CREST FUNDS INC, 497, 1996-04-03

CREST FUNDS INC
497, 1996-04-03

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CRESTFUNDS(Register mark), INC.--TRUST CLASS

PROSPECTUS

MARCH 28, 1996

CrestFunds(Register mark), Inc. (the "Company"), a Maryland corporation, is a
registered open-end management investment company that offers investors a
selection of money market, bond and equity funds (the "Funds"). The Funds offer
one or more of three classes of shares: the Trust Class shares, the Investors
Class A Shares ("A Shares") and the Investors Class B Shares ("B Shares"). All
three classes of each Fund share a common investment objective and investment
portfolio. This Prospectus relates to shares of the Trust Class, which are
offered to qualified individual or institutional customers whose assets are
managed and/or administered by Crestar Bank's Trust & Investment Management
Group. Trust Class shares of the money market funds also are offered to
qualified individual or institutional customers who have qualified cash
management (or "sweep") accounts with Crestar Bank or one of its bank
affiliates. A Shares and B Shares are offered by a separate prospectus which is
available by calling 1-800-273-7827.

MONEY MARKET FUNDS

Cash Reserve Fund
U.S. Treasury Money Fund
Tax Free Money Fund

THE MONEY MARKET FUNDS' SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT ANY OF THE MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

BOND FUNDS EQUITY FUNDS
Limited Term Bond Fund Value Fund
Intermediate Bond Fund Capital Appreciation Fund
Government Bond Fund Special Equity Fund
Maryland Municipal Bond Fund
Virginia Intermediate Municipal Bond Fund
Virginia Municipal Bond Fund

THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, INSURED OR
ENDORSED BY, CRESTAR BANK, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTING IN MUTUAL FUNDS
INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THE VALUE OF AN INVESTMENT IN THE FUNDS AND ITS RETURN WILL FLUCTUATE AND ARE
NOT GUARANTEED. WHEN SOLD, THE VALUE OF AN INVESTMENT MAY BE HIGHER OR LOWER
THAN THE AMOUNT ORIGINALLY INVESTED.

Please read this Prospectus before investing. This Prospectus sets forth
concisely the information about the Funds that a prospective investor should
know before investing, and is designed to help investors decide if a Fund's
goals match their own. Retain this document for future reference. A Statement of
Additional Information (March 28, 1996) for the Trust Class of the Funds and an
Annual Report for the fiscal year ended November 30, 1995 have been filed with
the Securities and Exchange Commission ("SEC") and are incorporated herein by
reference. The Statement of Additional Information and the Annual Report are
available without charge upon request by calling 1-800-273-7827.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus and in the related Statement of Additional Information, in
connection with the offer contained in this Prospectus. If given or made, such
other information or representations must not be relied upon as having been
authorized by the Funds or by the Funds' distributor. This Prospectus and the
related Statement of Additional Information do not constitute an offer by any
Fund or the Funds' distributor to sell shares of any Fund to any person to whom
it is unlawful to make such an offer.

<PAGE>

TABLE OF CONTENTS

PAGE

Summary of Fund Expenses............................................. 3
The Funds' Financial History......................................... 5
Investment Objectives and Policies................................... 11
Risk Factors and Investment Considerations........................... 18
Investment Limitations............................................... 20
Fund Management...................................................... 21
Pricing of Shares.................................................... 21
How to Purchase, Exchange and Redeem Shares.......................... 21
Dividends and Tax Matters............................................ 23
Performance.......................................................... 25
Portfolio Transactions............................................... 26
Advisory and Related Agreements...................................... 26
Other Expense Information............................................ 28
Banking Law Matters.................................................. 28
Description of Common Stock.......................................... 28
Appendix............................................................. 30
Summary of Bond Ratings.............................................. 37
Summary of Commercial Paper Ratings.................................. 37

<PAGE>

SUMMARY OF FUND EXPENSES

The expense summary format below was developed for use by all mutual funds to
help investors make their investment decisions. The purpose of the tables is to
assist investors in understanding the various costs and expenses that an
investor in Trust Class shares would bear directly or indirectly. Investors
should consider this expense information for the Funds along with other
important information in this Prospectus, including each Fund's investment
objective, financial highlights and, where available, past performance. As is
more fully described under the heading "How to Purchase, Exchange and Redeem
Shares," Trust Class shares of the Funds are currently available, without
payment of any sales charge, to qualified individual or institutional customers
whose assets are managed and/or administered by Crestar Bank's Trust &
Investment Management Group. Trust Class shares of the money market funds also
are offered to qualified individuals or institutional customers who have
qualified cash management (or "sweep") accounts with Crestar Bank or one of its
bank affiliates. Such relationships may involve the payment of account or
service fees not reflected in the tables below.

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) -- NET OF
WAIVERS AND/OR REIMBURSEMENT:

<TABLE>
<CAPTION>
TOTAL
ADVISORY 12B-1 OTHER OPERATING
FUND FEE+ FEES+ EXPENSES+ EXPENSES+

<S> <C> <C> <C> <C>
Cash Reserve Fund.................................................... .40% 0% .26% .66%
U.S. Treasury Money Fund............................................. .40 0 .26 .66
Tax Free Money Fund.................................................. .40 0 .26 .66
Limited Term Bond Fund............................................... .50 0 .28 .78
Intermediate Bond Fund............................................... .60 0 .28 .88
Government Bond Fund................................................. .50 0 .21 .71
Maryland Municipal Bond Fund......................................... .10 0 .61 .71
Virginia Intermediate Municipal Bond Fund............................ .50 0 .22 .72
Virginia Municipal Bond Fund......................................... .50 0 .21 .71
Value Fund........................................................... .75 0 .27 1.02
Capital Appreciation Fund............................................ .75 0 .35 1.10
Special Equity Fund.................................................. .75 0 .29 1.04
</TABLE>

+ Net of waivers and reimbursement.

EXAMPLE: You would pay the following expenses on a $1,000 investment in a Fund,
assuming (1) 5% annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS

<S> <C> <C> <C> <C>
Cash Reserve Fund........................................................ $ 7 $21 $37 $ 82
U.S. Treasury Money Fund................................................. 7 21 37 82
Tax Free Money Fund...................................................... 7 21 37 82
Limited Term Bond Fund................................................... 8 25 43 97
Intermediate Bond Fund................................................... 9 28 49 108
Government Bond Fund..................................................... 7 23 40 88
Maryland Municipal Bond Fund............................................. 7 23 40 88
Virginia Intermediate Municipal Bond Fund................................ 7 23 40 89
Virginia Municipal Bond Fund............................................. 7 23 40 88
Value Fund............................................................... 10 32 56 125
Capital Appreciation Fund................................................ 11 35 61 134
Special Equity Fund...................................................... 11 33 57 127
</TABLE>

<PAGE>

EXPLANATION OF TABLE:

ANNUAL FUND OPERATING EXPENSES. Advisory fees are paid by the Funds to
Capitoline Investment Services Incorporated ("Capitoline" or the "Adviser") for
managing the Funds' investments and business affairs (see "Adviser"). Other
Expenses for the Government Bond Fund, the Maryland Municipal Bond Fund and the
Virginia Municipal Bond Fund are based on estimates for the current fiscal year.
The Funds pay administration fees at an annualized rate of .15% to SEI Financial
Management Corporation ("SFM") for administrative services.

Absent fee waivers, advisory fees for the Government Bond Fund, Maryland
Municipal Bond Fund and Virginia Municipal Bond Fund would be .60% for each
Fund. Absent fee waivers, 12b-1 fees would be .15% for each Fund. Absent the
waiver of administration fees, Other Expenses would be .36% and .36% for the
Government Bond Fund and Virginia Municipal Bond Fund, respectively. Absent all
fee waivers, Total Operating Expenses would be .81% for the Cash Reserve Fund,
U.S. Treasury Money Fund and Tax Free Money Fund and .93%, 1.03%, 1.11%, .87%,
1.11%, 1.36%, 1.17%, 1.25%, and 1.19% for the Limited Term Bond Fund,
Intermediate Bond Fund, Government Bond Fund, Virginia Intermediate Municipal
Bond Fund, Virginia Municipal Bond Fund, Maryland Municipal Bond Fund, Value
Fund, Capital Appreciation Fund and Special Equity Fund, respectively. Please
refer to the sections "Administrator and Distributor," "Transfer Agent and
Custodian" and "Other Expense Information." The information contained in the
table and example above relates only to Trust Class shares; expenses for Trust
Class shares differ from those of A Shares and B Shares. See "Description of
Common Stock." Advisory fees and Other Expenses are reflected in each Fund's
share price and are not charged directly to individual shareholder accounts.

EXAMPLE. The hypothetical example illustrates the expenses associated with a
$1,000 investment in Trust Class shares over periods of 1, 3, 5 and 10 years
based on the expenses in the Table above and an assumed annual return of 5%. THE
RETURN OF 5% AND EXPENSES SHOULD NOT BE CONSIDERED INDICATIONS OF ACTUAL OR
EXPECTED PERFORMANCE OR EXPENSES, BOTH OF WHICH MAY VARY.

<PAGE>

THE FUNDS' FINANCIAL HISTORY

FINANCIAL HIGHLIGHTS. The table that follows is included in the Annual Report
for the Company and has been audited by Deloitte & Touche LLP, independent
auditors. Their report on the financial statements and financial highlights is
included in the Annual Report. Additional performance information is set forth
in the Company's Annual Report, which may be obtained without charge by calling
1-800-273-7827. A Shares became available for purchase in May 1993 and B Shares
became available for purchase in April 1995. Returns prior to those dates do not
reflect the effects of the separate transfer agency arrangements or additional
12b-1 expenses, and therefore may not be representative of A Shares' or B
Shares' expected results. Expenses for A Shares and B Shares vary from those of
Trust Class shares. The financial statements and financial highlights for A
Shares, B Shares and Trust Class shares for the Funds are incorporated by
reference from the Company's Annual Report into the Statement of Additional
Information. The Maryland Municipal Bond Fund had not commenced operations as of
November 30, 1995.

CASH RESERVE FUND

<TABLE>
<CAPTION>
TRUST CLASS
YEAR ENDED NOVEMBER 30
1995 1994 1993 1992 1991 1990 1989 1988 1987**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income....... 0.053 0.034 0.027 0.036 0.060 0.079 0.088 0.071 0.062
Distributions:
Net investment income....... (0.053) (0.034) (0.027) (0.036) (0.060) (0.079) (0.088) (0.071) (0.062)
Net asset value, end of
year...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++.............. 5.45% 3.46% 2.76% 3.66% 6.17%+ 8.15%+ 9.22% 7.40% 6.62%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year
(thousands)............... $520,185 $377,493 $408,036 $496,847 $396,534 $297,683 $395,324 $363,196 $361,521
Ratio of expenses to average
daily net assets (1)...... 0.66% 0.66% 0.66% 0.61% 0.51% 0.49% 0.49% 0.49% 0.49%*
Ratio of net investment
income to average daily
net assets................ 5.31% 3.37% 2.75% 3.50% 6.00% 7.88% 8.82% 7.10% 6.43%*
(1) During the periods,
certain expenses were
voluntarily reimbursed.
The ratios of expenses
to average daily net
assets had such
reimbursements not
occurred are as
follows:............... 0.81% 0.66% 0.66% 0.61% 0.58% 0.59% 0.61% 0.61% 0.65%*
</TABLE>

* Annualized.
** Commencement of operations -- December 8, 1986.
+ Total return would have been lower had the Adviser and/or Administrator not
waived or reimbursed certain expenses during the period.
++ Total return for periods of less than one year are not annualized.

<PAGE>

U.S. TREASURY MONEY FUND

<TABLE>
<CAPTION>
TRUST CLASS
YEAR ENDED NOVEMBER 30
1995 1994 1993 1992 1991 1990 1989 1988 1987**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of
year........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income......... 0.052 0.033 0.025 0.034 0.058 0.076 0.085 0.068 0.045
Distributions:
Net investment income......... (0.052) (0.033) (0.025) (0.034) (0.058) (0.076) (0.085) (0.068) (0.045)
Net asset value, end of
year........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN.................. 5.29% 3.30% 2.51% 3.55%+ 6.00%+ 7.92%+ 8.84% 7.03% 4.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year
(thousands)................. $370,454 $319,477 $342,537 $482,881 $279,790 $204,792 $145,571 $54,996 $29,429
Ratio of expenses to average
daily net assets (1)........ 0.66% 0.66% 0.66% 0.64% 0.56% 0.49% 0.49% 0.49% 0.50%*
Ratio of net investment income
to average daily net assets.. 5.16% 3.23% 2.52% 3.37% 5.61% 7.65% 8.52% 6.84% 5.82%*
(1) During the periods
certain expenses were
voluntarily reimbursed.
The ratios of expenses to
average daily net assets
had such reimbursements
not occurred are as
follows:................. 0.81% 0.66%* 0.66% 0.65% 0.62% 0.64% 0.67% 0.73% 1.02%*
</TABLE>

* Annualized.
** Commencement of operations -- February 18, 1987.
+ Total return would have been lower had the Adviser and/or Administrator not
waived or reimbursed certain expenses during the period.

TAX FREE MONEY FUND

<TABLE>
<CAPTION>
TRUST CLASS
YEAR ENDED NOVEMBER 30
1995 1994 1993 1992 1991 1990 1989**
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of year............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................ 0.032 0.021 0.019 0.031 0.046 0.057 0.027
Distributions:
Net investment income............................ (0.032) (0.021) (0.019) (0.031) (0.046) (0.057) (0.027)
Net asset value, end of year..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN..................................... 3.26% 2.07% 1.88% 3.03%+ 4.72%+ 5.86%+ 2.80%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (thousands).............. $202,333 $157,602 $142,284 $155,458 $166,670 $ 43,300 $ 34,667
Ratio of expenses to average daily net assets
(1)............................................ 0.66% 0.67% 0.66% 0.47% 0.27% 0.20% 0.20%*
Ratio of net investment income to average daily
net assets..................................... 3.19% 2.06% 1.85% 3.00% 4.39% 5.70% 5.86%*
(1) During the periods, certain expenses were
voluntarily reimbursed. The ratios of
expenses to average daily net assets had
such waivers and reimbursements not occurred
are as follows:............................. 0.81% 0.67% 0.66% 0.62% 0.70% 0.78% 0.75%*
</TABLE>

* Annualized.
** Commencement of operations -- June 15, 1989.
+ Total return would have been lower had the Advisor and/or Administrator not
waived or reimbursed certain expenses during the period.

<PAGE>

LIMITED TERM BOND FUND

<TABLE>
<CAPTION>
TRUST CLASS
PERIOD FROM
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 28, 1992**
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1995 1994 1993 1992
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period..................... $ 9.49 $ 10.16 $ 9.81 $ 10.00
Income from investment operations:
Net investment income.................................... 0.532 0.480 0.500 0.070
Net realized and unrealized gain/(loss) on investments... 0.534 (0.640) 0.350 (0.190)
Total from investment operations......................... 1.066 (0.160) 0.850 (0.120)
Distributions:
Net investment income.................................... (0.526) (0.480) (0.500) (0.070)
Net realized gain........................................ -- (0.030) -- --
Total distributions...................................... (0.526) (0.510) (0.500) (0.070)
Net asset value, end of period........................... $ 10.03 $ 9.49 $ 10.16 $ 9.81
TOTAL RETURN++........................................... 11.50% (1.56)% 8.84% (1.22)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands).................... $ 88,789 $ 83,369 $ 85,968 $72,590
Ratio of expenses to average daily net assets............ 0.78% 0.76% 0.77% 1.04%*
Ratio of net investment income to average daily net
assets................................................. 5.44% 4.92% 4.95% 4.46%*
Portfolio turnover rate.................................. 36% 47% 61% 2%
</TABLE>

* Annualized.
** Commencement of operations.
++ Total return for periods of less than one year are not annualized.

INTERMEDIATE BOND FUND

<TABLE>
<CAPTION>
TRUST CLASS
PERIOD FROM
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 28, 1992**
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1995 1994 1993 1992
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period..................... $ 9.16 $ 10.20 $ 9.70 $ 10.00
Income from investment operations:
Net investment income.................................... 0.569 0.530 0.520 0.080
Net realized and unrealized gain/(loss) on investments... 0.954 (1.000) 0.500 (0.300)
Total from investment operations......................... 1.523 (0.470) 1.020 (0.220)
Distributions:
Net investment income.................................... (0.563) (0.530) (0.520) (0.080)
Net realized gain........................................ -- (0.040) -- --
Total distributions...................................... (0.563) (0.570) (0.520) (0.080)
Net asset value, end of period........................... $ 10.12 $ 9.16 $ 10.20 $ 9.70
TOTAL RETURN++........................................... 17.07% (4.72)% 10.69% (2.20)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands).................... $ 81,870 $ 77,143 $ 58,487 $13,759
Ratio of expenses to average daily net assets............ 0.88% 0.88% 0.90% 1.15%*
Ratio of net investment income to average daily net
assets................................................. 5.89% 5.53% 5.15% 4.63%*
Portfolio turnover rate.................................. 37% 39% 28% 0%
</TABLE>

* Annualized.
** Commencement of operations.
++ Total return for periods of less than one year are not annualized.

<PAGE>

GOVERNMENT BOND FUND

<TABLE>
<CAPTION>
TRUST CLASS
PERIOD FROM
APRIL 5, 1995**
TO NOVEMBER 30,
1995
<S> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period.................................................................... $ 10.00
Income from investment operations:
Net investment income................................................................................... 0.412
Net realized and unrealized gain (loss) on investments.................................................. 0.753
Total from investment operations........................................................................ 1.165
Distributions:
Net investment income................................................................................... (0.412)
Net realized gain....................................................................................... (0.093)
Total distributions..................................................................................... (0.505)
Net asset value, end of period.......................................................................... $ 10.66
TOTAL RETURN++.......................................................................................... 11.85%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands)................................................................... $10,211
Ratio of expenses to average daily net assets (1)....................................................... 0.71%*
Ratio of net investment income to average daily net assets.............................................. 6.00%*
Portfolio turnover rate................................................................................. 28%

(1) During the period, certain fees and expenses were voluntarily waived and reimbursed. The ratio of
expenses to average daily net assets had such waivers and reimbursements not occurred is as
follows:............................................................................................ 1.11%*
</TABLE>

* Annualized.
** Commencement of operations.
++ Total returns for periods of less than one year are not annualized.

VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND

<TABLE>
<CAPTION>
TRUST CLASS
PERIOD FROM
YEAR ENDED YEAR ENDED JANUARY 11, 1993**
NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1995 1994 1993
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period..................................... $ 9.21 $ 10.33 $ 10.00
Income from investment operations:
Net investment income.................................................... 0.428 0.440 0.390
Net realized and unrealized gain/(loss) on investments................... 1.030 (1.100) 0.330
Total from investment operations......................................... 1.458 (0.660) 0.720
Distributions:
Net investment income.................................................... (0.428) (0.440) (0.390)
Net realized gain........................................................ -- (0.020) --
Total distributions...................................................... (0.428) (0.460) (0.390)
Net asset value, end of period........................................... $ 10.24 $ 9.21 $ 10.33
TOTAL RETURN++........................................................... 16.09% (6.53)%+ 7.25%+
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands).................................... $ 43,373 $ 41,365 $39,392
Ratio of expenses to average daily net assets (1)........................ 0.72% 0.65% 0.71%*
Ratio of net investment income to average daily net assets............... 4.34% 4.48% 4.25%*
Portfolio turnover rate.................................................. 28% 24% 39%
(1) During the periods, certain fees and expenses were voluntarily waived
and reimbursed. The ratios of expenses to average daily net assets
had such waivers and reimbursements not occurred are as follows:..... 0.94% 0.77% 0.85%*
</TABLE>

* Annualized.
** Commencement of operations.
+ Total return would have been lower had the Advisor and/or Administrator not
waived and reimbursed certain expenses during the period.
++ Total return for periods of less than one year are not annualized.

<PAGE>

VIRGINIA MUNICIPAL BOND FUND

<TABLE>
<CAPTION>
TRUST CLASS
PERIOD FROM
APRIL 5, 1995**
TO NOVEMBER 30,
1995
<S> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period.................................................................... $ 10.00
Income from investment operations:
Net investment income................................................................................... 0.309
Net realized and unrealized gain/(loss) on investments.................................................. 0.445
Total from investment operations........................................................................ 0.754
Distributions:
Net investment income................................................................................... (0.310)
Net realized gain....................................................................................... (0.044)
Total distributions..................................................................................... (0.354)
Net asset value, end of period.......................................................................... $ 10.40
TOTAL RETURN++.......................................................................................... 7.67%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands)................................................................... $ 6,247
Ratio of expenses to average daily net assets (1)....................................................... 0.71%*
Ratio of net investment income to average daily net assets.............................................. 4.61%*
Portfolio turnover rate................................................................................. 35%
(1) During the period, certain expenses were voluntarily waived and reimbursed. The ratio of expenses to
average daily net assets had such waivers and reimbursements not occurred is as follows............. 1.11%*
</TABLE>

* Annualized.
** Commencement of operations.
++ Total return for periods of less than one year are not annualized.

VALUE FUND

<TABLE>
<CAPTION>
TRUST CLASS
PERIOD FROM
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 28, 1992**
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1995 1994 1993 1992
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period..................... $ 10.73 $ 11.38 $ 10.50 $ 10.00
Income from investment operations:
Net investment income.................................... 0.245 0.200 0.180 0.030
Net realized and unrealized gain/(loss) on investments... 2.619 (0.240) 0.870 0.500
Total from investment operations......................... 2.864 (0.040) 1.050 0.530
Distributions:
Net investment income.................................... (0.262) (0.190) (0.170) (0.030)
Net realized gain........................................ (1.732) (0.420) -- --
Total distributions...................................... (1.994) (0.610) (0.170) (0.030)
Net asset value, end of period........................... $ 11.60 $ 10.73 $ 11.38 $ 10.50
TOTAL RETURN++........................................... 28.76% (0.49)% 10.05% 5.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands).................... $220,386 $166,713 $167,337 $ 82,944
Ratio of expenses to average daily net assets............ 1.02% 1.01% 1.03% 1.28%*
Ratio of net investment income to average daily net
assets................................................. 2.01% 1.82% 1.64% 1.74%*
Portfolio turnover rate.................................. 175% 116% 77% 5%
</TABLE>

* Annualized.
** Commencement of operations.
++ Total return for periods of less than one year are not annualized.

<PAGE>

CAPITAL APPRECIATION FUND

<TABLE>
<CAPTION>
TRUST CLASS
PERIOD FROM
YEAR ENDED YEAR ENDED JANUARY 11, 1993**
NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1995 1994 1993
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period..................................... $ 10.17 $ 9.79 $ 10.00
Income from investment operations:
Net investment income.................................................... 0.043 0.010 0.010
Net realized and unrealized gain/(loss) on investments................... 2.035 0.380 (0.210)
Total from investment operations......................................... 2.078 0.390 (0.200)
Distributions:
Net investment income.................................................... (0.046) (0.010) (0.010)
Net realized gain........................................................ (1.332) -- --
Total distributions...................................................... (1.378) (0.010) (0.010)
Net asset value, end of period........................................... $ 10.87 $ 10.17 $ 9.79
TOTAL RETURN++........................................................... 20.74% 4.13% (2.00)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands).................................... $ 19,592 $ 12,869 $ 7,741
Ratio of expenses to average daily net assets............................ 1.10% 1.05% 1.11%*
Ratio of net investment income to average daily net assets............... 0.40% 0.17% 0.20%*
Portfolio turnover rate.................................................. 470% 271% 133%
</TABLE>

* Annualized.
** Commencement of operations.
++ Total return for periods of less than one year are not annualized.

SPECIAL EQUITY FUND

<TABLE>
<CAPTION>
TRUST CLASS
PERIOD FROM
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 28, 1992**
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1995 1994 1993 1992
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period..................... $ 10.56 $ 12.76 $ 11.19 $ 10.00
Income from investment operations:
Net investment income.................................... 0.100 0.030 0.010 0.010
Net realized and unrealized gain/(loss) on investments... 1.928 (0.460) 1.560 1.180
Total from investment operations......................... 2.028 (0.430) 1.570 1.190
Distributions:
Net investment income.................................... (0.108) (0.020) -- --
Net realized gain........................................ (0.360) (1.750) -- --
Total distributions...................................... (0.468) (1.770) -- --
Net asset value, end of period........................... $ 12.12 $ 10.56 $ 12.76 $ 11.19
TOTAL RETURN++........................................... 20.07% (4.74)% 14.07% 11.90%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands).................... $ 54,221 $ 43,640 $ 32,706 $ 21,925
Ratio of expenses to average daily net assets............ 1.04% 1.03% 1.03% 1.28%*
Ratio of net investment income to average daily net
assets................................................. 0.90% 0.32% 0.06% 0.23%*
Portfolio turnover rate.................................. 81% 117% 95% 3%
</TABLE>

* Annualized.
** Commencement of operations.
++ Total return for periods of less than one year are not annualized.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Each Fund's objective, together with those policies identified as being
fundamental, may not be changed except by approval of the majority of the
outstanding shares of that Fund. All other investment policies of a Fund may be
changed by the Company's Board of Directors without shareholder approval.
Capitoline will manage each Fund consistent with that Fund's investment
objective and policies. There is no assurance that a Fund will achieve its
investment objective. For more information regarding each Fund's investment
policies, please refer to the Statement of Additional Information.

MONEY MARKET FUNDS:

The investment objective of each money market fund is to provide high current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. A further objective of Tax Free Money Fund is to
provide high current income exempt from federal income taxes.

Each money market fund invests in accordance with the requirements of Rule 2a-7
("Rule 2a-7") under the Investment Company Act of 1940, as amended (the "1940
Act"). These requirements provide that money market funds must limit their
investments to securities with remaining maturities of 397 days or less and
maintain a dollar-weighted average maturity of 90 days or less. If the
Securities and Exchange Commission ("SEC") adopts new or amended requirements
under Rule 2a-7, the money market funds will comply with all such additional or
amended requirements.

There may be occasions when, in order to raise cash to meet redemptions or to
maintain the quality standards of the portfolio, the Funds might be required to
sell securities at a loss.

CASH RESERVE FUND

Cash Reserve Fund invests only in high quality, U.S. dollar-denominated money
market instruments of U.S. and foreign issuers, including floating and variable
rate instruments. Investments include:

o obligations of institutions, such as banks and insurance companies.
These obligations include certificates of deposit, bankers' acceptances
and time deposits;

o obligations of the U.S. and certain foreign governments and their
agencies or instrumentalities;

o short-term corporate obligations, including commercial paper, notes and
bonds; and

o other eligible debt obligations, including repurchase agreements.

The Fund's investments in domestic bank obligations (including their foreign
branches) are limited to those banks having total assets in excess of one
billion dollars and subject to regulation by the U.S. Government. The Fund may
also invest in certificates of deposit issued by banks insured by the Federal
Deposit Insurance Corporation ("FDIC") having total assets of less than one
billion dollars, provided that the Fund will at no time own more than an
aggregate of $100,000 in principal and interest obligations (or any higher
principal amount or principal and interest amount, which in the future may be
fully covered by FDIC insurance) of any one such issuer.

The Fund may invest in obligations of U.S. banks, foreign branches of U.S. banks
("Eurodollars"), U.S. branches and agencies of foreign banks ("Yankee dollars"),
and foreign branches of foreign banks. Eurodollar, Yankee dollar, and foreign
bank obligation investments involve risks in addition to those inherent in
investing in domestic bank obligations. These risks may include future
unfavorable political and economic developments, withholding taxes, seizures of
foreign deposits, currency controls, interest limitations, or other governmental
restrictions that might affect payment of principal or interest. Additionally,
there may be less public information available about foreign banks and their
branches. Foreign branches of foreign banks are not regulated by U.S. banking
authorities and generally are not subject to accounting, auditing, or financial
reporting standards comparable to those applicable to U.S. banks. Although
Capitoline carefully considers these factors when making investments, the Fund
does not limit the amount of its assets that can be invested in any one type of
instrument or in any foreign country.

The Fund's investments in obligations of domestic or foreign branches of foreign
banks are limited to U.S. dollar-denominated obligations of foreign banks which,
at the time of investment: (i) have more than $5 billion, or the equivalent in
other currencies, in total assets; and (ii) have branches or agencies in the
United States. Investments in the foregoing foreign bank obligations are further
limited to banks headquartered in and to those branches located in the United
Kingdom, France, Germany, Belgium, the Netherlands, Italy, Switzerland, Denmark,
Norway, Sweden, Australia, Japan and Canada.

Cash Reserve Fund limits its investments in U.S. dollar-denominated foreign
government obligations to those obligations issued or guaranteed by the
governments of the countries listed above. Such obligations may be subject to
the risks described above in connection with the purchase of obligations of
foreign branches of domestic and foreign banks.

<PAGE>

QUALITY. Pursuant to Rule 2a-7 and policies and procedures adopted by the
Company's Board of Directors, Cash Reserve Fund may purchase only high-quality
securities determined by Capitoline to present minimal credit risks. To be
considered high-quality, a security must be a U.S. Government security or rated
in accordance with applicable rules in one of the two highest categories for
short-term securities by at least two nationally recognized statistical rating
organizations ("NRSRO") (or by one, if only one NRSRO has rated the security);
or, if unrated, judged to be of equivalent quality by Capitoline pursuant to
procedures adopted by the Company's Board of Directors. Purchases of unrated
securities and securities rated by only one NRSRO will be ratified by the
Company's Board of Directors. Foreign obligations are considered to be unrated.

High-quality securities are divided into "first tier" and "second tier"
securities. FIRST TIER securities have received the highest rating (e.g.,
Standard & Poor Corporation's ("S&P") A-1 rating) from at least two NRSROs (or
one, if only one has rated the security). SECOND TIER securities have received
ratings within the two highest categories (e.g., S&P A-1 or A-2) from at least
two NRSROs (or one, if only one has rated the security), but do not qualify as
first tier securities. If a security has been assigned different ratings by
different NRSROs, at least two NRSROs must have assigned the higher rating in
order for Capitoline to determine eligibility on the basis of that higher
rating. The Fund does not currently intend to invest in commercial paper rated
below first tier and will not invest more than 10% of its net assets in illiquid
securities. Cash Reserve Fund may not invest more than 5% of its total assets in
second tier securities.

DIVERSIFICATION. The Fund may not invest more than 5% of its total assets in the
securities of any one issuer, except that it may invest up to 25% of its assets
in the first-tier securities of a single issuer for up to three business days.
The Fund may not invest more than 25% of its total assets in any one industry.

Cash Reserve Fund may not invest more than 1% of its total securities or $1
million (whichever is greater) in the second tier securities of a single issuer.

The Fund will invest only in securities which satisfy the requirements of Rule
2a-7. Accordingly, if the issuing government or some other entity, such as an
insurance company or other corporate obligor, guarantees a security purchased by
the Fund, or if a bank issues a letter of credit in support of a security
purchased by the Fund, the Fund will not purchase any security which would
result in the value of all securities issued or guaranteed by that guarantor or
by that issuer of the letter of credit exceeding 10% of the value of the total
assets of the Fund.

U.S. TREASURY MONEY FUND

U.S. Treasury Money Fund's investments are limited to obligations having a
remaining maturity of 397 days or less that are issued by the U.S. Treasury and
repurchase agreements that provide for repurchase within 397 days and that are
collateralized by obligations issued or guaranteed by the U.S. Treasury. The
investment policies of the Fund may result in a lower yield than that of other
money market funds, such as Cash Reserve Fund, which may invest in other types
of instruments.

U.S. Treasury Money Fund limits its investments so as to obtain the highest
investment quality rating by an NRSRO. These quality ratings are based on, but
not limited to, an analysis of the Fund's operational policies, investment
strategies and management. These rating organizations also may undertake an
ongoing analysis and assessment of these criteria in order to continually update
the Fund's rating.

TAX FREE MONEY FUND

Tax Free Money Fund invests only in high-quality municipal securities that have
remaining maturities at the time of purchase of 397 days or less. Although the
Fund will attempt to invest 100% of its assets in tax-exempt municipal
securities, the interest on which is exempt from federal income tax, including
the federal alternative minimum tax, the Fund reserves the right to invest up to
20% of the value of its net assets in securities, including private activity
bonds, the interest on which is fully taxable or subject to the alternative
minimum tax. As a fundamental policy, at least 80% of the Fund's income will,
under normal circumstances, be exempt from federal income tax including the
federal alternative minimum tax.

MUNICIPAL OBLIGATIONS AND INVESTMENT POLICIES. Tax Free Money Fund will invest
in municipal obligations whose interest payments are exempt from federal income
tax. Municipal obligations, which are issued by states, cities, municipalities
or municipal agencies, will include variable rate demand obligations ("VRDOs"),
tax anticipation notes ("TANs"), revenue anticipation notes ("RANs"), bond
anticipation notes ("BANs"), construction loan notes, and tax-exempt commercial
paper. The Fund may also invest in municipal bonds within the maturity
limitations discussed above and may enter into commitments to purchase these
securities on a delayed-delivery basis.

The Fund is non-diversified, which means that it has greater latitude than a
diversified fund to invest in the securities of a relatively few municipal
issuers. As a non-diversified fund, the Fund may present greater risks than a
diversified fund.

<PAGE>

QUALITY. Pursuant to Rule 2a-7 and policies and procedures adopted by the
Company's Board of Directors, the Fund may purchase securities determined by
Capitoline to present minimal credit risks. Securities must be rated in
accordance with applicable rules in the highest rating category for short-term
securities by at least one NRSRO and, if rated by more than one NRSRO, rated in
one of the two highest categories for short-term securities by another NRSRO or,
if unrated, judged to be equivalent to the highest short-term rating category by
Capitoline pursuant to procedures adopted by the Company's Board of Directors.

The Fund will not invest more than 10% of its net assets in illiquid securities.
For purposes of this limitation, "illiquid securities" shall be deemed to
include municipal securities not rated at the time of purchase by the requisite
NRSROs, or not guaranteed or supported by a letter of credit issued by, or
subject to a remarketing agreement with, a responsible party, and not otherwise
determined by Capitoline to be readily marketable.

The Fund may from time to time have more than 25% of its assets invested in
municipal securities of issuers located in one or more of Arizona, California,
Maryland, New Jersey, New York and Pennsylvania and will invest more than 25% of
its assets in municipal securities of issuers located in Virginia.

The Fund will invest in securities, including the foregoing types of securities,
only if the investments are of a type which would satisfy the requirements of
Rule 2a-7. Accordingly, if the issuing government or some other entity, such as
an insurance company or other corporate obligor, guarantees a security purchased
by the Fund, or if a bank issues a letter of credit in support of a security
purchased by the Fund, the Fund will not purchase any security which, as to 75%
of the value of total assets held by the Fund, would result in the value of all
securities issued or guaranteed by that guarantor or by that issuer of the
letter of credit exceeding 10% of the value of the total assets of the Fund.

In order to permit the Fund to invest in new instruments that may be created in
the future, the Fund, upon supplementing its Prospectus, may invest in
obligations other than those listed above, provided the investments are
consistent with the Fund's investment objectives and policies.

The Fund may also purchase shares of other money market funds. Should the Fund
elect to do so, it will incur additional expenses charged by that money market
fund, such as management fees.

TAXABLE INVESTMENTS. Although the Fund will attempt to invest 100% of its assets
in tax-exempt municipal securities, including those securities exempt from the
federal alternative minimum tax amount, the Fund may under certain circumstances
invest up to 20% of the value of its net assets in securities on which the
interest income is fully taxable or subject to the alternative minimum tax.
Subject to such limitation, the Fund may invest in any taxable investment,
including repurchase agreements, appropriate for investment by Cash Reserve
Fund.

Yields on municipal obligations depend on a variety of factors, including the
general conditions of the money markets and of the municipal bond and municipal
note markets, the size of a particular offering, the maturity of the obligation
and the rating of the issue. Municipal obligations with longer maturities tend
to produce higher yields and generally are subject to potentially greater price
fluctuations than obligations with shorter maturities.

The Fund anticipates being as fully invested as practicable in municipal
obligations; however, because the Fund presently does not intend to invest in
taxable obligations, there may be occasions when, as a result of maturities of
portfolio securities or sales of Fund shares or in order to meet anticipated
redemption requests, the Fund may hold cash which is not earning income.

BOND FUNDS:
CORPORATE BOND FUNDS:

LIMITED TERM BOND FUND

Limited Term Bond Fund seeks to provide a high level of current income by
investing in investment-grade fixed-income debt obligations. The Fund is managed
to maintain a dollar-weighted average portfolio maturity of between 1 and 5
years. See "Investment Policies -- Corporate Bond Funds."

INTERMEDIATE BOND FUND

Intermediate Bond Fund seeks to provide a high level of current income by
investing in investment-grade fixed-income debt obligations. The Fund is managed
to maintain a dollar-weighted average portfolio maturity of between 5 and 10
years. See "Investment Policies -- Corporate Bond Funds" below for a complete
description of Fund's investment policies.

INVESTMENT POLICIES -- CORPORATE BOND FUNDS

For each corporate bond fund, Capitoline will consider the ratings of Moody's
Investors Service, Inc. ("Moody's"), S&P, Fitch Investors Service, Inc.
("Fitch"), Duff and Phelps ("Duff") or other recognized sources of credit
ratings assigned to various obligations.

<PAGE>

Each corporate bond fund will seek to obtain a high level of current income by
investing exclusively in investment-grade debt obligations of domestic and
foreign issuers as follows:

o corporate obligations which are rated at least Baa by Moody's, BBB by
S&P, BBB by Fitch, or BBB by Duff (see "Investment-grade Securities" in
the Appendix to this Prospectus);

o obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and

o commercial paper which is rated Prime-1 by Moody's or A-1 by S&P.

Each corporate bond fund also may purchase unrated securities that are deemed by
Capitoline to be of equivalent quality to investment-grade debt obligations
pursuant to procedures established by the Company's Board of Directors. Credit
ratings are considered at the time of purchase; the sale of securities is not
required in the event of a subsequent rating downgrade. In the event that a
security owned by a Fund is downgraded below the stated ratings categories,
Capitoline will review the security and take appropriate action.

Fixed-income securities held by each corporate bond fund may include (but are
not limited to), in any proportion, bonds, notes, mortgage-related and
asset-backed securities, U.S. Government and government agency obligations, zero
coupon securities, indexed securities, convertible notes and bonds, convertible
preferred securities, foreign securities (see "Foreign Investments" in the
Appendix), and short-term obligations such as certificates of deposit,
repurchase agreements, bankers' acceptances, and commercial paper. The Funds may
also enter into reverse repurchase agreements. These funds also may purchase
shares of money market mutual funds. Should a Fund elect to purchase shares of
money market funds, it will incur additional expenses charged by that money
market fund, such as management fees.

Limited Term Bond Fund may hold individual securities with remaining maturities
of more than 5 years, as long as the Fund's dollar-weighted average portfolio
maturity is no more than 5 years. Intermediate Bond Fund may hold individual
securities with remaining maturities of more than 10 years, as long as its
dollar-weighted average portfolio maturity is no more than 10 years. For the
purpose of determining the dollar-weighted average portfolio maturity of each
corporate bond fund, the maturities of mortgage-backed securities,
collateralized mortgage obligations and asset-backed securities are determined
on a "weighted average life" basis. (The weighted average life is the average
time in which principal is repaid; for a mortgage security, this average time is
calculated by estimating the expected principal payments for the life of the
mortgage.) The weighted average life of such securities is likely to be
substantially shorter than their stated final maturity as a result of scheduled
and unscheduled principal prepayments. The maturities of most of the other
securities held by the corporate bond funds will be determined on a "stated
final maturity" basis. One exception would be "extendible" debt instruments,
which can be retired at the option of the corporate bond funds at various dates
prior to maturity, and which may be treated as maturing on the next optional
retirement date when calculating average portfolio maturity.

The corporate bond funds also may purchase obligations of U.S. banks (including
certificates of deposit and bankers' acceptances) which have capital, surplus,
and undivided profits (as of the date of their most recently published annual
financial statements) of $100 million or more.

In making investment decisions for the corporate bond funds, Capitoline will
consider many factors other than current yield, including preservation of
capital, the potential for realizing capital appreciation, maturity and yield to
maturity. Capitoline will monitor each corporate bond fund's investments in
particular securities or in types of debt securities in response to its
appraisal of changing economic conditions and trends. Capitoline may sell
securities in anticipation of a market decline or purchase securities in
anticipation of a market rise. Each corporate bond fund may invest a portion of
its assets in securities issued by foreign companies and foreign governments,
which may be less liquid or more volatile than domestic investments. The
corporate bond funds will only invest in U.S. dollar-denominated securities.

GOVERNMENT BOND FUNDS:

GOVERNMENT BOND FUND

Government Bond Fund seeks to provide a high level of current income in a manner
consistent with preserving principal by investing primarily in obligations
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
(U.S. Government Securities). In seeking current income, the Fund also may
consider the potential for capital gain.

The Fund seeks to achieve its objective by investing primarily in U.S.
Government Securities. Under normal conditions, at least 65% of the Fund's total
assets will be invested in U.S. Government bonds or other debt instruments,
including repurchase agreements secured by U.S. Government Securities.

<PAGE>

Any remaining assets may be invested in fixed-income securities that are
eligible for purchase by the corporate bond funds. The Fund may purchase
securities on a delayed-delivery basis. There are no limits on the
dollar-weighted average portfolio maturity of the Fund, and, consistent with its
investment objective of obtaining current income while preserving principal, the
Fund may acquire individual securities without regard to their remaining
maturities.

The Fund invests in various debt obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, including U.S. Treasury Bonds,
Notes and Bills, Government National Mortgage Association mortgage-backed
securities and mortgage-backed securities issued by the Federal National
Mortgage Association (Fannie Maes) or the Federal Home Loan Mortgage Corporation
(Freddie Macs). The Fund is not restricted as to the percentage of its assets
that may be invested in any one type of U.S. Government Security. The U.S.
Government Securities the Fund invests in may or may not be fully backed by the
U.S. Government. The Fund may enter into repurchase agreements involving U.S.
Government Securities and any other securities in which it may invest and also
may enter into reverse repurchase agreements. The Fund considers "government
securities" to include U.S. Government securities subject to repurchase
agreements. The Fund may for temporary defensive purposes invest without limit
in U.S. Government Securities having a maturity of 365 days or less.

MUNICIPAL BOND FUNDS:

MARYLAND MUNICIPAL BOND FUND

Maryland Municipal Bond Fund seeks to provide high current income exempt from
federal and Maryland income tax in a manner consistent with the preservation of
capital by investing in municipal bonds of investment-grade quality. (See
"Investment-grade Securities" in the Appendix to this Prospectus.) There are no
limits on the dollar-weighted average portfolio maturity of the Fund, and the
Fund may acquire individual securities without regard to their remaining
maturities. See "Investment Policies -- Municipal Bond Funds."

The Fund is non-diversified, which means that it has greater latitude than a
diversified fund with respect to the investment of its assets in the securities
of a relatively few municipal issuers. As a non-diversified fund, the Fund may
present greater risks than a diversified fund.

As a fundamental policy, at least 80% of the Fund's income will, under normal
circumstances, be exempt from regular federal income taxes. Interest on some
"private activity" municipal obligations is subject to the federal alternative
minimum tax ("AMT bonds"). AMT bonds are municipal obligations that benefit a
private or industrial user or finance a private facility. The Fund reserves the
right to invest up to 100% of its assets in AMT bonds.

As a non-fundamental policy, at least 65% of the Fund's assets will be invested
in bonds that will, under normal circumstances, produce income that is exempt
from Maryland income taxes.

VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND

Virginia Intermediate Municipal Bond Fund seeks to provide high current income
exempt from federal and Virginia income tax in a manner consistent with the
preservation of capital by investing in municipal bonds of investment-grade
quality. (See "Investment-grade Securities" in the Appendix to this Prospectus.)
The Fund is managed to maintain a dollar-weighted average portfolio maturity of
between 5 and 10 years. The Fund may hold individual securities with remaining
maturities of more than 10 years, as long as the dollar-weighted average
maturity is no more than 10 years. Stability and growth of principal also will
be considered when choosing securities. See "Investment Policies -- Municipal
Bond Funds."

As a non-fundamental policy, at least 65% of the Fund's assets will be invested
in bonds that will, under normal circumstances, produce income that is exempt
from Virginia income taxes.

VIRGINIA MUNICIPAL BOND FUND

Virginia Municipal Bond Fund seeks to provide high current income exempt from
federal and Virginia income tax in a manner consistent with the preservation of
capital by investing in municipal bonds of investment-grade quality. (See
"Investment-grade Securities" in the Appendix to this Prospectus.) There are no
limits on the dollar-weighted averageportfolio maturity of the Fund, and the
Fund may acquire individual securities without regard to their remaining
maturities. See "Investment Policies -- Municipal Bond Funds."

<PAGE>

As a non-fundamental policy, at least 65% of the Fund's assets will be invested
in bonds that will, under normal circumstances, produce income that is exempt
from Virginia income taxes.

INVESTMENT POLICIES -- MUNICIPAL BOND FUNDS

Each municipal bond fund will, consistent with its investment objective,
purchase securities which meet the applicable quality and maturity
characteristics established for that Fund. In doing so, it will consider the
ratings of Moody's or S&P assigned to various obligations.

Each municipal bond fund normally will invest primarily in municipal securities
of all types and of investment-grade quality. Investment grade municipal bonds
are considered to be securities rated Baa or higher by Moody's or BBB or higher
by S&P, and unrated securities that are deemed by Capitoline to be of comparable
quality to each municipal bond fund's ratings requirements. (See
"Investment-grade Securities" in the Appendix to this Prospectus.) Municipal
securities are issued to raise money for various public purposes, including
general purpose financing for state and local governments as well as financing
for specific projects or public facilities. Municipal securities may be backed
by the full taxing power of a municipality, by the revenues derived from a
specific project or by the credit of a private organization. Some municipal
securities are insured by private insurance companies, while others may be
supported by letters of credit furnished by domestic or foreign banks.
Capitoline monitors the financial condition of parties (including insurance
companies, banks, and corporations) whose creditworthiness is relied upon in
determining the credit quality of securities eligible for purchase by each
municipal bond fund. Each municipal bond fund may invest more than 25% of its
assets in industrial development bonds.

Generally, the municipal bond funds' investments in municipal securities may
include fixed, variable, or floating rate general obligation and revenue bonds
(including municipal lease obligations and resource recovery bonds); zero coupon
and asset-backed securities; tax, revenue, or bond anticipation notes; and
tax-exempt commercial paper. The municipal bond funds may buy or sell securities
on a when-issued or delayed-delivery basis (including refunding contracts) and
may acquire standby commitments. See the Appendix.

Each municipal bond fund may deviate from its investment objective for temporary
defensive purposes. During periods when, in Capitoline's opinion, a temporary
defensive posture in the market is appropriate, each municipal bond fund may
hold cash that is not earning interest or may invest in obligations whose
interest may be subject to federal and/or state tax. The municipal bond funds'
defensive investments may include short-term municipal obligations, money market
instruments and shares of money market mutual funds. Should a Fund elect to
purchase shares of money market funds, it will incur additional expenses charged
by that money market fund, such as management fees. Under such circumstances,
the municipal bond funds may each temporarily invest so that less than 80% of
their income distributions are federally and/or state tax-free. Federally
taxable obligations in which a Fund may invest include, but are not limited to,
obligations issued by the U.S. Government or any of its agencies or
instrumentalities, high-quality commercial paper, certificates of deposit, and
repurchase agreements.

RISKS AND SPECIAL CONSIDERATIONS CONCERNING MARYLAND MUNICIPAL BOND FUND

Investors should be aware of certain factors that might affect the financial
condition of issuers of Maryland municipal securities.

Total combined tax supported debt outstanding of the State, Baltimore City, and
all of the counties, municipalities, and special districts within Maryland
totaled $12 billion as of June 30, 1994. The State of Maryland had $2.62 billion
in general obligation bonds outstanding as of December 31, 1995. General
obligation debt of the State of Maryland is rated Aaa by Moody's, AAA by S&P and
AAA by Fitch; there can be no assurance that these ratings will continue. There
is no general limit on state general obligation bonds imposed by the State
Constitution or laws; state general obligation bonds are payable from ad valorem
taxes and, under the State Constitution, may not be issued unless the debt is
authorized by a law levying an annual tax or taxes sufficient to pay the debt
service within 15 years and prohibiting the repeal of the tax or taxes or their
use for another purpose until the debt has been paid. State and local general
obligation debt on a per capita basis and as a percentage of property values
have increased by 33.4% and 7.1%, respectively since 1990. Although the State
may borrow up to $100 million in short-term notes in anticipation of taxes and
revenues, the State has not made use of this authority. See the Appendix.

<PAGE>

The Fund will not use more than 5% of its assets to acquire derivative
securities. For this purpose, "derivative securities" shall mean Indexed
Securities, Stripped Mortgage-Backed Securities and Stripped Government
Securities. See "Appendix" for a description of these types of securities.

RISKS AND SPECIAL CONSIDERATIONS CONCERNING VIRGINIA INTERMEDIATE MUNICIPAL BOND
FUND AND VIRGINIA MUNICIPAL BOND FUND

Investors should be aware of certain factors that might affect the financial
condition of issuers of Virginia municipal securities.

The Constitution of Virginia limits the ability of the Commonwealth to create
debt. An amendment to the Constitution requiring a balanced budget was approved
by the voters on November 6, 1984. The economy of the Commonwealth of Virginia
is based primarily on manufacturing, the government sector (including defense),
agriculture, mining and tourism. The Commonwealth has maintained a high level of
fiscal stability for many years due in large part to conservative financial
operations and diverse sources of revenue. Recessionary conditions beginning in
1990 have resulted in revenue shortfalls which have necessitated budget
revisions and matching expenditure cuts to keep the budget in balance.

The Commonwealth currently has an S&P rating of AAA and a Moody's rating of Aaa
on its general obligation bonds. There can be no assurance that the economic
conditions on which these ratings are based will continue or that particular
bond issues may not be adversely affected by changes in economic or political
conditions. Furthermore, the credit of the Commonwealth is not material to the
ability of political subdivisions and private entities to make payments on the
obligations issued by them. See the Appendix.

EQUITY FUNDS:

VALUE FUND

Value Fund seeks to provide long-term capital appreciation and, as a secondary
objective, current income, by investing primarily in income producing equity
securities of companies with large market capitalizations. See "Investment
Policies -- Value Fund and Capital Appreciation Fund."

The Fund's investments will be broadly diversified among major economic sectors
and among those securities with above-average total return potential. A number
of valuation criteria are considered in the equity selection process, the
principal one being the issue's price to earnings ("P/E") ratio in relation to
other stocks in the same industry. Stocks with the lowest P/E ratios, along with
strong financial quality and above-average earnings momentum, are selected to
secure the best relative values in each economic sector. Capitoline believes
that this approach will produce a portfolio with less volatility and greater
dividend yield than the market as a whole. The Fund will invest primarily in the
income producing equity securities of companies with market capitalizations of
at least $1 billion.

CAPITAL APPRECIATION FUND

Capital Appreciation Fund seeks to provide long-term capital appreciation by
investing primarily in the equity securities of companies with medium to large
market capitalizations.

The Fund may invest a portion of its assets in foreign securities, securities of
small capitalization companies, and in securities having common stock
characteristics, such as rights and warrants. Capitoline considers many factors
when evaluating the overall quality of a security for the Fund, including, but
not limited to, a company's current financial strength, earnings momentum, and
relative value. The Fund will invest primarily in the equity securities of
companies with market capitalizations of at least $250 million.

INVESTMENT POLICIES -- VALUE FUND AND CAPITAL APPRECIATION FUND

Value Fund and Capital Appreciation Fund each will invest primarily in domestic
and foreign common stock and in securities convertible into common stock, such
as convertible bonds and convertible preferred stock rated investment-grade.
Capitoline will select stocks for these Funds from a list of companies traded in
the U.S. securities markets, including sponsored American Depositary Receipts
("ADRs") of qualifying foreign companies. (See "Foreign Investments" in the
Appendix.) A qualitative screening process is employed to exclude companies with
poor earnings results or highly leveraged balance sheets in an effort to
construct a portfolio with low risk characteristics relative to the major stock
market indices, although it is not the intention of either Fund to match the
risk or performance characteristics of any index. As a non- fundamental
investment policy, each Fund may to the extent consistent with its investment
objective, invest in any debt security in which the corporate bond funds may
invest. (See "Investment Policies -- Corporate Bond Funds" on page 13.) As a
non-fundamental investment policy, each of the Value Fund and Capital
Appreciation Fund may also invest up to 10% and 5%, respectively, of its assets
in the U.S. Treasury obligations.

<PAGE>

Although the Value Fund and Capital Appreciation Fund intend, under normal
circumstances, to be fully invested at all times in the securities mentioned
above, each Fund may make substantial temporary investments in high-quality,
short-term debt securities and money market instruments, including repurchase
agreements, and in shares of other open-end management investment companies
which invest primarily in money market instruments, when Capitoline believes
market conditions warrant a defensive position. Should a Fund elect to purchase
shares of money market funds, it will incur additional expenses charged by that
money market fund, such as management fees.

SPECIAL EQUITY FUND

Special Equity Fund seeks to provide long-term capital appreciation by investing
primarily in the equity securities of companies with small to medium market
capitalizations.

Small to medium capitalization companies with rapid growth rates may have higher
P/E ratios than other companies. The market prices of securities with higher P/E
ratios tend to drop more suddenly in response to negative news than securities
with low P/E's. That is especially true for smaller, less well-known companies
that have a narrow product line or whose securities are thinly traded.

These companies typically tend to offer the potential for accelerated earnings
or revenue growth because of new products or technologies, new channels of
distribution, revitalized management or industry conditions, or similar new
opportunities. Smaller companies often pay no dividends, and current income is
not a goal of the Fund. Representative industries may include, but are not
limited to, technology, health care and biotechnology, environmental services,
communications, and energy and alternative energy.

INVESTMENT POLICIES -- SPECIAL EQUITY FUND

The Fund will invest primarily in domestic and foreign common stock and in
securities convertible into common stock, such as convertible bonds and
convertible preferred stock. The Fund generally will invest primarily in the
securities of companies with market capitalizations of less than $1 billion. It
also may invest a portion of its assets in sponsored ADRs of qualifying foreign
companies (see "Foreign Investments" in the Appendix), and in securities having
common stock characteristics, such as rights and warrants. As a non-fundamental
investment policy, the Fund may also invest up to 5% of its assets in
obligations of the U.S. Treasury.

Although the Special Equity Fund intends, under normal circumstances, to be
fully invested in equity securities, the Fund may make substantial temporary
investments in high-quality, short-term debt securities and money market
instruments, including repurchase agreements, and in the securities of other
open-end management investment companies investing primarily in money market
instruments, when Capitoline believes market conditions warrant a defensive
position. Should the Fund elect to purchase shares of a money market fund, it
will incur additional expenses charged by that money market fund, such as
management fees.

RISK FACTORS AND INVESTMENT CONSIDERATIONS

Individually, none of the Funds constitutes a balanced investment plan. The
money market funds emphasize income, preservation of capital and liquidity and
do not seek the higher yields or capital appreciation that more aggressive
investments may provide. The bond funds tend to provide higher yields than the
money market funds; however, unlike money market funds, the bond funds do not
seek to maintain a stable $1.00 share price, and may not be able to return
dollar for dollar the money invested. The primary focus of the equity funds is
long-term capital appreciation. Fluctuations in the stock market will directly
affect the share price of the equity funds.

A MONEY MARKET FUND'S ability to achieve its investment objective depends on the
quality and maturity of its investments. Although each money market fund's
policies are designed to help maintain a stable $1.00 share price, money market
instruments can change in value when interest rates or an issuer's
creditworthiness change, or if an issuer or guarantor of a security fails to pay
interest or principal when due. If these changes in value are large enough, a
money market fund's share price could deviate (positively or negatively) from
$1.00. In general, securities with longer maturities are more vulnerable to
price changes, although they may provide higher yields.

U.S. TREASURY MONEY FUND is the most conservative of the CrestFunds(Register
mark) money market funds as it invests solely in short-term money market
instruments issued by the U.S. Treasury, and repurchase agreements backed by
U.S. Treasury instruments.

<PAGE>

CASH RESERVE FUND invests in high quality money market instruments that are not
backed by the U.S. Government and therefore is likely to provide higher yields
than U.S. Treasury Money Fund.

TAX FREE MONEY FUND emphasizes tax-free income by investing primarily in the
high quality tax-exempt securities of states, cities, municipalities and
municipal agencies.

Each money market fund's yield will vary from day to day, generally reflecting
current short-term interest rates and other market conditions.

Each CORPORATE BOND FUND emphasizes high current income by investing in
fixed-income securities. Fixed- income securities (except for securities with
floating or variable interest rates) are generally considered to be interest
rate sensitive, which means that their value (and the Funds' share prices) will
tend to decrease when interest rates rise and increase when interest rates fall.
Securities with shorter maturities, while offering lower yields, generally
provide greater price stability than longer-term securities and are less
affected by changes in interest rates. The ability of all bond funds to achieve
their investment objectives depends greatly on the quality and maturity of the
investments and the reliability of the issuer to make interest payments in a
timely manner. Market risk is addressed through a strategy of adjusting the
dollar-weighted average maturity of each bond fund to reflect changing economic
and interest rate environments. The timing of portfolio transactions in response
to anticipated changes in interest rate trends is important to the successful
application of such strategies. Bond funds are generally subject to two risk
factors: (1) credit risk and (2) interest rate risk.

LIMITED TERM BOND FUND is a conservative bond fund which seeks higher current
yields than a money market fund. Because of the different levels of risk
associated with investing in a money market fund, which seeks to maintain a
stable net asset value per share and to preserve principal, and the Limited Term
Bond Fund, which seeks high current income, the Limited Term Bond Fund will
experience greater fluctuations in its principal value than would a money market
fund.

INTERMEDIATE BOND FUND is likely to experience greater share price fluctuation
and potentially higher income than Limited Term Bond Fund, due to its
investments in longer term bonds.

GOVERNMENT BOND FUND is a conservative government bond fund which invests
primarily in U.S. Government securities with intermediate to long maturities.
The Fund may experience greater price fluctuations due to its investments in
longer term bonds.

The MUNICIPAL BOND FUNDS emphasize high tax-free current income by investing
primarily in investment-grade municipal securities. Because Virginia
Intermediate Municipal Bond Fund, Virginia Municipal Bond Fund and Maryland
Municipal Bond Fund invest primarily in Virginia or Maryland obligations, as the
case may be, the quality and supply of eligible securities may present
additional risks to those of more diversified municipal bond funds. Virginia
Intermediate Municipal Bond Fund is less interest rate sensitive than the
Virginia Municipal Bond Fund. It seeks higher Virginia tax free income than a
tax-free money fund, with some share price fluctuation. Virginia Municipal Bond
Fund is likely to experience greater share price fluctuation and potentially
higher tax-free income due to its investments in longer term municipal bonds.
Maryland Municipal Bond Fund also is likely to experience greater share price
fluctuation and potentially higher tax free income than an intermediate term
municipal bond fund.

The EQUITY FUNDS emphasize capital appreciation by investing primarily in common
stock and securities convertible to common stock, such as preferred stock and
convertible bonds. These funds are inherently more risky than the money market
and bond funds. The share prices of companies with larger capitalization tend to
fluctuate less over time than the stock of companies having smaller market
capitalization. Therefore, a stock mutual fund investing in companies with
smaller average market capitalization is more aggressively oriented than one
which invests in companies with a large average market capitalization, and while
a "small-cap" fund's potential for growth may be greater, its share price is
likely to respond more suddenly and dramatically to changes in the stock market.
Because of fluctuating share price and total returns, the equity funds may not
be appropriate investments for investors seeking a more conservative investment.

VALUE FUND emphasizes long-term capital appreciation and current income through
investment in the income producing equity securities of companies with large
market capitalizations. It is anticipated that the Fund will provide more
current income than, but will not achieve capital appreciation at a rate
comparable to, funds that pursue growth as a primary objective.

CAPITAL APPRECIATION FUND invests primarily in the equity securities of
companies with medium to large market capitalization.

SPECIAL EQUITY FUND invests primarily in the equity securities of companies with
small to medium market capitalization. Because these companies usually do not
pay dividends, income is not a goal of the Fund. While Capitoline purchases
securities for the Fund that it believes present the greatest opportunity for
growth, these securities may also be considered speculative.

<PAGE>

From time to time each Fund, to the extent consistent with its investment
objective, policies and restrictions, may invest in securities of companies with
which Crestar Bank has a lending relationship, including industrial development
bonds and other private activity municipal securities backed by the credit and
security of such companies. The investment objectives and policies for each Fund
are supplemented by its investment limitations. See the Appendix for further
discussion of the Funds' investments.

INVESTMENT LIMITATIONS

The following summarizes each Fund's principal investment limitations. A
complete listing is contained in the Statement of Additional Information. With
the exception of limitations 4, 5, 6, 7(b) and (c), and 9(b) and (c), these
limitations are fundamental and may not be changed without shareholder approval.
Except for the Funds' percentage limitations concerning borrowings, the
limitations and policies discussed in this Prospectus are considered at the time
of purchase. Accordingly, the sale of securities is not required in the event of
a subsequent change in circumstances.

MONEY MARKET FUNDS

1. Each Fund may not, with respect to 75% of its assets (50% in the case of Tax
Free Money Fund), invest more than 5% of the total market value of its assets
(determined at the time of investment) in the securities of any one issuer other
than the U.S. Government, its agencies or instrumentalities.

2. Each Fund may not invest more than 25% of the total market value of its
assets (determined at the time of investment) in the securities of foreign banks
and foreign branches of domestic banks, in the securities of foreign governments
or in the securities of issuers conducting their principal business activities
in any one industry; provided, (i) there is no limitation on the aggregate of
the Fund's investment in obligations (excluding commercial paper) of domestic
commercial banks and in obligations of the U.S. Government, its agencies or
instrumentalities; and (ii) consumer finance companies, industrial finance
companies and gas, electric, water and telephone utility companies are each
considered to be separate industries.

3. Each Fund may not borrow money, except from banks for temporary or emergency
purposes, including the meeting of redemption requests which might require the
untimely disposition of securities. Borrowing in the aggregate may not exceed
10%, and borrowing for purposes other than meeting redemptions may not exceed 5%
of the value of a Fund's total assets (including the amount borrowed) at the
time the borrowing is made. Outstanding borrowings in excess of 5% of the value
of a Fund's total assets will be repaid before any subsequent investments are
made by a Fund.

4. As a non-fundamental limit, Cash Reserve Fund and U.S. Treasury Money Fund
each may not make loans except that each Fund may lend portfolio securities in
an amount not to exceed 10% of the value of its total assets. Tax Free Money
Fund does not currently intend to lend portfolio securities.

CASH RESERVE FUND

5. To comply with Rule 2a-7, the Fund normally may not, with respect to 100% of
its assets, invest more than 5% of the total market value of its assets in the
securities of any one issuer other than the U.S. Government, its agencies or
instrumentalities, provided, however, that the Fund may invest up to 25% of its
total assets in the first tier securities of a single issuer for up to three
days.

MARYLAND MUNICIPAL BOND FUND, VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND AND
VIRGINIA MUNICIPAL BOND FUND

6. For federal tax purposes each Fund will limit its investments so that: (a)
with regard to at least 50% of its total assets, no more than 5% of its total
assets are invested in the securities of a single issuer; and (b) no more than
25% of its total assets are invested in the securities of a single issuer. This
limitation does not apply to "government securities" as defined for federal tax
purposes.

7. Each Fund (a) may borrow money solely for temporary or emergency purposes,
but not in an amount exceeding 33 1/3% of its total assets; (b) may borrow money
only from banks or by engaging in reverse repurchase agreements; and (c) will
not purchase securities when borrowings exceed 5% of its total assets.

CORPORATE BOND, GOVERNMENT BOND, MUNICIPAL BOND AND EQUITY FUNDS

8. Each Fund may not, with respect to 75% of its total assets, purchase the
securities of any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities) if, as a result, (a)
more than 5% of its total assets would be invested in the securities of that
issuer, or (b) it would hold more than 10% of the outstanding voting securities
of the issuer.

9. Each Fund (a) may borrow money solely for temporary or emergency purposes,
but not in an amount exceeding 33 1/3% of its total assets; (b) may borrow money
only from banks or by engaging in reverse repurchase agreements; and (c) will
not purchase securities when borrowings exceed 5% of its total assets.

<PAGE>

FUND MANAGEMENT

Jeffrey E. Markunas, CFA, is Senior Vice President and Director of Equity
Management for Capitoline. Mr. Markunas has primary responsibility for the
management of Value Fund, Capital Appreciation Fund and Special Equity Fund. In
addition, he oversees the investment management of Crestar's Southeast Equity
Fund, as well as other large institutional equity accounts. Mr. Markunas joined
Capitoline in May, 1992, and has managed the CrestFunds(Register mark) Value
Fund and Special Equity Fund since inception. From April, 1990 to May, 1992, Mr.
Markunas was a portfolio manager with Sovran Capital Management. Prior to that,
he served as Director of Research for Sovran Bank.

Boyce G. Reid, CFA, is Senior Vice President and Director of Fixed-Income
Management for Capitoline. Mr. Reid has primary responsibility for the
management of Limited Term Bond Fund, Intermediate Bond Fund, Government Bond
Fund, Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund
and Virginia Municipal Bond Fund. He also oversees the investment management of
over $1.4 billion of other pension, endowment, foundation, union and insurance
funds. Mr. Reid has been the Director of Fixed-Income Management since 1986.

Jennifer M. Constine is Vice President and Fixed-Income Portfolio Manager for
Capitoline. Ms. Constine shares responsibility with Mr. Reid for the management
of Limited Term Bond Fund, Intermediate Bond Fund and Government Bond Fund. She
also oversees the investment management of approximately over $422 million of
other pension, endowment, foundation, union and insurance fixed-income funds.
Ms. Constine has been a portfolio manager at Capitoline since 1987.

Cheryl L. Page, CFA, is Assistant Vice President and Fixed-Income Portfolio
Manager for Capitoline. Ms. Page shares responsibility with Mr. Reid for the
management of Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond
Fund and Virginia Municipal Bond Fund. She also oversees the investment
management of approximately $640 million of other pension, endowment,
foundation, union and insurance funds. Ms. Page has been with Capitoline since
December, 1991; prior to that, she was a portfolio manager for First American
Bank, N.A. for three years.

PRICING OF SHARES

The net asset value per share ("NAV") of Tax Free Money Fund is determined as of
12:00 noon, Eastern time, and as of the close of regular trading hours of the
New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern time). The NAV of
Cash Reserve Fund and U.S. Treasury Money Fund is determined as of 1:00 p.m.
Eastern time and as of the close of regular trading hours of the NYSE. The NAV
of each bond and equity fund is determined as of the close of regular trading
hours on the NYSE. Each Fund's NAV is determined on each day the NYSE and the
Funds' custodian, Crestar Bank, are open for business. The NAV of a Fund is
calculated by adding the value of all securities and other assets of a Fund,
deducting the liabilities allocated to each class, and dividing the result by
the proportional number of the shares of the Fund outstanding in a class.

Assets in the money market funds are valued based upon the amortized cost
method. Each money market fund seeks to maintain an NAV of $1.00, although there
can be no assurance that an NAV of $1.00 will be maintained.

With respect to the bond and equity funds, securities which are traded on a
recognized stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded or at the last sale price
on any national securities exchange. Securities traded only on over-the-counter
markets are valued on the basis of closing over-the-counter bid prices.
Securities for which there were no such transactions are valued at the average
of the current bid and asked prices. Securities for which market quotations are
not available are valued at fair value as determined by the Board of Directors.
The Funds may also utilize pricing services in determining the value of their
securities. Debt securities with remaining maturities of 60 days or less at the
time of purchase are valued on an amortized cost basis (unless the Board
determines that such basis does not represent fair value at the time). Under
this method, such securities are valued initially at cost on the date of
purchase. Thereafter, absent unusual circumstances, the Fund assumes a constant
proportionate amortization of any discount or premium until maturity of the
security.

HOW TO PURCHASE, EXCHANGE AND REDEEM SHARES

DISTRIBUTOR

Shares of each Fund are sold on a continuous basis by the Funds' Distributor,
SEI Financial Services Company ("SFS" or the "Distributor"). SFS is a registered
broker-dealer with principal offices at 680 East Swedesford Road, Wayne,
Pennsylvania 19087.

PURCHASE OF SHARES

Before you buy shares, please read the following information to make sure your
investment is accepted and credited properly.

<PAGE>

Trust Class shares are offered continuously to qualified individual or
institutional customers that have entered into an agreement for their assets to
be managed and/or administered by Crestar Bank's Trust and Investment Management
Group. Trust Class shares of the money market funds are offered to qualified
individuals or institutional customers who have qualified cash management (or
"sweep") accounts with Crestar Bank or one of its bank affiliates. The minimum
initial investment required of a bank in each Fund is $1 million, except for
agency accounts for which the minimum is $25,000, and qualified cash management
accounts for which the minimum initial investment is waived. There is no minimum
for subsequent investments. Banks may impose initial or subsequent investment
minimums on their customers. Trust Class shares are sold without a sales charge,
although banks may charge their customer accounts for services provided in
connection with the purchase of shares. Information concerning these services
and any charges may be obtained from the bank. With the exception of agency
accounts, Fund shares may be held of record by the banks, although bank
customers may retain the right to vote them. Generally, shares held in agency
accounts will be registered in the principal's name. Confirmations of share
purchases and redemptions will be sent to shareholders of record. Beneficial
ownership of Fund shares will be recorded by the banks and reflected in the
account statements provided by them to their customers. For further information
on opening an account, contact an account officer at the bank. Sales personnel
of financial institutions distributing the Funds' shares and other persons
entitled to receive compensation for selling such shares may receive differing
compensation.

Shares of the Funds may be purchased through procedures established by the banks
in connection with the requirements of customer accounts. Purchases will be
effected only on days on which the purchasing banks and the Funds are open for
business ("Business Days"). Before the customer authorizes the purchase of
shares of a Fund, this Prospectus should be read in conjunction with information
from the customer's bank concerning services and charges. The issuance of shares
is recorded on the books of the Funds, and share certificates will not be issued
for shares of the Funds. The Funds reserve the right to reject any purchase
order.

EFFECTIVE TIME OF PURCHASES --
MONEY MARKET FUNDS

Purchases will be effected only when federal funds are available for investment
on the Business Day the purchase order is received by Crestar Bank, the Funds'
transfer agent. A purchase order received by Crestar Bank before 12:00 noon for
Tax Free Money Fund and 1:00 p.m. for Cash Reserve Fund and U.S. Treasury Money
Fund will begin earning dividends that day. All other orders received by 4:00
p.m. will be effected at the 4:00 p.m. NAV and will begin earning dividends on
the next Business Day. If federal funds are not received by the transfer agent
by the close of business (normally 4:00 p.m.) on the day of the order, the order
may be cancelled. Shares are purchased at the NAV next determined after receipt
of the order by Crestar Bank.

EFFECTIVE TIME OF PURCHASES --
BOND AND EQUITY FUNDS

Purchase orders for shares in the bond and equity funds must be received by
Crestar Bank before the close of regular trading hours on the NYSE. Orders are
priced according to the NAV determined on that day. Any orders received after
that time will be processed at the NAV next calculated. All purchases must be
paid for in U.S. dollars and checks must be drawn on U.S. banks. Purchase orders
will be executed by 4:00 p.m., on the business day on which the purchase order
is received in good order by Crestar Bank. Payment for the purchase is expected
at the time of the order but must be received within 5 business days of the date
of the order. Each Fund reserves the right to withhold redemption proceeds until
it is reasonably satisfied that checks received as payment have cleared (which
can take up to 7 days). If available funds are not received within 5 business
days, the order may be cancelled and notice thereof will be provided to the
party placing the order.

It is the responsibility of the banks to transmit orders for purchases by their
customers to the Transfer Agent and for the banks to deliver required funds on a
timely basis in accordance with the above-stated procedures. Any fees and/or
losses incurred due to cancellation of an order will be the responsibility of
the party placing the order.

EXCHANGES

Trust Class shares of one Fund normally may only be exchanged for Trust Class
shares of other Funds approved for sale in an investor's state and offered
through the investor's bank. Trust Class money market fund shares held in
qualified cash management accounts may be exchanged for other Trust Class money
market fund shares only. All dividends credited to the shareholder up to the
date of exchange are paid to the shareholder at the end of the month. Each Fund
reserves the right to refuse exchanges if the Fund would be unable to invest
effectively in accordance with its investment objective and policies or would
otherwise be affected adversely. The Funds further reserve the right to
terminate or modify the exchange privilege in the future. Exchanges are subject
to the same investment minimums and time frames listed above. An exchange is
considered a sale and subsequent purchase of shares and may result in a capital
gain or loss for federal income tax purposes.

<PAGE>

Trust Class shares may be exchanged for A Shares or B Shares of the same Fund
should the holder of Trust Class shares cease to be eligible to invest in the
Trust Class. For example, in the event that legal title to Trust Class shares
passes to a trust beneficiary, or in the event that a trust, agency or similar
account distributes Trust Class shares, the shares may be held by the account
beneficiary only if they are promptly exchanged for A Shares or B Shares of
certain funds shares. Each Fund reserves the right to redeem Trust Class shares
held by shareholders not eligible to purchase such shares if not converted to A
Shares or B Shares after 30 days. A Shares may be exchanged for A Shares or B
Shares of certain funds only. A Shares of U.S. Treasury Money Fund are not
currently available for purchase by conversion or otherwise. A Shares of
Government Bond Fund, Maryland Municipal Bond Fund and Virginia Municipal Bond
Fund are only available for purchase by conversion.

REDEMPTION OF SHARES

Customers may redeem all or part of their Trust Class shares of a Fund held
through their bank in accordance with instructions and limitations pertaining to
their account at the bank. It is the responsibility of each bank to transmit
redemption orders to Crestar Bank and to credit the bank's customers' accounts
with the redemption proceeds on a timely basis. No charge for wiring redemption
payments is imposed by the Funds, although banks may charge their customer
accounts for services provided in connection with the redemption of shares of
the Funds. Information concerning these services and any charges are available
from the banks. For further information contact an account officer at the bank.
Redemption orders are effected at the NAV next determined after receipt of the
order in good order by Crestar Bank. All dividends credited to the shareholder
up to the date of redemption are paid to the shareholder at the end of the
month.

Crestar Bank reserves the right to wire redemption proceeds within 7 days
following receipt of the order. With respect to the money market funds, if a
redemption order is received before 12:00 noon (or 1:00 p.m.), on a Business
Day, payment will normally be wired the same day to the bank.

Subject to each Fund's compliance with applicable regulations, each Fund has
reserved the right to pay the redemption, either totally or partially, by a
distribution of securities or other property (instead of cash) from a Fund's
portfolio. The securities or property distributed in such a distribution would
be valued at the same amount as that assigned to them in calculating the NAV for
the shares being sold. If a shareholder receives a distribution in kind,
brokerage or transaction charges may be incurred when converting the securities
to cash, and the shareholder may realize a gain or loss for tax purposes on both
the distribution and the subsequent conversion.

A Trust Class shareholder may be required to redeem shares in a Fund if the
balance in the shareholder's account with the Fund drops below $1 million
($25,000 for agency accounts) as a result of redemptions and the shareholder
does not increase the account's balance to at least $1 million (or $25,000) on
30 days' written notice. If the share balance in a customer's account at a bank
falls below any minimum the customer has agreed to maintain with the bank, the
customer may be required to redeem all or a part of his Fund shares or to
increase his holdings of Fund shares to the extent necessary to maintain the
required minimum balance in the account. Qualified cash management accounts
purchasing Trust Class shares will not be required to maintain a minimum balance
in any Fund.

DIVIDENDS AND TAX MATTERS

DISTRIBUTIONS. Income dividends from the money market and bond funds are
declared daily and distributed monthly. Each equity fund's income dividends are
declared and paid monthly. All Funds distribute substantially all of their net
investment income and capital gains (if any) to shareholders each year. Unless
the Funds are instructed otherwise, all dividends and distributions of capital
gains are automatically reinvested into additional shares of the Fund
immediately upon payment thereof.

FEDERAL TAXES. Interest earned by the Maryland Municipal Bond Fund, Tax Free
Money Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal
Bond Fund is federally tax-free when distributed to shareholders as income
dividends. If one of the tax-free funds earned federally taxable income from any
of its investments, it would be distributed as a taxable dividend. These Funds
may invest in securities the interest on which is subject to the federal
alternative minimum tax for individuals, and to the extent that each such Fund
does so, individuals who are subject to the alternative minimum tax will be
required to report a portion of their dividends as a "tax preference item" in
determining their federal taxes.

A portion of each equity fund's dividends may qualify for the dividends-received
deduction for corporations. Distributions from a Fund's taxable net investment
income and short-term capital gains generally are taxable to shareholders as
dividends, and long-term capital gains (if any) are taxed as long-term capital
gains.

<PAGE>

Each Fund's distributions are taxable when they are paid, whether taken in cash
or reinvested in additional shares, except that distributions declared in
December and paid in January will be taxable as if paid on December 31. Each
Fund will send shareholders a tax statement by January 31 showing the tax status
of the distributions received in the past year and will file a copy with the
Internal Revenue Service ("IRS"). You should keep all statements you receive to
assist in your personal recordkeeping.

STATE AND LOCAL TAXES.

MARYLAND MUNICIPAL BOND FUND:

To the extent the Fund qualifies as a regulated investment company under the
Code, it will be subject to tax only on (1) that portion of its income on which
tax is imposed for federal income tax purposes under Section 852(b)(1) of the
Code and (2) that portion of its income which consists of federally tax exempt
interest on obligations other than Maryland Exempt Obligations (hereinafter
defined) to the extent such interest is not paid to Fund shareholders in the
form of exempt-interest dividends. To the extent dividends paid by the Fund
represent interest excludable from gross income for federal income tax purposes,
that portion of exempt-interest dividends that represents interest received by
the Fund on obligations issued by the State of Maryland, its political
subdivisions, Puerto Rico, the U.S. Virgin Islands, or Guam and their respective
authorities or municipalities ("Maryland Exempt Obligations"), will be exempt
from Maryland state and local income taxes when allocated or distributed to a
shareholder of the Fund except in the case of a shareholder that is a financial
institution. Except as noted below, all other dividend distributions will be
subject to Maryland state and local income taxes.

Capital gains distributed by the Fund to a shareholder or any gains realized by
a shareholder from a redemption or sale of shares must be recognized for
Maryland state and local income tax purposes to the extent recognized for
federal income tax purposes. However, capital gains distributions included in
the gross income of shareholders for federal income tax purposes are subtracted
from capital gains income for Maryland income tax purposes to the extent such
distributions are derived from the disposition by the Fund of debt obligations
issued by the State of Maryland, its political subdivisions and authorities.

Except in the case of a shareholder that is a financial institution, dividends
received by a shareholder from the Fund that are derived from interest on U.S.
government obligations will be exempt from Maryland state and local income
taxes.

In the case of individuals, Maryland presently imposes an income tax on items of
tax preference with reference to such items as defined in the Code for purposes
of calculating the federal alternative minimum tax. Interest paid on certain
private activity bonds is a preference item for purposes of calculating the
federal alternative minimum tax. Accordingly, if the Fund holds such bonds, the
excess of 50% of that portion of exempt interest dividends which is attributable
to interest on such bonds over a threshold amount may be taxable by Maryland.
Interest on indebtedness incurred or continued (directly or indirectly) by a
shareholder in order to purchase or carry shares of the Fund will not be
deductible for Maryland state and local income tax purposes. Individuals will
not be subject to personal property tax on their shares of the Fund. Shares of
the Fund held by a Maryland resident at death may be subject to Maryland
inheritance and estate taxes.

VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND AND
VIRGINIA MUNICIPAL BOND FUND:

Under existing Virginia law, provided that Virginia Intermediate Municipal Bond
Fund and Virginia Municipal Bond Fund each qualify as a separate "regulated
investment company" under the Internal Revenue Code and qualify to and pay
dividends that are exempt from federal income tax, distributions to shareholders
from the Funds will not be subject to Virginia income taxation to the extent
that such distributions are either (i) excludable from gross income for federal
income tax purposes and attributable to interest on obligations of Virginia or
any of its political subdivisions or instrumentalities ("Virginia Obligations")
or obligations of Puerto Rico, the United States Virgin Islands or Guam
("Possessions Obligations") or (ii) attributable to interest on obligations
issued by the United States or any authority, commission or instrumentality of
the United States in the exercise of the borrowing power, and backed by the full
faith and credit, of the United States ("United States Obligations"). For
shareholders who are subject to Virginia income taxation, distributions from the
Funds (whether paid in cash or reinvested in additional common stock) generally
will be includable in Virginia taxable income to the extent not described in the
preceding sentence. Thus, for example, the portion of a distribution excludable
from gross income for federal income tax purposes and attributable to interest
on obligations of a state other than Virginia will not be exempt from Virginia
income taxation. Interest on indebtedness incurred or continued by a shareholder
to purchase or carry shares of the Funds will not be deductible for Virginia
income tax purposes to the extent such interest expense relates to the portions
of distributions exempt from Virginia income taxation.

<PAGE>

To be entitled to an exemption described above for distributions attributable to
interest on Virginia Obligations, Possessions Obligations or United States
Obligations, a shareholder must be able to substantiate the exempt portions of
each distribution with reasonable certainty. The determination of exempt
portions must be made on a monthly (rather than annual or quarterly) basis if,
as planned, the Funds make monthly distributions. Shareholders should retain
their statements from the Funds, which are to be issued at least annually,
showing the percentages of each monthly distribution attributable to interest on
Virginia Obligations, Possessions Obligations and United States Obligations.

Capital gain distributions from the Funds and gain recognized on a sale or other
disposition of shares of the Funds (including transfers in connection with the
redemption or repurchase of shares) generally will not be exempt from Virginia
income taxation.

For taxpayers other than corporations, the maximum marginal Virginia income tax
rate is 5.75%. The same rate applies to capital gains as to other taxable
income.

Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the Funds to purchase or carry shares of the Funds generally will not be
deductible for Virginia income tax purposes. The Funds will not be subject to
any Virginia intangible personal property tax on any obligations in the Funds.
In addition, shares of the Funds held for investment purposes will not be
subject to any Virginia intangible personal property tax.

CAPITAL GAINS. Shareholders in the equity and bond funds may realize a capital
gain or loss when they redeem or exchange shares. For most types of accounts,
the equity and bond funds will report the proceeds of the redemptions to
investors and the IRS annually. However, because the tax treatment also depends
on an individual's purchase price and his personal tax position, shareholders
should keep their regular account statements to use in determining their tax.

"BUYING A DIVIDEND." On the ex-dividend date for an income dividend or
distribution from capital gains, each bond and equity fund's share value is
reduced by the amount of the distribution. If you buy shares just before the
record date ("buying a dividend"), you would pay the full price for the shares
and then receive a portion of the share price as a taxable distribution unless
the distribution were an exempt-interest dividend.

OTHER TAX INFORMATION. In addition to federal taxes, you may be subject to state
or local taxes depending on the laws in their area. Consult your tax adviser
concerning the application of state and local taxes to investments in the Funds,
which may differ from the federal income tax consequences described above.

When you sign your account application, you will be asked to certify that your
social security or taxpayer identification number is correct and that you are
not subject to backup withholding for failing to report income to the IRS. If
you violate IRS regulations, the IRS can require the Funds to withhold 31% of
your taxable distributions and redemptions.

Please refer to the Statement of Additional Information for more information
regarding taxes.

PERFORMANCE

Performance of each Class may be quoted in advertising in terms of YIELD,
EFFECTIVE YIELD, TAX EQUIVALENT YIELD OR TOTAL RETURN, as appropriate.
Performance figures are based on historical results and are not intended to
indicate future performance.

The YIELD of each class of each bond and money market fund is calculated by
dividing the net investment income (net of expenses) (as defined by the SEC)
earned by the fund over a 30-day period (for each bond fund) and 7-day period
(for money market funds), by the average number of shares entitled to receive
distributions, expressed as an annualized percentage rate. The EFFECTIVE YIELD
is calculated similarly, but assumes that the income earned from the investment
is reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. Because yield
accounting methods differ from the methods used for other accounting purposes,
each bond and money market fund's yield may not equal its distribution rate, the
income paid to an account or the income reported in the fund's financial
statements.

Tax Free Money Fund and the municipal bond funds also may quote TAX-EQUIVALENT
YIELDS, which show the approximate taxable yield an investor would have to earn,
before taxes, to equal the fund's tax-free yield. A tax-equivalent yield is
calculated by dividing the tax-exempt yield by the result of one minus a stated
federal and/or state tax rate. If only a portion of the Fund's income was tax-
exempt, only that portion is adjusted in the calculation.

<PAGE>

TOTAL RETURNS are based on the overall dollar or percentage change in value of a
hypothetical investment in a Fund and assumes that all dividends and capital
gain distributions are reinvested. A CUMULATIVE TOTAL RETURN reflects a Fund's
performance over a stated period of time. An AVERAGE ANNUAL TOTAL RETURN
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if the Fund's performance had been constant
over the entire period. Because average annual total returns tend to smooth out
variations in the Funds' returns, investors should recognize that they are not
the same as actual year-by-year results. The yield and total return of the three
classes are calculated separately; the yields and total returns of A Shares and
B Shares will be lower than that of Trust Shares. When a class quotes an average
annual total return covering a period of less than one year, the calculation
assumes the performance will remain constant for the rest of the year. Since
this may or may not occur, these average annual total returns should be viewed
as hypothetical returns rather than actual performance. To illustrate the
components of overall performance, the Funds may separate their cumulative and
average annual total returns into income results and capital gain or loss. The
Funds may quote their total returns on a before tax or after tax basis.

PORTFOLIO TRANSACTIONS

When placing a portfolio transaction, Capitoline attempts to obtain the best net
price and execution of the transaction. Commissions for portfolio transactions
executed on a securities exchange are negotiated between Capitoline and the
executing broker. Capitoline seeks to obtain the lowest commission rate
available from brokers while also considering the quality of the service
rendered by the broker and the broker's provision of the research and execution
services described below. A Fund may, however, pay higher than the lowest
available commission rates when Capitoline believes it is reasonable to do so in
light of the value of the brokerage, research and other services provided by the
broker effecting the transaction. The determination and evaluation of the
reasonableness of the brokerage commissions paid in connection with portfolio
transactions are based to a large degree on the professional opinions of the
persons responsible for the placement and review of such transactions.

Capitoline may place portfolio transactions with broker-dealers who provide
research or execution services to the Funds or other accounts over which
Capitoline or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the availability of
securities or purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). The selection of such broker-dealers is generally made by
Capitoline (to the extent possible consistent with execution considerations) in
accordance with a ranking of broker-dealers determined periodically by
Capitoline's investment staff based upon the quality of research or execution
services provided. The Funds may execute brokerage or other agency transactions
through its distributor or an affiliate of its distributor or through an
affiliate of Capitoline, which are registered broker-dealers.

The frequency of portfolio transactions, a Fund's portfolio turnover rate, will
vary from year to year depending on market conditions. For the fiscal year ended
November 30, 1995, Funds' portfolio turnover rates were: Limited Term Bond Fund,
36%; Intermediate Bond Fund, 37%; Government Bond Fund, 28%; Virginia
Intermediate Municipal Bond Fund, 28%; Virginia Municipal Bond Fund, 35%; Value
Fund, 175%; Capital Appreciation Fund, 470%; and Special Equity Fund, 35%. The
portfolio turnover rate for Maryland Municipal Bond Fund is estimated to be 50%.

ADVISORY AND RELATED AGREEMENTS

ADVISER

Capitoline Investment Services, Incorporated, 919 East Main Street, Richmond,
Virginia 23219, provides investment advisory services to each of the Funds
subject to the general supervision of the Company's Board of Directors.

The Company has entered into Investment Advisory Agreements with Capitoline
("Advisory Agreements") on behalf of each Fund, Capitoline is paid for its
advisory services to each Fund at an annual rate based on the following fee
schedule: Cash Reserve Fund, U.S. Treasury Money Fund and Tax Free Money Fund,
.40% of each Fund's average daily net assets for the first $500 million of net
assets; .35% of each Fund's average daily net assets on the next $500 million of
net assets; and .30% of each Fund's average daily net assets on all remaining
net assets; Capital Appreciation Fund, Value Fund and Special Equity Fund, .75%
of each Fund's average daily net assets; Limited Term Bond Fund and Intermediate
Bond Fund, .50% and .60%, respectively, of each Fund's average daily net assets;
Virginia Intermediate Municipal Bond Fund, .50% of the Fund's average daily net
assets; and Government Bond Fund, Maryland Municipal Bond Fund and Virginia
Municipal Bond Fund, .60% of average daily net assets for its advisory services
to each of these Funds. Capitoline, in its sole discretion, may waive all or any
portion of its advisory fee. Any waiver, which may be discontinued at any time,
has the effect of increasing the Fund's yield for the period during which the
waiver was in effect and may not be recouped at a later date. The advisory fees
for Capital Appreciation Fund, Value Fund and Special Equity Fund are higher
than those generally paid by investment companies.

<PAGE>

Capitoline, at its sole discretion, may pay financial institutions or other
industry professionals such as investment advisers, accountants, banks, and
estate planning firms ("Qualified Recipients") for shareholder support services.
Capitoline may engage banks and brokers, including Crestar Bank and Crestar
Securities Corporation, as Qualified Recipients to perform certain shareholder
support services. In addition, such Qualified Recipients may impose charges or
other requirements on their customers for automatic investment and other cash
management services which an investor utilizing such Qualified Recipients should
take into consideration when determining the effective yield of an investment in
a Fund.

For the fiscal year ended November 30, 1995, for services provided to the Funds,
Capitoline received advisory fees from Cash Reserve Fund, U.S. Treasury Money
Fund, Tax Free Money Fund, Limited Term Bond Fund, Intermediate Bond Fund,
Government Bond Fund, Virginia Intermediate Municipal Bond Fund, Virginia
Municipal Bond Fund, Value Fund, Capital Appreciation Fund and Special Equity
Fund equal to .40%, .40%, .40%, .50%, .60%, .50%, .50%, .50%, .75%, .75% and
.75%, respectively, of the average daily net assets of each Fund.

Capitoline is a wholly-owned subsidiary of Crestar Bank, which is a subsidiary
of Crestar Financial Corporation, a MidAtlantic Region banking organization.
Crestar Financial Corporation had total assets of approximately $18.3 billion as
of December 31, 1995. Crestar Financial Corporation was organized in 1962 as a
bank holding company registered under the federal Bank Holding Company Act of
1956 and files annual and periodic reports with the Securities and Exchange
Commission under the Securities Exchange Act of 1934. (See "Banking Law
Matters.")

Capitoline was organized in 1973 and is one of the largest investment advisory
organizations in Virginia. As of December 31, 1995, Capitoline managed trust and
investment assets of approximately $11.4 billion.

ADMINISTRATOR AND DISTRIBUTOR

SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), provides the Company with administrative
services, including fund accounting, regulatory reporting, necessary office
space, equipment, personnel, and facilities.

The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .15% of the average daily net assets of the Funds.
SEI Financial Services Company, a wholly-owned subsidiary of SEI, serves as
distributor. Each Fund may execute brokerage or other agency transactions
through the Distributor for which the Distributor receives compensation.

DISTRIBUTION AND SERVICE PLANS

The Board of Directors of the Company has approved an Amended and Restated
Distribution and Service Plan (the "Plan") pursuant to Rule 12b-1 of the 1940
Act (the "Rule"). Under this Plan the Distributor is compensated at the annual
rate of .15% of the aggregate average daily net assets of the Trust Class Shares
of each Fund. The Distributor will be compensated for distribution services
provided to the Trust Class shares including the printing and distribution of
Prospectuses, Statements of Additional Information or reports prepared for the
use in connection with the offering of shares of the Funds (other than to
existing shareholders at the time of such mailing), the expenses incurred for
the preparation of any other literature used by the Distributor in connection
with any such offering. The Distributor has agreed to waive any fees payable
pursuant to the Plan, and will bear the costs of other distribution-related
activities. The Distributor reserves the right to terminate its waiver at any
time at its sole discretion.

The Plan also permits Capitoline, at its sole discretion, to use all or a
portion of the advisory fee received, as well as its past profits or other
resources, to pay financial institutions or other industry professionals such as
investment advisers, accountants, banks, and estate planning firms for
shareholder support services. Capitoline may engage banks and broker-dealers,
including Crestar Bank and Crestar Securities Corporation, as Qualified
Recipients to perform certain shareholder support services. Such Qualified
Recipients may impose charges or other requirements on their customers for
automatic investment and other cash management services which an investor
utilizing such services through a Qualified Recipient should take into
consideration when determining the effective yield of an investment in a Fund.

The Distributor may pay all or a portion of the distribution fee to Qualified
Recipients who sell shares of each Fund. Qualified Recipients who provide
enhanced inquiry, order entry and sales facilities in connection with
transactions in Fund shares by their clients may receive a fee up to the maximum

<PAGE>

applicable asset based sales charges. In addition, the Distributor will, at its
expense provide promotional incentives such as sales contests and trips to
investment professionals who support the sale of shares of each Fund. In some
instances, these incentives will be offered only to certain types of investment
professionals, such as bank-affiliated or non-bank affiliated broker-dealers, or
to investment professionals whose representatives provide services in connection
with the sale or expected sale of significant amounts of shares.

TRANSFER AGENT AND CUSTODIAN

Crestar Bank (the "Transfer Agent"), 919 East Main Street, Richmond, VA 23219,
acts as each Fund's transfer agent, dividend paying agent and custodian. As
Transfer Agent, Crestar Bank maintains shareholder accounts and records for each
Fund. For its services as Transfer Agent, Crestar Bank is paid a monthly fee at
the annual rate of .05% of average net assets of the Trust Class of each Fund.

As Custodian, Crestar Bank safeguards and controls the Funds' cash and
securities, handles the receipt and delivery of securities and collects income
on Fund investments. For these services, Crestar Bank is paid a monthly fee at
an annual rate of up to .04% of each Fund's average net assets.

Crestar Bank is permitted to subcontract any or all of its functions to one or
more qualified sub-transfer agents, sub-custodians or other persons. Crestar
Bank is permitted to compensate those agents for their services, but no such
compensation may increase the aggregate amount of payments by the Funds to
Crestar Bank pursuant to the Transfer Agent or Custodian Agreements.

OTHER EXPENSE INFORMATION

Each Fund may elect not to qualify its shares for sale in every state. For the
purpose of Capitoline's obligation to reimburse expenses, each Fund's annual
expenses are estimated and accrued daily, and any appropriate estimated payments
will be made by Capitoline monthly. Each Fund's expenses include Company
expenses attributable to a particular Fund, are allocated to that Fund. Expenses
not directly attributable to a particular Fund, are allocated among the Funds in
proportion to their average net assets. Expenses attributable to a particular
Class of shares are paid by that Class.

Subject to the obligations of Capitoline under the Advisory Agreement to
reimburse a Fund for its expenses in excess of the lowest applicable state
limitations, each Fund has confirmed its obligation to pay all of that Fund's
other expenses.

BANKING LAW MATTERS

Banking laws and regulations, including the Glass-Steagall Act (as currently
interpreted by the Board of Governors of the Federal Reserve System), prohibit a
bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing, controlling, or distributing
the shares of a registered, open-end investment company continuously engaged in
the issuance of its shares and prohibit banks generally from issuing,
underwriting, selling or distributing securities. The same laws and regulations
generally permit a bank or bank affiliate to act as an investment adviser and to
purchase shares of the investment company as agent for and upon the order of a
customer. Upon advice of counsel, the Company's Board of Directors believes that
Capitoline, Crestar Bank and any bank or bank affiliate may perform processing
or transfer agency or similar services described in this Prospectus for each
Fund and its shareholders without violating applicable federal banking laws or
regulations.

However, judicial or administrative decisions or interpretations of, as well as
changes in, either federal or state statutes or regulations relating to the
activities of banks and their affiliates could prevent a bank or bank affiliate
from continuing to perform all or a part of the activities contemplated by this
Prospectus. If banks or bank affiliates were prohibited from so acting, the
Company would change its existing policies to permit bank customers who are
shareholders to remain shareholders of a Fund and would implement alternative
means for continuing the servicing of such shareholders. In such event, changes
in the operation of the Fund might occur and a shareholder serviced by such bank
or bank affiliates may no longer be able to avail itself of the bank's or its
affiliates' services. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.

DESCRIPTION OF COMMON STOCK

Cash Reserve Fund, U.S. Treasury Money Fund, Limited Term Bond Fund,
Intermediate Bond Fund, Government Bond Fund, Value Fund, Capital Appreciation
Fund and Special Equity Fund are diversified portfolios of CrestFunds(Register
mark), Inc. Maryland Municipal Bond Fund, Tax Free Money Fund, Virginia
Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund are
non-diversified portfolios of CrestFunds(Register mark), Inc. The authorized
capital stock of the Company, which was incorporated as a Maryland corporation
on March 17, 1986, consists of 20 billion shares of stock having a par value of
one tenth of one cent ($.001) per share. The Board of Directors may, without
shareholder approval and at

<PAGE>

the Company's expense, divide the authorized stock into an unlimited number of
separate series. Currently all the authorized stock of the Company is divided
into 12 separate series: Cash Reserve Fund Common Stock, U.S. Treasury Money
Fund Common Stock, Tax Free Money Fund Common Stock, Limited Term Bond Fund
Common Stock, Intermediate Bond Fund Common Stock, Government Bond Fund Common
Stock, Maryland Municipal Bond Fund Common Stock, Virginia Intermediate
Municipal Bond Fund Common Stock, Virginia Municipal Bond Fund Common Stock,
Value Fund Common Stock, Capital Appreciation Fund Common Stock and Special
Equity Fund Common Stock, representing shares for each of the Company's 12
CrestFunds(Register mark). The CrestFunds(Register mark) offer one or more of
three classes of shares: Trust Class (offered by this Prospectus) and A Shares
and B Shares (offered by a separate prospectus). U.S. Treasury Money Fund has
indefinitely suspended its offering of A Shares. The offering may recommence
upon supplementing the A Shares and B Shares Prospectus.

A Shares and B Shares are offered continuously to individual and institutional
customers investing directly in CrestFunds(Register mark). A Shares of the money
market funds are offered at NAV. A Shares of Limited Term Bond Fund are offered
at NAV plus a maximum 2.0% sales charge. A Shares of Intermediate Bond Fund are
offered at NAV plus a maximum 3.0% sales charge. A Shares of Virginia
Intermediate Bond Fund are offered at NAV plus a maximum 3.5% sales charge.
Equity funds are offered at NAV plus a maximum 4.50% sales charge. A Shares of
each money market fund pay an additional distribution-related 12b-1 fee at
annual rate of .25% of the average net assets of the A Shares of that Fund. The
A Shares and B Shares of each Fund also pay a fee for transfer agency services
at an annual rate of .06% of the average net assets of that Fund. Performance of
A Shares and B Shares is lower than that of Trust Class shares of the same Fund
due to A Shares' and B Shares' higher total expenses. A Shares and B Shares bond
fund yields and bond and equity fund total returns generally include the effects
of the maximum applicable sales charge, or contingent deferred sales charge,
which has the effect of lowering the yield and total return figures.

B Shares are offered with a contingent deferred sales charge to retail investors
who engage an investment professional for investment advice. B Shares are
subject to an annual distribution fee at the rate of .75% of average net assets,
an annual shareholder service fee at the rate of .25% of average net assets, and
a contingent deferred sales charge upon redemption within seven years of
purchase, which decreases from a maximum of 5% to 0%. At the end of seven years,
B Shares automatically convert to A Shares. B Shares are available for Special
Equity Fund, Value Fund, Cash Reserve Fund, Government Bond Fund, Maryland
Municipal Bond Fund, and Virginia Municipal Bond Fund. Performance for B Shares
is expected to be lower than that of A Shares and Trust Class shares of a Fund
due to B Shares' higher total expenses.

All shares of the Company have equal voting and liquidation rights, and
fractional shares have those rights proportionately. Generally, shares will be
voted in the aggregate without reference to a particular Fund or Class, unless
the matter affects only one Fund or Class or voting by a Fund or Class is
required by law, in which case shares will be voted separately by the Fund or
Class, as the case may be. Maryland law does not require the Company to hold
annual meetings of shareholders and the Company does not intend to do so, though
special meetings will be held when required by law. Shareholders representing
25% or more of the Company or a Fund may, as set forth in the Company's By-laws,
call meetings of the Company or a Fund, as the case may be, including, in the
case of a meeting of the entire Company, the purpose of voting on removal of one
or more Directors. There are no conversion or preemptive rights in connection
with shares of each Fund. All shares, when issued and paid for, in accordance
with the terms of the offering will be fully paid and non-assessable.

A shareholder owning of record or beneficially more than 25% of a Fund's shares
may be considered to control that Fund. As of March 1, 1996 Crestar Bank was the
record holder of more than 25% of the shares of the following Funds:

<TABLE>
<CAPTION>
FUND NAME SHAREHOLDER %
<S> <C> <C>
Cash Reserve Fund.................................................................... Crestar Bank, Richmond, VA 94%
U.S. Treasury Money Fund............................................................. Crestar Bank, Richmond, VA 99%
Tax Free Money Fund.................................................................. Crestar Bank, Richmond, VA 94%
Limited Term Bond Fund............................................................... Crestar Bank, Richmond, VA 89%
Intermediate Bond Fund............................................................... Crestar Bank, Richmond, VA 88%
Government Bond Fund................................................................. Crestar Bank, Richmond, VA 46%
VA Intermediate Municipal Bond Fund.................................................. Crestar Bank, Richmond, VA 78%
VA Municipal Bond Fund............................................................... Crestar Bank, Richmond, VA 61%
MD Municipal Bond Fund............................................................... Crestar Bank, Richmond, VA 100%
Value Fund........................................................................... Crestar Bank, Richmond, VA 89%
Capital Appreciation Fund............................................................ Crestar Bank, Richmond, VA 44%
Special Equity Fund.................................................................. Crestar Bank, Richmond, VA 84%
</TABLE>

This record ownership includes accounts owning Fund shares for which Crestar
Bank acts as trustee or agent.

<PAGE>

APPENDIX

The following briefly describes the securities in which the Funds may invest and
the transactions they may make. The Funds are not limited by this discussion,
however, and may purchase other types of securities and enter into other types
of transactions if they meet each Fund's respective quality, maturity, and
liquidity requirements.

A complete listing of the Fund's policies and limitations and more detailed
information about the Fund's investments is contained in the Fund's Statement of
Additional Information. Recent holdings and investment strategies are described
in the Fund's financial reports.

AMERICAN DEPOSITARY RECEIPTS ("ADRS"). Value Fund and Capital Appreciation Fund
may invest in sponsored ADRs, which are certificates evidencing ownership of
shares of a foreign-based corporation held in trust by a bank or similar
financial institution. Designed for use in U.S. securities markets, ADRs are
alternatives to the purchase of the underlying securities in their national
markets and currencies. A sponsored ADR is an ADR established jointly by the
issuer of the security underlying the receipt and the bank or other financial
institution holding the receipt.

ASSET-BACKED SECURITIES. Asset-backed securities represent interests in pools of
consumer loans (generally unrelated to mortgage loans) and most often are
structured as pass-through securities. Interest and principal payments
ultimately depend on payment of the underlying loans by individuals, although
the securities may be supported by letters of credit or other credit
enhancements. The value of asset-backed securities may also depend on the
creditworthiness of the servicing agent for the loan pool, the originator of the
loans, or the financial institution providing the credit enhancement. A Fund may
purchase units of beneficial interest in pools of purchase contracts, financing
leases, and sales agreements entered into by municipalities. These municipal
obligations may be created when a municipality enters into an installment
purchase contract or lease with a vendor and may be secured by the assets
purchased or leased by the municipality. However, except in very limited
circumstances, there will be no recourse against the vendor if the municipality
stops making payments. The market for tax-exempt asset-backed securities is
still relatively new. These obligations are likely to involve unscheduled
prepayments of principal.

BANKERS' ACCEPTANCES. The money market funds may purchase bankers' acceptances,
which are time drafts drawn on and accepted by a bank, the customary means of
effecting payment for merchandise sold in import-export transactions and a
source of financing used extensively in international trade.

BANK OBLIGATIONS. The performance of the money market funds may be affected by
conditions affecting the banking industry. Banks are subject to extensive
governmental regulations which may limit both the amounts and types of loans and
other financial commitments they can make and the interest rates and fees they
can charge. Bank profitability is largely dependent on the availability and cost
of capital funds, and has shown significant fluctuation recently as a result of
volatile interest rate levels. In addition, general economic conditions are
important to bank operations, with exposure to credit losses potentially having
an adverse effect.

CERTIFICATES OF DEPOSIT. Cash Reserve Fund and Tax Free Money Fund may purchase
certificates of deposit, which are debt instruments issued by a bank that
usually pays interest. Maturities range from a few weeks to several years.
Interest rates are set by competitive forces in the marketplace.

COLLATERALIZED MORTGAGE OBLIGATIONS. The corporate bond funds may purchase
collateralized mortgage obligations ("CMOs"), which are pay-through securities
collateralized by mortgages or mortgage-backed securities. CMOs are issued in
classes and have different maturities and often are retired in sequence. CMOs
may be issued by governmental or non-governmental entities such as banks and
other mortgage lenders. CMOs may be volatile investments. During periods of
declining interest rates, prepayment of mortgages underlying CMOs can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these prepayment risks, the realized yield or total return of a particular issue
may be reduced.

COMMERCIAL PAPER. The money market funds may purchase commercial paper, which is
comprised of short-term obligations issued by banks, broker-dealers,
corporations, or other entities for purposes such as financing their current
obligations. Currently only the Cash Reserve Fund intends to purchase commercial
paper and will limit its purchase of these instruments to those rated Prime-1 by
Moody's or A-1 by S&P.

COMMON STOCK. The equity funds may purchase common stock which is evidence of
ownership of a corporation. Owners typically are entitled to vote on the
selection of directors and other important matters as well as to receive
dividends on their holdings. In the event that a corporation is liquidated, the
claims of secured and unsecured creditors and owners of bonds and preferred
stock take precedence over the claims of those who own common stock. For the
most part, however, common stock has more potential for appreciation. Preferred
stock is a class of capital stock that pays dividends at a specified rate and
that has preference over common stock in the payment of dividends and the
liquidation of assets. Preferred stock does not ordinarily carry voting rights.

<PAGE>

CONVERTIBLE PREFERRED STOCK. The corporate bond funds and the equity funds may
purchase convertible preferred stock, which is preferred stock that may be
converted or exchanged by the holder into shares of the underlying common stock
at a stated exchange ratio. A convertible security may also be subject to
redemption by the issuer after a particular date and under certain circumstances
(including a specified price) established upon issue. If a convertible security
held by a Fund is called for redemption, the Fund could be required to tender it
for redemption, convert it to the underlying common stock, or sell it to a third
party.

DELAYED-DELIVERY TRANSACTIONS. The money market and bond funds may buy and sell
obligations on a when-issued or delayed-delivery basis, with payment and
delivery taking place at a future date. Ordinarily, a Fund will not earn
interest on securities purchased until they are delivered, failure by the other
party to deliver a security purchased by a Fund may result in a loss or a missed
opportunity to make an alternative investment. The market value of obligations
purchased in this way may change before the delivery date, which could increase
fluctuations in a bond fund's yield.

DEMAND FEATURE. A put that entitles the security holder to repayment of the
principal amount of the underlying security on no more than 30 days' notice at
any time or at specified intervals is a demand feature. With respect to the
money market funds, such intervals may not exceed 397 days. A standby commitment
is a put that entitles the security holder to same-day settlement at amortized
cost plus accrued interest.

FOREIGN INVESTMENTS. The corporate bond funds and the equity funds may invest in
foreign securities traded in the United States, which involve risks in addition
to the risks inherent in domestic investments. The Funds' foreign investments
may be affected by the strength of foreign currencies relative to the U.S.
dollar, or by political or economic developments in foreign countries. Foreign
companies may not be subject to accounting standards or governmental supervision
comparable to U.S. companies, and there may be less public information about
their operations. In addition, foreign markets may be less liquid or more
volatile than U.S. markets and may offer less protection to investors. These
risks are typically greater for investments in less developed countries whose
governments and financial markets may be more susceptible to adverse political
and economic developments. In addition to the political and economic factors
that can affect foreign securities, a governmental issuer may be unwilling to
repay principal and interest when due, and may require that the conditions for
payment be renegotiated. These factors could make foreign investments,
especially those in developing countries more volatile. Capitoline considers
these factors in making investments for the Fund. There is no limitation on the
amount each corporate bond fund and equity fund may invest in foreign securities
or in any one country. The corporate bond funds will invest only in U.S.
dollar-denominated foreign securities.

GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities are referred to as government securities. They
may be backed by the credit of the U.S. Government as a whole or only by the
issuing agency. For example, securities issued by the Federal Home Loan Banks
and the Federal Home Loan Mortgage Corporation are supported only by the credit
of the issuing agency, and not by the U.S. Government. Securities issued by the
Federal Farm Credit System, the Federal Land Banks and the Federal National
Mortgage Association are supported by the agency's right to borrow money from
the U.S. Treasury under certain circumstances. U.S. Treasury securities and some
agency securities, such as those issued by the Federal Housing Administration
and the Government National Mortgage Association, are backed by the full faith
and credit of the U.S. Government and are the highest quality government
securities.

ILLIQUID SECURITIES. Illiquid securities are securities which cannot be disposed
of within seven days at approximately the price at which they are being carried
on a Fund's books. An illiquid security includes a demand instrument with a
demand notice period exceeding seven days, where there is no secondary market
for such security, and repurchase agreements of over seven days in length.
Capitoline will determine and monitor the liquidity of portfolio securities
subject to the supervision of the Fund's Board of Directors.

INDEXED SECURITIES. The corporate bond and government bond funds may invest in
indexed securities whose value is linked to currencies, interest rates,
commodities, indices, or other financial indicators. Most indexed securities are
short to intermediate term fixed-income securities whose values at maturity or
interest rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be positively or negatively
indexed (i.e., their value may increase or decrease if the underlying instrument
appreciates), and may have return characteristics similar to direct investments
in the underlying instrument or to one or more options on the underlying
instrument. Indexed securities may be more volatile than the underlying
instrument itself.

<PAGE>

INVESTMENT-GRADE SECURITIES. Investment-grade securities include securities
rated BBB or higher by S&P or Baa or higher by Moody's which generally provide
adequate to strong protection of principal and interest payments. Securities
rated BBB or Baa may be more susceptible to potential adverse changes in
circumstances which may lead to a weakened capacity to make principal and
interest payments, and may have speculative characteristics as well. If a
security is rated investment-grade by one rating agency and below
investment-grade by another rating agency, Capitoline may make a determination
as to the security's investment-grade quality.

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and in order to generate additional income, the corporate bond
funds, taxable money market funds and equity funds may lend their portfolio
securities to broker-dealers and other institutional borrowers. Such loans must
be callable at any time and continuously secured by collateral (cash, U.S.
Government securities or money market instruments) in an amount not less than
the market value, determined daily, of the securities loaned. Loans secured by
cash collateral are invested in short-term high quality debt securities, U.S.
Government securities or money market instruments.

In the event of the bankruptcy of the other party to either a securities loan, a
repurchase agreement or a reverse repurchase agreement, a Fund could experience
delays in recovering either the securities it lent or its cash. To the extent
that, in the meantime, the value of the securities a Fund lent has increased or
the value of the securities it purchased has decreased, it could experience a
loss.

LETTERS OF CREDIT. Issuers or financial intermediaries who provide demand
features or standby commitments often support their ability to buy securities on
demand by obtaining letters of credit ("LOCs") or other guarantees from banks.
LOCs also may be used as credit supports for other types of municipal
instruments. Capitoline may rely upon its evaluation of a bank's credit in
determining whether to purchase an instrument supported by an LOC. In evaluating
a foreign bank's credit, Capitoline will consider whether adequate public
information about the bank is available and whether the bank may be subject to
unfavorable political or economic developments, currency controls, or other
governmental restrictions that might affect the bank's ability to honor its
credit commitment.

MORTGAGE-BACKED SECURITIES. The corporate bond and government bond funds may
purchase mortgage-backed securities issued by government and non-government
entities such as banks, mortgage lenders, or other financial institutions. A
mortgage-backed security may be an obligation of the issuer backed by a mortgage
or pool of mortgages or a direct interest in an underlying pool of mortgages.
Some mortgage-backed securities, such as collateralized mortgage obligations, or
CMOs, make payments of both principal and interest at a variety of intervals;
others make semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond). Mortgage-backed securities are
based on different types of mortgages including those on commercial real estate
or residential properties. Other types of mortgage-backed securities will likely
be developed in the future, and the corporate bond funds may invest in them if
Capitoline determines they are consistent with the Funds' investment objective
and policies.

The market volatility of mortgage-backed securities can be greater than the
market volatility of other bonds. The value of mortgage-backed securities may
change due to shifts in the market's perception of issuers. In addition,
regulatory or tax changes may adversely affect the mortgage securities market as
a whole. Non- government mortgage-backed securities may offer higher yields than
those issued by government entities, but also may be subject to greater price
changes than government issues. Mortgage-backed securities are subject to
prepayment risk. Prepayment, which occurs when unscheduled or early payments are
made on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns. During periods of declining
interest rates, prepayment of mortgages underlying mortgage securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield or total return of a
particular issue. In the absence of a known maturity, market participants
generally refer to a security's estimated average life. An average life estimate
is a function of an assumption regarding anticipated prepayment patterns, based
upon current interest rates, current conditions in the relevant housing markets
and other factors. The assumption is necessarily subjective, and thus different
market participants can produce different average life estimates with regard to
the same security. There can be no assurance that estimated average life will be
a security's actual average life.

<PAGE>

STRIPPED MORTGAGE-BACKED SECURITIES. Securities created when a U.S. Government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual securities
are stripped mortgage-backed securities. The holder of the "principal-only"
security (PO) receives the principal payments made by the underlying
mortgage-backed security, while the holder of the "interest-only" security (IO)
receives interest payments from the same underlying security. The prices of
stripped mortgage-backed securities may be particularly affected by changes in
interest rates. As interest rates fall, prepayment rates tend to increase, which
tends to reduce prices of IOs and increase prices of POs. Rising interest rates
can have the opposite effect. The market volatility of stripped mortgage-backed
securities tends to be greater than the market volatility of other types of
mortgage-backed securities in which the Funds may invest. If the mortgage assets
which underlie the stripped mortgage-backed securities were to experience
greater than anticipated prepayments of principal, a Fund could fail to fully
recoup its initial investment in these securities, even if they are rated in the
highest rating categories (e.g., AAA or Aaa by S&P or Moody's, respectively).

MUNICIPAL SECURITIES. Municipal securities include general obligation
securities, which are backed by the full taxing power of a municipality, and
revenue securities, which are backed by the revenues of a specific tax, project,
or facility. Industrial development, or private activity, bonds are a type of
revenue bond backed by the credit and security of a private entity and may
involve greater risk; such securities, which may be subject to the federal
alternative minimum tax, include securities issued to finance housing projects,
many hospital and university facilities, student loans, and privately owned
solid waste disposal and water and sewage treatment facilities.

REPURCHASE AGREEMENTS. The corporate bond funds, government bond fund, taxable
money market funds and equity funds may enter into repurchase agreements. In a
repurchase agreement, a Fund buys a security at one price and simultaneously
agrees to sell it back at a higher price. In the event of bankruptcy of the
other party to a repurchase agreement, the Funds could experience delays in
recovering its cash. To the extent that, in the meantime, the value of
securities purchased had decreased, the Funds could experience a loss. In all
cases, Capitoline must find the creditworthiness of the other party to the
transaction satisfactory.

RESOURCE RECOVERY BONDS. The Tax Free Money Fund and the municipal bond funds
may purchase resource recovery bonds, which are a type of revenue bond issued to
build facilities such as solid waste incinerators or waste-to-energy plants.
Typically, a private corporation will be involved, at least during the
construction phase, and the revenue stream will be secured by fees or rents paid
by municipalities for use of the facilities. The viability of a resource
recovery project, environmental protection regulations, and project operator tax
incentives may affect the value and credit quality of resource recovery bonds.

REFUNDING CONTRACTS. The municipal bond funds may invest in refunding contracts
which require the issuer to sell and a Fund to buy refunded municipal
obligations at a stated price and yield on a settlement date that may be several
months or several years in the future.

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Fund
temporarily transfers possession of a portfolio instrument to another party,
such as a bank or broker-dealer, in return for cash. At the same time, a Fund
agrees to repurchase the instrument at an agreed-upon price and time. A Fund
expects that it will engage in reverse repurchase agreements for temporary
purposes such as to fund redemptions. Reverse repurchase agreements may increase
the risk of fluctuation in the market value of a Fund's assets or in its yield.

While a reverse repurchase agreement is outstanding, a Fund will maintain
appropriate liquid assets such as cash, U.S. Government securities, or other
liquid high grade debt securities in a segregated custodial account to cover its
obligations under the agreement. A Fund will enter into reverse repurchase
agreements only with those parties whose creditworthiness is deemed satisfactory
by Capitoline.

STRIPPED GOVERNMENT SECURITIES. Stripped securities are created by separating
the income and principal components of a debt instrument and selling them
separately. Each Fund may purchase U.S. Treasury STRIPS (Separate Trading of
Registered Interest and Principal of Securities), that are created when the
coupon payments and the principal payment are stripped from an outstanding
Treasury bond by the Federal Reserve Bank. Bonds issued by the Resolution
Funding Corporation (REFCORP) can also be stripped in this fashion. REFCORP
STRIPS are eligible investments for each money market and bond fund.

<PAGE>

Each Fund except the U.S. Treasury Fund may purchase privately stripped
government securities, which are created when a dealer deposits a Treasury
security or federal agency security with a custodian for safekeeping and then
sells the coupon payments and principal payments that will be generated by this
security. Proprietary receipts, such as Certificates of Accrual on Treasury
Securities (CATS), Treasury Investment Growth Receipts (TIGRs), and generic
Treasury Receipts (TRs), are stripped U.S. Treasury securities that are
separated into their component parts through trusts created by their broker
sponsors. Bonds issued by the Financing Corporation (FICO) can also be stripped
in this fashion.

Because of the SEC's views on privately stripped government securities, a Fund
must treat them as it would non-government securities pursuant to regulatory
guidelines applicable to all money market funds. Accordingly, a Fund currently
intends to purchase only those privately stripped government securities that
have either received the highest rating from two nationally recognized rating
services (or one, if only one has rated the security), or, if unrated, been
judged to be of equivalent quality by Capitoline.

TAX AND REVENUE ANTICIPATION NOTES. Tax and revenue anticipation notes are
issued by municipalities in expectation of future tax or other revenues, and are
payable from those specific taxes or revenues. Bond anticipation notes normally
provide interim financing in advance of an issue of bonds or notes, the proceeds
of which are used to repay the anticipation notes. Tax-exempt commercial paper
is issued by municipalities to help finance short-term capital or operating
needs.

TIME DEPOSITS. Time deposits are non-negotiable deposits in a banking
institution earning a specified interest rate over a given period of time. Time
deposits with a maturity of seven business days or more are considered illiquid.

VARIABLE AND FLOATING RATE INSTRUMENTS. The money market funds and the bond
funds may purchase variable and floating rate instruments, including certain
participation interests in municipal obligations, which have interest rate
adjustment formulas that help to stabilize their market values. Many variable
and floating rate instruments also carry demand features that permit the Funds
to sell them at par value plus accrued interest on short notice. When
determining the maturity of a variable or floating rate instrument, the Funds
may look to the date the demand feature can be exercised, or to the date the
interest rate is readjusted, rather than to the final maturity of the
instrument.

ZERO COUPON BONDS. The corporate bond funds may purchase zero coupon bonds. Zero
coupon bonds do not make regular interest payments; instead, they are sold at a
deep discount from their face value and are redeemed at face value when they
mature. Because zero coupon bonds do not pay current income, their prices can be
very volatile when interest rates change. In calculating its daily dividend,
each Fund takes into account as income a portion of the difference between a
zero coupon bond's purchase price and its face value.

RISKS AND SPECIAL CONSIDERATIONS CONCERNING
MARYLAND MUNICIPAL BOND FUND

ECONOMY. The economy of the State of Maryland continues to demonstrate
relatively strong performance, with personal income well above the national
average. Total State employment was 2.58 million in December, 1995 with the
majority of jobs in trade, service, and government sectors. The national
recession caused a loss of jobs in Maryland since employment levels peaked in
mid-1990 but employment levels began to recover in mid-1992. Unemployment was
4.8% in December, 1995, compared to a national average of 5.6%. The State's
population in 1994 was approximately 5 million, with 83% concentrated in the
Baltimore-Washington corridor.

DEBT. In addition to the State of Maryland and its agencies, there are 23
counties and 156 incorporated municipalities in Maryland (including Baltimore
City, which functions much like a county), many of which have outstanding debt.
As described below, a number of Maryland public authorities also issue debt. The
State of Maryland and its political subdivisions issue four basic types of debt
having varying degrees of credit risk: general obligation bonds backed by the
unlimited taxing power of the issuer, revenue bonds secured by specific pledged
taxes or revenue streams, conduit revenue bonds payable from the repayment of
certain loans to entities such as hospitals and universities, and tax-exempt
lease obligations (including certificates of participation in the same), the
payments under which are subject to annual appropriation. In 1995, $1.763
billion in state and local debt was issued in Maryland, with approximately 60%
representing general obligation debt and 40% revenue bonds or lease-backed debt,
compared to 46% general obligation and 54% revenue backed bonds nationally.

<PAGE>

AAA by Fitch; there can be no assurance that these ratings will continue. There
is no general limit on state general obligation bonds imposed by the State
Constitution or laws; state general obligation bonds are payable from ad valorem
taxes and, under the State Constitution, may not be issued unless the debt is
authorized by a law levying an annual tax or taxes sufficient to pay the debt
service within 15 years and prohibiting the repeal of the tax or taxes or their
use for another purpose until the debt has been paid. State and local general
obligation debt on a per capita basis and as a percentage of property values
have increased by 33.4% and 7.1%, respectively since 1990. Although the State
may borrow up to $100 million in short-term notes in anticipation of taxes and
revenues, the State has not made use of this authority.

Many agencies and instrumentalities of the State government are authorized to
borrow money under legislation which expressly provides that the obligations
shall not be deemed to constitute a debt or a pledge of the faith and credit of
the State. The Department of Transportation issues limited, special obligations
payable primarily from fixed-rate excise taxes and other revenues related mainly
to highway use, the amount of which was limited by the General Assembly to
$1.054 billion for fiscal year 1996 (ending June 30, 1996); the principal amount
of such bonds outstanding as of December 31, 1995 was $990.3 million. The
Maryland Transportation Authority, the Community Development Administration of
the Department of Housing and Community Development, the Maryland Stadium
Authority, the Maryland Environmental Service, the public educational
institutions (which include the University of Maryland System, Morgan State
University, St. Mary's College of Maryland and Baltimore City Community
College), the Maryland Food Center Authority and the Maryland Water Quality
Financing Administration also have issued and have outstanding bonds, the
principal of and interest on which are payable solely from specified sources,
principally fees or loan payments generated from use of the facilities,
enterprises financed by the bonds, or other dedicated fees. None of these bonds
constitute debts or pledges of the faith and credit of the State. The issuers of
these obligations are subject to various economic risks and uncertainties, and
the credit quality of the securities issued by them may vary considerably from
that of the State's general obligation bonds. Total outstanding revenue and
enterprise debt of these State units at December 31, 1995 was approximately
$4.17 billion.

Certain State agencies also execute capital lease or conditional purchase
agreements to finance certain facilities; all of the payments under these
arrangements are subject to annual appropriation by the State. In the event that
appropriations are not made, the State and its agencies may not be held
contractually liable for the lease payments. As of December 31, 1995
approximately $113.9 million of lease and conditional purchase financings were
outstanding.

In addition, the Maryland Health and Higher Educational Facilities Authority,
the Maryland Industrial Development Financing Authority, the Northeast Maryland
Waste Disposal Authority and the Maryland Economic Development Corporation issue
conduit revenue bonds, the proceeds of which are lent to borrowers eligible
under relevant State and federal law. These bonds are payable solely from the
loan payments made by the borrowers, and their credit quality vary with the
financial strengths of the respective borrowers.

FINANCIAL. To a large degree, the risk of the portfolio is dependent upon the
financial strength of the State of Maryland, its political subdivisions and the
obligors on conduit revenue bonds. During the 1991, 1992 and 1993 fiscal years,
Maryland experienced the effects of the national recession and a weakened
economy. During this period, the State experienced unanticipated shortfalls in
revenues. At the same time, the State experienced increased expenditures for
public assistance. To address this situation, the State reduced appropriations,
including aid to local governments, in several instances.

As a result of successive rounds of cuts in local and other State expenditures
and increases in taxes, the financial situation of the State stabilized in
fiscal year 1993 with revenues coming in, at or above budgeted amounts,
permitting the State to conclude fiscal year 1993 with a general fund surplus
(budgetary basis) of $10.5 million (after $24.5 million of transfers to reserve
accounts) and a $50.9 million balance in the Revenue Stabilization Account of
the State Reserve Fund. Demonstrating continued improvement, the State ended its
fiscal year 1994 with a general fund surplus of $60 million on a budgetary basis
and $161.8 million on deposit in the Revenue Stabilization Account of the State
Reserve Fund. The State's finances continued to improve in fiscal year 1995,
with revenues exceeding estimate by $217.4 million and expenditures at $184.9
million above budget. The State ended its fiscal year 1995 with a General Fund
undesignated fund balance of $26.5 million (after reservation of $106 million
for fiscal year 1996 expenses) and an additional $286.1 million on deposit in
the Revenue Stabilization Account of the State Reserve Fund.

In April, 1995 the State's General Assembly approved a $14.4 billion budget for
fiscal year 1996, an 8.2% increase above the fiscal year 1995 spending level.
This budget did not include any

<PAGE>

expenditures based upon additional revenue from new or broad-based taxes but
included a $270 million appropriation to the State Reserve Fund (excluding a $60
million deficiency appropriation), including $200 million of which is
appropriated to the Revenue Stabilization Account. When the fiscal year 1996
budget was enacted, the State projected that it would end the fiscal year with a
general fund surplus of $7.8 million on a budgetary basis; it is currently
estimated to be $1.0 million. In December, 1995 the State reduced its estimate
of general fund revenues by $92 million; the Governor has proposed a plan to
address this change that includes reductions in or cancellations of general fund
appropriations, $18 million transferred from the Revenue Stabilization Account
and use of the $26.5 fiscal year 1995 surplus. The State projects a year-end
balance in the Revenue Stabilization Account of the State Reserve Fund of $500
million.

OTHER MARYLAND ISSUERS. Many local Maryland governments have also suffered from
fiscal stress and general declines in financial performance. Recessionary
impacts have resulted in downturns in real estate related receipts, declines in
the growth of income tax revenues, lower cash positions and reduced interest
income. To compensate for reductions in State aid to local governments, local
governments closed this gap by increasing property and other taxes, program
cuts, and curtailing pay raises. Certain counties in Maryland are subject to
voter approval limitations on property tax levy increases or on increases in
governmental spending which limits their flexibility in responding to external
changes. Various tax initiatives to reform existing tax structures in certain
counties were placed on the November, 1992 election ballot and were adopted.
Future initiatives, if proposed and adopted, could create pressure on the
counties and other local governments and their ability to raise revenues. The
Fund cannot predict the impact of any such future tax limitations on debt
quality.

Many Maryland counties have established agencies with bond issuing authority,
such as housing authorities. Maryland municipalities also have the power to
issue conduit revenue bonds. Maryland local governments and their authorities
are subject to various risks and uncertainties, and the credit quality of the
bonds issued by them may vary considerably from that of State general obligation
bonds.

SECTORS. Certain areas of potential investment concentration present unique
risks. In recent years, 6 to 12% of tax-exempt debt issues in Maryland has been
for public or non-profit hospitals. A significant portion of the Fund's assets
may be invested in health care issues. Since 1983, the hospital industry has
been under significant pressure to reduce expenses and limit length of stay, a
phenomenon which has negatively affected the financial health of many hospitals.
While each issue is separately secured by the individual hospital's revenues,
third party reimbursement mechanisms for patient care are common to the group.
At the present time Maryland hospitals operate under a system which reimburses
hospitals according to a State administered set of rates and charges rather than
the Federal Diagnosis Related Group (DRG) system for Medicare payments. Since
1983, Maryland hospitals have operated below the national average in terms of
Medicare cost increases, allowing them to continue operating under a Medicare
waiver. However, any loss of this waiver in the future may have an adverse
impact upon the credit quality of Maryland hospitals. Additionally, national
focus on health care reform and any resulting legislation may further impact the
financial condition of hospitals in Maryland and other states.

The Fund may from time to time invest in solid waste revenue bonds which have
exposure to environmental, technological and market risks which could affect the
security and value of the bonds. Such risks include construction delay or
shortfalls in construction funds due to increased regulation, and market
disruption and revenue variability due to recent court decisions and legislative
proposals.

RISKS AND SPECIAL CONSIDERATIONS CONCERNING VIRGINIA INTERMEDIATE MUNICIPAL BOND
FUND AND VIRGINIA MUNICIPAL BOND FUND

General obligations of cities, towns or counties in Virginia are payable from
the general revenues of the entity, including ad valorem tax revenues on
property within the jurisdiction. The obligation to levy taxes could be enforced
by mandamus, but such a remedy may be impracticable and difficult to enforce.
Under section 15.1-227.61 of the Code of Virginia, a holder of any general
obligation bond in default may file with the Governor an affidavit setting forth
such default. If, after investigating, the Governor determines that such default
exists, he is directed to order the State Comptroller to withhold State funds
appropriated and payable to the entity and apply the amount so withheld to
unpaid principal and interest. The Commonwealth, however, has no obligation to
provide any additional funds necessary to pay such principal and interest.

Revenue bonds issued by Virginia political subdivisions include (1) revenue
bonds payable exclusively from revenue producing governmental enterprises and
(2) industrial revenue bonds, college and hospital revenue bonds and other
private activity bonds which are essentially non-governmental debt issues and
which are payable exclusively by private entities such as non-profit
organizations and business concerns of all sizes. State and local governments
have no obligation to provide for payment of such private activity bonds and in
many cases would be legally prohibited from doing so. The value of such private
activity bonds may be affected by a wide variety of factors relevant to
particular localities or industries, including economic developments outside of
Virginia.

<PAGE>

Virginia municipal securities that are lease obligations are customarily subject
to "non-appropriation" clauses. See "Investment Objective and Policies." Legal
principles may restrict the enforcement of provisions in lease financing
limiting the municipal issuer's ability to utilize property similar to that
leased in the event that debt service is not appropriated.

Chapter 9 of the United States Bankruptcy Code permits a municipality, if
insolvent or otherwise unable to pay its debts as they become due, to file a
voluntary petition for the adjustment of debts provided that such municipality
is "generally authorized to be a debtor under Chapter 9 by State law, or by a
governmental officer or organization empowered by State law to authorize such
entity to be a debtor under such chapter." Current Virginia statutes do not
expressly authorize municipalities generally to file under Chapter 9. It is
unclear, however, whether powers otherwise conferred by Virginia law upon
municipalities generally or governmental officers might provide "general
authorization" for filing a Chapter 9 petition by a municipality. Chapter 9 does
not authorize the filing of involuntary petitions against municipalities.

No Virginia law expressly authorizes Virginia political subdivisions to file
under Chapter 9 of the United States Bankruptcy Code, but recent case law
suggests that the granting of general powers to such subdivisions may be
sufficient to permit them to file voluntary petitions under Chapter 9.

Virginia municipal issuers are generally not required to provide ongoing
information about their finances and operations, although a number of cities,
counties and other issuers prepare annual reports.

Although revenue obligations of the Commonwealth or its political subdivisions
may be payable from a specific project or source, including lease rentals, there
can be no assurance that future economic difficulties and the resulting impact
on Commonwealth and local government finances will not adversely affect the
market value of the portfolio of the Fund or the ability of the respective
obligors to make timely payments of principal and interest on such obligations.

SUMMARY OF BOND RATINGS*

<TABLE>
<CAPTION>
RATING SERVICES
INVESTMENT GRADE MOODY'S S&P
<S> <C> <C>
Highest quality............................................................................ Aaa AAA
High quality............................................................................... Aa AA
Upper medium grade......................................................................... A A
Medium grade, some speculative characteristics............................................. Baa BBB
</TABLE>

SUMMARY OF COMMERCIAL PAPER RATINGS*

<TABLE>
<CAPTION>
RATING SERVICES
MOODY'S S&P
<S> <C> <C>
Highest quality............................................................................ Prime-1 A-1
High quality............................................................................... Prime-2 A-2
</TABLE>

* Please refer to the Statement of Additional Information for a more complete
discussion of these ratings.