01 @ 102 (AMBAC)...................... 2,164,640
6,000,000 Chesapeake, Water & Sewer, Series A, G.O., 5.00%,
12/1/25 Callable 12/1/05 @ 102..................... 5,781,179
700,000 Chesterfield County, G.O., 5.50%, 7/15/05 Callable
7/15/02 @101.5..................................... 740,180
885,000 Chesterfield County, G.O., 6.25%, 7/15/05 Callable
7/15/01 @ 102...................................... 958,482
1,000,000 Chesterfield County, G.O., 5.60%, 7/15/06 Callable
7/15/02 @ 101.5.................................... 1,059,390
600,000 Danville, G.O., 6.40%, 5/1/09 Callable 5/1/02 @ 102. 648,312
500,000 Danville, G.O., 6.40%, 5/1/10 Callable 5/1/02 @ 102. 538,185
1,000,000 Fairfax County, G.O., 6.00%, 5/1/07 Callable 11/1/99
@ 102.............................................. 1,052,520
1,000,000 Fairfax County, Industrial Development Revenue
Authority, 5.00%, 8/15/13.......................... 998,850
1,250,000 Fairfax County, Industrial Development Revenue
Authority, 5.25%, 8/15/19.......................... 1,241,888
1,000,000 Fairfax County, Industrial Development Revenue
Authority, Inova Health Systems Project, 5.25%,
5/15/19............................................ 1,002,490
1,000,000 Fairfax County, Public Improvement, Series A, 5.50%,
6/1/15 Callable 6/1/03 @ 102....................... 1,022,810
500,000 Fairfax County, Water Authority, Water Revenue,
5.00%, 4/1/16 Callable 4/1/04 @ 102................ 487,660
1,500,000 Fairfax County, Water Authority, Water Revenue,
5.00%, 4/1/21...................................... 1,459,605
1,265,000 Fairfax County, Water Authority, Water Revenue,
6.00%, 4/1/22 Callable 4/1/07 @ 102................ 1,358,648
735,000 Fairfax County, Water Authority, Water Revenue,
6.00%, 4/1/22 Prerefunded 4/1/07 @ 102............. 820,797
2,000,000 Fairfax County, Water Authority, Water Revenue, 5.00
%, 4/1/29 Callable 4/1/07 @102..................... 1,923,400
1,000,000 Franklin, G.O., 6.40%, 1/15/12 Callable 1/15/04 @
100................................................ 1,071,780
1,000,000 Hampton, G.O., 5.90%, 1/15/07 Callable 1/15/05 @
102................................................ 1,090,110
2,000,000 Hampton, Hospital Facilities Revenue, 5.38%, 11/1/15
Callable 11/1/07 @ 101............................. 2,020,500
1,000,000 Hanover County, Industrial Development Authority,
Bon Secours Health Systems Projects, 5.50%, 8/15/25
Callable 8/15/05 @ 102 (MBIA)...................... 1,002,150
1,000,000 Hanover County, Industrial Development Authority,
Bon Secours Health Systems Projects, 5.50%, 8/15/25
Callable 8/15/05 @ 102 (MBIA)...................... 1,003,640
1,000,000 Hanover County, Memorial Regional Medical Center,
6.38%, 8/15/18 (MBIA).............................. 1,150,060
2,000,000 Henrico County, G.O., 5.30%, 1/15/10 Callable
1/15/03 @ 102...................................... 2,050,200
1,000,000 Henrico County, Water & Sewer, 6.25%, 5/1/13
Callable 5/1/02 @ 100.............................. 1,055,230
1,000,000 James City County, G.O., 5.20%, 12/15/10 Callable
12/15/05 @ 102..................................... 1,021,800
725,000 Lynchburg, G.O., 6.88%, 4/1/01 Callable 4/1/00 @102. 782,282
700,000 Newport News, G.O., 5.80%, 7/1/06 Callable 7/1/99
@101.75............................................ 724,766
1,000,000 Newport News, G.O., 5.20%, 1/15/18 Callable 1/15/06
@ 102.............................................. 995,000
1,000,000 Newport News, Series A, 6.00%, 6/1/06 Callable
6/1/02 @ 101....................................... 1,067,080
1,000,000 Newport News, Series A, 6.00%, 6/1/07 Callable
6/1/02 @ 101.25.................................... 1,069,130
1,000,000 Newport News, Series A, 5.70%, 7/1/16 Callable
7/15/05 @ 102 (MBIA)............................... 1,038,560
1,000,000 Norfolk, Depaul Hospital, 6.50%, 12/1/07 Callable
12/1/02 @ 102...................................... 1,091,590
</TABLE>
See notes to financial statements.
21
<PAGE>
Schedule of Portfolio Investments, Continued
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund November 30, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- ----------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
$1,000,000 Norfolk, Industrial Development Authority, Childrens
Hospital Kings Group, 6.50%, 6/1/21
Callable 6/1/01 @ 102............................... $ 1,074,580
2,500,000 Norfolk, Industrial Development Authority, Sentara
Hospitals, Series A, 6.50%, 11/1/13
Callable 11/1/04 @ 102.............................. 2,758,825
1,900,000 Norfolk, Industrial Development Authority, Sentara
Hospitals, Series A, 5.50%, 11/1/17
Callable 11/1/04 @ 102.............................. 1,922,610
1,000,000 Norfolk, Refinements & Improvements, 5.25%, 2/1/06
Callable 2/1/03 @ 102............................... 1,043,000
2,000,000 Norfolk, Refinements & Improvements, 5.50%, 2/1/08
Callable 2/1/03 @ 102............................... 2,092,640
1,000,000 Norfolk, Refinements & Improvements, Series A, 5.90%,
2/1/06 Callable 2/1/01 @ 102........................ 1,057,060
1,000,000 Norfolk, Refinements & Improvements, Series A, 6.00%,
2/1/08 Callable 2/1/01 @ 102........................ 1,065,200
2,000,000 Norfolk, Water Revenue Bonds, 5.75%, 11/1/12 Callable
11/1/05 @ 102....................................... 2,112,940
500,000 Norfolk, Water Revenue Bonds, 5.90%, 11/1/25 Callable
11/1/07 @ 100....................................... 529,230
1,000,000 Portsmouth, Public Improvement, 6.10%, 11/1/03
Callable 11/1/01 @ 102.............................. 1,076,740
1,000,000 Prince William County, Improvements & Refinements,
Series A, G.O., 5.90%, 12/1/03
Callable 12/1/00 @ 102.............................. 1,061,710
1,000,000 Prince William County, Industrial Development
Authority, Hospital Revenue, 5.63%, 4/1/12
Callable 4/1/03 @ 102............................... 1,014,620
1,000,000 Richmond, G.O., 5.00%, 1/15/21 Callable 1/15/06 @
102................................................. 961,500
1,500,000 Richmond, Public Improvement, Series B, G.O., 5.50%,
7/15/23 Callable 7/15/03 @ 102...................... 1,510,110
1,000,000 Rivanna, Water & Sewer, 4.80%, 10/1/15 Callable
10/1/03 @ 101.5..................................... 951,560
500,000 Roanoke County, Water Systems Revenue Bonds, 5.00%,
7/1/21 Callable 1/15/06 @ 102 (FGIC)................ 478,615
2,000,000 Roanoke Industrial Development Authority, 5.25%,
7/1/25 Callable 7/1/03 @ 102 (MBIA)................. 1,954,300
1,000,000 Roanoke Refinements & Improvements, Series B, G.O.,
6.20%, 8/1/05 Callable 8/1/01 @ 101................. 1,068,210
1,250,000 Roanoke, G.O., 6.30%, 8/1/07 Callable 8/1/01 @101.5.. 1,339,850
3,475,000 Roanoke, G.O., 5.25%, 8/1/24 Callable 8/1/04 @ 102... 3,454,983
1,000,000 Salem, G.O., 6.50%, 6/1/02 Callable 6/1/98 @ 101..... 1,022,600
1,000,000 Spotsylvania County, G.O., 5.50%, 7/15/05 Callable
7/15/02 @102........................................ 1,058,030
1,000,000 Spotsylvania County, Public Improvement, 5.70%,
7/15/07 Callable 7/15/02 @ 102...................... 1,059,400
1,500,000 University of Virginia, University Revenues, 5.20%,
6/1/15 Callable 6/1/03 @ 102........................ 1,500,915
1,000,000 Virginia Beach, G.O., 5.70%, 7/15/06 Callable 7/15/04
@ 100............................................... 1,064,140
1,000,000 Virginia Beach, G.O., 5.80%, 7/15/07 Callable 7/15/02
@ 102............................................... 1,064,380
1,000,000 Virginia Beach, G.O., 6.20%, 9/1/14 Callable 9/1/04 @
102................................................. 1,082,940
1,000,000 Virginia Beach, Series C, 6.10%, 8/1/02 Callable
8/1/01 @ 102........................................ 1,078,500
1,000,000 Virginia College Building Authority, Washington & Lee
University Project, 5.80%, 1/1/24
Callable 1/1/04 @ 102............................... 1,037,160
1,000,000 Virginia Housing Development Authority, 6.35%, 1/1/15
Callable 1/1/08 @ 100............................... 1,071,500
1,000,000 Virginia Housing Development Authority, 6.40%, 7/1/17
Callable 1/1/05 @ 100................................ 1,052,200
1,500,000 Virginia Polytechnic Institute & State University,
5.50%, 6/1/16 Callable 6/1/06 @ 102................. 1,537,290
300,000 Virginia Public School Authority, 5.75%, 1/1/08
Callable 1/1/03 @ 102............................... 317,868
1,000,000 Virginia State Higher Education, Series C, 6.00%,
6/1/06 Callable 6/1/02 @ 100........................ 1,065,200
500,000 Virginia State Housing Development Authority, 7.00%,
7/1/99.............................................. 514,625
1,000,000 Virginia State Housing Development Authority, 6.55%,
1/1/11 Callable 1/1/06 @ 102........................ 1,084,770
1,000,000 Virginia State Housing Development Authority, 6.40%,
7/1/17 Callable 1/1/03 @ 102........................ 1,052,200
500,000 Virginia State Housing Development Authority, Series
B, 7.10%, 7/1/00 Prerefunded 1/1/98 @ 100........... 516,645
400,000 Virginia State Housing Development Authority, Series
F, 6.45%, 5/1/01.................................... 417,200
</TABLE>
See notes to financial statements.
22
<PAGE>
Schedule of Portfolio Investments, Continued
- --------------------------------------------------------------------------------
MarketWatch Virginia Municipal Bond Fund November 30, 1997
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
---------- ------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
$ 500,000 Virginia State Housing Development Authority, Series
H, 6.10%, 1/1/07 Callable 1/1/05 @ 102............... $ 525,955
500,000 Virginia State Housing Development Authority, Series
H, 6.20%, 1/1/08 Callable 1/1/05 @ 102............... 526,575
500,000 Virginia State Housing Development Authority, Series
H, 6.30%, 1/1/09 Callable 1/1/05 @ 102............... 526,460
1,000,000 Virginia State Public Facilities, Series A, 5.50%,
6/1/06 Callable 6/1/03 @ 102......................... 1,065,740
1,000,000 Virginia State Public School Authority, 6.25%, 1/1/04
Callable 1/1/02 @ 102................................ 1,081,750
690,000 Virginia State Resource Authority, Water & Sewer
Revenue, 5.50%, 10/1/22 Callable 10/1/07 @ 102....... 701,972
1,000,000 Virginia State Resource Authority, Water & Sewer
Revenue, 5.60%, 10/1/25 Callable 10/01/05 @ 102...... 1,013,510
1,000,000 Virginia State Resource Authority, Appomattox River
Water Systems Revenue, 5.25%, 10/1/13 Callable
10/1/03 @ 102........................................ 1,005,030
1,000,000 Virginia State University & College Improvements,
5.25%, 6/1/16 Callable 6/1/05 @ 100.................. 1,008,010
750,000 Washington County, Industrial Development Authority,
Johnston Memorial Hospital Revenue, 6.00%, 7/1/14
Callable 7/1/05 @ 102................................ 779,318
2,000,000 Williamsburg, Industrial Development Authority, 5.75%,
10/1/22 Callable 10/1/03 @ 102....................... 2,011,100
------------
108,179,687
------------
Total Municipal Bonds 108,179,687
------------
INVESTMENT COMPANIES (1.0%):
1,097,624 Dreyfus Tax Exempt Fund............................... 1,097,624
------------
Total Investment Companies 1,097,624
------------
Total (Cost--$103,651,723)(a) $109,277,311
============
</TABLE>
- ------
Percentages indicated are based on net assets of $111,159,973.
(a)Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....... $5,629,461
Unrealized depreciation....... (3,873)
----------
Net Unrealized appreciation... $5,625,588
==========
</TABLE>
Revenue Source Diversification:
<TABLE>
<S> <C>
General Obligation Bonds.......... 47.69%
Health Care Bonds................. 20.79%
Utility Bonds..................... 12.97%
Other (individually make up less
than 10%)......................... 15.85%
</TABLE>
AMBAC--Insured by AMBAC Indemnity Corporation
GO--General Obligation
MBIA--Insured by Municipal Bond Insurance Association.
See notes to financial statements.
23
<PAGE>
Notes to Financial Statements
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 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.
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 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 exchange) in which such
securities are normally traded. Securities may be valued by an independent
pricing
Continued
24
<PAGE>
Notes to Financial Statements, Continued
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
service approved by the Company's Board of Trustees. Investments in
investment companies are valued at their respective net asset values as
reported by such companies. Securities, including restricted securities, for
which market quotations are not readily available, are valued at fair market
value under the supervision of the Company's Board of Trustees.
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 deemed
creditworthy by the Fund's investment adviser 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 coupon
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 least equal to 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-tax 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, 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
year ended November 30, 1997 are as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ -----------
<S> <C> <C>
Equity Fund........................................... $ 98,346,243 $36,543,313
Intermediate Fixed Income Fund........................ $121,351,902 $72,143,753
Virginia Municipal Bond Fund.......................... $ 60,574,344 $15,783,550
</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, 1997, BISYS received $888,789 from commissions earned on sales
of shares of the Company's variable net asset value funds of which $91,778
was allowed to Central Fidelity Securities and $747,026 was allowed to
Corelink, each an affiliate and 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.
Continued
26
<PAGE>
Notes to Financial Statements, Continued
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
Fees may be voluntarily reduced or expenses reimbursed to assist the Funds in
maintaining competitive expense ratios.
Information regarding these transactions is as follows for the year ended
November 30, 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.............. $77,627 $715,537 $233,378 $389,362
ADMINISTRATIVE FEES:
Annual fee as a percentage of average
daily net assets...................... 0.20% 0.20% 0.20% 0.20%
Voluntary fee reductions.............. $7,757 $141,171 $46,978 $56,031
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.............. $38,787 -- -- --
CUSTODIAN FEES:
Annual fee as a percentage of average
daily net assets...................... 0.02% 0.02% 0.02% 0.02%
Voluntary fee reductions.............. $3,103 -- -- --
TRANSFER AGENT AND MUTUAL FUND
ACCOUNTANT FEES:...................... $51,868 $207,516 $63,799 $90,297
REIMBURSED EXPENSES:.................. $44,937 $1,651 $721 --
</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 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 percentage eligible distributions for
the dividends received deduction for corporations:
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
Equity Fund......................................................... 100.00%
</TABLE>
7.EXEMPT-INTEREST INCOME DESIGNATION (UNAUDITED):
The Company designates the following exempt-interest dividends from the
taxable year ended November 30, 1997:
<TABLE>
<CAPTION>
Tax-Exempt
Distribution
------------
<S> <C>
Virginia Municipal Bond Fund...................................... $4,771,826
</TABLE>
Continued
27
<PAGE>
Notes to Financial Statements, Continued
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
8.FEDERAL INCOME TAXES:
For federal income tax purposes, the following Funds have capital loss
carryforwards as of November 30, 1997, 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.............................. $2,871,544 2001
121,910 2002
186,030 2003
----------
$3,179,484
==========
Virginia Municipal Bond Fund................................ $1,843,892 2002
484,527 2004
----------
$2,328,419
==========
</TABLE>
9.ACQUISITION OF MARKETWATCH COMMON TRUST FUNDS:
On December 20, 1996, Funds of the Company acquired portfolio securities and
other assets from related parties pursuant to the procedures adopted by the
Trustees for transactions between Funds of the Company and certain other
related entities in a tax free exchange. The Diversified Equity Common Trust
Fund, Medium Term Common Trust Fund, Growth & Income Common Trust Fund, Short
Term Common Trust Fund, and Municipal Common Trust Fund maintained by Central
Fidelity National Bank exchanged their portfolio securities and related
assets for shares of the MarketWatch Equity Fund, MarketWatch Intermediate
Bond Fund and Virginia Municipal Bond Fund detailed below:
<TABLE>
<S> <C>
MarketWatch Equity Fund
DIVERSIFIED EQUITY COMMON TRUST FUND
Shares........................................................... 2,783,755
Net assets....................................................... $44,261,710
Net asset value.................................................. $ 15.90
Unrealized appreciation.......................................... $21,243,903
MarketWatch Intermediate Bond Fund
MEDIUM TERM COMMON TRUST FUND
Shares........................................................... 4,500,438
Net assets....................................................... $44,104,297
Net asset value.................................................. $ 9.80
Unrealized appreciation.......................................... $ 1,442,056
</TABLE>
Continued
28
<PAGE>
Notes to Financial Statements, Continued
- -------------------------------------------------------------------------------
MarketWatch Funds November 30, 1997
<TABLE>
<S> <C>
GROWTH & INCOME COMMON TRUST FUND
Shares........................................................... 475,476
Net assets....................................................... $ 4,659,662
Net asset value.................................................. $ 9.80
Unrealized appreciation.......................................... $ 123,714
SHORT TERM COMMON TRUST FUND
Shares........................................................... 649,552
Net assets....................................................... $ 6,365,605
Net asset value.................................................. $ 9.80
Unrealized appreciation.......................................... $ 26,626
MarketWatch Virginia Municipal Bond Fund
MUNICIPAL BOND COMMON TRUST FUND
Shares........................................................... 5,008,157
Net assets....................................................... $50,181,730
Net asset value.................................................. $ 10.02
Unrealized appreciation.......................................... $ 1,668,807
</TABLE>
10.SUBSEQUENT EVENT:
A Special Meeting of Shareholders of the Funds was held on December 5, 1997.
Shareholders of each Fund approved a New Advisory Agreement with Wachovia
Bank, N.A. with respect to each portfolio of the Trust. As described in the
related Notice of Special Meeting of Shareholders dated November 21, 1997 and
Proxy Statement, the terms and conditions, including advisory fees charged
thereunder, are substantially the same as those under the previous Advisory
Agreement with Central Fidelity National Bank. On January 21, 1998, the Board
of Trustees of the MarketWatch Fund's approved the Agreement and Plan of
Reorganization between the MarketWatch Funds and the Wachovia Funds. Any such
combination will be subject to, among other things, separate consideration
and approval by the Wachovia Fund Board of Trustees and by the shareholders
of each MarketWatch Fund.
29
<PAGE>
Financial Highlights
- -------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Money Market Fund
----------------------------------------------------------------
February 1,
Year Ended Year Ended Year Ended Year Ended 1993 to
November 30, November 30, November 30, November 30, November 30,
1997 1996 1995 1994 1993(a)
------------ ------------ ------------ ------------ ------------
<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......... 0.050 0.049 0.052 0.034 0.020
Net realized and
unrealized
gain/(loss)
from
investments.... -- -- -- -- --
------- ------- ------- ------- -------
Total from
Investment
Activities..... 0.050 0.049 0.052 0.034 0.020
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net
investment
income......... (0.050) (0.049) (0.052) (0.034) (0.020)
In excess of net
investment
income......... -- -- -- -- --
From net
realized gains. -- -- -- -- --
Total
Distributions... (0.050) (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)........ 5.06% 4.99% 5.32% 3.49% 2.01%(b)
RATIOS/
SUPPLEMENTARY
DATA:
Net Assets,
End of Period
(000).......... $17,196 $13,721 $13,445 $11,364 $16,041
Ratio of
expenses to
average net
assets......... 0.32% 0.32% 0.32% 0.32% 0.63%(c)
Ratio of net
investment
income to
average net
assets......... 4.95% 4.89% 5.19% 3.39% 2.37%(c)
Ratio of
expenses to
average net
assets(*)...... 1.43% 1.44% 1.54% 1.65% 1.59%(c)
Ratio of net
investment
income to
average net
assets(*)...... 3.84% 3.76% 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
------------------------------------------------------------------
January 29,
Year Ended Year Ended Year Ended Year Ended 1993 to
November 30, November 30, November 30, November 30, November 30,
1997 1996 1995 1994 1993(a)
------------ ------------ ------------ ------------ --------------
<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......... 0.13 0.15 0.17 0.17 0.15
Net realized and
unrealized
gain/(loss)
from
investments.... 4.44 3.67 3.09 (0.40) 0.19
------------ ------------ ------------ ------------ --------------
Total from
Investment
Activities..... 4.57 3.82 3.26 (0.23) 0.34
------------ ------------ ------------ ------------ --------------
DISTRIBUTIONS:
From net
investment
income......... (0.13) (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... (0.38) (0.29) (0.18) (0.17) (0.14)
------------ ------------ ------------ ------------ --------------
Net Asset Value,
End of Period... $ 20.60 $ 16.41 $ 12.88 $ 9.80 $ 10.20
============ ============ ============ ============ ==============
Total return
(excludes sales
charges)........ 28.50% 30.10% 33.59% (2.26%) 3.42%(b)
RATIOS/
SUPPLEMENTARY
DATA:
Net Assets,
End of Period
(000).......... $338,724 $186,147 $119,484 $103,140 $107,859
Ratio of
expenses to
average net
assets......... 1.30% 1.35% 1.35% 1.35% 1.33%(c)
Ratio of net
investment
income to
average net
assets......... 0.70% 1.04% 1.58% 1.75% 1.75%(c)
Ratio of
expenses to
average net
assets(*)...... 1.60% 1.66% 1.71% 1.75% 1.72%(c)
Ratio of net
investment
income to
average net
assets(*)...... 0.40% 0.73% 1.22% 1.34% 1.36%(c)
Portfolio
Turnover....... 13.12% 12.33% 29.98% 30.33% 29.72%(c)
Average
commission rate
paid (d)....... $ 0.0597 $ 0.0634 -- -- --
</TABLE>
- -----
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or 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.
30
<PAGE>
Financial Highlights
- -------------------------------------------------------------------------------
MarketWatch Funds
<TABLE>
<CAPTION>
Intermediate Fixed Income Fund
----------------------------------------------------------------
January 29,
Year Ended Year Ended Year Ended Year Ended 1993 to
November 30, November 30, November 30, November 30, November 30,
1997 1996 1995 1994 1993(a)
------------ ------------ ------------ ------------ ------------
<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......... 0.54 0.55 0.55 0.44 0.33
Net realized and
unrealized
gain/(loss)
from
investments.... 0.06 (0.11) 0.76 (0.79) 0.19
------- ------- ------- ------- -------
Total from
Investment
Activities..... 0.60 0.44 1.31 (0.35) 0.52
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net
investment
income......... (0.53) (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.. (0.53) (0.55) (0.55) (0.54) (0.32)
------- ------- ------- ------- -------
Net Asset Value,
End of Period... $ 10.03 $ 9.96 $ 10.07 $ 9.31 $ 10.20
======= ======= ======= ======= =======
Total return
(excludes sales
charges)........ 6.32% 4.46% 14.44% (3.51%) 5.19%(b)
RATIOS/
SUPPLEMENTARY
DATA:
Net Assets,
End of Period
(000).......... $96,626 $43,277 $35,796 $48,730 $64,674
Ratio of
expenses to
average net
assets......... 1.04% 1.09% 1.10% 1.09% 1.08%(c)
Ratio of net
investment
income to
average net
assets......... 5.50% 5.62% 5.60% 4.46% 3.92%(c)
Ratio of
expenses to
average net
assets (*)..... 1.34% 1.40% 1.51% 1.49% 1.47%(c)
Ratio of net
investment
income to
average net
assets (*)..... 5.20% 5.31% 5.19% 4.07% 3.53%(c)
Portfolio
Turnover....... 80.77% 83.76% 43.65% 55.36% 57.40%
<CAPTION>
Virginia Municipal Bond Fund
------------------------------------------------------------------
February 1,
Year Ended Year Ended Year Ended Year Ended 1993 to
November 30, November 30, November 30, November 30, November 30,
1997 1996 1995 1994 1993(a)
------------ ------------ ------------ ------------ --------------
<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......... 0.46 0.44 0.42 0.38 0.28
Net realized and
unrealized
gain/(loss)
from
investments.... 0.13 (0.10) 0.85 (0.90) 0.30
------------ ------------ ------------ ------------ --------------
Total from
Investment
Activities..... 0.59 0.34 1.27 (0.52) 0.58
------------ ------------ ------------ ------------ --------------
DISTRIBUTIONS:
From net
investment
income......... (0.45) (0.44) (0.42) (0.38) (0.27)
In excess of net
investment
income......... -- -- -- (0.01) --
In excess of net
realized gains. -- -- -- -- --
------------ ------------ ------------ ------------ --------------
Total
Distributions.. (0.45) (0.44) (0.42) (0.39) (0.27)
------------ ------------ ------------ ------------ --------------
Net Asset Value,
End of Period... $ 10.30 $ 10.15 $ 10.25 $ 9.40 $ 10.31
============ ============ ============ ============ ==============
Total return
(excludes sales
charges)........ 5.97% 3.50% 13.79% (5.17%) 5.84%(b)
RATIOS/
SUPPLEMENTARY
DATA:
Net Assets,
End of Period
(000).......... $111,160 $70,378 $54,041 $39,978 $33,652
Ratio of
expenses to
average net
assets......... 0.96% 1.04% 1.05% 1.04% 1.02%(c)
Ratio of net
investment
income to
average net
assets......... 4.50% 4.45% 4.33% 3.90% 3.65%(c)
Ratio of
expenses to
average net
assets (*)..... 1.36% 1.44% 1.51% 1.56% 1.66%(c)
Ratio of net
investment
income to
average net
assets (*)..... 4.10% 4.05% 3.87% 3.38% 3.01%(c)
Portfolio
Turnover....... 15.15% 36.99% 77.50% 87.36% 86.08%
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or 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>
Independent Auditors' Report
- -------------------------------------------------------------------------------
MarketWatch Funds
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, and the Virginia Municipal Bond Fund (the Funds), including the
schedules of portfolio investments, as of November 30, 1997, 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 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, 1997 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 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, 1997, the results of their operations, the changes in their net assets and
the financial highlights for the periods indicated herein, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 9, 1998
32
<PAGE>
Investment Adviser and Custodian
Central Fidelity National Bank
1021 East Cary Street
Richmond, Virginia 23219
Administrator
and Distributor
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
Legal Counsel
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
Philadelphia, Pennsylvania 19107
Auditors
KPMG Peat Marwick LLP
Two Nationwide Plaza
Suite 1600
Columbus, Ohio 43215
[LOGO OF MARKETWATCH APPEARS HERE]
ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1997
---------------------------
CENTRAL FIDELITY NATIONAL BANK
INVESTMENT ADVISER
BISYS FUND SERVICES
1/98
