JULY 31, 1997
[LOGO OMITTED]
THE OVB FUNDS
PORTFOLIOS OF THE ARBOR FUND
SEMI-ANNUAL
REPORT
TO SHAREHOLDERS
<PAGE>
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THE OVB FUNDS
TABLE OF CONTENTS
- -----------------------------------------------------
Letter to Shareholders..............................1
Investment Adviser's Review.........................2
Financial Statements................................5
THE OVB FUNDS:
[bullet] NOT FDIC INSURED
[bullet] NO BANK GUARANTEE
[bullet] MAY LOSE VALUE
<PAGE>
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LETTER TO SHAREHOLDERS JULY 31,1997
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[PHOTOGRAPH OF DAVID G. LEE OMITTED]
DEAR OVB FUNDS SHAREHOLDER:
DURING THIS PERIOD IN WHICH THE FINANCIAL MARKETS HAVE BECOME A TOPIC OF
EVERYDAY CONVERSATION, IT CAN BE DIFFICULT TO RECALL THAT INVESTING WAS ONCE THE
PROVINCE OF THOSE WHO WERE PARTICULARLY AFFLUENT, OR WHO HAD A SPECIAL INTEREST
IN FINANCIAL MATTERS.
TODAY, HOWEVER, MILLIONS OF AMERICANS AT ALL ECONOMIC LEVELS ARE TAKING PART IN
THE GROWTH OF THE FINANCIAL MARKETS THROUGH THE CONVENIENCE OF MUTUAL FUND
INVESTING.
WE ARE PROUD TO BRING THE MUTUAL FUND REVOLUTION TO THE RESIDENTS OF WEST
VIRGINIA -- AND NOW VIRGINIA -- BY WAY OF A DIVERSIFIED FAMILY OF NO-LOAD
PORTFOLIOS, THE OVB FAMILY OF FUNDS.
SINCE GROWTH IS A GOAL THAT WE VERY MUCH SHARE WITH INVESTORS IN OUR FUNDS, WE
ARE ESPECIALLY GRATIFIED BY THE RESULTS OF THE PAST SIX MONTHS, WHICH HAVE
INCLUDED SOLID GAINS THROUGHOUT OUR MUTUAL FUND FAMILY.
ON BEHALF OF OUR INVESTMENT MANAGEMENT TEAM, WE THANK YOU FOR CHOOSING THE OVB
FAMILY OF FUNDS AS YOUR VEHICLE FOR PARTICIPATING IN AMERICA'S ECONOMIC GROWTH.
/S/ SIGNATURE
David G. Lee
President
The Arbor Fund
1
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INVESTMENT ADVISER'S REVIEW
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INVESTMENT ADVISER'S REVIEW
The six-month period ending July 31, 1997 was one of strong results in the
stock, bond, and money markets, as the economy continued to benefit from low
inflation, moderate growth, stable interest rates, and healthy corporate
profits.
These conditions have created an ideal environment for financial assets. And
while we cannot predict how much longer the current trend will continue, we see
no immediate signs of a dramatic change in any of the factors fueling the
markets' rise.
MONEY MARKET REVIEW
At its March 1997 meeting, the Federal Reserve Board increased short-term
rates by one quarter of one percent, causing a brief uptick in yields.
Otherwise, yields moved in a very narrow range during most of the period.
Looking ahead, we see a continuation of the current trend toward stability in
short-term rates. This could change, of course, if economic growth or other
market conditions cause the Fed to take more aggressive action.
BOND MARKET REVIEW
Conventional wisdom says that an economy cannot experience strong growth
without generating inflationary pressure. However, the current economy is
proving this wisdom to be wrong, at least for the moment.
Economic growth during the period was particularly strong, with first quarter
results showing an annual rate of expansion of nearly six percent. At the same
time, the news on inflation was the best it has been in many years, as the
Producer Price Index actually declined for six months in a row -- a record that
has not been equalled in the fifty-year history of the Index.
Among the reasons for this seeming paradox were restrained monetary growth,
the growing impact of global wage competition, and rising productivity -- due
largely to the impact of technology.
The bond market has been slow to accept the reality of the current
conditions, and has flinched with every release of good economic news. However,
most market declines have been relatively small and short-lived, so that overall
performance for the period was fairly strong.
Going forward, we see still more reasons to maintain a positive outlook for
bonds. For example, strong Federal tax receipts are reducing the Federal
deficit,
2
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JULY 31,1997
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which is projected to be as low as $37 billion by October. This, along with the
new balanced budget amendment, may actually reduce the government's need to
issue new Treasury securities in the future, tightening supply.
Not all signs are positive, however. The central banks of some foreign
nations have been selling U.S. Treasury securities at the most rapid pace in
over five years, putting a damper on the market. And the threat of inflation
could yet lead the Federal Reserve Board to raise rates in the months ahead.
In the tax-exempt market, the supply of new issues within the state of West
Virginia has been adequate, although not exceptional. This, along with
relatively stable market conditions, resulted in good overall performance during
the past six months.
Looking ahead in the tax-exempt market, we believe that the new Federal
tax law could have a mixed impact on investors. On the positive side, certain
stipulations may discourage non-essential financings such as stadium
construction, reducing overall supply.
The supply of new issues could be further reduced by the fact that many state
budgets are currently running at a surplus. On the negative side, the reduction
in capital gains taxes on equities could somewhat reduce the attractiveness of
municipal bonds for some investors.
EQUITY MARKET REVIEW
Like the bond market, the equity market has tested some long held beliefs in
the past six months. For instance, history has shown that whenever the Dow Jones
Industrial Average rises by more than 50% over a two-year period, it declines
during the third year. And while calendar 1997 is not yet over, the market
appears poised to break that tradition with solid gains for a third consecutive
year.
The reasons, once again, include ongoing economic growth, low inflation,
stable interest rates, and strong corporate profits. In addition, money
continues to flow into the market from 401(k) plans and other sources, as
individual investors have embraced the wisdom of investing regardless of whether
the market is up or down.
The market continues to be dominated by large-capitalization issues, which
are benefitting from strong profits as well as the popularity of "index" funds,
most of which are heavily weighted in larger issues.
This trend has benefitted the OVB Equity Income Portfolio, which holds a
large proportion of large-cap issues. And while dividend income continues to
shrink due to rising stock prices, many companies have compensated investors
through dividend increases and stock buyback programs, both of which benefit
stockholders.
(CONTINUED)
3
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INVESTMENT ADVISER'S REVIEW (CONCLUDED)
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Also seeking to take advantage of this trend, the Capital Appreciation
Portfolio has placed an emphasis on large-capitalization issues. However, the
Portfolio maintains some exposure to mid-cap issues, in the belief that their
very attractive valuations will soon lead to a rally in this sector.
Looking ahead, we remain optimistic about the equity markets, due to the
continued strength of the economy and corporate profits. Also, the markets
should benefit from the upcoming reductions in capital gains tax rates, which
will increase the attractiveness of owning stocks -- particularly those
smaller-cap issues (such as those found in the OVB Emerging Growth Portfolio)
whose primary form of growth is capital gains, rather than income.
Recognizing that the markets never move in a straight line, however, we see
potential short-term corrections if interest rates should rise, or if corporate
profits should prove to be disappointing.
CONCLUSION
While many people are asking when the current market conditions will end, we
believe that the question is irrelevant for long-term investors. Because history
has shown, yet again, that the markets reward those who remain invested through
the best -- and worst -- of times.
As always, we thank you for joining us on this journey, and we will continue
to strive to earn your confidence in the OVB Family of Funds.
/S/ SIGNATURE
J. RANDY VALENTINE
SENIOR VICE PRESIDENT
ONE VALLEY BANK, N.A.
4
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STATEMENT OF NET ASSETS JULY 31, 1997 (UNAUDITED)
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PRIME OBLIGATIONS PORTFOLIO
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[Pie Chart depicting percentage of Portfolio investments omitted]
Plot Points are as follows:
CORPORATE OBLIGATION 4%
BANKER'S ACCEPTANCE 3%
U.S. GOVERNMENT AGENCY OBLIGATION 7%
FLOATING RATE INSTRUMENTS 13%
MORTGAGE RELATED 3%
CERTIFICATE OF DEPOSIT 3%
BANK NOTES 6%
REPURCHASE AGREEMENT 1%
COMMERCIAL PAPER 60%
% of Total Portfolio Investments
Pie chart unaudited
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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COMMERCIAL PAPER -- 59.5%
Banking -- 6.9%
Government Development Bank of Puerto Rico
5.790%, 08/19/97 $ 3,000 $ 2,991
New Center Asset Trust
5.570%, 12/15/97 3,000 2,937
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TOTAL BANKING 5,928
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Financial Services -- 43.3%
Associates of North America
5.764%, 08/25/97 3,000 2,989
BT Securities
5.640%, 09/23/97 2,800 2,777
Centric Funding
5.738%, 09/08/97 1,900 1,889
Corporate Receivable
5.612%, 08/08/97 3,000 2,997
Enterprise Funding
5.657%, 09/12/97 2,500 2,484
Eureka
5.676%, 08/04/97 2,500 2,499
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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General Electric Capital
5.927%, 11/26/97 $ 3,000 $ 2,945
GMAC
6.056%, 11/10/97 3,000 2,951
Greenwich Funding
5.640%, 08/06/97 2,600 2,598
Kitty Hawk Funding
5.822%, 09/02/97 3,000 2,985
Peacock Funding
5.689%, 10/06/97 2,007 1,987
Ranger Funding
5.648%, 09/19/97 2,500 2,481
Societe Generale North America
5.853%, 12/10/97 3,000 2,939
Svenska Handels Banking New York
5.701%, 09/30/97 2,500 2,477
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TOTAL FINANCIAL SERVICES 36,998
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Industrial -- 9.3%
Aon
5.760%, 08/01/97 2,475 2,475
Chevron Transport
5.908%, 12/08/97 3,000 2,939
Toshiba America
5.746%, 08/22/97 2,500 2,492
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TOTAL INDUSTRIAL 7,906
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TOTAL COMMERCIAL PAPER
(COST $50,832) 50,832
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U.S. GOVERNMENT AGENCY OBLIGATION -- 7.0%
FNMA (A)
5.440%, 08/25/97 6,000 6,000
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TOTAL U.S. GOVERNMENT AGENCY
OBLIGATION (COST $6,000) 6,000
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BANKER'S ACCEPTANCE -- 3.5%
Bank of Hawaii
5.670%, 08/27/97 3,000 2,988
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TOTAL BANKER'S ACCEPTANCE
(COST $2,988) 2,988
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CORPORATE OBLIGATION -- 3.5%
Bank of America (A)
5.650%, 10/16/97 3,000 2,999
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TOTAL CORPORATE OBLIGATION
(COST $2,999) 2,999
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(CONTINUED)
5
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STATEMENT OF NET ASSETS
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PRIME OBLIGATIONS PORTFOLIO (CONCLUDED)
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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FLOATING RATE INSTRUMENTS -- 12.9%
Bank One, Columbus (A)
5.470%, 09/24/97 $ 3,000 $ 2,998
Key Bank (A)
5.860%, 08/30/97 3,000 2,999
People's Security Life (A)
5.980%, 08/01/97 3,000 3,000
Travelers Insurance (A)
5.831%, 10/01/97 2,000 2,000
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TOTAL FLOATING RATE INSTRUMENTS
(COST $10,997) 10,997
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MORTGAGE RELATED -- 3.5%
Goldman Sachs Investment Trust
Ser 1997-C, Cl N (A)
5.688%, 08/15/97 3,000 3,000
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TOTAL MORTGAGE RELATED (COST $3,000) 3,000
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CERTIFICATE OF DEPOSIT -- 3.5%
Bank of Tokyo Mitsubishi
5.940%, 11/17/97 3,000 3,000
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TOTAL CERTIFICATE OF DEPOSIT
(COST $3,000) 3,000
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BANK NOTES -- 5.9%
First National Bank of Boston
5.650%, 10/08/97 2,500 2,500
Morgan Guaranty NY
5.955%, 06/22/98 2,500 2,499
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TOTAL BANK NOTES
(COST $4,999) 4,999
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REPURCHASE AGREEMENT -- 1.0%
Lehman Government Securities
5.76%, dated 07/31/97, matures
08/01/97, repurchase price
$842,135 (collateralized
by U.S. Treasury STRIPS,
par value $4,095,000, 0%,
08/15/21: market value $874,754) 842 842
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TOTAL REPURCHASE AGREEMENT
(COST $842) 842
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TOTAL INVESTMENTS -- 100.3%
(COST $85,657) 85,657
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VALUE
DESCRIPTION (000)
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OTHER ASSETS AND LIABILITIES -- (0.3%)
Other Assets and Liabilities, Net $ (264)
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TOTAL OTHER ASSETS AND LIABILITIES (264)
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NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
79,275,324 outstanding shares of
beneficial interest 79,275
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
6,127,016 outstanding shares of
beneficial interest 6,127
Accumulated net realized loss on investments (9)
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TOTAL NET ASSETS -- 100.0% $85,393
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NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
PER SHARE -- CLASS A $1.00
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
PER SHARE -- CLASS B $1.00
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(A) Floating Rate Instrument. Rate reflected on the Statement of Net Assets
is the rate in effect on July 31, 1997.
Cl Class
FNMA Federal National Mortgage Association
Ser Series
STRIPS Separately Traded Registered Interest and Principal Securities
The accompanying notes are an integral part of the financial statements.
6
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JULY 31, 1997 (UNAUDITED)
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WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
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[Pie Chart depicting percentage of Portfolio investments omitted]
Plot Points are as follows:
MUNICIPAL BONDS 99%
CASH EQUIVALENT 1%
% of Total Portfolio Investments
Pie chart unaudited
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS -- 98.6%
West Virginia -- 98.6%
Beckley, Industrial Development
Authority, Beckley Water
Project, RB
7.000%, 10/01/17 $ 1,000 $ 1,095
Beckley, Nursing Facility
Health Care Project, RB
6.000%, 09/01/12 310 317
Beckley, Sewage System
Refunding, RB
6.750%, 10/01/25 400 421
Berkeley County, Board of
Education, GO, BIG
7.375%, 04/01/03 425 490
Berkeley County, Board of
Education, GO, FGIC
4.500%, 06/01/09 940 913
4.125%, 06/01/10 400 370
Berkeley County, Sewer System
Refunding, RB, MBIA
5.625%, 10/01/19 895 925
Brooke County, Board of Education,
GO, AMBAC
8.800%, 08/01/97 85 85
9.000%, 08/01/98 15 16
Brooke County, Tyler Wetzel
Project, RB
7.400%, 08/15/10 1,675 2,029
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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Cabell County, Board of
Education, GO, MBIA
6.500%, 05/01/03 $ 150 $ 167
6.600%, 05/01/04 1,000 1,131
Cabell, Putnam & Wayne Counties,
Single Family Mortgage, FGIC
7.375%, 04/01/10 250 296
Cabell, Putnam & Wayne Counties,
Single Family Residence Mortgage,
RB, FGIC
7.375%, 04/01/11 440 531
Charleston, Community Parking
Facilities Authority, RB
6.000%, 12/01/10 300 312
0.000%, 12/01/26 4,000 580
Charleston, Parking Facility
Improvements Project,
RB, Ser A
7.000%, 06/01/16 1,080 1,188
Charleston, Public Housing
Authority, RB
5.000%, 02/01/99 100 102
Clarksburg, Water Refunding &
Improvements, RB
6.100%, 09/01/04 450 493
6.200%, 09/01/05 500 548
6.250%, 09/01/19 430 450
Crab Orchard-MacArthur, Public
Service District Sewer Project,
RB, AMBAC
5.500%, 10/01/25 1,170 1,190
Fairmont West Virginia
Waterworks Revenue Bond, MBIA
5.375%, 07/01/13 680 695
Fayette County, Pollution Control
Union Carbide Project, RB
5.200%, 02/01/98 127 128
Greenbrier County, Public Service
District Sewer Project, RB
5.625%, 10/01/19 500 516
Greenbrier County, Public Service
District Sewer Project, RB, MBIA
5.850%, 10/01/15 700 745
Harrison County, Board of
Education, GO, FGIC
6.200%, 05/01/04 850 943
6.400%, 05/01/07 175 201
Harrison County, Solid Waste
Disposal, RB, MBIA
6.300%, 05/01/23 200 213
Harrison County, Solid Waste
Disposal, Monongahela Power
Company, Ser A, RB
6.875%, 04/15/22 2,150 2,365
(CONTINUED)
7
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STATEMENT OF NET ASSETS
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WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO (CONTINUED)
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS (CONTINUED)
Harrison County, Solid Waste
Disposal, Potomac Edison
Project, Ser B,
RB, AMBAC
6.250%, 05/01/23 $ 400 $ 423
Harrison County, Solid Waste
Disposal,
West Penn Power Harrison
Project, Ser B, RB, AMT
6.300%, 05/01/23 500 532
Huntington County, Sewer System
Refunding, RB, FSA
5.375%, 11/01/23 1,000 1,000
Jackson County, Residential
Mortgage, RB, FGIC
7.375%, 06/01/10 420 487
Kanawha County, Building
Commission, Charleston Area
Medical Center Project, RB
6.250%, 12/01/98 50 51
Kanawha County, Building
Commission, Charleston Area
Medical Center Project,
Ser A, RB, AMBAC
7.500%, 11/01/08 1,000 1,094
Kanawha County, Residential
Mortgage, RB, FGIC
7.375%, 09/01/10 1,030 1,190
7.375%, 09/01/11 285 343
Kanawha County, Single Family
Mortgage, RB, FGIC
7.100%, 12/01/99 15 16
7.300%, 12/01/04 805 939
7.400%, 12/01/10 185 222
Kanawha, Mercer & Nicholas
Counties, Single Family
Mortgage, RB, Prerefunded
02/01/14 @ 89.8452
0.000%, 02/01/15 2,000 730
Kanawha & Putnam Counties,
Huntington/Charleston,
Single Family
Mortgage, Ser A, RB
0.000%, 12/01/16 2,000 697
Logan County, Health Care
Center Project, RB
8.000%, 12/01/16 690 856
Marion County, Single Family
Mortgage, RB, FGIC
7.100%, 08/01/99 135 143
7.375%, 08/01/11 495 596
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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Marshall County, Pollution
Ohio Power Project,
Ser B, RB, MBIA
5.450%, 07/01/14 $ 800 $ 818
Marshall County, Pollution
Control, Ohio Power Project,
Ser C, RB, MBIA
6.850%, 06/01/22 1,000 1,112
Marshall County, Special
Obligation Refunding, GO
6.500%, 05/15/10 855 936
Mason County, Pollution Control,
Ohio Power Project,
Ser B, RB, AMBAC
5.450%, 12/01/16 720 730
Mason County, Single Family
Mortgage, RB, FGIC
7.400%, 08/01/11 608 747
Monongalia County, Board of
Education, GO, MBIA
7.000%, 04/01/03 1,000 1,131
Monongalia County, Single
Family Mortgage, RB
7.200%, 03/01/11 1,280 1,469
Morgantown, Building Commission
Municipal Lease, RB, MBIA
5.750%, 01/01/19 250 260
Ohio County, Board of Education,
GO, MBIA
5.250%, 06/01/16 1,070 1,091
5.250%, 06/01/17 830 848
Parkersburg, Waterworks &
Sewer System Project, RB, FSA
5.800%, 09/01/19 2,600 2,714
Pea Ridge, Public Service
District Sewer Project,
Ser 1994, RB, AMBAC
7.000%, 05/01/20 10 11
Pleasants County, Pollution
Control, Potomac Edison
Project, RB, AMBAC
6.150%, 05/01/15 500 541
Pleasants County, Pollution
Control, West Penn Power,
RB, AMBAC
6.150%, 05/01/15 500 541
Raleigh, Fayette & Nicholas
Counties, Special
Obligation Bonds
6.150%, 08/01/03 100 109
6.250%, 08/01/11 795 890
South Charleston,
Herbert J. Thomas
Memorial Hospital Project, RB,
Prerefunded 10/01/98 @ 102
8.000%, 10/01/04 500 532
8
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JULY 31, 1997 (UNAUDITED)
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WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS (CONTINUED)
South Charleston,
Herbert J. Thomas
Memorial Hospital Project,
Ser A, RB, MBIA
5.500%, 10/01/09 $ 1,020 $ 1,053
Webster County, Multifamily
Housing, Circlebrook Project,
Ser A, RB
6.500%, 04/01/18 1,010 1,069
West Virginia State GO, FGIC
6.500%, 11/01/26 1,000 1,172
West Virginia State Board of
Regents, RB, MBIA
5.900%, 04/01/04 385 419
6.000%, 04/01/04 280 295
West Virginia State Board of
Regents, Ser B, RB, MBIA
7.250%, 04/01/03 50 54
West Virginia State Building
Commission, Lottery
Revenue, RB
5.500%, 07/01/07 1,000 1,071
5.250%, 07/01/09 2,000 2,073
West Virginia State College,
RB, AMBAC
5.875%, 04/01/05 900 972
6.000%, 04/01/06 425 462
6.000%, 04/01/07 425 463
6.000%, 04/01/12 890 958
West Virginia State Economic
Development
Tourism Authority,
Ser B, RB, FGIC
4.625%, 07/01/19 900 927
West Virginia State General
Obligation, Ser D, FGIC
5.000%, 11/01/21 2,000 1,963
West Virginia State Hospital
Finance Authority, RB, FSA
4.700%, 08/01/06 300 300
5.000%, 08/01/09 250 253
West Virginia State Hospital
Finance Authority, Cabell
County Project, RB
7.875%, 01/01/19 200 214
West Virginia State Hospital
Financing Authority,
Charleston Area Medical
Center Project, Ser A, RB
6.500%, 09/01/16 625 674
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
West Virginia State Hospital
Finance Authority, Charleston
Area Medical Center Project,
Ser A, RB, Prerefunded
06/01/96 @ 102
6.500%, 09/01/23 $3,310 $3,562
West Virginia State Hospital
Finance Authority,
Linked Bears and Bulls,
RB, MBIA
6.100%, 01/01/18 1,300 1,355
West Virginia State Hospital
Finance Authority, University
Medical Center
Project, RB, MBIA
5.900%, 01/01/06 680 728
West Virginia State Hospital
Financing Authority,
University Hospitals
Project, RB, MBIA
5.400%, 06/01/11 500 513
West Virginia State Housing
Development Fund, Ser E, RB
6.250%, 11/01/12 1,000 1,049
West Virginia State Parkways
Economic Development &
Tourism Authority, RB, FGIC
4.800%, 05/15/00 340 346
0.000%, 07/01/03 250 193
0.000%, 05/15/07 500 314
5.800%, 05/15/13 140 147
West Virginia State
School Building
Authority, RB, MBIA
5.250%, 07/01/99 100 102
6.250%, 07/01/01 500 536
7.250%, 07/01/15 560 618
West Virginia State School
Building Authority, Ser 1994,
RB, MBIA
5.625%, 07/01/02 100 106
West Virginia State School
Building Authority, Capital
Improvement, Ser B,
RB, MBIA
5.750%, 07/01/15 1,000 1,026
6.750%, 07/01/17 900 981
West Virginia State University
Project, RB, AMBAC
6.000%, 04/01/07 400 438
6.000%, 04/01/12 700 753
(CONTINUED)
9
<PAGE>
STATEMENT OF NET ASSETS
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WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO (CONTINUED)
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- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS (CONTINUED)
West Virginia State Water
Development Authority,
RB, FSA
5.800%, 11/01/12 $ 450 $ 461
West Virginia State Water
Development Authority,
Ser A, RB
7.700%, 11/01/29 1,500 1,686
West Virginia State Water
Development Authority,
Ser A-I, RB, FSA
5.250%, 11/01/21 795 793
West Virginia State Water
Development Authority, Sewer
System Loan Program, RB
7.100%, 11/01/09 1,350 1,583
West Virginia State Water
Development Authority Loan
Program, Ser A, RB
7.000%, 11/01/11 800 895
West Virginia State Water
Development Authority Loan
Program, Capital
Guaranty Custodial Receipts
7.500%, 11/01/29 500 546
West Virginia State Water
Development Authority Loan
Program II, Ser A, RB
7.300%, 11/01/11 475 540
West Virginia State Water
Development Authority Loan
Program II, Ser A, RB, FSA
5.500%, 11/01/23 625 631
West Virginia State Water
Development Authority Loan
Program II, Ser A-II, RB, FSA
6.050%, 11/01/13 1,000 1,031
West Virginia State Water
Development Authority Loan
Program II, Ser B, RB, FSA
5.375%, 11/01/25 785 788
West Virginia State, GO
6.000%, 06/01/98 15 15
4.000%, 02/01/99 15 15
West Virginia State,
Ser A, GO, FGIC
5.750%, 11/01/21 2,340 2,448
5.250%, 11/01/26 1,645 1,659
West Virginia State, Building
Commission Lease, Regional
Jail & Correction Facility
Project, Ser A, RB, MBIA
6.500%, 07/01/00 105 112
West Virginia State, Housing
Development Authority,
Ser A, RB
5.450%, 11/01/21 135 135
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
West Virginia State, Housing
Development Fund, BIG
7.375%, 11/01/05 $ 500 $ 512
West Virginia State, Housing
Development Fund, RB
6.100%, 11/01/99 15 15
6.000%, 12/15/08 600 618
6.000%, 12/15/09 600 616
West Virginia State, Housing
Development Fund, Ser A, RB
6.700%, 05/01/08 210 224
6.700%, 11/01/09 285 302
West Virginia State, Housing
Development Fund,
Ser A, RB, AMBAC
5.500%, 11/01/11 530 535
West Virginia State, Housing
Development Fund, Ser E, RB
6.350%, 05/01/24 1,375 1,433
West Virginia University,
Marshall Library Project,
RB, AMBAC
5.750%, 04/01/16 1,000 1,043
West Virginia Water Development
Authority Loan Program II,
Ser A, RB, FSA
5.750%, 11/01/29 150 155
West Virginia Water Development
Authority Loan Program II,
Ser B, RB, FSA
5.375%, 11/01/25 920 923
Wheeling, Waterworks
& Sewage System,
Ser B, RB, FGIC
6.450%, 12/01/07 1,000 1,098
6.650%, 12/01/15 1,100 1,217
- --------------------------------------------------------------------------------
TOTAL WEST VIRGINIA 92,442
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $86,701) 92,442
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.6%
SEI Tax Exempt Trust
Tax Free Portfolio 567 567
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(COST $567) 567
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.2%
(COST $87,268) 93,009
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.8%
Other Assets and Liabilities, Net 767
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES 767
- --------------------------------------------------------------------------------
10
<PAGE>
[LOGO OMITTED]
JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 8,452,796 outstanding shares of
beneficial interest $80,880
Portfolio Shares of Class B (unlimited
authorization -- no par value) based
on 695,932 outstanding shares of
beneficial interest 6,845
Accumulated net realized gain on investments 310
Net unrealized appreciation on investments 5,741
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $93,776
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
PER SHARE -- CLASS A $10.25
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
PER SHARE -- CLASS B $10.24
- --------------------------------------------------------------------------------
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BIG Bond Investors Guaranty
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Investor Assurance
RB Revenue Bond
Ser Series
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
[Pie Chart depicting percentage of Portfolio investments omitted]
Plot Points are as follows:
COMMON STOCKS 4%
U.S. GOVERNMENT AGENCY OBLIGATIONS 52%
REPURCHASE AGREEMENT 5%
CORPORATE OBLIGATIONS 1%
MUNICIPAL BONDS 9%
U.S. TREASURY OBLIGATIONS 29%
% of Total Portfolio Investments
Pie chart unaudited
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 28.5%
U.S.Treasury Bonds
8.375%, 08/15/08 $ 950 $ 1,063
8.750%, 11/15/08 300 341
9.125%, 05/15/09 300 350
7.500%, 11/15/24 500 573
U.S.Treasury Notes
7.000%, 04/15/99 431 440
8.750%, 08/15/00 416 450
8.000%, 05/15/01 1,331 1,427
7.500%, 11/15/01 1,500 1,590
6.250%, 01/31/02 500 507
7.500%, 05/15/02 1,169 1,247
6.000%, 07/31/02 2,000 2,008
7.875%, 11/15/04 1,000 1,109
7.625%, 02/15/07 1,000 1,061
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
U.S.Treasury STRIPS
0.000%, 02/15/07 $ 1,000 $ 560
0.000%, 05/15/11 1,000 421
0.000%, 11/15/18 2,500 643
0.000%, 11/15/20 1,400 317
0.000%, 02/15/25 3,000 531
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $14,092) 14,638
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 52.1%
FFCB MTN
5.690%, 03/03/00 2,000 1,990
5.800%, 12/18/00 400 393
6.150%, 03/03/03 1,000 1,000
8.400%, 12/01/05 1,500 1,702
6.900%, 09/08/15 600 614
FHLB
7.040%, 05/24/99 500 510
8.375%, 10/25/99 750 789
7.780%, 10/19/01 500 532
8.090%, 12/28/04 400 445
8.125%, 03/07/05 1,000 1,048
FHLB MTN
6.880%, 04/26/00 500 511
5.990%, 10/01/03 500 490
7.030%, 05/06/11 500 528
FHLMC
6.900%, 04/04/03 500 507
8.640%, 10/14/09 400 418
7.500%, 11/01/09 1,668 1,707
8.060%, 03/24/10 500 517
Financing Corporation
8.600%, 09/26/19 500 604
FNMA
6.390%, 12/09/03 1,000 991
6.320%, 12/23/03 400 396
8.250%, 10/12/04 500 522
Housing Urban Development
94a Abilene, Taxable,
Callable 08/01/03 @ 100
7.180%, 08/01/13 160 166
Housing Urban Development
94a Barberton, Taxable,
Callable 08/01/03 @ 100
7.180%, 08/01/13 520 538
12
<PAGE>
[LOGO OMITTED]
JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Housing Urban Development 94a
Egg Harbor, Taxable, Callable
08/01/03 @ 100
6.930%, 08/01/08 $ 160 $ 164
7.180%, 08/01/13 220 227
Housing Urban Development 94a
Ocean Shores, Taxable, Callable
08/01/03 @ 100
6.930%, 08/01/08 225 228
Housing Urban Development 94a
Pohatcong Township, Taxable,
Callable 08/01/03 @ 100
6.930%, 08/01/08 240 243
Housing Urban Development 94a
Providence, Taxable, Callable
08/01/03 @ 100
6.930%, 08/01/08 130 133
Housing Urban Development 94a
Roanoke, Taxable, Callable
08/01/03 @ 100
7.180%, 08/01/13 100 103
Housing Urban Development 92a
Scranton, Taxable, Callable
08/01/02 @ 100
7.800%, 08/01/10 400 427
Housing Urban Development 94a
Tacoma, Taxable, Callable
08/01/03 @ 100
7.080%, 08/01/11 365 370
Housing Urban Development 94a-I
Montgomery, Taxable, Callable
08/01/03 @ 100
6.930%, 08/01/08 55 56
Private Export Funding
7.300%, 01/31/02 2,100 2,205
6.240%, 05/15/02 250 252
7.950%, 11/01/06 1,500 1,629
TVA
8.375%, 10/01/99 1,169 1,226
7.450%, 10/15/01 2,000 2,065
6.875%, 01/15/02 500 507
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $26,014) 26,753
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 8.7%
Berkeley County, WV IRS Computer
Center Facility Project,
Ser 1994, Taxable RB
7.900%, 07/15/03 640 690
Chicago Heights, IL, Ser B,
Taxable GO,
Callable 12/01/12
@ 100, FGIC
7.550%, 12/01/13 1,000 1,079
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
Fairview, MN Hospital &
Health Care Services,
Ser B, Refunding Taxable
RB, MBIA
7.000%, 11/15/15 $ 670 $ 703
Gardena, CA Financing Agency,
Taxable RB, Prerefunded
07/01/03 @ 102
9.250%, 07/01/13 200 230
Henry County, GA Water & Sewer
Authority, Ser B, Taxable
RB, AMBAC
6.000%, 02/01/04 250 245
6.000%, 02/01/05 220 214
6.700%, 02/01/11 200 198
Las Vegas, NV Fremont Street
Project, Taxable GO, Callable
07/01/03 @ 101, FGIC
7.200%, 07/01/15 800 826
San Bernardino County, CA COP,
Taxable, Prerefunded
03/01/04 @ 102
8.500%, 03/01/14 275 314
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $4,341) 4,499
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 1.4%
American Heavy Lift Title XI
7.180%, 06/01/17 200 206
General Electric Capital MTN
6.020%, 12/15/03 500 496
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(COST $700) 702
- --------------------------------------------------------------------------------
COMMON STOCKS -- 3.9%
Communications Equipment -- 0.4%
SBC Communications 3,300 195
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 195
- --------------------------------------------------------------------------------
Electric Services -- 3.5%
Allegheny Power System 8,300 243
American Electric Power 6,200 277
CMS Energy 10,000 370
Duke Power 5,000 253
FPL Group 4,200 201
LG&E 10,000 218
Public Service of Colorado 6,200 258
- --------------------------------------------------------------------------------
TOTAL ELECTRIC SERVICES 1,820
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,646) 2,015
- --------------------------------------------------------------------------------
(CONTINUED)
13
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.4%
Merrill Lynch 6,800 $ 209
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(COST $175) 209
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.3%
Dresdner
5.77%, dated 07/31/97, matures
08/01/97 repurchase price
$2,192,067 (collateralized
by various FHLMC obligations,
total par value $2,391,000,
6.00%-6.50%, 01/15/14-12/15/23:
total market value $2,228,278) $2,192 2,192
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $2,192) 2,192
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.3%
(COST $49,160) 51,008
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.7%
Other Assets and Liabilities, Net 334
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES 334
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
5,012,923 outstanding shares of
beneficial interest $48,192
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
138,462 outstanding shares of
beneficial interest 1,357
Accumulated net realized loss on investments (55)
Net unrealized appreciation on investments 1,848
- --------------------------------------------------------------------------------
Total Net Assets -- 100.0% $51,342
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
PER SHARE -- CLASS A $9.97
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
PER SHARE -- CLASS B $9.98
- --------------------------------------------------------------------------------
AMBAC American Municipal Bond Assurance Corporation
COP Certificate of Participation
FFCB Federal Farm Credit Bank
FGIC Financial Guaranty Insurance Company
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GO General Obligation
MBIA Municipal Bond Investors Assurance
MTN Medium-Term Note
RB Revenue Bond
Ser Series
STRIPS Separately Traded Registered Interest and Principal Securities
TVA Tennessee Valley Authority
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
[LOGO OMITTED]
SCHEDULE OF INVESTMENTS JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
[Pie Chart depicting percentage of Portfolio investments omitted]
Plot Points are as follows:
REPURCHASE AGREEMENT 2%
COMMON STOCKS 98%
% of Total Portfolio Investments
Pie chart unaudited
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.0%
Aircraft -- 4.0%
BE Aerospace* 49,350 $ 1,770
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT 1,770
- --------------------------------------------------------------------------------
Apparel/Textiles -- 2.1%
Sport-Haley* 56,000 917
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES 917
- --------------------------------------------------------------------------------
Communications Equipment-- 7.6%
Advanced Fibre Communication* 13,000 908
Ciena* 17,600 988
DSC Communications* 18,700 552
MRV Communications* 31,500 972
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 3,420
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
Computer Software -- 8.7%
McAfee Associates* 19,400 $ 1,265
MDSI Mobile Data Solutions* 40,000 1,075
Siebel Systems* 45,500 1,547
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 3,887
- --------------------------------------------------------------------------------
Drugs -- 8.9%
Ascent Pediatrics* 40,000 300
Bio-Technology General* 34,250 450
Incyte Pharmaceuticals* 13,200 894
Kos Pharmaceuticals* 44,700 1,743
Medicis Pharmaceutical, Cl A* 13,000 587
- --------------------------------------------------------------------------------
TOTAL DRUGS 3,974
- --------------------------------------------------------------------------------
Electrical Technology -- 2.6%
ANADIGICS* 18,650 718
Viisage Technology* 32,000 448
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL TECHNOLOGY 1,166
- --------------------------------------------------------------------------------
Entertainment -- 1.5%
Ballantyne of Omaha* 32,600 697
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT 697
- --------------------------------------------------------------------------------
Financial Services -- 4.7%
Americredit* 42,000 969
Medallion Financial 35,500 670
ACC Consumer Finance* 27,000 462
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 2,101
- --------------------------------------------------------------------------------
Food, Beverage & Tobacco-- 2.3%
Fine Host* 20,000 605
Wild Oates Markets* 16,300 436
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO 1,041
- --------------------------------------------------------------------------------
Insurance -- 2.2%
Frontier Insurance Group 16,000 499
Mercury General 6,400 496
- --------------------------------------------------------------------------------
TOTAL INSURANCE 995
- --------------------------------------------------------------------------------
Measuring Devices -- 1.5%
Datum* 21,000 693
- --------------------------------------------------------------------------------
TOTAL MEASURING DEVICES 693
- --------------------------------------------------------------------------------
(CONTINUED)
15
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Medical Products & Services -- 0.8%
Ventana Medical Systems* 22,000 $ 370
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 370
- --------------------------------------------------------------------------------
Miscellaneous Business Services -- 6.2%
Computer Horizons* 25,650 1,026
Data Dimensions* 37,000 867
Harbinger* 28,100 910
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES 2,803
- --------------------------------------------------------------------------------
Oil & Gas Well Equipment-- 11.6%
EVI* 13,000 635
Falcon Drilling* 23,000 664
Halter Marine* 44,500 1,363
Marine Drilling* 30,000 744
Parker Drilling* 80,000 1,045
Cliffs Drilling* 14,300 749
- --------------------------------------------------------------------------------
TOTAL OIL & GAS WELL EQUIPMENT 5,200
- --------------------------------------------------------------------------------
Printing & Publishing -- 5.8%
Applied Graphics Technologies* 65,000 2,585
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING 2,585
- --------------------------------------------------------------------------------
Retail -- 4.7%
CKE Restaurants 38,000 1,316
Pacific Sunwear of California* 26,100 799
- --------------------------------------------------------------------------------
TOTAL RETAIL 2,115
- --------------------------------------------------------------------------------
Schools -- 2.1%
Computer Learning Centers* 20,000 957
- --------------------------------------------------------------------------------
TOTAL SCHOOLS 957
- --------------------------------------------------------------------------------
Semi-Conductors/Instruments -- 16.5%
ASM Lithography Holding* 16,000 1,296
Cymer* 15,000 1,095
Helix Technology 8,700 438
KLA-Tencor Instruments* 9,200 557
Micrel* 11,000 722
PMC-Sierra* 45,600 1,493
Tegal* 50,000 350
Triquint Semiconductor* 18,800 658
Vitesse Semiconductor* 16,100 779
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS 7,388
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
Steel & Steel Works -- 1.4%
Precision Castparts 10,000 $ 629
- --------------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS 629
- --------------------------------------------------------------------------------
Wholesale -- 2.8%
MSC Industrial Direct* 29,000 1,254
- --------------------------------------------------------------------------------
TOTAL WHOLESALE 1,254
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $31,229) 43,962
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.0%
Lehman Brothers
5.38%, dated 07/31/97, matures
08/01/97 repurchase price $876,648
(collateralized by U.S. Treasury
Bond, par value $667,684, 9.25%,
02/15/16: market value $902,987) $877 $ 877
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $877) 877
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% (COST $32,106) $44,839
- --------------------------------------------------------------------------------
* Non-income producing security
Cl Class
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
[LOGO OMITTED]
STATEMENT OF NET ASSETS JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- --------------------------------------------------------------------------------
[Pie Chart depicting percentage of Portfolio investments omitted]
Plot Points are as follows:
COMMON STOCKS 100%
% of Total Portfolio Investments
Pie chart unaudited
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 100.0%
Aircraft -- 2.0%
Boeing 21,500 $ 1,264
United Technologies 13,600 1,150
- --------------------------------------------------------------------------------
TOTAL AIRCRAFT 2,414
- --------------------------------------------------------------------------------
Beauty Products -- 2.3%
Colgate-Palmolive 37,000 2,803
- --------------------------------------------------------------------------------
TOTAL BEAUTY PRODUCTS 2,803
- --------------------------------------------------------------------------------
Communications Equipment-- 5.1%
L.M. Ericsson Telephone ADR 32,050 1,450
Lucent Technologies 36,800 3,126
Tellabs* 26,150 1,566
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 6,142
- --------------------------------------------------------------------------------
Computer Networking Products -- 2.4%
Cisco Systems* 36,800 2,928
- --------------------------------------------------------------------------------
TOTAL COMPUTER NETWORKING PRODUCTS 2,928
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
Computer Software -- 1.2%
Microsoft* 10,000 $ 1,415
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 1,415
- --------------------------------------------------------------------------------
Computers & Services -- 4.8%
Compaq Computer* 29,500 1,685
Dell Computer* 23,600 2,018
IBM 20,000 2,115
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES 5,818
- --------------------------------------------------------------------------------
Drugs -- 10.8%
American Home Products 28,000 2,308
Merck 31,850 3,310
Pfizer 51,000 3,041
SmithKline Beecham 34,400 3,345
Warner Lambert 8,200 1,145
- --------------------------------------------------------------------------------
TOTAL DRUGS 13,149
- --------------------------------------------------------------------------------
Electrical Utilities -- 2.1%
AES* 32,300 2,552
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL UTILITIES 2,552
- --------------------------------------------------------------------------------
Entertainment -- 1.0%
Walt Disney 15,000 1,212
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT 1,212
- --------------------------------------------------------------------------------
Financial Services -- 5.2%
American Express 30,100 2,521
FHLMC 28,800 1,039
FNMA 27,000 1,277
Merrill Lynch 21,200 1,493
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 6,330
- --------------------------------------------------------------------------------
Food, Beverage & Tobacco -- 3.0%
Interstate Bakeries 20,000 1,220
Quaker Oats 48,000 2,457
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO 3,677
- --------------------------------------------------------------------------------
Glass Products -- 1.1%
Corning 21,300 1,317
- --------------------------------------------------------------------------------
TOTAL GLASS PRODUCTS 1,317
- --------------------------------------------------------------------------------
(CONTINUED)
17
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Household Products -- 3.7%
Clorox 17,400 $ 2,429
Gillette 20,350 2,015
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS 4,444
- --------------------------------------------------------------------------------
Industrial -- 4.8%
General Electric 45,000 3,158
Tyco International 32,700 2,649
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL 5,807
- --------------------------------------------------------------------------------
Insurance -- 12.9%
Aetna 20,000 2,279
AIG 11,775 1,254
Allstate 31,000 2,449
Marsh & McLennan 34,000 2,633
MGIC Investment 45,500 2,392
Sunamerica 32,400 1,960
Travelers 37,500 2,698
- --------------------------------------------------------------------------------
TOTAL INSURANCE 15,665
- --------------------------------------------------------------------------------
Medical Products & Services -- 3.2%
McKesson 28,700 2,488
Medtronic 16,200 1,413
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 3,901
- --------------------------------------------------------------------------------
Miscellaneous Business Services -- 0.9%
Ecolab 25,000 1,167
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES 1,167
- --------------------------------------------------------------------------------
Office Furniture & Fixtures -- 2.6%
Xerox 38,200 3,142
- --------------------------------------------------------------------------------
TOTAL OFFICE FURNITURE & FIXTURES 3,142
- --------------------------------------------------------------------------------
Oil & Gas Well Equipment -- 11.5%
Baker Hughes 48,450 2,135
Diamond Offshore Drilling 24,400 2,275
Ensco International* 33,750 2,232
Global Marine* 88,200 2,525
Halliburton 47,800 2,199
Schlumberger 34,000 2,597
- --------------------------------------------------------------------------------
TOTAL OIL & GAS WELL EQUIPMENT 13,963
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
Retail -- 11.7%
CVS 55,000 $ 3,128
Dollar General 67,700 2,979
TJX 115,000 3,436
Wal-mart Stores 57,000 2,141
Walgreen 44,000 2,486
- --------------------------------------------------------------------------------
TOTAL RETAIL 14,170
- --------------------------------------------------------------------------------
Semi-Conductors/Instruments-- 5.8%
Applied Materials* 32,550 2,991
Intel 16,700 1,533
Texas Instruments 22,000 2,530
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS 7,054
- --------------------------------------------------------------------------------
Telephones & Telecommunication -- 1.9%
Bell Atlantic 32,000 2,322
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATION 2,322
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $82,352) 121,392
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.3%
Lehman Brothers
5.74%, dated 07/31/97, matures
08/01/97 repurchase price $369,260
(collateralized by U.S. Treasury
Bond, par value $281,237,
9.25%, 02/15/16:
market value $380,351) $369 369
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $369) 369
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.3%
(COST $82,721) 121,761
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.3%)
Other Assets and Liabilities, Net (389)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (389)
- --------------------------------------------------------------------------------
18
<PAGE>
[LOGO OMITTED]
JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 6,656,781 outstanding shares of
beneficial interest $ 58,266
Portfolio Shares of Class B(unlimited
authorization -- no par value) based
on 311,886 outstanding shares
of beneficial interest 3,973
Distributions in excess of net investment income (11)
Accumulated net realized gain on investments 20,104
Net unrealized appreciation on investments 39,040
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $121,372
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION
PRICE PER SHARE -- CLASS A $17.42
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION
PRICE PER SHARE -- CLASS B $17.29
- --------------------------------------------------------------------------------
* Non-income producing security
ADR American Depository Receipt
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
[Pie Chart depicting percentage of Portfolio investments omitted]
Plot Points are as follows:
PREFERRED STOCKS 5%
COMMON STOCKS 90%
CONVERTIBLE BOND 1%
REPURCHASE AGREEEMENT 4%
% of Total Portfolio Investments
Pie chart unaudited
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 91.3%
Aerospace & Defense -- 3.7%
Lockheed Martin 8,800 $ 937
United Technologies 12,000 1,015
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE 1,952
- --------------------------------------------------------------------------------
Automotive -- 2.3%
Chrysler 33,000 1,225
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE 1,225
- --------------------------------------------------------------------------------
Banks -- 3.0%
Crestar Financial 21,500 1,015
J. P. Morgan 5,000 579
- --------------------------------------------------------------------------------
TOTAL BANKS 1,594
- --------------------------------------------------------------------------------
Chemicals -- 4.6%
E. I. du Pont de Nemours 14,000 937
Hercules 12,000 638
Witco 18,000 821
- --------------------------------------------------------------------------------
TOTAL CHEMICALS 2,396
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
Cosmetics, Soaps & Toiletries -- 2.6%
Colgate-Palmolive 10,800 $ 818
Procter & Gamble 3,500 532
- --------------------------------------------------------------------------------
TOTAL COSMETICS, SOAPS & TOILETRIES 1,350
- --------------------------------------------------------------------------------
Drugs -- 5.4%
American Home Products 18,000 1,484
Bristol-Myers Squibb 9,200 722
Johnson & Johnson 10,000 623
- --------------------------------------------------------------------------------
TOTAL DRUGS 2,829
- --------------------------------------------------------------------------------
Electrical Utilities -- 4.4%
Allegheny Power System 30,000 879
LG&E 30,000 654
Scana 30,000 750
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL UTILITIES 2,283
- --------------------------------------------------------------------------------
Electronic & Other Electrical Equipment -- 2.7%
General Electric 20,200 1,418
- --------------------------------------------------------------------------------
TOTAL ELECTRONIC & OTHER
ELECTRICAL EQUIPMENT 1,418
- --------------------------------------------------------------------------------
Financial Services -- 1.9%
American Express 6,500 544
FNMA 10,000 473
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 1,017
- --------------------------------------------------------------------------------
Food, Beverage & Tobacco -- 4.5%
General Mills 7,200 498
H.J. Heinz 20,600 952
Sara Lee 21,000 920
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO 2,370
- --------------------------------------------------------------------------------
Forestry -- 2.4%
Rayonier 26,500 1,240
- --------------------------------------------------------------------------------
TOTAL FORESTRY 1,240
- --------------------------------------------------------------------------------
Gas/Natural Gas -- 5.5%
El Paso Natural Gas 8,000 463
KN Energy 9,000 378
MCN 12,000 380
National Fuel & Gas 10,000 425
Williams Company 27,200 1,244
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS 2,890
- --------------------------------------------------------------------------------
20
<PAGE>
[LOGO OMITTED]
JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Insurance -- 6.2%
American General 10,000 $ 533
Jefferson Pilot 18,000 1,277
Marsh & McLennan 7,000 542
Travelers 12,033 866
- --------------------------------------------------------------------------------
TOTAL INSURANCE 3,218
- --------------------------------------------------------------------------------
Machinery -- 1.5%
Lincoln Electric 20,000 803
- --------------------------------------------------------------------------------
TOTAL MACHINERY 803
- --------------------------------------------------------------------------------
Medical Products & Services -- 0.7%
C.R. Bard 10,000 376
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 376
- --------------------------------------------------------------------------------
Office Equipment -- 1.8%
Xerox 11,500 946
- --------------------------------------------------------------------------------
TOTAL OFFICE EQUIPMENT 946
- --------------------------------------------------------------------------------
Petroleum Refining -- 10.8%
Amoco 10,000 940
Atlantic Richfield 15,000 1,122
Exxon 20,000 1,285
Mobil 19,500 1,492
Texaco 7,000 812
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING 5,651
- --------------------------------------------------------------------------------
Printing & Publishing -- 4.9%
Knight-Ridder 25,800 1,282
McGraw-Hill 19,000 1,288
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING 2,570
- --------------------------------------------------------------------------------
Real Estate Investment Trust -- 6.0%
Cali Realty 14,000 512
Centerpoint Properties Trust 13,000 429
Duke Realty Investments 12,000 533
National Golf Properties 13,000 413
Post Properties 10,000 399
Public Storage 16,000 475
Security Capital Pacific Trust 16,000 366
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUST 3,127
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
Retail -- 3.3%
McDonalds 11,000 $ 591
Nike 10,000 623
Sears Roebuck 8,000 507
- --------------------------------------------------------------------------------
TOTAL RETAIL 1,721
- --------------------------------------------------------------------------------
Semi-Conductors/Instruments -- 0.8%
AMP 8,000 418
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS 418
- --------------------------------------------------------------------------------
Telephones & Telecommunication-- 5.4%
Bell Atlantic 14,000 1,016
Bellsouth 22,100 1,047
GTE 8,000 372
Sprint 8,000 396
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATION 2,831
- --------------------------------------------------------------------------------
Transportation Services -- 2.5%
CSX 21,200 1,309
- --------------------------------------------------------------------------------
TOTAL TRANSPORTATION SERVICES 1,309
- --------------------------------------------------------------------------------
Water Utilities -- 4.4%
American Water Works 44,500 965
Aquarion 16,000 430
Southern California Water 39,700 906
- --------------------------------------------------------------------------------
TOTAL WATER UTILITIES 2,301
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $38,941) 47,835
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 5.2%
McDonalds 20,000 510
MCI 20,000 509
Merrill Lynch 15,000 461
Microsoft 9,800 866
TVA 15,000 393
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $2,633) 2,739
- --------------------------------------------------------------------------------
CONVERTIBLE BOND -- 1.0%
Oryx Energy
7.500%, 05/15/14 $500 505
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BOND
(COST $485) 505
- --------------------------------------------------------------------------------
(CONTINUED)
21
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.8%
Lehman Brothers
5.38%, dated 07/31/97, matures
08/01/97, repurchase price
$1,996,621 (collateralized
by U.S. Treasury Bond, par
value $1,520,693, 9.25%,
02/15/16: market value
$2,056,612) $1,996 $ 1,996
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $1,996) 1,996
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.3%
(COST $44,055) 53,075
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (1.3%)
Other Assets and Liabilities, Net (690)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (690)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value)
based on 3,852,691 outstanding
shares of beneficial interest 39,585
Portfolio Shares of Class B (unlimited
authorization -- no par value)
based on 224,462 outstanding shares
of beneficial interest 2,463
Accumulated net realized gain on investments 1,317
Net unrealized appreciation on investments 9,020
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $52,385
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
PER SHARE -- CLASS A $12.85
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
PER SHARE -- CLASS B $12.85
- --------------------------------------------------------------------------------
FNMA Federal National Mortgage Association
TVA Tennessee Valley Authority
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
[LOGO OMITTED]
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
AS OF JULY 31, 1997
(IN THOUSANDS)
--------------------
EMERGING GROWTH
PORTFOLIO
- --------------------------------------------------------------------------------
ASSETS:
Investments at market value (cost $32,106) $44,839
Receivable for investment securities sold 2,750
Receivable for capital shares sold 5
Accrued income 7
- --------------------------------------------------------------------------------
TOTAL ASSETS 47,601
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities purchased 459
Payable for capital shares repurchased 2
Accrued expenses and other liabilities 65
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 526
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited authorization --
no par value) based on 3,446,877 outstanding
shares of beneficial interest 30,109
Portfolio shares of Class B (unlimited authorization --
no par value) based on 262,705 outstanding
shares of beneficial interest 2,885
Distributions in excess of net investment income (199)
Accumulated net realized gain on investments 1,547
Net unrealized appreciation on investments 12,733
- --------------------------------------------------------------------------------
TOTAL NET ASSETS $47,075
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share -- Class A $12.70
================================================================================
Net Asset Value, Offering Price and Redemption
Price Per Share -- Class B $12.58
================================================================================
The accompanying notes are an integral part of the financial statements
23
<PAGE>
<TABLE>
<CAPTION>
[LOGO OMITTED]
STATEMENT OF OPERATIONS JULY 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1997 (UNAUDITED)
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS WEST VIRGINIA TAX-EXEMPT GOVERNMENT SECURITIES
PORTFOLIO INCOME PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
2/1/97 TO 7/31/97 2/1/97 TO 7/31/97 2/1/97 TO 7/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $2,551 $2,756 $1,814
Dividend income -- -- 68
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,551 2,756 1,882
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administrator fees 91 94 56
Investment advisory fees 113 212 209
Less: investment advisory fees waived (77) (15) (78)
Sub-advisory fees 34 -- --
Custodian fees 6 4 4
Professional fees 13 11 8
Registration & filing fees (5) 8 (4)
Printing expenses 9 5 5
Trustee fees 5 3 3
Pricing fees -- 4 1
Distribution fees (1) 9 8 2
Transfer agent fees 27 22 22
Amortization of organization costs 5 5 4
Miscellaneous expenses 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 231 362 233
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 2,320 2,394 1,649
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (2) 528 (9)
Net change in unrealized appreciation
(depreciation) on investments -- 2,221 1,031
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (2) 2,749 1,022
====================================================================================================================================
Increase (decrease) in net assets
resulting from operations $2,318 $5,143 $2,671
====================================================================================================================================
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH CAPITAL APPRECIATION EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
2/1/97 TO 7/31/97 2/1/97 TO 7/31/97 2/1/97 TO 7/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 57 $141 $ 89
Dividend income 19 533 755
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 76 674 844
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administrator fees 47 114 66
Investment advisory fees 225 543 171
Less: investment advisory fees waived (45) (143) (16)
Sub-advisory fees -- -- --
Custodian fees 4 6 6
Professional fees 8 15 12
Registration & filing fees (4) (4) 1
Printing expenses 5 10 9
Trustee fees 3 5 2
Pricing fees 1 1 1
Distribution fees (1) 4 6 3
Transfer agent fees 22 28 22
Amortization of organization costs 4 5 2
Miscellaneous expenses 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 275 587 280
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (199) 87 564
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 2,450 13,838 1,316
Net change in unrealized appreciation
(depreciation) on investments (2,719) 88 5,230
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (269) 13,926 6,546
====================================================================================================================================
Increase (decrease) in net assets
resulting from operations $ (468) $14,013 $7,110
====================================================================================================================================
<FN>
(1) Distribution fees are only incurred on Class B shares.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
24 & 25
<PAGE>
<TABLE>
<CAPTION>
[LOGO OMITTED]
STATEMENT OF CHANGES IN NET ASSETS JULY 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1997 (UNAUDITED) AND THE PERIOD ENDED JANUARY 31, 1997
(IN THOUSANDS)
-----------------------------------------------------------------------------------
PRIME OBLIGATIONS
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
2/1/97 TO 7/31/97 2/1/96 TO 1/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income $2,320 $4,773
Net realized gain (loss) on investments (2) --
Net change in unrealized appreciation
(depreciation) on investments -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS 2,318 4,773
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A (2,153) (4,444)
Class B (167) (329)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS: (2,320) (4,773)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 70,543 170,977
Shares issued in lieu of cash distributions 4 1
Shares redeemed (81,580) (165,337)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (11,033) 5,641
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 4,090 14,171
Shares issued in lieu of cash distributions 116 244
Shares redeemed (5,580) (13,068)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS (1,374) 1,347
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (12,407) 6,988
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (12,409) 6,988
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 97,802 90,814
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $85,393 $97,802
====================================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 70,543 170,977
Shares issued in lieu of cash distributions 4 1
Shares redeemed (81,580) (165,337)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS (11,033) 5,641
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 4,090 14,171
Shares issued in lieu of cash distributions 116 244
Shares redeemed (5,580) (13,068)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS (1,374) 1,347
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS (12,407) 6,988
====================================================================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT GOVERNMENT SECURITIES
INCOME PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
2/1/97 TO 7/31/97 2/1/96 TO 1/31/97 2/1/97 TO 7/31/97 2/1/96 TO 1/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $2,394 $2,753 $1,649 $3,254
Net realized gain (loss) on investments 528 (53) (9) 32
Net change in unrealized appreciation
(depreciation) on investments 2,221 2,317 1,031 (2,140)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS 5,143 5,017 2,671 1,146
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A (2,238) (2,511) (1,605) (3,166)
Class B (156) (242) (44) (88)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS: (2,394) (2,753) (1,649) (3,254)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 1,455 62,118 2,747 30,767
Shares issued in lieu of cash distributions -- -- -- --
Shares redeemed (9,975) (8,422) (12,801) (29,916)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (8,520) 53,696 (10,054) 851
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 1,039 3,020 70 1,183
Shares issued in lieu of cash distributions 132 203 35 71
Shares redeemed (434) (1,296) (575) (548)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 737 1,927 (470) 706
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (7,783) 55,623 (10,524) 1,557
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (5,034) 57,887 (9,502) (551)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 98,810 40,923 60,844 61,395
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $93,776 $98,810 $51,342 $60,844
====================================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Sharesissued 146 6,540 282 3,187
Shares issued in lieu of cash distributions -- -- -- --
Shares redeemed (1,001) (851) (1,319) (3,073)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS (855) 5,689 (1,037) 114
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 104 308 7 122
Shares issued in lieu of cash distributions 13 20 4 3
Shares redeemed (44) (132) (60) (26)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS 73 196 (49) 99
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS (782) 5,885 (1,086) 213
====================================================================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
26 & 27
<PAGE>
<TABLE>
<CAPTION>
[LOGO OMITTED]
STATEMENT OF CHANGES IN NET ASSETS JULY 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1997 (UNAUDITED) AND THE PERIOD ENDED JANUARY 31, 1997
(IN THOUSANDS)
-------------------------------------------------------------------------------
EMERGING GROWTH
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
2/1/97 TO 7/31/97 2/1/96 TO 1/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income (loss) $ (199) $ (519)
Net realized gain on investments 2,450 3,935
Net change in unrealized appreciation (depreciation)
on investments (2,719) 3,217
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS (468) 6,633
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A -- --
Class B -- --
In excess of net investment income:
Class A -- --
Class B -- --
Net realized gains:
Class A -- (625)
Class B -- (43)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS: -- (668)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 13,752 21,222
Shares issued in lieu of cash distributions -- --
Shares redeemed (25,429) (19,180)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (11,677) 2,042
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 393 2,726
Shares issued in lieu of cash distributions -- 42
Shares redeemed (856) (1,502)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS (463) 1,266
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (12,140) 3,308
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (12,608) 9,273
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 59,683 50,410
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $47,075 $59,683
====================================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 1,246 1,871
Shares issued in lieu of cash distributions -- --
Shares redeemed (2,331) (1,547)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS (1,085) 324
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 37 222
Shares issued in lieu of cash distributions -- 3
Shares redeemed (81) (122)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS (44) 103
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS (1,129) 427
====================================================================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION EQUITY INCOME
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
2/1/97 TO 7/31/97 2/1/96 TO 1/31/97 2/1/97 TO 7/31/97 8/2/96 TO 1/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 87 $ (21) $ 564 $ 536
Net realized gain on investments 13,838 9,585 1,316 1
Net change in unrealized appreciation (depreciation)
on investments 88 15,858 5,230 3,790
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS 14,013 25,422 7,110 4,327
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A (43) -- (537) (522)
Class B -- -- (27) (14)
In excess of net investment income:
Class A -- (38) -- --
Class B -- -- -- --
Net realized gains:
Class A -- (5,300) -- --
Class B -- (198) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS: (43) (5,536) (564) (536)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 3,551 31,064 7,152 39,723
Shares issued in lieu of cash distributions -- -- -- --
Shares redeemed (19,782) (31,168) (5,449) (1,841)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS (16,231) (104) 1,703 37,882
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 1,273 1,997 1,136 1,424
Shares issued in lieu of cash distributions -- 197 25 14
Shares redeemed (995) (466) (109) (27)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS 278 1,728 1,052 1,411
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (15,953) 1,624 2,755 39,293
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,983) 21,510 9,301 43,084
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 123,355 101,845 43,084 --
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $121,372 $123,355 $52,385 $43,084
====================================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued 237 2,489 608 3,875
Shares issued in lieu of cash distributions -- -- -- --
Shares redeemed (1,307) (2,247) (457) (173)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALCLASS A SHARE TRANSACTIONS (1,070) 242 151 3,702
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued 86 144 97 135
Shares issued in lieu of cash distributions -- 14 2 1
Shares redeemed (67) (34) (9) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS 19 124 90 134
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS (1,051) 366 241 3,836
====================================================================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
28 & 29
<PAGE>
<TABLE>
<CAPTION>
[LOGO OMITTED]
FINANCIAL HIGHLIGHTS JULY 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JULY 31, 1997 (UNAUDITED) AND PERIODS ENDED JANUARY 31,
NET ASSET NET REALIZED DISTRIBUTIONS DISTRIBUTIONS NET ASSET
VALUE, NET AND UNREALIZED FROM NET FROM VALUE,
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT CAPITAL END OF TOTAL
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS PERIOD RETURN
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1997** $ 1.00 $ 0.03 $0.00 $(0.03) $0.00 $ 1.00 5.26%*
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 5.11
1996 1.00 0.06 0.00 (0.06) 0.00 1.00 5.65
1995 1.00 0.04 0.00 (0.04) 0.00 1.00 4.15
1994 (1) 1.00 0.00 0.00 -- 0.00 1.00 2.95
CLASS B
1997** $ 1.00 $ 0.02 $0.00 $(0.02) $0.00 $ 1.00 4.99%*
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 4.85
1996 1.00 0.05 0.00 (0.05) 0.00 1.00 5.39
1995 (2) 1.00 0.04 0.00 (0.04) 0.00 1.00 3.95
- ------------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997** $ 9.95 $ 0.25 $ 0.30 $(0.25) $0.00 $10.25 5.64%+
1997 10.12 0.49 (0.17) (0.49) 0.00 9.95 3.35
1996 9.36 0.49 0.76 (0.49) 0.00 10.12 13.66
1995 10.17 0.46 (0.81) (0.46) 0.00 9.36 (3.38)
1994 (1) 10.00 0.07 0.17 (0.07) 0.00 10.17 2.43
CLASS B
1997** $ 9.95 $ 0.24 $ 0.29 $(0.24) $0.00 $10.24 5.41%+
1997 10.11 0.47 (0.16) (0.47) 0.00 9.95 3.19
1996 9.36 0.47 0.75 (0.47) 0.00 10.11 13.26
1995 10.17 0.43 (0.81) (0.43) 0.00 9.36 (3.62)
1994 (3) 10.07 0.05 0.10 (0.05) (0.04) 10.17 1.48
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997** $ 9.76 $ 0.28 $ 0.21 $(0.28) $0.00 $ 9.97 5.18%+
1997 10.15 0.56 (0.39) (0.56) 0.00 9.76 1.83
1996 9.09 0.55 1.06 (0.55) (1.48) 10.15 18.14
1995 10.06 0.51 (0.97) (0.51) (0.18) 9.09 (4.48)
1994 (1) 10.00 0.08 0.06 (0.08) 0.00 10.06 1.39
CLASS B
1997** $ 9.77 $ 0.27 $ 0.21 $(0.27) $0.00 $ 9.98 5.05%+
1997 10.15 0.53 (0.38) (0.53) 0.00 9.77 1.69
1996 9.10 0.53 1.05 (0.53) (1.48) 10.15 17.72
1995 10.06 0.49 (0.96) (0.49) (0.18) 9.10 (4.62)
1994 (4) 10.01 0.04 0.05 (0.04) 0.00 10.06 0.89
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
** For the six-month period ended July 31, 1997
+ Total return is not annualized.
(1) Commenced operations on December 1, 1993. All ratios for the period have been annualized.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME (LOSS)
RATIO OF NET INVESTMENT AVERAGE TO AVERAGE
NET ASSETS, EXPENSES TO INCOME (LOSS) NET ASSETS NET ASSETS PORTFOLIO
END OF AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
CLASS A
1997** $79,267 0.49%* 5.13%* 0.66%* 4.96%* N/A
1997 90,301 0.49 5.00 0.66 4.83 N/A
1996 84,660 0.49 5.50 0.64 5.35 N/A
1995 77,295 0.49 4.08 0.69 3.88 N/A
1994 (1) 82,477 0.49 2.89 0.80 2.58 N/A
CLASS B
1997** $ 6,126 0.74%* 4.88%* 0.91%* 4.71%* N/A
1997 7,501 0.74 4.75 0.91 4.58 N/A
1996 6,154 0.74 5.15 0.89 5.00 N/A
1995 (2) 669 0.74 4.33 0.93 4.14 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997** $86,647 0.75%* 5.09%* 0.78%* 5.06%* 8%
1997 92,619 0.75 5.01 0.85 4.91 26
1996 36,611 0.75 5.02 0.89 4.88 43
1995 26,096 0.75 4.88 1.09 4.54 28
1994 (1) 20,477 0.75 4.18 1.62 3.31 17
CLASS B
1997** $ 7,129 1.00%* 4.84%* 1.03%* 4.81%* 8%
1997 6,191 1.00 4.76 1.10 4.66 26
1996 4,312 1.00 4.78 1.14 4.64 43
1995 2,263 1.00 4.68 1.34 4.34 28
1994 (3) 935 1.00 3.87 2.14 2.73 17
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997** $49,960 0.83%* 5.91%* 1.11%* 5.63%* 6%
1997 59,014 0.83 5.75 1.16 5.42 46
1996 60,228 0.83 5.68 1.11 5.40 28
1995 61,067 0.83 5.61 1.17 5.27 13
1994 (1) 34,654 0.83 4.64 1.49 3.98 5
CLASS B
1997** $ 1,382 1.08%* 5.66%* 1.36%* 5.38%* 6%
1997 1,830 1.08 5.50 1.41 5.17 46
1996 1,167 1.08 5.39 1.36 5.11 28
1995 457 1.08 5.34 1.42 5.00 13
1994 (4) 141 1.08 4.47 2.00 3.35 5
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(2) Commenced operations on February 7, 1994. All ratios for the period have been annualized.
(3) Commenced operations on December 17, 1993. All ratios for the period have been annualized.
(4) Commenced operations on December 31, 1993. All ratios for the period have been annualized.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
30 & 31
<PAGE>
<TABLE>
<CAPTION>
[LOGO OMITTED]
FINANCIAL HIGHLIGHTS JULY 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JULY 31, 1997 (UNAUDITED) AND PERIODS ENDED JANUARY 31,
NET ASSET NET REALIZED DISTRIBUTIONS DISTRIBUTIONS NET ASSET
VALUE, NET AND UNREALIZED FROM NET FROM VALUE, NET ASSETS,
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT CAPITAL END OF TOTAL END OF
OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME GAINS PERIOD RETURN PERIOD (000)
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1997** $12.34 $ 0.06 $0.30 $0.00 $0.00 $12.70 2.92%+ $ 43,770
1997 11.43 (0.10) 1.16 0.00 (0.15) 12.34 9.30 55,924
1996 7.86 (0.10) 3.67 0.00 0.00 11.43 45.42 48,090
1995 10.48 (0.06) (2.56) 0.00 0.00 7.86 (25.00) 34,772
1994 (1) 10.00 0.00 0.48 0.00 0.00 10.48 (4.80) 36,670
CLASS B
1997** $12.24 $ 0.06 $0.28 $0.00 $0.00 $12.58 2.78%+ $ 3,305
1997 11.36 (0.12) 1.15 0.00 (0.15) 12.24 9.09 3,759
1996 7.83 (0.12) 3.65 0.00 0.00 11.36 45.08 2,320
1995 10.48 (0.06) (2.59) 0.00 0.00 7.83 (25.29) 730
1994 (2) 9.77 0.00 0.71 0.00 0.00 10.48 7.27 330
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997** $15.38 $ 0.03 $2.02 $(0.01) $0.00 $17.42 13.31%+ $115,978
1997 13.31 0.00 2.86 (0.01) (0.78) 15.38 22.06 118,873
1996 9.57 0.01 3.93 (0.01) (0.19) 13.31 41.31 99,612
1995 10.53 0.03 (0.96) (0.03) 0.00 9.57 (8.84) 70,502
1994 (1) 10.00 0.00 0.53 0.00 0.00 10.53 5.30 54,022
CLASS B
1997** $15.28 $ 0.02 $1.99 $0.00 $0.00 $17.29 13.15%+ $ 5,394
1997 13.25 (0.03) 2.84 0.00 (0.78) 15.28 21.81 4,482
1996 9.55 (0.01) 3.90 0.00 (0.19) 13.25 40.88 2,233
1995 10.52 0.01 (0.97) (0.01) 0.00 9.55 (9.11) 505
1994 (3) 10.33 0.00 0.19 0.00 0.00 10.52 1.84 171
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1997** $11.23 $ 0.14 $1.62 $(0.14) $0.00 $12.85 15.76%+ $ 49,500
1997(4) 10.00 0.16 1.23 (0.16) 0.00 11.23 13.98 41,580
CLASS B
1997** $11.24 $ 0.11 $1.63 $(0.13) $0.00 $12.85 15.53%+ $ 2,885
1997 (4) 10.00 0.15 1.24 (0.15) 0.00 11.24 13.98 1,504
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
** For the six-month period ended July 31, 1997
+ Total return is not annualized.
(1) Commenced operations on December 1, 1993. All ratios for the period have been annualized.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET INVESTMENT
RATIO OF EXPENSES TO INCOME (LOSS)
RATIO OF NET INVESTMENT AVERAGE TO AVERAGE
EXPENSES TO INCOME (LOSS) NET ASSETS NET ASSETS PORTFOLIO AVERAGE
AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMMISSION
NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE RATE
- ---------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
<C> <C> <C> <C> <C> <C> <C>
1997** 1.15%* (0.83)%* 1.34%* (1.02)%* 69% $0.0608
1997 1.15 (0.91) 1.33 (1.09) 119 0.0574
1996 1.15 (0.92) 1.32 (1.09) 117 N/A
1995 1.15 (0.75) 1.42 (1.02) 126 N/A
1994 (1) 1.15 (0.83) 1.70 (1.38) 7 N/A
CLASS B
1997** 1.40%* (1.08)%* 1.59%* (1.27)%* 69% $0.0608
1997 1.40 (1.15) 1.58 (1.33) 119 0.0574
1996 1.40 (1.19) 1.57 (1.36) 117 N/A
1995 1.40 (0.98) 1.67 (1.25) 126 N/A
1994 (2) 1.40 (1.08) 2.15 (1.83) 7 N/A
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
1997** 1.02%* 0.16%* 1.27%* (0.09)%* 78% $0.0908
1997 1.02 (0.01) 1.28 (0.27) 90 0.0739
1996 1.02 0.08 1.27 (0.17) 119 N/A
1995 1.02 0.28 1.33 (0.03) 107 N/A
1994 (1) 1.02 0.12 1.51 (0.37) 7 N/A
CLASS B
1997** 1.27%* (0.09)%* 1.52%* (0.34)%* 78% $0.0908
1997 1.27 (0.27) 1.53 (0.53) 90 0.0739
1996 1.27 (0.16) 1.52 (0.41) 119 N/A
1995 1.27 0.02 1.58 (0.29) 107 N/A
1994 (3) 1.27 0.19 2.01 (0.55) 7 N/A
- ---------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
1997** 1.19%* 2.45%* 1.26%* 2.38%* 40% $0.0845
1997(4) 1.20 3.27 1.25 3.22 10 0.0787
CLASS B
1997** 1.44%* 2.14%* 1.51%* 2.07%* 40% $0.0845
1997 (4) 1.45 3.02 1.50 2.97 10 0.0787
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
(2) Commenced operations on December 29, 1993. All ratios for the period have been annualized.
(3) Commenced operations on December 31, 1993. All ratios for the period have been annualized.
(4) Commenced operations on August 2, 1996. All ratios for the period have been annualized.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
32 &33
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION:
The Arbor Fund (the "Trust") was organized as a Massachusetts business trust
under a Declaration of Trust dated July 24, 1992 and had no operations through
February 1, 1993, other than those related to organizational matters and the
sale of initial shares to SEI Fund Resources (the "Administrator"), on October
9, 1992. SEI Financial Management Corporation, a wholly-owned subsidiary of SEI
Investments Company, is the owner of all beneficial interest in the
Administrator. The Trust is registered under the Investment Company Act of 1940,
as amended, as an open-end management company. The financial statements included
herein relate to the Trust's OVB Family of Funds. The OVB Family of Funds
includes the Prime Obligations Portfolio (the "Money Market Portfolio"), Capital
Appreciation Portfolio, Emerging Growth Portfolio, Equity Income Portfolio (the
"Equity Portfolios"), Government Securities Portfolio and West Virginia
Tax-Exempt IncomePortfolio (the "Fixed Income Portfolios"). The financial
statements of the remaining portfolios of the Trust are presented separately.
The assets of each Portfolio are segregated, and a shareholder's interest is
limited to the Portfolio in which shares are held.The Portfolios' prospectus
provides a description of each Portfolio's investment objectives, policies and
strategies. The Portfolios are registered to offer two classes of shares:Class A
and Class B (see note 3).
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION--
Investments in equity securities that are traded on a national securities
exchange (or reported on NASDAQ national market system) are stated at the last
quoted sales price, if readily available for such equity securities on each
business day; other equity securities traded in the over-the-counter market and
listed equity securities for which no sale was reported on that date are stated
at the last quoted bid price. Debt obligations exceeding sixty days to maturity
for which market quotations are readily available are valued at the most
recently quoted bid price. Debt obligations with sixty days or less until
maturity may be valued at their amortized cost.
Investment securities held by the Money Market Portfolio are stated at
amortized cost which approximates market value. Under the amortized cost method,
any discount or premium is amortized ratably to the maturity of the security and
is included in interest income.
FEDERAL INCOME TAXES--
It is each Portfolio's intention to continue to qualify as a regulated
investment company for Federal income tax purposes by complying with the
appropriate provisions of the Internal Revenue Code of 1986, as amended.
34
<PAGE>
[LOGO OMITTED]
JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
Accordingly, no provision for Federal income taxes is required in the financial
statements.
SECURITY TRANSACTIONS AND RELATED INCOME--
Security transactions are accounted for on the date the security is purchased or
sold (trade date). Dividend income is recognized on the ex-dividend date, and
interest income is recognized on the accrual basis. Costs used in determining
realized gains and losses on the sales of investment securities are those of the
specific securities sold. Purchase discounts and premiums on securities held by
the Fixed Income Portfolios are accreted and amortized to maturity using the
scientific interest method, which approximates the effective interest method.
REPURCHASE AGREEMENTS--
The Portfolios, except the West Virginia Tax-Exempt Income Portfolio, invest in
tri-party repurchase agreements. Securities held as collateral for tri-party
repurchase agreements are maintained in a segregated account by the broker's
custodian bank until maturity of the repurchase agreement. Provisions of the
repurchase agreements require that the market value of the collateral, including
accrued interest thereon, is sufficient in the event of default of the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization
and/or retention of the collateral by the Portfolios may be delayed or limited.
CLASSES--
Class specific expenses are borne by that class. Income, expenses, and realized
and unrealized gains/losses are allocated to the respective classes of shares on
the basis of their relative daily net assets.
EXPENSES--
Expenses that are directly related to one of the Portfolios are charged directly
to that Portfolio. Other operating expenses of the Trust are prorated to the
portfolios on the basis of relative net assets. Class B shares bear a class
specific 12b-1 fee. Income, other expenses and accumulated realized and
unrealized gains and losses of a Portfolio are allocated to the respective class
on the basis of relative net asset value each day.
DISTRIBUTIONS--
Distributions from net investment income for the Equity Portfolios are paid to
shareholders in the form of quarterly dividends. Distributions from net
investment income for the Money Market and Fixed Income Portfolios are declared
daily and paid to shareholders on a monthly basis. Any net realized capital
gains on sales of securities are distributed to shareholders at least annually.
The amounts of distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax regulations,
which may differ from those amounts determined
(CONTINUED)
35
<PAGE>
NOTES TO FINANCIALSTATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
under generally accepted accounting principles. These book/tax differences are
either temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in capital in the period that
the difference arises.
3. INVESTMENT ADVISORY, ADMINISTRATION, TRANSFER AGENT,
AND DISTRIBUTION AGREEMENTS:
One Valley Bank, N.A. (the "Adviser") serves as Investment Adviser to each
Portfolio pursuant to an investment advisory agreement (the "Advisory
Agreement") with the Trust. For its services, the Adviser is entitled to a fee,
that is calculated daily and paid monthly, at an annual rate based on the
average daily net assets of each Portfolio as follows:
Prime Obligations Portfolio --.25%,
Capital Appreciation Portfolio --.95%,
Emerging Growth Portfolio --.95%,
Equity Income Portfolio --.74%,
Government Securities Portfolio --.75%
and West Virginia Tax-Exempt Income Portfolio --.45%. The Adviser has agreed to
voluntarily waive a portion of its fee so that the total annual expenses of each
Portfolio will not exceed the voluntary expense limitations adopted by the
Adviser. In the event that the total annual expenses of a Portfolio, after
reflecting a waiver of all fees by the Adviser, exceed the specific limitations,
the Adviser has agreed to bear such excess. Fee waivers by the Adviser are
voluntary and may be terminated at any time.
Wellington Management Company, LLP (the "Sub-Adviser") serves as the
Investment Sub-Adviser to the Prime Obligations Portfolio pursuant to a
sub-advisory agreement (the "Sub-Advisory Agreement") with the Adviser and the
Trust. Under the Sub-Advisory Agreement, the Sub-Adviser manages the Portfolio,
selects investments, and places all orders for purchases and sales of the
Portfolio's securities, subject to the general supervision of the Trustees of
the Trust and the Adviser. For the services provided and expenses incurred
pursuant to the Sub-Advisory Agreement, the Sub-Adviser is entitled to receive a
fee, computed daily and paid monthly, at the annual rate of .075% of the first
$500 million of "managed assets" and .02% of "managed assets" in excess of $500
million. "Managed assets" are all of the money market fund assets that the
Sub-Adviser manages for the Trust, including assets of funds other than the
Prime Obligations Portfolio. The fee paid by the Portfolio is based on its
proportionate share of "managed assets."
The Trust and the Administrator have entered into an administration
agreement. Under terms of the administration agreement, the Administrator is
entitled to a fee calculated daily and paid monthly at an annual rate of .20% of
the average daily
36
<PAGE>
[LOGO OMITTED]
JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
net assets of each Portfolio. There is a minimum annual fee of $100,000
payable to the Administrator by each Portfolio. The Administrator has
voluntarily agreed to waive a portion of its fee relating to the West Virginia
Tax-Exempt Income Portfolio in order to limit that Portfolio's administration
fee to .20% of its average daily net assets on an annualized basis.The
Administrator also serves as the shareholder servicing agent for the
Trust.Compensation for this service is paid under the administration agreement.
DST Systems, Inc. serves as the transfer agent and dividend disbursing
agent for the Portfolios under a transfer agency agreement with the Trust.
The Trust and SEI Investments Distribution Co. (the "Distributor"), a
wholly-owned subsidiary of SEI Investments Company, have entered into a
distribution agreement. The Class B shares of each Portfolio have a distribution
plan (the "Class B Plan"), pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended. As provided in the Distribution Agreement and the Class
B Plan, the Trust will pay a fee, at an annual rate of .25% of each Portfolio's
average daily net assets attributable to Class B shares to the Distributor as
compensation for its services.
4. ORGANIZATIONAL COSTS AND
TRANSACTIONS WITH AFFILIATES:
Organizational costs have been capitalized by the Trust and are being amortized
over sixty months beginning with the commencement of operations. In the event
any of the initial shares are redeemed by any holder thereof during the period
that the fund is amortizing its organizational costs, the redemption proceeds
payable to the holder thereof by the Trust will be reduced by the unamortized
organizational costs in the same ratio as the number of initial shares being
redeemed bears to the number of initial shares outstanding at the time of the
redemption. These costs include legal fees of approximately $23,000 for
organizational work performed by a law firm of which two officers of the Trust
and a Trustee of the Trust are partners.
Certain officers of the Trust and a Trustee are also officers of the
Administrator and/or Distributor. Such officers are paid no fees by the Trust
for serving in their respective roles.
(CONTINUED)
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from the sale of securities,
other than temporary cash investments, during the period ended July 31, 1997
were as follows:
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
--------------- ----------------
PURCHASES SALES PURCHASES SALES
PORTFOLIO (000) (000) (000) (000)
- --------- --------- ----- --------- -----
West Virginia Tax-
Exempt Income $ -- $ -- $ 7,778 $ 14,619
Government
Securities 3,417 13,530 -- 1,187
Emerging Growth -- -- 31,774 46,116
Capital Appreciation -- -- 86,271 101,830
Equity Income -- 2,005 22,298 15,814
At July 31, 1997, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation on investment securities at July
31, 1997, for each Equity and Fixed Income Portfolio is as follows:
NET
APPRECIATED DEPRECIATED UNREALIZED
SECURITIES SECURITIES APPRECIATION
PORTFOLIO (000) (000) (000)
- --------- ---------- ------------ ------------
West Virginia
Tax-Exempt
Income $ 5,839 $(98) $ 5,741
Government
Securities 1,991 (143) 1,848
Emerging
Growth 13,081 (348) 12,733
Capital
Appreciation 39,092 (52) 39,040
Equity
Income 9,176 (156) 9,020
At January 31, 1997, the following Portfolios had available realized
capital losses to offset future net capital gains through fiscal year ending:
CAPITAL POST
LOSS 10/31/96
CARRYFORWARDS DEFERRED
2003 2004 2005 UTILIZED LOSSES
PORTFOLIO (000) (000) (000) (000) (000)
- --------- ------- ------- ------- ------- -------
Prime
Obligations $ 6 $ -- $-- $ 2 $ 3
West Virginia
Tax-Exempt
Income 24 141 48 -- --
Government
Securities -- 59 -- 12 --
Emerging
Growth -- -- -- 4,170 903
For tax purposes, capital losses can be carried forward for a maximum of eight
years to offset any future net realized capital gains. Post-October deferred
losses have been deferred to fiscal year 1998 for tax purposes.
38
<PAGE>
[LOGO OMITTED]
JULY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
6. CONCENTRATION OF CREDIT RISK:
The Money Market Portfolio invests primarily in money market instruments
maturing in 397 days or less whose ratings are within the two highest ratings
categories assigned by a nationally recognized statistical rating organization
or, if not rated, are believed to be of comparable quality. The Fixed Income
Portfolios invest primarily in marketable debt instruments.The market value of
these investments will change in response to interest rate changes and other
factors.During periods of falling interest rates, the values of debt securities
generally rise. Conversely, during periods of rising interest rates the values
of such securities generally decline. The ability of the issuers of the
securities held by these Portfolios to meet their obligations may be affected by
economic and political developments in a specific industry, state or region.
Changes by recognized rating organizations in the ratings of any debt security
and in the ability of an issuer to make payments of interest and principal may
also affect the value of these investments.
39
<PAGE>
NOTES
- --------------------------------------------------------------------------------
<PAGE>
[LOGOS OMITTED]
<PAGE>
THE OVB FUNDS
PORTFOLIOS OF THE ARBOR FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISER:
One Valley Bank, N.A.
One Valley Square, P.O. Box 1793
Charleston, WV 25326
DISTRIBUTOR:
SEI Investments Distribution Co.
Oaks, PA 19456
SEI Investments Distribution Co., the Distributor of the OVB Funds,
is not affiliated with One Valley Bank, N.A.
One Valley Bank, N.A. serves as Investment Adviser for the OVB Funds.
This material must be preceded or accompanied by a current prospectus.
FOR MORE INFORMATION, CALL:
1-800-545-6331
OVB-F-008-04
