JULY 31, 1998
[LOGO OMITTED]
THE OVB FUNDS
PORTFOLIOS OF THE ARBOR FUND
SEMI-ANNUAL
REPORT
TO SHAREHOLDERS
<PAGE>
[LOGO OMITTED] THE OVB FUNDS
TABLE OF CONTENTS
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Investment Adviser's Review.........................1
Financial Statements................................4
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THE OVB FUNDS:
[BULLET] NOT FDIC INSURED
[BULLET] NO BANK GUARANTEE
[BULLET] MAY LOSE VALUE
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JULY 31, 1998
INVESTMENT ADVISER'S REVIEW
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INVESTMENT ADVISER'S REVIEW
The six-month period ended amid rising uncertainty in the stock and bond
markets, while stability continued to prevail in the money markets.
A variety of concerns came into sharper focus during the period, most notably
the growing economic crisis in Asia and the related downward pressure on U.S.
corporate profits.
At the same time, the U.S. markets were supported by continued economic
growth, controlled inflation, steady interest rates, and relatively strong
consumer demand.
The constant push-and-pull between these conflicting forces was responsible
for an overall increase in market volatility, and speculation that perhaps the
market's long-term advance had reached its limits, at least for now.
MONEY MARKET REVIEW
As of July 31, 1998, Class "A" shares of the OVB Funds Prime Obligations
Portfolio produced a seven-day current yield of 5.20%. Class "B" shares produced
a seven-day current yield of 4.95%.
In the past six months, the Federal Reserve Board refrained from their early
bias to raise interest rates on the apparent theory that global events would
keep the domestic economy from overheating.
Looking ahead, we believe that short-term rates will remain relatively
stable, and that any change could actually be to the downside. For the time
being, the money markets should continue to provide a healthy return to
investors who seek stability in an environment of change.
BOND MARKET REVIEW
For the six months ended July 31, 1998, Class "A" shares of the West Virginia
Tax-Exempt Income Portfolio produced a total return of 1.62% while Class "B"
shares returned 1.40%. Class "A" shares of the Government Securities Portfolio
produced a total return of 2.29%, while Class "B" shares returned 2.16%.
As they often do during times of uncertainty, bonds performed well overall,
helped in part by inflows of cash from domestic and international investors
seeking the safe haven of U.S. government and corporate debt instruments.
The bond market also benefited from the continued focus on inflation by the
Federal Reserve Board, which saw the Asian economic crisis as an additional
reason to leave interest rates at their current levels.
Looking ahead, we see little chance of a significant hike in interest rates,
as weaknesses in various sectors of the economy continue to appear. If anything,
we can envision a slight easing of rates
1
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INVESTMENT ADVISER'S REVIEW (CONCLUDED)
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if the Fed perceives a need to keep the American economy a bastion of strength.
Therefore, we expect bonds to continue to perform well in the months ahead.
In the tax-exempt market, the state of West Virginia continued to benefit
from a strong local economy. This, combined with a limited supply of new issues,
led to good overall performance for the state's bonds during the past six
months.
While West Virginia's economy could be impacted by a global slowdown in
demand for natural resources and other products and services, we believe the
outlook remains relatively strong. Therefore, we believe that state and local
municipal issues will continue to be attractive to investors.
EQUITY MARKET REVIEW
For the six months ended July 31, 1998, Class "A" shares of the Emerging
Growth Portfolio rose 8.68%, while Class "B" shares rose 8.50%. Class "A" shares
of the Capital Appreciation Portfolio produced a total return of 19.50%, while
Class "B" shares produced a total return of 19.44%. Class "A" shares of the
Equity Income Portfolio rose 7.14%, while Class "B" shares rose 7.02%.
After reaching record highs earlier in the fiscal year, equities declined
during the period as the Asian crisis began having a meaningful impact on
American corporate profits -- particularly for those multinational companies
whose growth had been fueled in part by the former "miracle" economies of the
Far East.
Domestic equities continued to be a tale of two markets. On the one hand,
large-cap stocks continued to perform relatively well, thanks to ongoing
accumulation by index funds that favor the biggest names. This trend continued
to benefit the OVB Equity Income Portfolio and the OVB Capital Appreciation
Portfolio both of which are strongly invested in blue-chip stocks.
On the other hand, small-cap issues continued to compete in vain for investor
interest, despite the comparatively good values that exist among emerging growth
companies. As a result, funds such as the OVB Emerging Growth Portfolio
continued to lag their large-cap counterparts.
Ironically, it is now easier to find good values, as measured by
price-earnings ratios and other traditional yardsticks, among emerging-growth
companies than among the world's largest corporations. This is a reversal of
normal market psychology, which generally tends to place a higher value on
companies in the earlier stages of their growth cycles. And while such a trend
must try the patience of small-cap investors, we believe that the real values in
the market will eventually be recognized.
2
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JULY 31, 1998
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Looking ahead, we remain cautiously optimistic about the equity markets in
general. It is true that the valuations on large-cap issues have reached beyond
historic norms. In addition, the values assigned to certain very speculative
issues, particularly those of companies involved in Internet commerce, are far
beyond the fringes of rationality.
However, we believe that the prudent investment approach employed by our fund
managers can help us avoid the market's worst excesses, and will lead us to
strong values for the long term. And while we are aware that a significant
correction is a growing possibility, we believe that our long-range focus will
help us stay on course through any downturns.
CONCLUSION
As always, we view the investment markets not in terms of weeks or months,
but in years and decades -- and we encourage our investors to do the same. While
economic conditions may well be changing world- wide, one should not allow
current events to overshadow the many positive developments and long-term
opportunities that continue to abound.
The continued expansion of our fund family, both in the number of investors
and in the size of our asset base, indicates that a growing family of
individuals and institutions share our view of the investment world. We thank
you for being among them, and look forward to continuing to serve you in the
years to come.
/S/ SIGNATURE
J. Randy Valentine
Senior Vice President
One Valley Bank, N.A.
3
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STATEMENT OF NET ASSETS
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PRIME OBLIGATIONS PORTFOLIO
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[PIE CHART OMITTED]
FLOATING RATE INSTRUMENTS 9.3%
U.S. GOVERNMENT AGENCY OBLIGATION 11.2%
COMMERCIAL PAPER 58.3%
CERTIFICATES OF DEPOSIT 14.2%
BANK NOTE 3.3%
CORPORATE OBLIGATION 3.7%
% of Total Portfolio Investments
Pie chart unaudited
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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COMMERCIAL PAPER -- 58.2%
Financial Services -- 44.3%
Apreco
5.700%, 08/03/98 $1,800 $ 1,799
Avon Capital Corporation
5.550%, 08/10/98 1,775 1,773
Ciesco LP
5.550%, 08/27/98 1,045 1,041
Eureka Securities
5.530%, 08/31/98 1,500 1,493
Falcon Asset Securitization
5.550%, 08/17/98 1,000 998
Greyhawk Funding
5.540%, 09/22/98 1,620 1,607
GTE Funding
5.600%, 08/19/98 1,608 1,603
Island Finance
5.600%, 09/08/98 1,500 1,491
Kitty Hawk Funding
5.500%, 02/26/99 1,800 1,742
Merrill Lynch & Company
5.560%, 09/11/98 1,800 1,789
Mont Blanc Capital
5.560%, 08/17/98 2,000 1,995
Park Avenue Receivables
5.550%, 08/12/98 2,000 1,997
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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Peacock Funding
5.520%, 11/09/98 $1,800 $ 1,772
Prefco
5.560%, 10/05/98 1,800 1,782
Quebec Province
5.520%, 12/22/98 1,000 978
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TOTAL FINANCIAL SERVICES 23,860
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Industrial -- 8.8%
Fortune Brands
5.650%, 08/19/98 1,800 1,795
General Motors
5.540%, 08/24/98 1,800 1,794
Motorola
5.600%, 08/03/98 1,145 1,145
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TOTAL INDUSTRIAL 4,734
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Insurance -- 3.3%
Aon
5.570%, 08/12/98 1,800 1,797
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TOTAL INSURANCE 1,797
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Retail -- 1.8%
Wal-Mart Stores
5.680%, 08/03/98 950 950
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TOTAL RETAIL 950
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TOTAL COMMERCIAL PAPER (COST $31,341) 31,341
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U.S. GOVERNMENT AGENCY OBLIGATION -- 11.1%
FNMA (A)
5.233%, 08/04/98 6,000 6,000
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TOTAL U.S. GOVERNMENT AGENCY
OBLIGATION (COST $6,000) 6,000
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CORPORATE OBLIGATION -- 3.7%
Abbey National Treasury Service
5.875%, 12/22/98 2,000 2,001
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TOTAL CORPORATE OBLIGATION (COST $2,001) 2,001
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FLOATING RATE INSTRUMENTS -- 9.3%
People's Security Life (A)
5.820%, 08/01/98 3,000 3,000
Travelers Insurance (A)
5.738%, 09/01/98 2,000 2,000
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TOTAL FLOATING RATE INSTRUMENTS
(COST $5,000) 5,000
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4
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JULY 31, 1998 (UNAUDITED)
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PRIME OBLIGATIONS PORTFOLIO (CONCLUDED)
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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CERTIFICATES OF DEPOSIT -- 14.2%
Bankers Trust
5.970%, 10/27/98 $1,625 $ 1,625
Chase Manhattan Bank
5.700%, 07/02/99 1,000 999
Rabobank Nederland
5.750%, 04/27/99 2,000 1,999
Svenska Handels
5.740%, 06/01/99 1,000 999
Unibank
5.950%, 12/01/98 2,000 2,001
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TOTAL CERTIFICATES OF DEPOSIT (COST $7,623) 7,623
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BANK NOTE -- 3.3%
American Express Centurion Bank (A)
5.596%, 08/26/98 1,800 1,800
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TOTAL BANK NOTE (COST $1,800) 1,800
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TOTAL INVESTMENTS -- 99.8% (COST $53,765) 53,765
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OTHER ASSETS AND LIABILITIES, NET -- 0.2%
Other Assets and Liabilities, Net 99
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TOTAL OTHER ASSETS AND LIABILITIES 99
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VALUE
DESCRIPTION (000)
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NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
48,355,110 outstanding shares of
beneficial interest $48,355
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
5,505,268 outstanding shares of
beneficial interest 5,505
Undistributed net investment income 2
Accumulated net realized gain on investments 2
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TOTAL NET ASSETS -- 100.0% $53,864
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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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FNMA Federal National Mortgage Association
LP Limited Partnership
(A) Adjustable Rate Security. The rate reported on the Statement of Net Assets
is the rate in effect on July 31, 1998. The date shown is the next scheduled
reset date.
The accompanying notes are an integral part of the financial statements.
5
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STATEMENT OF NET ASSETS
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WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO
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[PIE CHART OMITTED]
MUNICIPAL BONDS 99.9%
CASH EQUIVALENT 0.1%
% of Total Portfolio Investments
Pie chart unaudited
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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MUNICIPAL BONDS -- 99.2%
West Virginia -- 99.2%
Beckley, Industrial Development Authority,
Beckley Water Project, RB
7.000%, 10/01/17 $1,000 $ 1,091
Beckley, Nursing Facility, Health
Care Project, Series A, RB
6.000%, 09/01/12 310 322
Beckley, Sewage System Refunding
Bond, Series A, RB
6.750%, 10/01/25 400 426
Berkeley County, Board of Education,
GO, BIG, Escrowed to Maturity
7.375%, 04/01/03 425 482
Berkeley County, Board of Education,
GO, FGIC
4.500%, 06/01/09 540 535
Berkeley County, Sewer System
Refunding Bond, RB, MBIA
5.625%, 10/01/19 895 938
Brooke County, Board of Education, GO,
AMBAC, Escrowed to Maturity
9.000%, 08/01/98 15 15
Cabell County, Board of Education,
GO, MBIA, Escrowed to Maturity
6.600%, 05/01/04 1,000 1,119
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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Cabell, Putnam & Wayne Counties, Single
Family Mortgage, RB, FGIC,
Escrowed to Maturity
7.375%, 04/01/10 $ 250 $ 292
7.375%, 04/01/11 440 533
Charles Town, Waterworks &
Sewer System, RB, FSA
5.250%, 10/01/18 500 499
Charleston, Building
Community Parking
Facility, Capital
Appreciation, Series A, RB
7.000%, 06/01/16 580 641
Charleston, Building
Community Parking
Facility, Capital
Appreciation, Subseries C, RB
6.000%, 12/01/10 290 311
0.000%, 12/01/15 385 152
0.000%, 12/01/16 380 142
0.000%, 12/01/26 1,000 180
Charleston, Public Housing
Authority, RB
5.000%, 02/01/99 100 101
Clarksburg, Water Refunding &
Improvements, RB
6.100%, 09/01/04 450 492
6.200%, 09/01/05 500 546
6.250%, 09/01/19 430 453
Fairmont, Waterworks, RB, MBIA
5.375%, 07/01/13 680 709
Greenbrier County, Public
Service, District
Sewer Project, RB, MBIA
5.600%, 10/01/11 175 187
5.625%, 10/01/19 500 522
Harrison County, Board of
Education, GO,
FGIC, Escrowed to Maturity
6.200%, 05/01/04 850 934
6.400%, 05/01/07 175 199
Harrison County, Building
Commission, Maplewood
Retirement Project,
RB, AMBAC
5.150%, 04/01/18 1,680 1,661
Harrison County, Solid Waste
Disposal, RB, MBIA
6.300%, 05/01/23 200 214
Harrison County, Solid
Waste Disposal,
Monongahela Power Company,
Series A, RB
6.875%, 04/15/22 2,150 2,341
Harrison County, Solid
Waste Disposal,
Potomac Edison Project,
Series B, RB, AMBAC
6.250%, 05/01/23 400 425
6
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JULY 31, 1998 (UNAUDITED)
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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,
West Penn Power Project,
Series B, RB, AMT
6.300%, 05/01/23 $ 500 $ 539
Harrison County, Special
Obligation Bonds,
Series A, Escrowed to Maturity
6.250%, 05/15/10 100 112
Huntington County, Sewer System
Refunding, RB, FSA
5.375%, 11/01/23 1,000 1,007
Jackson County, Residential
Mortgage, RB, FGIC,
Escrowed to Maturity
7.375%, 06/01/10 420 486
Jefferson County, Public
Service, District Sewer
Project, Series A, RB
5.125%, 10/01/18 215 216
Kanawha & Putnam Counties,
Huntington/Charleston,
Single Family Mortgage,
Series A, RB, Escrowed
to Maturity
0.000%, 12/01/16 2,000 777
Kanawha County, Building
Commission, Charleston Area
Medical Center Project,
Series A, RB, AMBAC
7.500%, 11/01/08 1,000 1,065
Kanawha County, Residential
Mortgage, RB, FGIC,
Escrowed to Maturity
7.375%, 09/01/10 1,030 1,187
7.375%, 09/01/11 285 345
Kanawha County, Single
Family Mortgage,
RB, FGIC, Escrowed
to Maturity
7.100%, 12/01/99 15 16
7.300%, 12/01/04 805 915
7.400%, 12/01/10 185 221
Logan County, Health
Care Center Project,
RB, Escrowed to Maturity
8.000%, 12/01/16 690 861
Marion County, Single
Family Mortgage,
RB, FGIC, Escrowed
to Maturity
7.100%, 08/01/99 135 139
7.375%, 08/01/11 495 596
Marshall County,
Pollution Control,
Ohio Power Project,
Series B, RB, MBIA
5.450%, 07/01/14 800 826
Marshall County,
Pollution Control,
Ohio Power Project,
Series C, RB, MBIA
6.850%, 06/01/22 1,000 1,100
Marshall County,
Special Obligation,
Refunding Bond, GO
6.500%, 05/15/10 855 954
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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Mason County, Pollution Control,
Ohio Power Project,
Series B, RB, AMBAC
5.450%, 12/01/16 $ 720 $ 739
Mason County, Single Family
Mortgage, RB, FGIC
7.400%, 08/01/11 608 709
Monongalia County,
Board of Education,
Series A, GO, MBIA
7.000%, 04/01/03 1,000 1,119
Monongalia County,
Community Building,
Series A, RB
5.750%, 11/15/14 175 175
6.000%, 11/15/27 300 302
Monongalia County,
Single Family Mortgage,
RB, Escrowed to Maturity
7.200%, 03/01/11 1,280 1,466
Morgantown, Building Commission,
Municipal Lease, RB, MBIA
5.750%, 01/01/19 250 261
Ohio County, Board of Education, GO,
MBIA, Escrowed to Maturity
5.250%, 06/01/16 1,070 1,109
5.250%, 06/01/17 830 861
5.125%, 05/01/18 1,300 1,297
Ohio County, Single
Family Residence
Mortgage, RB, Escrowed
to Maturity
5.200%, 05/01/11 100 104
Parkersburg, Waterworks & Sewer
System Project, RB, FSA
5.800%, 09/01/19 2,660 2,813
Pea Ridge, Public Service,
District Sewer
Project, Series 1994,
RB, AMBAC
7.000%, 05/01/20 10 11
Pleasants County,
Pollution Control,
Potomac Edison Project,
RB, AMBAC
6.150%, 05/01/15 500 542
Pleasants County,
Pollution Control,
West Penn Power,
RB, AMBAC
6.150%, 05/01/15 500 542
Raleigh County,
Community Public
Office Building, RB
4.850%, 04/01/04 300 303
Raleigh, Fayette & Nicholas
Counties, Special
Obligation Bonds,
Escrowed to Maturity
6.250%, 08/01/11 795 898
(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)
Randolph County, Community Health
Systems, Davis Health Systems,
Series A, RB, FSA
5.200%, 11/01/21 $ 700 $ 699
South Charleston,
Herbert J. Thomas
Memorial Hospital Project, RB,
Pre-refunded @ 102 (A)
8.000%, 10/01/04 400 411
South Charleston,
Herbert J. Thomas Memorial
Hospital Project,
Series A, RB, MBIA
5.500%, 10/01/09 520 536
Webster County, Multi-Family
Housing, Circlebrook
Project, Series A, RB, FHA
6.500%, 04/01/18 1,010 1,078
West Virginia State,
Board of Directors,
State College,
Series A, RB, AMBAC
5.125%, 04/01/27 300 295
West Virginia State, Board of
Regents, RB, MBIA
5.900%, 04/01/04 340 362
West Virginia State,
Board of Regents,
RB, MBIA, Escrowed to Maturity
6.000%, 04/01/04 225 237
West Virginia State,
Building Commission,
Series A, RB, MBIA
5.250%, 07/01/09 2,000 2,110
West Virginia State
College, RB, AMBAC
5.875%, 04/01/05 900 969
6.000%, 04/01/06 225 243
6.000%, 04/01/07 425 459
6.000%, 04/01/12 890 960
West Virginia State,
Economic Development &
Tourism Authority, RB, FGIC
4.800%, 05/15/00 340 345
0.000%, 05/15/07 500 334
5.800%, 05/15/13 140 148
West Virginia State,
Economic Development
& Tourism Authority,
RB, FGIC, Escrowed
to Maturity
0.000%, 07/01/03 250 203
West Virginia State, Economic
Development & Tourism Authority,
Series B, RB,
Pre-refunded @ 102 (A)
4.625%, 07/01/99 900 926
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
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West Virginia State, Highway
Improvements, GO, FGIC
5.000%, 06/01/17 $1,500 $ 1,464
West Virginia State,
Hospital Finance
Authority, Cabell
County Project,
RB, Pre-refunded @ 102 (A)
7.875%, 01/01/19 200 207
West Virginia State,
Hospital Finance
Authority, Charleston
Area Medical Center
Project, Series A, RB
6.500%, 09/01/16 625 674
6.500%, 09/01/23 1,810 1,948
West Virginia State,
Hospital Finance Authority,
Linked Bears and Bulls, RB, MBIA
6.100%, 01/01/18 1,300 1,363
West Virginia State,
Hospital Finance
Authority, RB, FSA
4.700%, 08/01/06 300 304
4.750%, 08/01/08 200 202
5.000%, 08/01/09 500 513
West Virginia State,
Hospital Finance
Authority, University Medical
Center Project, RB, MBIA
5.900%, 01/01/06 680 720
West Virginia State,
Housing Development
Fund, HUD Section 236, RB
6.000%, 12/15/08 600 611
6.000%, 12/15/09 600 611
West Virginia State, Housing
Development Fund, Series A,
BIG, RB, Pre-refunded @ 101 (A)
7.375%, 11/01/98 500 509
West Virginia State, Housing
Development Fund, Series A, RB
4.550%, 05/01/01 100 101
6.700%, 11/01/09 285 304
5.450%, 11/01/21 110 112
West Virginia State,
Housing Development
Fund, Series A, RB, AMBAC
5.500%, 11/01/11 530 544
West Virginia State,
Housing Development
Fund, Series E, RB
6.250%, 11/01/12 1,000 1,063
6.350%, 05/01/24 1,375 1,451
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JULY 31, 1998 (UNAUDITED)
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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, Public
Improvements, GO, FGIC
5.000%, 11/01/21 $ 500 $ 488
West Virginia State,
School Building
Authority, Capital
Improvements, RB, MBIA
5.250%, 07/01/99 100 101
6.250%, 07/01/01 500 529
West Virginia State,
School Building Authority,
Capital Improvements,
Series B, RB, MBIA
5.750%, 07/01/15 1,000 1,030
West Virginia State,
School Building Authority,
Capital Improvements,
Series B, RB, MBIA,
Pre-refunded @ 102 (A)
6.750%, 07/01/00 900 964
West Virginia State,
School Building
Authority, Series A,
RB, MBIA, Pre-refunded
@ 102 (A)
7.000%, 07/01/04 210 230
West Virginia State,
School Building Authority,
Series B, RB, FSA
5.125%, 07/01/13 100 101
West Virginia State,
Series A, GO, FGIC
5.000%, 11/01/21 1,500 1,464
5.750%, 11/01/21 2,340 2,463
5.200%, 11/01/26 2,000 1,988
5.250%, 11/01/26 4,820 4,826
West Virginia State,
Series D, GO, FGIC
5.000%, 11/01/21 2,000 1,953
5.250%, 11/01/23 200 201
6.500%, 11/01/26 1,000 1,169
West Virginia State
University, Dorm Project,
Series B, RB, AMBAC
5.000%, 05/01/22 400 393
West Virginia State
University, Marshall
Library Project, RB, AMBAC
5.750%, 04/01/16 1,000 1,058
West Virginia State
University, RB, AMBAC
6.000%, 04/01/07 400 430
6.000%, 04/01/12 700 755
West Virginia State,
Water Development
Authority, Loan Program,
Series A, RB, FSA
7.000%, 11/01/25 190 206
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FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
West Virginia State,
Water Development
Authority, Loan Program,
Series A-I, RB, FSA
5.800%, 11/01/12 $ 450 $ 460
5.250%, 11/01/21 795 798
West Virginia State,
Water Development
Authority, Loan Program II,
Series A, RB, FSA
7.000%, 11/01/11 800 878
West Virginia State,
Water Development
Authority, Loan
Program II, Series A,
RB, Pre-refunded @ 102 (A)
7.300%, 11/01/01 475 529
7.700%, 11/01/29 500 549
West Virginia State,
Water Development
Authority, Loan Program II,
Series A-II, RB, FSA
6.050%, 11/01/13 1,000 1,023
5.500%, 11/01/23 625 637
5.750%, 11/01/29 150 156
West Virginia State,
Water Development Authority,
Loan Program II,
Series B, RB, FSA
5.375%, 11/01/25 1,740 1,764
5.250%, 11/01/35 1,660 1,668
West Virginia State,
Water Development
Authority, Sewer
System Loan Program,
RB, Escrowed to Maturity
7.100%, 11/01/09 1,350 1,576
Wheeling, Waterworks
& Sewage System,
Series B, RB, FGIC,
Pre-refunded @ 100 (A)
6.450%, 06/01/02 1,000 1,083
6.650%, 06/01/02 1,100 1,198
- --------------------------------------------------------------------------------
TOTAL WEST VIRGINIA 96,759
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $91,663) 96,759
- --------------------------------------------------------------------------------
CASH EQUIVALENT -- 0.1%
SEI Tax Exempt Trust, Tax Free
Portfolio 63 63
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT (COST $63) 63
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.3% (COST $91,726) 96,822
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET -- 0.7%
Other Assets and Liabilities, Net 721
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES 721
- --------------------------------------------------------------------------------
(CONTINUED)
9
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT INCOME PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
8,658,215 outstanding shares of
beneficial interest $83,011
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
871,478 outstanding shares of
beneficial interest 8,643
Accumulated net realized gain on investments 793
Net unrealized appreciation on investments 5,096
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $97,543
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.24
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS B $10.23
- --------------------------------------------------------------------------------
(A) Pre-refunded Security. The pre-refunded date is shown as the maturity date
on the Statement of Net Assets.
AMT Alternative Minimum Tax
AMBAC American Municipal Bond Assurance Corporation
BIG Bond Investors Guaranty
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance
GO General Obligation
HUD Department of Housing and Urban Development
MBIA Municipal Bond Insurance Association
RB Revenue Bond
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
[LOGO OMITTED]
JULY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
[PIE CHART OMITTED]
CORPORATE OBLIGATIONS 4.2%
MUNICIPAL BONDS 8.5%
U.S. TREASURY OBLIGATIONS 26.6%
COMMON STOCKS 3.9%
REPURCHASE AGREEMENT 2.2%
PREFERRED STOCK 1.0%
U.S. GOVERNMENT AGENCY OBLIGATIONS 53.6%
% of Total Portfolio Investments
Pie chart unaudited
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 26.4%
U.S. Treasury Bonds
8.375%, 08/15/08 $ 550 $ 614
8.750%, 11/15/08 300 341
9.125%, 05/15/09 300 350
7.500%, 11/15/24 500 613
6.000%, 02/15/26 500 514
6.125%, 11/15/27 500 528
U.S. Treasury Notes
8.000%, 05/15/01 1,331 1,414
7.500%, 11/15/01 1,500 1,586
6.250%, 01/31/02 500 511
7.500%, 05/15/02 1,169 1,245
6.000%, 07/31/02 2,000 2,030
7.875%, 11/15/04 1,000 1,119
7.625%, 02/15/07 1,000 1,062
5.625%, 05/15/08 500 504
U.S. Treasury STRIPS
0.000%, 02/15/07 1,000 622
0.000%, 05/15/11 1,000 480
0.000%, 11/15/20 1,400 383
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $13,246) 13,916
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 53.2%
FFCB MTN
5.690%, 03/03/00 $2,000 $ 2,001
5.800%, 12/18/00 400 400
6.150%, 03/03/03 1,000 1,016
8.400%, 12/01/05 1,500 1,722
6.900%, 09/08/15 600 656
FHLB
7.040%, 05/24/99 500 506
8.375%, 10/25/99 750 774
7.780%, 10/19/01 500 530
8.090%, 12/28/04 400 448
8.125%, 03/07/05 1,000 1,037
FHLB MTN
6.880%, 04/26/00 500 510
5.990%, 10/01/03 500 497
7.030%, 05/06/11 500 550
FHLMC
6.900%, 04/04/03 500 509
8.640%, 10/14/09 400 414
7.500%, 11/01/09 1,237 1,272
8.060%, 03/24/10 500 516
6.500%, 11/01/12 1,924 1,938
Financing Corporation
8.600%, 09/26/19 500 635
FNMA
6.320%, 12/23/03 400 399
8.250%, 10/12/04 500 515
6.240%, 01/14/08 1,000 1,003
FNMA MTN
6.250%, 03/10/03 500 501
FNMA STRIPS
0.000%, 07/24/05 1,000 667
FNMA, Callable 10/24/00 @ 100
6.400%, 10/24/02 500 506
Housing Urban Development
92a Scranton, Callable
08/01/02 @ 100
7.800%, 08/01/10 400 426
Housing Urban Development
94a Abilene,Callable
08/01/03 @ 100
7.180%, 08/01/13 160 167
Housing Urban Development
94a Barberton, Callable
08/01/03 @ 100
7.180%, 08/01/13 520 542
(CONTINUED)
11
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Housing Urban Development 94a Egg Harbor,
Callable 08/01/03 @ 100
6.930%, 08/01/08 $ 160 $ 166
7.180%, 08/01/13 220 230
Housing Urban Development
94a Ocean Shores,
Callable 08/01/03 @ 100
6.930%, 08/01/08 225 232
Housing Urban Development
94a Pohatcong Township,
Callable 08/01/03 @ 100
6.930%, 08/01/08 240 246
Housing Urban Development
94a Providence, Callable
08/01/03 @ 100
6.930%, 08/01/08 130 135
Housing Urban Development
94a Roanoke, Callable
08/01/03 @ 100
7.180%, 08/01/13 100 104
Housing Urban Development
94a Tacoma, Callable
08/01/03 @ 100
7.080%, 08/01/11 365 376
Housing Urban Development
94a-I Montgomery,
Callable 08/01/03 @ 100
6.930%, 08/01/08 55 57
Private Export Funding
7.300%, 01/31/02 2,100 2,200
6.240%, 05/15/02 250 254
7.950%, 11/01/06 1,500 1,661
Tennessee Valley Authority
8.375%, 10/01/99 1,169 1,203
0.000%, 10/15/09 1,000 516
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $27,052) 28,037
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 8.4%
Berkeley County, WV,
IRS Computer Center
Facility Project, Taxable
RB, Series 1994
7.900%, 07/15/03 640 690
Fairview, MN, Hospital
& Health Care Services,
Taxable RB, Series B, MBIA
7.000%, 11/15/15 670 713
Gardena, CA, Financing
Agency, Taxable RB,
Pre-refunded @ 102 (A)
9.250%, 07/01/13 200 229
Henry County, GA, Water
& Sewer Authority,
Taxable RB, Series B, AMBAC
6.000%, 02/01/04 250 249
6.000%, 02/01/05 220 219
6.700%, 02/01/11 200 203
- --------------------------------------------------------------------------------
FACE AMOUNT VALUE
DESCRIPTION (000)/SHARES (000)
- --------------------------------------------------------------------------------
Las Vegas, NV, Fremont
Street Project, Taxable
GO, FGIC, Callable
07/01/03 @ 101
7.200%, 07/01/15 $ 800 $ 833
Portsmouth, VA, Taxable GO,
Callable 07/15/07 @ 102
6.630%, 07/15/14 500 498
Saint Paul, MN, Taxable GO,
Series B, Callable
02/01/08 @ 100
6.450%, 02/01/15 500 496
San Bernardino County, CA,
COP, Taxable RB,
Pre-refunded @ 102 (A)
8.500%, 03/01/14 275 314
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $4,285) 4,444
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 4.2%
American Heavy Lift Title XI
7.180%, 06/01/17 200 211
BellSouth Telecom,
Callable 05/15/05 @ 103.66
7.625%, 05/15/35 500 524
General Electric Capital MTN
6.020%, 12/15/03 500 501
Salomon Smith Barney
6.250%, 01/15/05 1,000 988
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS (COST $2,225) 2,224
- --------------------------------------------------------------------------------
COMMON STOCKS -- 3.8%
Communications Equipment -- 0.5%
SBC Communications 6,600 270
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 270
- --------------------------------------------------------------------------------
Electric Services -- 2.9%
American Electric Power 6,200 267
CMS Energy 5,000 211
Duke Power 5,000 286
FPL Group 4,200 255
LG&E 10,000 244
New Century Energies 6,200 258
- --------------------------------------------------------------------------------
TOTAL ELECTRIC SERVICES 1,521
- --------------------------------------------------------------------------------
Electrical Utilities -- 0.4%
Allegheny Energy 8,300 226
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL UTILITIES 226
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $1,507) 2,017
- --------------------------------------------------------------------------------
12
<PAGE>
[LOGO OMITTED]
JULY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 1.0%
Public Service of Colorado 20,000 $ 510
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK (COST $500) 510
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.2%
Morgan Stanley
5.25%, dated 07/31/98, matures
08/03/98, repurchase price
$1,175,461 (collateralized
by U.S. Treasury Note:
total market value $1,201,456) $1,172 1,172
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $1,172) 1,172
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.2% (COST $49,987) 52,320
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET -- 0.8%
Other Assets and Liabilities, Net 434
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES 434
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
5,010,467 outstanding shares
of beneficial interest 48,197
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
203,377 outstanding shares
of beneficial interest 2,012
Distributions in excess of net investment income (1)
Accumulated net realized gain on investments 213
Net unrealized appreciation on investments 2,333
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $52,754
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION VALUE
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.12
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS B $10.13
- --------------------------------------------------------------------------------
(A) Pre-refunded Security. The pre-refunded date is shown as the maturity date
on the Statement of Net Assets.
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 Insurance Association
MTN Medium Term Note
RB Revenue Bond
STRIPS Separate Trading of Registered Interest and Principal of Securities
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
[PIE CHART OMITTED]
REPURCHASE AGREEMENT 5.2%
COMMON STOCKS 94.8%
% of Total Portfolio Investments
Pie chart unaudited
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.7%
Aerospace & Defense -- 1.2%
Orbital Sciences* 10,000 $ 272
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE 272
- --------------------------------------------------------------------------------
Apparel/Textiles -- 1.5%
Cutter & Buck* 12,000 333
- --------------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES 333
- --------------------------------------------------------------------------------
Automotive Services -- 2.3%
Central Parking 10,200 512
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE SERVICES 512
- --------------------------------------------------------------------------------
Banks -- 2.2%
North Fork Bancorporation 19,500 475
- --------------------------------------------------------------------------------
TOTAL BANKS 475
- --------------------------------------------------------------------------------
Broadcasting, Newspapers & Advertising -- 3.8%
Cox Radio, Class A* 10,000 436
Sinclair Broadcast Group* 16,000 419
- --------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING 855
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
Computer Software -- 15.8%
CBT Group ADR* 9,300 $ 539
Citrix Systems* 8,600 548
J.D. Edwards* 6,600 247
Keane* 9,500 512
Legato Systems* 14,800 644
Lernout & Hauspie Speech* 10,000 516
Siebel Systems* 17,400 472
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 3,478
- --------------------------------------------------------------------------------
Computers & Services -- 4.7%
Cambridge Technology Partners* 6,100 258
Mindspring Enterprises* 6,300 257
Whittman-Hart* 11,800 544
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES 1,059
- --------------------------------------------------------------------------------
Drugs -- 1.9%
Schein Pharmaceuticals* 13,500 412
- --------------------------------------------------------------------------------
TOTAL DRUGS 412
- --------------------------------------------------------------------------------
Entertainment -- 2.1%
Family Golf Centers* 18,750 464
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT 464
- --------------------------------------------------------------------------------
Financial Services -- 10.5%
Federal Agricultural Mortgage* 7,500 441
Franchise Mortgage Acceptance* 22,000 547
Medallion Financial 18,750 459
Profit Recovery Group
International* 21,500 586
SEI Investments 3,800 285
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 2,318
- --------------------------------------------------------------------------------
Food, Beverage & Tobacco -- 2.7%
Hain Food Group* 12,000 241
Suiza Foods* 6,900 354
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO 595
- --------------------------------------------------------------------------------
Insurance -- 5.6%
CMAC Investment 5,000 276
Enhance Financial Services
Group 14,000 439
Fidelity National Financial 13,700 516
- --------------------------------------------------------------------------------
TOTAL INSURANCE 1,231
- --------------------------------------------------------------------------------
14
<PAGE>
[LOGO OMITTED]
JULY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Medical Products & Services -- 6.7%
Arterial Vascular* 10,200 $ 403
Boron Lepore & Associates* 13,600 507
Medquist* 24,400 564
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 1,474
- --------------------------------------------------------------------------------
Miscellaneous Business Services -- 18.2%
Abacus Direct* 9,400 404
AHL Services* 17,300 545
CSG Systems International* 10,700 457
Cultural Access Worldwide* 37,500 323
Labor Ready* 22,500 720
MSC Industrial Direct* 18,800 562
Snyder Communications,
Class A* 10,400 467
Staffmark* 13,000 348
Tava Technologies Inc* 30,000 196
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES 4,022
- --------------------------------------------------------------------------------
Nutritional Supplements -- 2.2%
Twinlab* 12,000 498
- --------------------------------------------------------------------------------
TOTAL NUTRITIONAL SUPPLEMENTS 498
- --------------------------------------------------------------------------------
Oil Field Services -- 2.0%
Core Laboratories* 21,500 450
- --------------------------------------------------------------------------------
TOTAL OIL FIELD SERVICES 450
- --------------------------------------------------------------------------------
Printing & Publishing -- 1.8%
Applied Graphics Technologies* 7,700 398
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING 398
- --------------------------------------------------------------------------------
Restaurants -- 2.9%
CKE Restaurants 11,400 426
Fresh Foods* 16,300 224
- --------------------------------------------------------------------------------
TOTAL RESTAURANTS 650
- --------------------------------------------------------------------------------
Retail -- 8.2%
Abercrombie & Fitch, Class A* 12,700 590
Amazon.com* 2,500 277
Pacific Sunwear of California* 18,225 538
Whole Foods Market* 7,500 407
- --------------------------------------------------------------------------------
TOTAL RETAIL 1,812
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
Semi-Conductors/Instruments -- 2.4%
PMC-Sierra* 6,000 $ 245
Sanmina* 6,200 283
- --------------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS/INSTRUMENTS 528
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $17,962) 21,836
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 5.4%
Morgan Stanley
5.25%, dated 07/31/98,
matures 08/03/98, repurchase
price $1,201,171 (collateralized
by U.S. Treasury Note: total market
value $1,230,662) $1,201 1,201
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $1,201) 1,201
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 104.1% (COST $19,163) 23,037
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET -- (4.1%)
Other Assets and Liabilities, Net (914)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (914)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
1,717,918 outstanding shares
of beneficial interest 8,893
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
227,884 outstanding shares
of beneficial interest 2,379
Distributions in excess of net
investment income (116)
Accumulated net realized gain on investments 7,093
Net unrealized appreciation on investments 3,874
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $22,123
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS A $11.39
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS B $11.23
- --------------------------------------------------------------------------------
* Non-income producing securities
ADR American Depository Receipt
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- --------------------------------------------------------------------------------
[PIE CHART OMITTED]
REPURCHASE AGREEMENT 0.2%
COMMON STOCKS 99.8%
% of Total Portfolio Investments
Pie chart unaudited
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.2%
Air Transportation -- 1.7%
AMR* 30,600 $2,186
- --------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION 2,186
- --------------------------------------------------------------------------------
Banks -- 2.8%
Mellon Bank 17,000 1,145
NationsBank 31,600 2,520
- --------------------------------------------------------------------------------
TOTAL BANKS 3,665
- --------------------------------------------------------------------------------
Broadcasting, Newspapers and Advertising -- 4.3%
CBS 40,000 1,357
Mediaone Group* 38,000 1,836
New York Times, Class A 36,800 1,132
Tribune 20,000 1,345
- --------------------------------------------------------------------------------
TOTAL BROADCASTING,
NEWSPAPERS AND ADVERTISING 5,670
- --------------------------------------------------------------------------------
Chemicals -- 0.8%
E.I. Du Pont de Nemours 17,600 1,091
- --------------------------------------------------------------------------------
TOTAL CHEMICALS 1,091
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
Communications Equipment -- 6.6%
Ascend Communications* 28,800 $ 1,281
General Instrument* 57,300 1,554
Lucent Technologies 49,000 4,529
Tellabs* 17,450 1,314
- --------------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 8,678
- --------------------------------------------------------------------------------
Computer Networking Products -- 5.6%
America Online* 37,000 4,329
Cisco Systems* 32,200 3,083
- --------------------------------------------------------------------------------
TOTAL COMPUTER NETWORKING PRODUCTS 7,412
- --------------------------------------------------------------------------------
Computer Software -- 3.0%
Microsoft* 14,600 1,605
Peoplesoft* 30,000 1,131
Sterling Commerce* 30,500 1,207
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 3,943
- --------------------------------------------------------------------------------
Computers & Services -- 3.2%
Compaq Computer 40,000 1,315
Computer Sciences* 25,000 1,600
HBO & Company 43,200 1,273
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES 4,188
- --------------------------------------------------------------------------------
Drugs -- 8.6%
American Home Products 37,700 1,942
Merck 22,400 2,762
Pfizer 39,700 4,367
Warner Lambert 30,000 2,267
- --------------------------------------------------------------------------------
TOTAL DRUGS 11,338
- --------------------------------------------------------------------------------
Electrical Utilities -- 2.0%
AES* 57,000 2,611
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL UTILITIES 2,611
- --------------------------------------------------------------------------------
Entertainment -- 1.2%
Walt Disney 45,000 1,550
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT 1,550
- --------------------------------------------------------------------------------
Financial Services -- 6.5%
American Express 30,100 3,322
Fannie Mae 20,500 1,271
Freddie Mac 27,000 1,276
Merrill Lynch 27,200 2,652
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 8,521
- --------------------------------------------------------------------------------
16
<PAGE>
[LOGO OMITTED]
JULY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Household Products -- 5.3%
Clorox 34,800 $ 3,567
Colgate-Palmolive 37,000 3,420
- --------------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS 6,987
- --------------------------------------------------------------------------------
Industrial -- 6.4%
General Electric 50,000 4,466
Tyco International 65,400 4,051
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL 8,517
- --------------------------------------------------------------------------------
Insurance -- 9.8%
AIG 11,775 1,776
Hartford Life, Class A 23,000 1,331
Marsh & McLennan 51,000 3,114
Sunamerica 48,600 2,986
Travelers 56,250 3,769
- --------------------------------------------------------------------------------
TOTAL INSURANCE 12,976
- --------------------------------------------------------------------------------
Leisure Products -- 0.9%
Hasbro 35,000 1,267
- --------------------------------------------------------------------------------
TOTAL LEISURE PRODUCTS 1,267
- --------------------------------------------------------------------------------
Leisure Services -- 2.1%
Carnival 38,000 1,404
Royal Caribbean Cruises 19,000 1,412
- --------------------------------------------------------------------------------
TOTAL LEISURE SERVICES 2,816
- --------------------------------------------------------------------------------
Medical Products & Services -- 6.7%
Guidant 32,000 2,378
McKesson 55,000 4,434
Medtronic 32,400 2,007
- --------------------------------------------------------------------------------
TOTAL MEDICAL PRODUCTS & SERVICES 8,819
- --------------------------------------------------------------------------------
Office Equipment & Supplies -- 0.9%
Xerox 11,400 1,203
- --------------------------------------------------------------------------------
TOTAL OFFICE EQUIPMENT & SUPPLIES 1,203
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
Retail -- 18.2%
CVS 110,000 $ 4,510
Dayton-Hudson 27,000 1,291
Dollar General 88,750 3,639
Family Dollar Stores 89,600 1,624
Lowe's Companies 39,200 1,509
Rite Aid 41,400 1,635
Staples* 53,000 1,742
TJX 180,000 4,230
Walgreen 88,000 3,800
- --------------------------------------------------------------------------------
TOTAL RETAIL 23,980
- --------------------------------------------------------------------------------
Telephones & Telecommunication -- 1.6%
Bell Atlantic 46,000 2,087
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATION 2,087
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $81,981) 129,505
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.2%
Morgan Stanley
5.25%, dated 07/31/98,
matures 08/03/98, repurchase
price $291,795 (collateralized
by U.S. Treasury Note:
total market value $298,958) $292 292
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $292) 292
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.4% (COST $82,273) 129,797
- --------------------------------------------------------------------------------
17
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
[PIE CHART OMITTED]
CONVERTIBLE BOND 1.4%
COMMON STOCKS 91.2%
REPURCHASE AGREEMENT 1.5%
PREFERRED STOCKS 5.9%
% of Total Portfolio Investments
Pie chart unaudited
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 92.4%
Aerospace & Defense -- 2.2%
Lockheed Martin 12,000 $1,196
- --------------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE 1,196
- --------------------------------------------------------------------------------
Automotive -- 3.6%
Chrysler 33,000 1,953
- --------------------------------------------------------------------------------
TOTAL AUTOMOTIVE 1,953
- --------------------------------------------------------------------------------
Banks -- 7.8%
Central Virginia Bancshares 3,000 102
Compass Bancshares 20,000 830
Crestar Financial 21,500 1,466
F&M National 10,000 284
Fleet Financial Group 10,000 859
J.P. Morgan 5,000 630
- --------------------------------------------------------------------------------
TOTAL BANKS 4,171
- --------------------------------------------------------------------------------
Chemicals -- 1.6%
E.I. Du Pont de Nemours 14,000 868
- --------------------------------------------------------------------------------
TOTAL CHEMICALS 868
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
Computers & Services -- 2.5%
International Business
Machines 10,000 $1,325
- --------------------------------------------------------------------------------
TOTAL COMPUTERS & SERVICES 1,325
- --------------------------------------------------------------------------------
Cosmetics, Soaps & Toiletries -- 1.5%
Procter & Gamble 10,000 794
- --------------------------------------------------------------------------------
TOTAL COSMETICS, SOAPS & TOILETRIES 794
- --------------------------------------------------------------------------------
Drugs -- 5.3%
Bristol-Myers Squibb 12,000 1,367
Merck 12,000 1,480
- --------------------------------------------------------------------------------
TOTAL DRUGS 2,847
- --------------------------------------------------------------------------------
Electrical Utilities -- 5.9%
Allegheny Energy 40,000 1,090
Montana Power 30,000 1,052
Southern 40,000 1,020
- --------------------------------------------------------------------------------
TOTAL ELECTRICAL UTILITIES 3,162
- --------------------------------------------------------------------------------
Electronic & Other Electrical Equipment -- 3.4%
General Electric 20,200 1,804
- --------------------------------------------------------------------------------
TOTAL ELECTRONIC & OTHER
ELECTRICAL EQUIPMENT 1,804
- --------------------------------------------------------------------------------
Financial Services -- 8.5%
A.G. Edwards & Sons 20,000 781
American Express 10,000 1,104
Donaldson, Lufkin, & Jenrette 24,000 1,266
Everen Capital 10,200 284
Fannie Mae 10,000 620
Washington Federal 20,000 520
- --------------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 4,575
- --------------------------------------------------------------------------------
Food, Beverage & Tobacco -- 5.5%
General Mills 7,200 446
H.J. Heinz 20,600 1,136
Lance 30,000 567
Quaker Oats 15,000 793
- --------------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO 2,942
- --------------------------------------------------------------------------------
Forestry -- 2.1%
Rayonier 26,500 1,118
- --------------------------------------------------------------------------------
TOTAL FORESTRY 1,118
- --------------------------------------------------------------------------------
Gas/Natural Gas -- 3.0%
Williams Company 50,000 1,603
- --------------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS 1,603
- --------------------------------------------------------------------------------
18
<PAGE>
[LOGO OMITTED]
JULY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO (CONCLUDED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALUE
DESCRIPTION SHARES (000)
- --------------------------------------------------------------------------------
Insurance -- 4.7%
Jefferson Pilot 28,500 $1,607
Marsh & McLennan 15,000 916
- --------------------------------------------------------------------------------
TOTAL INSURANCE 2,523
- --------------------------------------------------------------------------------
Machinery -- 6.8%
Camco International 20,000 1,420
Dresser Industries 25,000 883
Lincoln Electric Holdings 60,000 1,335
- --------------------------------------------------------------------------------
TOTAL MACHINERY 3,638
- --------------------------------------------------------------------------------
Petroleum Refining -- 7.6%
Exxon 20,000 1,402
Lyondell Petrochemical 30,000 735
Mobil 15,000 1,046
Texaco 15,000 912
- --------------------------------------------------------------------------------
TOTAL PETROLEUM REFINING 4,095
- --------------------------------------------------------------------------------
Printing & Publishing -- 5.9%
Knight-Ridder 25,800 1,361
McGraw-Hill 22,000 1,803
- --------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING 3,164
- --------------------------------------------------------------------------------
Real Estate Investment Trusts -- 5.9%
Boykin Lodging 50,000 847
Centerpoint Properties Trust 13,000 432
Duke Realty Investments 24,000 514
National Golf Properties 13,000 362
Sovran Self Storage 40,000 1,017
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS 3,172
- --------------------------------------------------------------------------------
Telephones & Telecommunication -- 5.5%
Alltel 10,000 419
Bell Atlantic 28,000 1,270
CFW Communication 30,000 645
GTE 12,000 653
- --------------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATION 2,987
- --------------------------------------------------------------------------------
Water Utilities -- 3.1%
American States Water 40,000 990
Aquarion 20,000 698
- --------------------------------------------------------------------------------
TOTAL WATER UTILITIES 1,688
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $40,431) 49,625
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE VALUE
DESCRIPTION AMOUNT (000) (000)
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 6.0%
MCI 20,000 $ 515
Merrill Lynch 20,000 500
Microsoft 10,000 953
TCI Communications 10,000 850
Tennessee Valley Authority 15,000 392
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $3,066) 3,210
- --------------------------------------------------------------------------------
CONVERTIBLE BOND -- 1.4%
Oryx Energy
7.500%, 05/15/14 $ 800 786
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BOND (COST $791) 786
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.5%
Morgan Stanley
5.25%, dated 07/31/98, matures
08/03/98, repurchase price $812,133
(collateralized by U.S. Treasury Note:
total market value $832,072) 812 812
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $812) 812
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.3% (COST $45,100) 54,433
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET -- (1.3%)
Other Assets and Liabilities, Net (714)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (714)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value) based on
3,619,382 outstanding shares
of beneficial interest 36,394
Portfolio Shares of Class B (unlimited
authorization -- no par value) based
on 395,548 outstanding shares of
beneficial interest 4,732
Accumulated net realized gain on investments 3,260
Net unrealized appreciation on investments 9,333
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $53,719
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS A $13.38
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- CLASS B $13.38
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
[LOGO OMITTED]
JULY 31, 1998 (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
AS OF JULY 31, 1998
(IN THOUSANDS)
- --------------------------------------------------------------------------------
CAPITAL
APPRECIATION
PORTFOLIO
- --------------------------------------------------------------------------------
ASSETS:
Investments at market value (cost $82,273) .................. $129,797
Cash ........................................................ (3)
Receivable for portfolio shares sold ........................ 45
Receivable for accrued income ............................... 99
Receivable for securities sold .............................. 7,573
- --------------------------------------------------------------------------------
TOTAL ASSETS .............................................. 137,511
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for accrued expenses ................................ 141
Payable for investment securities purchased ................. 5,325
Payable for portfolio shares redeemed ....................... 139
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................... 5,605
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A (unlimited authorization --
no par value) based on 7,358,658 outstanding
shares of beneficial interest ............................. 65,637
Portfolio shares of Class B (unlimited authorization --
no par value) based on 505,025 outstanding
shares of beneficial interest ............................. 6,868
Accumulated net investment income ........................... 9
Accumulated net realized gain on investments ................ 11,868
Net unrealized appreciation on investments .................. 47,524
- --------------------------------------------------------------------------------
TOTAL NET ASSETS .......................................... $131,906
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share -- Class A ................................ $16.79
================================================================================
Net Asset Value, Offering Price and Redemption
Price Per Share -- Class B ................................ $16.59
================================================================================
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
[LOGO OMITTED]
JULY 31, 1998
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS WEST VIRGINIA TAX-EXEMPT GOVERNMENT SECURITIES
PORTFOLIO INCOME PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
2/1/98 TO 7/31/98 2/1/98 TO 7/31/98 2/1/98 TO 7/31/98
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income .............................. $1,684 $2,672 $1,611
Dividend income .............................. -- -- 47
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME .................... 1,684 2,672 1,658
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administrator fees ........................... 59 96 52
Investment advisory fees ..................... 74 216 195
Less: investment advisory fees waived ........ (53) (35) (34)
Sub-advisory fees ............................ 22 -- --
Custodian fees ............................... 3 9 --
Professionalfees ............................. 16 21 --
Registration & filing fees ................... 5 5 --
Printing expenses ............................ 6 14 1
Trustee fees ................................. -- 5 --
Pricing fees ................................. 3 6 1
Distribution fees (1) ........................ 5 10 2
Transfer agent fees .......................... 11 22 1
Amortization of organization costs ........... -- -- --
Miscellaneous expenses ....................... -- 1 --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ............................... 151 370 218
- ---------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............... 1,533 2,302 1,440
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from securities sold -- 141 (4)
Net change in unrealized appreciation
(depreciation) on investments .............. -- (924) (278)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments ............................. -- (783) (282)
=================================================================================================================================
Increase in net assets resulting
from operations ............................ $1,533 $1,519 $1,158
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH CAPITAL APPRECIATION EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
2/1/98 TO 7/31/98 2/1/98 TO 7/31/98 2/1/98 TO 7/31/98
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income .............................. $ 23 $ 42 $ 56
Dividend income .............................. 24 540 779
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME .................... 47 582 835
- -------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administrator fees ........................... 28 130 55
Investment advisory fees ..................... 131 616 203
Less: investment advisory fees waived ........ (9) (165) --
Sub-advisory fees ............................ -- -- --
Custodian fees ............................... -- 7 --
Professionalfees ............................. -- 31 2
Registration & filing fees ................... 2 8 --
Printing expenses ............................ 1 10 --
Trustee fees ................................. -- 1 --
Pricing fees ................................. 1 -- --
Distribution fees (1) ........................ 4 9 6
Transfer agent fees .......................... 3 22 1
Amortization of organization costs ........... -- -- 1
Miscellaneous expenses ....................... -- 1 --
- -------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ............................... 161 670 268
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............... (114) (88) 567
- -------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from securities sold 6,082 7,117 2,233
Net change in unrealized appreciation
(depreciation) on investments .............. (3,046) 15,771 948
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments ............................. 3,036 22,888 3,181
===================================================================================================================
Increase in net assets resulting
from operations ............................ $2,922 $22,800 $3,748
===================================================================================================================
<FN>
(1) Distribution fees are only incurred on Class B shares.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 & 23
<PAGE>
[LOGO OMITTED]
JULY 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1998 (UNAUDITED) AND THE PERIOD ENDED JANUARY 31, 1998
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------
PRIME OBLIGATIONS
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------
2/1/98 TO 7/31/98 2/1/97 TO 1/31/98
- -------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income ...................................... $ 1,533 $ 4,587
Net realized gain (loss) on investments .................... -- 9
Net change in unrealized appreciation
(depreciation) on investments ............................ -- --
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS ............................... 1,533 4,596
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A .................................................. (1,382) (4,252)
Class B .................................................. (149) (335)
Realized net gains:
Class A .................................................. -- --
Class B .................................................. -- --
- -------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ........................................ (1,531) (4,587)
- -------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued ............................................ 77,050 162,497
Shares issued in lieu of cash distributions .............. 9 13
Shares redeemed .......................................... (80,879) (200,643)
- -------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS ................................. (3,820) (38,133)
- -------------------------------------------------------------------------------------------------------------
Class B:
Shares issued ............................................ 2,945 8,411
Shares issued in lieu of cash distributions .............. 90 224
Shares redeemed .......................................... (4,080) (9,586)
- -------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS ................................. (1,045) (951)
- -------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ................................. (4,865) (39,084)
- -------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................... (4,863) (39,075)
- -------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year .......................................... 58,727 97,802
- -------------------------------------------------------------------------------------------------------------
End of year ................................................ $ 53,864 $ 58,727
=============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued ............................................ 77,050 162,497
Shares issued in lieu of cash distributions .............. 9 13
Shares redeemed .......................................... (80,879) (200,643)
- -------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS ........................... (3,820) (38,133)
- -------------------------------------------------------------------------------------------------------------
Class B:
Shares issued ............................................ 2,945 8,411
Shares issued in lieu of cash distributions .............. 90 224
Shares redeemed .......................................... (4,080) (9,586)
- -------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS ........................... (1,045) (951)
- -------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS ................................... (4,865) (39,084)
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA TAX-EXEMPT GOVERNMENT SECURITIES
INCOME PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
2/1/98 TO 7/31/98 2/1/97 TO 1/31/98 2/1/98 TO 7/31/98 2/1/97 TO 1/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............................... $ 2,302 $ 4,661 $ 1,440 $ 3,085
Net realized gain (loss) on investments ............. 141 1,316 (4) 303
Net change in unrealized appreciation
(depreciation) on investments ..................... (924) 2,500 (278) 1,794
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS ........................ 1,519 8,477 1,158 5,182
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A ........................................... (2,112) (4,334) (1,394) (3,000)
Class B ........................................... (190) (327) (47) (85)
Realized net gains:
Class A ........................................... -- (410) -- (39)
Class B ........................................... -- (36) -- (1)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................. (2,302) (5,107) (1,441) (3,125)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued ..................................... 9,899 2,749 4,762 6,732
Shares issued in lieu of cash distributions ....... -- -- -- 39
Shares redeemed ................................... (5,597) (13,440) (3,894) (17,688)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS .......................... 4,302 (10,691) 868 (10,917)
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued ..................................... 1,483 2,096 705 331
Shares issued in lieu of cash distributions ....... 158 307 38 71
Shares redeemed ................................... (318) (1,191) (193) (767)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS .......................... 1,323 1,212 550 (365)
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS .......................... 5,625 (9,479) 1,418 (11,282)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............. 4,842 (6,109) 1,135 (9,225)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year ................................... 92,701 98,810 51,619 60,844
- ------------------------------------------------------------------------------------------------------------------------------------
End of year ......................................... $97,543 $92,701 $ 52,754 $ 51,619
====================================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued ..................................... 966 273 470 681
Shares issued in lieu of cash distributions ....... -- -- -- 4
Shares redeemed ................................... (547) (1,342) (384) (1,810)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS .................... 419 (1,069) 86 (1,125)
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Shares issued ..................................... 145 207 69 34
Shares issued in lieu of cash distributions ....... 15 30 4 7
Shares redeemed ................................... (31) (118) (19) (79)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS .................... 129 119 54 (38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS ............................ 548 (950) 140 (1,163)
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 & 25
<PAGE>
[LOGO OMITTED]
JULY 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31, 1998 (UNAUDITED) AND THE PERIOD ENDED JANUARY 31, 1998
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------
EMERGING GROWTH
PORTFOLIO
- ---------------------------------------------------------------------------------------------------------
2/1/98 TO 7/31/98 2/1/97 TO 1/31/98
- ---------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income (loss) ............................. $ (114) $ (375)
Net realized gain on investments ......................... 6,082 7,337
Net change in unrealized appreciation (depreciation)
on investments ......................................... (3,046) (8,532)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS ............................. 2,922 (1,570)
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A ................................................ -- --
Class B ................................................ -- --
Net realized gains:
Class A ................................................ -- (4,978)
Class B ................................................ -- (445)
- ---------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS....................................... -- (5,423)
- ---------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued .......................................... 19,549 34,519
Shares issued in lieu of cash distributions ............ -- --
Shares redeemed ........................................ (30,545) (56,079)
- ---------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS................................ (10,996) (21,560)
- ---------------------------------------------------------------------------------------------------------
Class B:
Shares issued .......................................... 141 706
Shares issued in lieu of cash distributions ............ -- 435
Shares redeemed ........................................ (931) (1,284)
- ---------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS................................ (790) (143)
- ---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS................................ (11,786) (21,703)
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................... (8,864) (28,696)
- ---------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year ........................................ 30,987 59,683
- ---------------------------------------------------------------------------------------------------------
End of year .............................................. $22,123 $30,987
=========================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued........................................... 1,643 3,070
Shares issued in lieu of cash distributions ............ -- --
Shares redeemed ........................................ (2,589) (4,938)
- ---------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS.......................... (946) (1,868)
- ---------------------------------------------------------------------------------------------------------
Class B:
Shares issued .......................................... 12 61
Shares issued in lieu of cash distributions ............ -- 45
Shares redeemed ........................................ (80) (117)
- ---------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS.......................... (68) (11)
- ---------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS.................................. (1,014) (1,879)
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------
2/1/98 TO 7/31/98 2/1/97 TO 1/31/98
- -------------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income (loss) ............................. $ (88) $ 91
Net realized gain on investments ......................... 7,117 25,364
Net change in unrealized appreciation (depreciation)
on investments ......................................... 15,771 (7,199)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS ............................. 22,800 18,256
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A ................................................ -- (43)
Class B ................................................ -- --
Net realized gains:
Class A ................................................ -- (25,454)
Class B ................................................ (1) (1,340)
- -------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS....................................... (1) (26,837)
- -------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued .......................................... 3,586 31,733
Shares issued in lieu of cash distributions ............ -- --
Shares redeemed ........................................ (14,655) (29,505)
- -------------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS................................ (11,069) 2,228
- -------------------------------------------------------------------------------------------------------------
Class B:
Shares issued .......................................... 1,989 2,254
Shares issued in lieu of cash distributions ............ 1 1,331
Shares redeemed ........................................ (883) (1,518)
- -------------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS................................ 1,107 2,067
- -------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS................................ (9,962) 4,295
- -------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................... 12,837 (4,286)
- -------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year ........................................ 119,069 123,355
- -------------------------------------------------------------------------------------------------------------
End of year .............................................. $131,906 $119,069
=============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued........................................... 225 2,220
Shares issued in lieu of cash distributions ............ -- --
Shares redeemed ........................................ (916) (1,898)
- -------------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS.......................... (691) 322
- -------------------------------------------------------------------------------------------------------------
Class B:
Shares issued .......................................... 128 147
Shares issued in lieu of cash distributions ............ -- 94
Shares redeemed ........................................ (56) (101)
- -------------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS.......................... 72 140
- -------------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS.................................. (619) 462
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------
EQUITY INCOME
PORTFOLIO
- --------------------------------------------------------------------------------------------------------
2/1/98 TO 7/31/98 2/1/97 TO 1/31/98
- --------------------------------------------------------------------------------------------------------
OPERATIONS:
<S> <C> <C>
Net investment income (loss) ............................. $ 567 $ 1,098
Net realized gain on investments ......................... 2,233 2,589
Net change in unrealized appreciation (depreciation)
on investments ......................................... 948 4,595
- --------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM INVESTMENT OPERATIONS ............................. 3,748 8,282
- --------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net investment income:
Class A ................................................ (519) (1,038)
Class B ................................................ (48) (60)
Net realized gains:
Class A ................................................ -- (1,455)
Class B ................................................ -- (108)
- --------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS....................................... (567) (2,661)
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued .......................................... 3,809 11,078
Shares issued in lieu of cash distributions ............ -- --
Shares redeemed ........................................ (6,450) (9,925)
- --------------------------------------------------------------------------------------------------------
TOTAL CLASS A TRANSACTIONS................................ (2,641) 1,153
- --------------------------------------------------------------------------------------------------------
Class B:
Shares issued .......................................... 1,632 2,340
Shares issued in lieu of cash distributions ............ 44 157
Shares redeemed ........................................ (251) (601)
- --------------------------------------------------------------------------------------------------------
TOTAL CLASS B TRANSACTIONS................................ 1,425 1,896
- --------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS................................ (1,216) 3,049
- --------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................... 1,965 8,670
- --------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year ........................................ 51,754 43,084
- --------------------------------------------------------------------------------------------------------
End of year .............................................. $53,719 $51,754
========================================================================================================
CAPITAL SHARE TRANSACTIONS:
Class A:
Shares issued........................................... 280 917
Shares issued in lieu of cash distributions ............ -- --
Shares redeemed ........................................ (471) (809)
- --------------------------------------------------------------------------------------------------------
TOTAL CLASS A SHARE TRANSACTIONS.......................... (191) 108
- --------------------------------------------------------------------------------------------------------
Class B:
Shares issued .......................................... 119 193
Shares issued in lieu of cash distributions ............ 3 13
Shares redeemed ........................................ (18) (48)
- --------------------------------------------------------------------------------------------------------
TOTAL CLASS B SHARE TRANSACTIONS.......................... 104 158
- --------------------------------------------------------------------------------------------------------
TOTAL SHARE TRANSACTIONS.................................. (87) 266
========================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 & 27
<PAGE>
[LOGO OMITTED]
JULY 31, 1998
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JULY 31, 1998 (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
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
1998** $ 1.00 $ 0.03 $ 0.00 $(0.03) $ 0.00 $ 1.00 5.37%*
1998 1.00 0.05 0.00 (0.05) 0.00 1.00 5.33
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 0.00 1.00 2.95
CLASS B
1998** $ 1.00 $ 0.03 $ 0.00 $(0.03) $ 0.00 $ 1.00 5.10%*
1998 1.00 0.05 0.00 (0.05) 0.00 1.00 5.07
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
1998** $10.32 $ 0.24 $(0.08) $(0.24) $ 0.00 $10.24 1.62%+
1998 9.95 0.50 0.42 (0.50) (0.05) 10.32 9.55
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
1998** $10.32 $ 0.23 $(0.09) $(0.23) $ 0.00 $10.23 1.40%+
1998 9.95 0.48 0.42 (0.48) (0.05) 10.32 9.28
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) 0.00 10.17 1.48
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A
1998** $10.17 $ 0.28 $(0.05) $(0.28) $ 0.00 $10.12 2.29%+
1998 9.76 0.57 0.42 (0.57) (0.01) 10.17 10.44
1997 10.15 0.56 (0.39) (0.56) 0.00 9.76 1.83
1996 9.09 0.55 1.06 (0.55) 0.00 10.15 18.14
1995 10.06 0.51 (0.97) (0.51) 0.00 9.09 (4.48)
1994 (1) 10.00 0.08 0.06 (0.08) 0.00 10.06 1.39
CLASS B
1998** $10.18 $ 0.27 $(0.05) $(0.27) $ 0.00 $10.13 2.16%+
1998 9.77 0.54 0.42 (0.54) (0.01) 10.18 10.16
1997 10.15 0.53 (0.38) (0.53) 0.00 9.77 1.69
1996 9.10 0.53 1.05 (0.53) 0.00 10.15 17.72
1995 10.06 0.49 (0.96) (0.49) 0.00 9.10 (4.62)
1994 (4) 10.01 0.04 0.05 (0.04) 0.00 10.06 0.89
- -----------------------------------------------------------------------------------------------------------------------------------
</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 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
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C> <C>
1998** $48,358 0.49%* 5.20%* 0.66%* 5.03%* N/A
1998 52,177 0.49 5.21 0.65 5.05 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
1998** $ 5,506 0.74%* 4.95%* 0.91%* 4.78%* N/A
1998 6,550 0.74 4.96 0.90 4.80 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
1998** $88,628 0.75%* 4.81%* 0.82%* 4.74%* 6%
1998 85,043 0.75 5.00 0.80 4.96 17
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
1998** $ 8,915 1.00%* 4.56%* 1.07%* 4.49%* 6%
1998 7,658 1.00 4.74 1.05 4.70 17
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
1998** $50,694 0.83%* 5.57%* 0.96%* 5.44%* 3%
1998 50,100 0.83 5.77 1.05 5.55 21
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
1998** $ 2,060 1.08%* 5.32%* 1.21%* 5.19%* 3%
1998 1,519 1.08 5.52 1.30 5.30 21
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>
* Annualized.
** For the six-month period ended July 31, 1998.
+ Total return is not annualized.
(1) Commenced operations on December 1, 1993. All ratios for the period have been annualized.
(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.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 & 29
<PAGE>
[LOGO OMITTED]
JULY 31, 1998
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JULY 31, 1998 (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 (LOSS) ON INVESTMENTS INCOME GAINS PERIOD RETURN
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
1998** $10.48 $ 0.07 $ 0.84 $ 0.00 $ 0.00 $11.39 8.68%+
1998 12.34 0.14 (0.29) 0.00 (1.71) 10.48 (0.30)
1997 11.43 (0.10) 1.16 0.00 (0.15) 12.34 9.30
1996 7.86 (0.10) 3.67 0.00 0.00 11.43 45.42
1995 10.48 (0.06) (2.56) 0.00 0.00 7.86 (25.00)
1994 (1) 10.00 0.00 0.48 0.00 0.00 10.48 (4.80)
CLASS B
1998** $10.35 $ 0.04 $ 0.84 $ 0.00 $ 0.00 $11.23 8.50%+
1998 12.24 0.05 (0.23) 0.00 (1.71) 10.35 (0.56)
1997 11.36 (0.12) 1.15 0.00 (0.15) 12.24 9.09
1996 7.83 (0.12) 3.65 0.00 0.00 11.36 45.08
1995 10.48 (0.06) (2.59) 0.00 0.00 7.83 (25.29)
1994 (2) 9.77 0.00 0.71 0.00 0.00 10.48 7.27
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1998** $14.04 $(0.02) $ 2.77 $ 0.00 $ 0.00 $16.79 19.50%+
1998 15.38 0.03 2.52 (0.01) (3.87) 14.05 17.12
1997 13.31 0.00 2.86 (0.01) (0.78) 15.38 22.06
1996 9.57 0.01 3.93 (0.01) (0.19) 13.31 41.31
1995 10.53 0.03 (0.96) (0.03) 0.00 9.57 (8.84)
1994 (1) 10.00 0.00 0.53 0.00 0.00 10.53 5.30
CLASS B
1998** $13.89 $(0.01) $ 2.71 $ 0.00 $ 0.00 $16.59 19.44%+
1998 15.28 0.02 2.46 0.00 (3.87) 13.89 16.76
1997 13.25 (0.03) 2.84 0.00 (0.78) 15.28 21.81
1996 9.55 (0.01) 3.90 0.00 (0.19) 13.25 40.88
1995 10.52 0.01 (0.97) (0.01) 0.00 9.55 (9.11)
1994 (3) 10.33 0.00 0.19 0.00 0.00 10.52 1.84
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1998** $12.62 $ 0.14 $ 0.76 $(0.14) $ 0.00 $13.38 7.14%+
1998 11.23 0.27 1.78 (0.27) (0.39) 12.62 18.44
1997 (4) 10.00 0.16 1.23 (0.16) 0.00 11.23 13.98
CLASS B
1998** $12.62 $ 0.12 $ 0.77 $(0.13) $ 0.00 $13.38 7.02%+
1998 11.24 0.23 1.79 (0.25) (0.39) 12.62 18.07
1997 (4) 10.00 0.15 1.24 (0.15) 0.00 11.24 13.98
- ------------------------------------------------------------------------------------------------------------------------------------
</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
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C> <C> <C>
1998** $ 19,565 1.15%* (0.80)%* 1.22%* (0.87)%* 51%
1998 27,923 1.15 (0.81) 1.28 (0.94) 133
1997 55,924 1.15 (0.91) 1.33 (1.09) 119
1996 48,090 1.15 (0.92) 1.32 (1.09) 117
1995 34,772 1.15 (0.75) 1.42 (1.02) 126
1994 (1) 36,670 1.15 (0.83) 1.70 (1.38) 7
CLASS B
1998** $ 2,558 1.40%* (1.05)%* 1.47%* (1.12)%* 51%
1998 3,064 1.40 (1.06) 1.53 (1.19) 133
1997 3,759 1.40 (1.15) 1.58 (1.33) 119
1996 2,320 1.40 (1.19) 1.57 (1.36) 117
1995 730 1.40 (0.98) 1.67 (1.25) 126
1994 (2) 330 1.40 (1.08) 2.15 (1.83) 7
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1998** $123,529 1.02%* (0.12)%* 1.28%* (0.38)%* 28%
1998 113,048 1.02 0.09 1.28 (0.17) 118
1997 118,873 1.02 (0.01) 1.28 (0.27) 90
1996 99,612 1.02 0.08 1.27 (0.17) 119
1995 70,502 1.02 0.28 1.33 (0.03) 107
1994 (1) 54,022 1.02 0.12 1.51 (0.37) 7
CLASS B
1998** $ 8,377 1.27%* (0.37)%* 1.53%* (0.63)%* 28%
1998 6,021 1.27 (0.16) 1.53 (0.42) 118
1997 4,482 1.27 (0.27) 1.53 (0.53) 90
1996 2,233 1.27 (0.16) 1.52 (0.41) 119
1995 505 1.27 0.02 1.58 (0.29) 107
1994 (3) 171 1.27 0.19 2.01 (0.55) 7
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
1998** $ 48,427 0.96%* 2.09%* 0.96%* 2.09%* 26%
1998 48,076 1.11 2.26 1.15 2.22 68
1997 (4) 41,580 1.20 3.27 1.25 3.22 107
CLASS B
1998** $ 5,292 1.21%* 1.84%* 1.21%* 1.84%* 26%
1998 3,678 1.36 2.01 1.40 1.97 68
1997 (4) 1,504 1.45 3.02 1.50 2.97 10
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized.
** For the six-month period ended July 31, 1998.
+ Total return is not annualized.
(1) Commenced operations on December 1, 1993. All ratios for the period have been annualized.
(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.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
30 & 31
<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 Investments-Mutual Fund Services (the
"Administrator"), on October 9, 1992. SEI Investments 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 consistently
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. When market quotations are not readily available,
securities are valued at fair value as determined in good faith by procedures
established and approved by the Board of Trustees. 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 are 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
32
<PAGE>
[LOGO OMITTED]
JULY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
company for Federal income tax purposes by complying with the appropriate
provisions of the Internal Revenue Code of 1986, as amended. Accordingly, no
provision for Federal income taxes has been made 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.
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, 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 under generally accepted
accounting prin-
(CONTINUED)
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
ciples. 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.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS--
The preparation of financial statements, in conformity with generally accepted
accounting principals, requires management to make estimates and assumptions
that affect the reported amount of net assets and liabilities and disclosure of
contingent assets at the date of the financial statements and the reported
results of operations during the reporting period. Actual results could differ
from those estimates.
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
34
<PAGE>
[LOGO OMITTED]
JULY 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
of the Money Market Portfolio assets that the Sub-Adviser manages for the Trust,
plus the assets of money market portfolios 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 net assets of each Portfolio. There is a minimum annual fee of
$100,000 payable to the Administrator by each Portfolio. At its discretion, the
Administrator may voluntarily choose not to invoke the $100,000 minimum annual
fee. 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)
35
<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, 1998
were as follows:
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
---------------- -----------------
PURCHASES SALES PURCHASES SALES
PORTFOLIO (000) (000) (000) (000)
- --------- --------- ----- --------- -------
West Virginia
Tax-Exempt Income $ -- $ -- $11,709 $ 5,298
Government
Securities 1,551 1,732 -- 500
Emerging Growth -- -- 13,666 25,093
Capital Appreciation -- -- 35,621 46,983
Equity Income -- -- 13,880 14,694
At July 31, 1998, 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, 1998, 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 $ 5,195 $ (99) $ 5,096
Government
Securities 2,383 (50) 2,333
Emerging
Growth 5,008 (1,134) 3,874
Capital
Appreciation 48,578 (1,054) 47,524
Equity
Income 10,217 (884) 9,333
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.
The West Virginia Tax-Exempt Income Portfolio Invests in debt instruments
of municipal issuers. Although this Portfolio monitors investment concentration,
the issuers' ability to meet their obligations may be affected by economic
developments in a specific state or region.
36
<PAGE>
NOTES
- --------------------------------------------------------------------------------
<PAGE>
NOTES
- --------------------------------------------------------------------------------
<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-008-05
