VISION GROUP OF FUNDS INC, 485BPOS, 1997-12-22

VISION GROUP OF FUNDS INC
485BPOS, 1997-12-22

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1933 Act File No. 33-20673
1940 Act File No. 811-5514

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---

Pre-Effective Amendment No. ....................

Post-Effective Amendment No. 30 ........................ X
---- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 31 ....................................... X
---- ---

VISION GROUP OF FUNDS, INC.

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

___immediately upon filing pursuant to paragraph (b)
X_on December 31, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
___75 days after filing pursuant to paragraph (a)(ii) on _________________
pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

_ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>

Copy to:

Charles H. Morin, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037

<PAGE>

CROSS-REFERENCE SHEET

This amendment to the Registration Statement of Vision Group of Funds, Inc.,
which is comprised of seven portfolios: (1) Vision Money Market Fund, (2) Vision
Treasury Money Market Fund, (3) Vision New York Tax-Free Money Market Fund, (4)
Vision New York Municipal Income Fund (formerly, Vision New York Tax-Free Fund),
(5) Vision U.S. Government Securities Fund, (6) Vision Growth and Income Fund,
(7) Vision Capital Appreciation Fund, and (8) Vision Equity Income Fund, relates
only to (8) Vision Equity Income Fund and is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page....................(1-8) Cover Page.
Item 2. Synopsis......................(1-8) Summary of Fund Expenses.
Item 3. Condensed Financial
Information...................(1-7) Financial Highlights; (1-7) How the Funds Show Performance.
Item 4. General Description of
Registrant....................(1-8) Synopsis; (1-7) How the Funds
Invest; (8) How the Fund Invests;
(1-7) Investment Objective; (1-8)
Investment Policies; (1-8) Acceptable
Investments; (1) Risk Factors
Associated with Foreign Investments;
(3,4) Investment Risks of New York
Municipal Securities; (3)
Concentration of Investments; (3)
Types of Municipal Securities; (3,4)
Temporary Investments; (1-3) Common
Fund Investment Techniques, Features
and Limitations; (4-8) Investment
Techniques, Features, and Limitations.
Item 5. Management of the Fund........(1-8)
Fund Management, Distribution, and
Administration; (1-8) Board of
Directors; (1-8) Investment Adviser;
(1-8) Distribution of Fund Shares;
(1-8) Administration of the Funds.
Item 6. Capital Stock and Other
Securities....................(1-8) Description of Fund Shares; (1-8) Voting Rights and Other
Information; (1-8) Tax Information.
Item 7. Purchase of Securities Being
Offered.......................(1-7) How the Funds Value Their Shares; (8) How the Fund Values
its Shares; (1-8) How to Buy
Shares; (1-8) How to Exchange Shares.
Item 8. Redemption or Repurchase......(1-8) How to Redeem Shares.

Item 9. Pending Legal Proceedings None.

<PAGE>

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page....................(1-8) Cover Page.
Item 11. Table of Contents.............(1-8) Table of Contents.
Item 12. General Information and
History.......................(1-8) General Information About the Funds;
Item 13. Investment Objectives and
Policies......................(1-7) Investment Objectives and Policies; (8) Investment Objective;
(8) Investment Policies; (1-8)
Investment Limitations.
Item 14. Management of the Fund........(1-8) Vision Group of Funds, Inc. Management.
----------------------
Item 15. Control Persons and Principal
Holders of Securities Not Applicable
Item 16. Investment Advisory and Other
Services......................(1-8) Investment Advisory Services; (1-8) Other Services;
Item 17. Brokerage Allocation..........(1-8) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities (1-8) Description of Fund Shares.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered ......................(1-8) How To Buy Shares; (1-8) Determining Net Asset Value; (1-8)
Redeeming Shares; (1-8) Redeeming Fund Shares.
Item 20. Tax Status....................(1-8) Tax Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data..........................(1-8) Performance Comparisons; (1-8) Total Return; (1-6, 8) Yield;
(3,4) Tax-Equivalent Yield;
(3,4) Tax-Equivalency Table; (4-7) Appendix.
Item 23. Financial Statements (8) Filed in Part A.
--------------------

</TABLE>

[LOGO OF VISION EQUITY INCOME FUND]

VISION EQUITY INCOME FUND
(A PORTFOLIO OF VISION GROUP OF FUNDS, INC.)
Semi-Annual Report and Supplement to Prospectus dated September 25, 1997

PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------

Dear Shareholder:

I am pleased to present the Semi-Annual Report and Supplement to the Prospectus
for Vision Equity Income Fund. This information covers the initial period of the
fund's operation (September 26, 1997) through October 31, 1997. It begins with
the financial highlights, followed by a list of the fund's holdings and complete
financial information.

This new addition to the VISION Group of Funds, Inc. is a conservative way to
pursue income and capital appreciation from income-producing equity securities.

It invests in undervalued, high yielding stocks that are relatively 'cheap'
compared to more aggressive growth stocks.* These stocks, issued by large
companies, typically offer dividend growth (and the opportunity for future
growth) and a steady stream of income.

Thank you for being among the first to participate in VISION Equity Income Fund.
We welcome your questions and comments as we keep you informed about the
progress of your investment.

Sincerely,

/s/ Edward C. Gonzales
Edward C. Gonzales
President
December 15, 1997

*Lower rated bonds involve a higher degree of risk than investment grade bonds
in return for higher yield potential.

A. Please insert the following "Financial Highlights" table as page 5 of the
Prospectus. In addition, please add the heading "Financial Highlights" to
the Table of Contents page after the heading "A Summary of the Fund's
Expenses."

VISION EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
OCTOBER 31, 1997(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.01
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.19)
- ---------------------------------------------------------------------------------------------- -------
Total from investment operations (0.18)
- ---------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.81
- ---------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) (1.80%)
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 1.41%*
- ----------------------------------------------------------------------------------------------
Net investment income 1.08%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 1.15%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $15,858
- ----------------------------------------------------------------------------------------------
Average commission rate paid (d) $0.0028
- ----------------------------------------------------------------------------------------------
Portfolio turnover 0%
- ----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from September 26, 1997 (date of
initial public investment) to October 31, 1997.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

(See Notes which are an integral part of the Financial Statements)

B. Please insert the following at the end of the first paragraph in the
subsection entitled "Voting Rights and Other Information" on page 26 of the
Prospectus.

"As of December 3, 1997, Reho & Co., Buffalo, New York owned 59.78% of the
voting securities of the Fund, and, therefore, may for certain purposes be
deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders. As of December 3, 1997, Tice
& Co., Buffalo, New York owned 30.88% of the voting securities of the Fund,
and, therefore, may for certain purposes be deemed to control the Fund and
be able to affect the outcome of certain matters presented for a vote of
shareholders."

C. Please insert the following Financial Statements after the section entitled
"Yield" and before the Addresses page. In addition, please add the heading
"Financial Statements" to the Table of Contents page after the heading
"Voting Rights and Other Information."

VISION EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------------------------------ -------------
<C> <S> <C>
COMMON STOCKS--97.0%
- ------------------------------------------------------------------------------------------------------
AUTOMOBILE--4.7%
------------------------------------------------------------------------------------------
10,000 Chrysler Corp. $ 352,500
------------------------------------------------------------------------------------------
8,900 Ford Motor Co. 388,819
------------------------------------------------------------------------------------------ -------------
Total 741,319
------------------------------------------------------------------------------------------ -------------
CAPITAL EQUIPMENT & SERVICES--6.6%
------------------------------------------------------------------------------------------
7,300 Caterpillar, Inc. 374,125
------------------------------------------------------------------------------------------
6,900 Cooper Industries, Inc. 359,662
------------------------------------------------------------------------------------------
6,200 Illinois Tool Works, Inc. 304,963
------------------------------------------------------------------------------------------ -------------
Total 1,038,750
------------------------------------------------------------------------------------------ -------------
CHEMICALS--3.7%
------------------------------------------------------------------------------------------
3,500 Air Products & Chemicals, Inc. 266,000
------------------------------------------------------------------------------------------
3,500 Dow Chemical Co. 317,625
------------------------------------------------------------------------------------------ -------------
Total 583,625
------------------------------------------------------------------------------------------ -------------
CONSUMER CYCLICAL--4.3%
------------------------------------------------------------------------------------------
7,000 Carnival Corp., Class A 339,500
------------------------------------------------------------------------------------------
5,800 Penney (J.C.) Co., Inc. 340,388
------------------------------------------------------------------------------------------ -------------
Total 679,888
------------------------------------------------------------------------------------------ -------------
CONSUMER NON-CYCLICAL--13.5%
------------------------------------------------------------------------------------------
9,500 Allied-Signal, Inc. 342,000
------------------------------------------------------------------------------------------
4,900 McGraw-Hill Cos., Inc. 320,338
------------------------------------------------------------------------------------------
3,500 Merck & Co., Inc. 312,375
------------------------------------------------------------------------------------------
12,700 Premark International, Inc. 343,694
------------------------------------------------------------------------------------------
12,200 Sonoco Products Co. 392,688
------------------------------------------------------------------------------------------
4,900 V.F. Corp. 437,938
------------------------------------------------------------------------------------------ -------------
Total 2,149,033
------------------------------------------------------------------------------------------ -------------
ELECTRONIC EQUIPMENT--2.5%
------------------------------------------------------------------------------------------
5,000 Pitney Bowes, Inc. 396,563
------------------------------------------------------------------------------------------ -------------
ENERGY--16.4%
------------------------------------------------------------------------------------------
8,200 New Century Energies, Inc. 342,350
------------------------------------------------------------------------------------------
</TABLE>

VISION EQUITY INCOME FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------------------------------ -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------------
ENERGY--CONTINUED
------------------------------------------------------------------------------------------
4,500 Atlantic Richfield Co. $ 370,406
------------------------------------------------------------------------------------------
5,000 Chevron Corp. 414,687
------------------------------------------------------------------------------------------
4,900 Exxon Corp. 301,044
------------------------------------------------------------------------------------------
5,200 Mobil Corp. 378,625
------------------------------------------------------------------------------------------
6,000 Royal Dutch Petroleum Co., ADR 315,750
------------------------------------------------------------------------------------------
5,600 Schlumberger Ltd. 490,000
------------------------------------------------------------------------------------------ -------------
Total 2,612,862
------------------------------------------------------------------------------------------ -------------
FINANCIAL SERVICES--23.2%
------------------------------------------------------------------------------------------
3,800 American International Group, Inc. 387,837
------------------------------------------------------------------------------------------
4,000 Bankers Trust New York Corp. 472,000
------------------------------------------------------------------------------------------
5,600 Comerica, Inc. 442,750
------------------------------------------------------------------------------------------
7,800 Federal National Mortgage Association 377,812
------------------------------------------------------------------------------------------
7,400 First Commerce Corp. 475,450
------------------------------------------------------------------------------------------
1,200 General RE Corp. 236,625
------------------------------------------------------------------------------------------
3,500 J.P. Morgan & Co., Inc. 384,125
------------------------------------------------------------------------------------------
5,700 Jefferson-Pilot Corp. 440,681
------------------------------------------------------------------------------------------
12,200 Reliastar Financial Corp. 455,975
------------------------------------------------------------------------------------------ -------------
Total 3,673,255
------------------------------------------------------------------------------------------ -------------
NATURAL RESOURCES--1.8%
------------------------------------------------------------------------------------------
13,800 Cyprus Amax Minerals 288,937
------------------------------------------------------------------------------------------ -------------
TECHNOLOGY--4.1%
------------------------------------------------------------------------------------------
5,600 Avnet, Inc. 352,450
------------------------------------------------------------------------------------------
3,900 Intel Corp. 300,300
------------------------------------------------------------------------------------------ -------------
Total 652,750
------------------------------------------------------------------------------------------ -------------
UTILITIES--16.2%
------------------------------------------------------------------------------------------
9,800 AT&T Corp. 479,587
------------------------------------------------------------------------------------------
5,300 Bell Atlantic Corp. 423,337
------------------------------------------------------------------------------------------
10,800 DPL, Inc. 267,975
------------------------------------------------------------------------------------------
6,000 GTE Corp. 254,625
------------------------------------------------------------------------------------------
5,300 General Electric Co. 342,181
------------------------------------------------------------------------------------------
17,400 Houston Industries, Inc. 378,450
------------------------------------------------------------------------------------------
</TABLE>

VISION EQUITY INCOME FUND
- --------------------------------------------------------------------------------

(a) Non-income producing security.

(b) The cost of investments for federal tax purposes amounts to $16,288,551. The
net unrealized depreciation of investments on a federal tax basis amounts to
$526,495 which is comprised of $157,230 appreciation and $683,725
depreciation at October 31, 1997.

Note: The categories of investments are shown as a percentage of net assets
($15,857,968) at October 31, 1997.

The following acronyms are used throughout this portfolio:

ADR--American Depositary Receipt

(See Notes which are an integral part of the Financial Statements)

VISION EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------------
Total investments in securities, at value
(identified and tax cost $16,288,551) $ 15,762,056
- -------------------------------------------------------------------------------------------------------
Cash 201
- -------------------------------------------------------------------------------------------------------
Income receivable 25,152
- -------------------------------------------------------------------------------------------------------
Receivable for shares sold 84,784
- ------------------------------------------------------------------------------------------------------- -------------
Total assets 15,872,193
- ------------------------------------------------------------------------------------------------------- -------------
LIABILITIES:
- --------------------------------------------------------------------------------------------
Accrued expenses $ 14,225
- -------------------------------------------------------------------------------------------- ---------
Total liabilities 14,225
- ------------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 1,616,411 shares outstanding $ 15,857,968
- ------------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSISTS OF:
- -------------------------------------------------------------------------------------------------------
Paid in capital $ 16,373,536
- -------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (526,495)
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 10,927
- ------------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 15,857,968
- ------------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($15,857,968 / 1,616,411 shares outstanding) $9.81
- ------------------------------------------------------------------------------------------------------- -------------
Offering Price Per Share (100/94.50 of $9.81)* $10.38
- ------------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share $9.81
- ------------------------------------------------------------------------------------------------------- -------------
</TABLE>

*See "What Fund Shares Cost" in the Prospectus.

(See Notes which are an integral part of the Financial Statements)

VISION EQUITY INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED OCTOBER 31, 1997 (UNAUDITED)*
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------------
Dividends $ 22,608
- ----------------------------------------------------------------------------------------------------------
Interest 2,544
- ---------------------------------------------------------------------------------------------------------- -----------
Total income 25,152
- ----------------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------------
Investment advisory fee $ 7,062
- -----------------------------------------------------------------------------------------------
Administrative personnel and services fee 4,521
- -----------------------------------------------------------------------------------------------
Custodian fees 51
- -----------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 2,128
- -----------------------------------------------------------------------------------------------
Directors'/Trustees' fees 41
- -----------------------------------------------------------------------------------------------
Legal fees 355
- -----------------------------------------------------------------------------------------------
Portfolio accounting fees 1,976
- -----------------------------------------------------------------------------------------------
Share registration costs 1,455
- -----------------------------------------------------------------------------------------------
Printing and postage 760
- -----------------------------------------------------------------------------------------------
Taxes 101
- -----------------------------------------------------------------------------------------------
Miscellaneous 7,358
- ----------------------------------------------------------------------------------------------- ---------
Total expenses 25,808
- -----------------------------------------------------------------------------------------------
Waivers--
- ------------------------------------------------------------------------------------
Waiver of investment advisory fee $(7,062)
- ------------------------------------------------------------------------------------
Waiver of administrative personnel and services fee (4,521)
- ------------------------------------------------------------------------------------ ---------
Total waivers (11,583)
- ----------------------------------------------------------------------------------------------- ---------
Net expenses 14,225
- ---------------------------------------------------------------------------------------------------------- -----------
Net investment income 10,927
- ---------------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------------
Net change in unrealized (depreciation) of investments (526,495)
- ---------------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (526,495)
- ---------------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ (515,568)
- ---------------------------------------------------------------------------------------------------------- -----------
</TABLE>

*For the period from September 26, 1997 (date of initial public investment) to
October 31, 1997.

(See Notes which are an integral part of the Financial Statements)

VISION EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
OCTOBER 31, 1997*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------------------
Net investment income $ 10,927
- ------------------------------------------------------------------------------------------------
Net change in unrealized depreciation (526,495)
- ------------------------------------------------------------------------------------------------ ---------------------
Change in net assets resulting from operations (515,568)
- ------------------------------------------------------------------------------------------------ ---------------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------------------------------------------
Proceeds from sale of shares 16,373,536
- ------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared --
- ------------------------------------------------------------------------------------------------
Cost of shares redeemed --
- ------------------------------------------------------------------------------------------------ ---------------------
Change in net assets resulting from share transactions 16,373,536
- ------------------------------------------------------------------------------------------------ ---------------------
Change in net assets 15,857,968
- ------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------------------------------ ---------------------
End of period (including undistributed net investment income of $10,927) $ 15,857,968
- ------------------------------------------------------------------------------------------------ ---------------------
</TABLE>

*For the period from September 26, 1997 (date of initial public investment) to
October 31, 1997.

(See Notes which are an integral part of the Financial Statements)

VISION EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

(1) ORGANIZATION

Vision Group of Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of eight portfolios. The
financial statements included herein are only those of Vision Equity Income Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective of the Fund is to provide current income.

(2) SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.

INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on a national securities exchange. Short-term securities are
valued at the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less at
the time of purchase may be valued at amortized cost, which approximates
fair market value. Investments in other open-end regulated investment
companies are valued at net asset value.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.

FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.

USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.

OTHER--Investment transactions are accounted for on the trade date.

VISION EQUITY INCOME FUND
- --------------------------------------------------------------------------------

(3) CAPITAL STOCK

At October 31, 1997, there were 1,000,000,000 shares of $0.001 par value capital
stock authorized.

Transactions in capital stock were as follows:

<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1997
<S> <C>
Shares sold 1,616,411
- -------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared --
- -------------------------------------------------------------------------------------------------
Shares redeemed --
- ------------------------------------------------------------------------------------------------- --------------------
Net change resulting from share transactions 1,616,411
- ------------------------------------------------------------------------------------------------- --------------------
</TABLE>

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE--Manufacturers and Traders Trust Company, the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.70% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.

ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Corporation for the period.
FAS may voluntarily choose to waive a portion of its fee.

DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may incur distribution
expenses up to 0.25% of the average daily net assets of the Fund shares,
annually, to compensate FSC. The Fund did not pay or accrue distribution
expenses during the period ended October 31, 1997.

SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Manufacturers and Traders Trust Company, the Fund will pay Manufacturers
and Traders Trust Company up to 0.25% of average daily net assets of the Fund
for the period. The fee paid to Manufacturers and Traders Trust Company is used
to finance certain services for shareholders and to maintain shareholder
accounts. For the period ended October 31, 1997, the Fund did not incur a
shareholder services fee.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the Fund.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.

ORGANIZATIONAL EXPENSES--Organizational expenses of $4,000 were borne by the
Adviser. The Fund has reimbursed the Adviser for these expenses. These expenses
have been deferred and are being amortized over the five year period following
the Fund's effective date. For the year ended October 31, 1997, the Fund
expensed $65 of organizational expenses.

GENERAL--Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.

VISION EQUITY INCOME FUND
- --------------------------------------------------------------------------------

(5) INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1997, were as follows:

<TABLE>
<CAPTION>
<S> <C>
PURCHASES $ 15,912,857
- ------------------------------------------------------------------------------------------------------- -------------
SALES $ 0
- ------------------------------------------------------------------------------------------------------- -------------
</TABLE>

Directors Officers
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Randall I. Benderson Edward C. Gonzales
Joseph J. Castiglia President and Treasurer
Daniel R. Gernatt, Jr. Charles L. Davis, Jr.
George K. Hambleton, Jr. Vice President and Assistant Treasurer
Victor R. Siclari
Secretary
C. Todd Gibson
Assistant Secretary
</TABLE>

SHARES OF THE VISION FUNDS ARE NOT FDIC INSURED OR OTHERWISE PROTECTED BY THE
U.S. GOVERNMENT, ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,
MANUFACTURERS AND TRADERS TRUST COMPANY ("M&T BANK"), AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.

Vision
Equity Income
Fund

---------------------------------------------

Semi-Annual Report
and Supplement to
Prospectus Dated
September 25, 1997

MANUFACTURERS AND TRADERS
TRUST COMPANY
---------------------------------------
Investment Adviser
A subsidiary of First Empire State
Corporation

[BIRD LOGO] FEDERATED INVESTORS
FEDERATED SECURITIES CORP., DISTRIBUTOR

Cusip 92830F802
G00158-04 (12/97) TRG00158-04

[LOGO OF VISION GROUP OF FUNDS, INC.]

PROSPECTUS

VISION EQUITY INCOME FUND
(A PORTFOLIO OF VISION GROUP OF FUNDS, INC.)
PROSPECTUS DATED SEPTEMBER 25, 1997

Vision Group of Funds, Inc. (the "Corporation") is an open-end management
investment company (a mutual fund) that offers you a choice of eight separate
investment portfolios with distinct investment objectives and policies. This
prospectus relates to one of the eight portfolios, Vision Equity Income Fund
("Fund").

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
MANUFACTURERS AND TRADERS TRUST COMPANY ("M&T BANK"), ARE NOT ENDORSED OR
GUARANTEED BY M&T BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THESE
SHARES INVOLVE INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL.

This prospectus gives you information about the Fund and can help you decide if
the Fund is a suitable investment for you. Please read the prospectus before you
invest and keep it for future reference.

You can find additional facts about the Fund in the Statement of Additional
Information dated September 25, 1997, which has also been filed with the
Securities and Exchange Commission ("SEC"). The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. To obtain a free copy of the Statement of Additional Information, or
a paper copy of this prospectus, if you have received it electronically, or make
other inquiries about the Fund, simply call or write Vision Group of Funds, Inc.
at the telephone number or address below. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund are maintained electronically with the SEC at
Internet Web site (http:// www.sec.gov).

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

VISION GROUP OF FUNDS, INC.
P.O. Box 4556
Buffalo, New York 14240-4556
(800) 836-2211 (716) 842-4488

TABLE OF CONTENTS

Synopsis 3

A Summary of the Fund's Expenses 4
How the Fund Invests 5

Investment Information 5
Fund Management, Distribution and
Administration 15
Board of Directors 15
Investment Adviser 15
Distribution of Fund Shares 16
Administration of the Fund 17

Your Guide to Using the Fund 18
How the Fund Values its Shares 18
What Fund Shares Cost 18
How to Buy Shares 21
How to Exchange Shares 22
How to Redeem Shares 23
Tax Information 26
Voting Rights and Other Information 26

SYNOPSIS

INVESTMENT OBJECTIVE AND POLICIES

Vision Group of Funds, Inc. (the "Corporation") offers you a convenient,
affordable way to participate in eight separate, professionally managed
portfolios. This prospectus describes the Vision Equity Income Fund.

VISION EQUITY INCOME FUND

(THE "FUND") IS A DIVERSIFIED PORTFOLIO WHICH SEEKS TO PROVIDE CURRENT INCOME.
CAPITAL APPRECIATION IS A SECONDARY INVESTMENT CONSIDERATION. THE FUND PURSUES
ITS INVESTMENT OBJECTIVE BY INVESTING IN A DIVERSIFIED PORTFOLIO CONSISTING
PRIMARILY OF INCOME-PRODUCING EQUITY SECURITIES OF DOMESTIC COMPANIES (E.G.
COMMON AND PREFERRED STOCKS, CONVERT- IBLE SECURITIES). THE FUND ALSO MAY
INVEST IN FOREIGN EQUITY SECURITIES AND DEBT OBLIGATIONS. (SEE "INVESTMENT
INFORMATION.")

BUYING AND REDEEMING FUND SHARES

You can conveniently buy and redeem Fund shares on almost any business day.
Shares of the Fund are sold at net asset value plus a sales charge and redeemed
at net asset value. The minimum initial investment in the Fund is $500 ($250 for
retirement plans and IRA accounts), and it may be waived or lowered from time to
time. (See "Your Guide to Using the Fund.")

FUND MANAGEMENT

The Fund's investment adviser is Manufacturers and Traders Trust Company ("M&T
Bank" or the "Adviser"). M&T Bank makes investment decisions for the Fund. M&T
Bank is the principal banking subsidiary of First Empire State Corporation. (See
"Adviser's Background.")

SHAREHOLDER SERVICES

When you become a shareholder, you can easily get information about your account
by calling M&T Bank's Mutual Fund Services at (800) 836-2211 (in the Buffalo
area, telephone 842-4488).

RISK FACTORS

An investment in the Fund may involve certain market risks that are explained
more fully in the sections of this prospectus discussing the Fund's investment
techniques.

A SUMMARY OF THE FUND'S EXPENSES

Every mutual fund incurs expenses in conducting operations, managing investments
and providing services to shareholders. The following summary breaks out the
Fund's expenses. You should consider this expense information, along with other
information provided in this prospectus, in making your investment decision.

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)
Management Fee (after waiver) (1) 0.12%
12b-1 Fee (2) 0.00%
Other Expenses 1.29%
Shareholder Servicing Fee (2) 0.00%
Total Fund Operating Expenses (3) 1.41%
</TABLE>

(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee by the investment adviser. The investment adviser
can terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee for the Fund is 0.70%.

(2) The Fund has no present intention of paying or accruing 12b-1 fees or
shareholder servicing fees during the fiscal year ending April 30, 1998. If the
Fund were paying or accruing 12b-1 fees or shareholder servicing fees, the Fund
would be able to pay up to 0.25% of its average daily net assets for 12b-1 fees
and up to 0.25% of its average daily net assets for shareholder servicing fees.
See "Fund Management, Distribution and Administration."

(3) Other Expenses were 1.65% absent the voluntary waiver of a portion of the
administrative fee by the administrator.

(4) The Total Fund Operating Expenses absent the voluntary waivers by the
investment adviser and administrator are estimated to be 2.35% for the year
ending April 30, 1998. The Total Fund Operating Expenses in the table above are
based on expenses expected during the fiscal year ending April 30, 1998.

The Table above can help you understand the various costs and expenses that a
shareholder in the Fund will bear, either directly or indirectly. For more
complete descriptions of the various costs and expenses, see the section "Fund
Management, Distribution and Administration." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.

<TABLE>
<S> <C> <C>
Example: 1 year 3 years
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return; (2) redemption at the end of each time period; and (3)
payment of the maximum sales charge. The Fund charges no
redemption fees........................................................................ $69 $97
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

HOW THE FUND INVESTS

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide current income. This
investment objective cannot be changed without approval of the Fund's
shareholders. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus.

INVESTMENT POLICIES

Unless indicated otherwise, the investment policies of the Fund may be changed
by the Directors without approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.

The Fund pursues its investment objective by maintaining a diversified portfolio
consisting primarily of income-producing equity securities of domestic companies
(e.g., common and preferred stocks, convertible securities). Capital
appreciation is a secondary non-fundamental consideration. The Fund will attempt
to provide a yield greater than the average yield offered by the stocks of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index") and a
lower level of price volatility, although there is no assurance that it will be
able to do so. The Adviser will invest in companies on the basis of traditional
research techniques, including assessment of the companies' earnings and
dividend growth prospects, risk/volatility of the company's industry, sound
management techniques, ability to finance expected growth, and on the basis of a
company's undervaluation relative to other companies in the same industry. These
companies may be categorized as "seasoned" or "well-established" companies,
although companies with less-established operating histories may be chosen for
investment if they have present opportunities for income and capital
appreciation.

Under normal market conditions, the Fund intends to invest at least 65% of the
value of its total assets in equity securities that are expected to produce
current income. The Fund will also consider whether the securities offer the
opportunity for capital appreciation. In selecting investments, the Adviser
intends to focus on large capitalization ("large-cap") companies which are those
companies with a market capitalization of at least $10 billion or more at the
time of investment. The Adviser also may invest, to a lesser extent, in medium
capitalization ("mid-cap") or small-capitalization ("small-cap") companies which
are generally companies with a market capitalization under $10 billion.
Investors should be aware that since the major portion of the Fund's portfolio
will normally be invested in common stocks, the Fund's net asset value may be
subject to greater fluctuation than a portfolio containing a substantial amount
of fixed income securities. There can be no assurance that the objective of the
Fund will be realized, that any income will be earned, or that the Fund's
portfolio will not decline in value.

While equity securities of large-cap companies are generally less volatile than
those of more aggressive mid-to-small cap companies, they may also offer less
potential for high growth. However, large-cap companies generally offer more
potential for income than mid-cap and small-cap stocks because they provide a
history of dividends that may help reduce the effects of broader stock price
changes. Furthermore, large-cap companies are often beyond the new or emerging
phase of their life cycles, yet still are dynamic enough to be responsive and
adaptive to changing needs. Large-cap companies can also offer potential for
growth yet tend to have less risk than small-cap companies because of their
greater resources, more established organizational structures and more
experienced management.

The Adviser also will focus on stocks of companies with unrecognized or
undervalued assets. A value approach seeks companies whose stock prices do not
appear to reflect their underlying value as measured by assets, earnings, cash
flow, business franchises, or other quantitative or qualitative measurements.
Value stocks may

be out of favor with or misunderstood by investors for a variety of reasons, but
are considered to have inherent value or future prospects that are not currently
reflected in their stock price. Accordingly, value stocks may have a price/
earnings ratio less than the S&P 500 Index, lower than average price to book
value, and a higher than average dividend yields than competitors, and thereby
offer greater income and growth potential.

The Fund may also seek income by investing up to 35% of the value of its total
assets in debt obligations.

For a description of these securities and the following list of Acceptable
Investments, see the "Investment Techniques, Features and Limitations" section.

ACCEPTABLE INVESTMENTS

The securities in which the Fund invests include:

. common or preferred stocks of U.S. companies which are either listed on the
New York Stock Exchange ("NYSE") or American Stock Exchange ("AMEX") or other
domestic stock exchange or traded in the over-the-counter markets;

. convertible securities;

. investments in American Depository Receipts ("ADRs") of foreign companies
traded on the NYSE or AMEX or other domestic stock exchange or in the
over-the-counter market. The Fund may not invest more than 25% of its total
assets in ADRs. In addition, the Fund may invest up to 20% of its total
assets in other securities of foreign issuers directly, which may include
securities traded on NYSE, AMEX or other domestic stock exchanges
("Non-ADRs");

. domestic issues of corporate debt obligations (including convertible bonds
and debentures) rated, at the time of purchase, investment grade by a
nationally recognized statistical rating organization ("NRSRO") (e.g., Baa or
higher by Moody's Investors Service, Inc. ("Moody's"), or BBB or higher by
Standard and Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch") or, if unrated, of comparable quality as determined by the Adviser;

. U.S. government securities;

. securities of other investment companies;

. mortgage-backed securities;

. asset-backed securities;

. for temporary defensive purposes, the Fund has adopted a temporary defensive
policy that allows the Fund to invest up to 35% of its total assets in money
market instruments, including commercial paper that, at the time of purchase,
are rated not less than P-1, A-1 or F-1, by Moody's, S&P or Fitch,
respectively, or, if unrated, are of comparable quality as determined by the
Adviser, time and savings deposits (including certificates of deposit) in
domestic and foreign commercial or savings banks, and bankers' acceptances;

. warrants;

. futures contracts; and

. options.

INVESTMENT TECHNIQUES, FEATURES AND LIMITATIONS

CONVERTIBLE SECURITIES

The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock when, in the opinion of the
Adviser, the investment characteristics of the underlying common shares will
assist the Fund in achieving its investment objective. Otherwise the Fund may
hold or trade convertible securities. In selecting convertible securities for
the Fund, the Adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument, and the investment potential
of the underlying equity security for capital appreciation. In evaluating these
matters with respect to a particular convertible security, the Adviser considers
numerous factors, including the economic and political outlook, the value of the
security relative to other investment alternatives, trends in the determinants
of the issuer's profits, and the issuer's management capability and practices.

CORPORATE DEBT OBLIGATIONS

The Fund may invest in corporate debt obligations, including corporate bonds,
notes, and debentures, which may have floating or fixed rates of interest. These
obligations will be rated

by an NRSRO at the time of purchase in the top four rating categories
(investment grade). If the obligations are unrated, they will be of comparable
quality as determined by the Adviser. If any security purchased by the Fund is
subsequently downgraded, securities will be evaluated on a case by case basis by
the Adviser. The Adviser will determine whether or not the security continues to
be an acceptable investment. If not, the security will be sold. The lowest
category of investment grade securities (e.g., Baa or BBB) has speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to pay principal and interest
payments on such obligations than higher rated obligations. A description of the
rating categories is contained in the Appendix to the Statement of Additional
Information.

FIXED RATE CORPORATE DEBT OBLIGATIONS. The Fund may invest in fixed rate
securities, including fixed rate securities with short-term characteristics.
Fixed rate securities with short-term characteristics are long-term debt
obligations, but are treated in the market as having short maturities because
call features of the securities may make them callable within a short period of
time. A fixed rate security with short-term characteristics would include a
fixed income security priced close to call or redemption price or a fixed income
security approaching maturity, where the expectation of call or redemption is
high.

Fixed rate securities tend to exhibit more price volatility during times of
rising or falling interest rates than securities with floating rates of
interest. This is because floating rate securities, as described below, behave
like short-term instruments in that the rate of interest they pay is subject to
periodic adjustments based on a designated interest rate index. Fixed rate
securities pay a fixed rate of interest and are more sensitive to fluctuating
interest rates. In periods of rising interest rates, the value of a fixed rate
security is likely to fall. Fixed rate securities with short-term
characteristics are not subject to the same price volatility as fixed rate
securities without such characteristics. Therefore, they behave more like
floating rate securities with respect to price volatility.

FLOATING RATE CORPORATE DEBT OBLIGATIONS. The Fund may invest in floating rate
corporate debt obligations, including increasing rate securities. Floating rate
securities are generally offered at an initial interest rate which is at or
above prevailing market rates. The interest rate paid on these securities is
then reset periodically (commonly every 90 days) to an increment over some
predetermined interest rate index. Commonly utilized indices include the
three-month Treasury bill rate, the 180-day Treasury bill rate, the one-month or
three-month London Interbank Offered Rate (LIBOR), the prime rate of a bank, the
commercial paper rates, or the longer-term rates on U.S. Treasury securities.

VARIABLE RATE DEMAND NOTES

The Fund may purchase variable rate demand notes, which are long-term corporate
debt instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear interest
at a rate that is intended to cause the securities to trade at par. The interest
rate may float or be adjusted at regular intervals (ranging from daily to
annually), and is normally based on a published interest rate or interest rate
index. Many variable rate demand notes allow the Fund to demand the repurchase
of the security on not more than seven days' prior notice. Other notes only
permit the Fund to tender the security at the time of each interest rate
adjustment or at other fixed intervals.

U.S. GOVERNMENT SECURITIES

The Fund may invest in U.S. government securities which include:

. direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes,
and bonds;

. notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States;

. notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

. notes, bonds, and discount notes of other U.S. government instrumentalities
supported by the credit of the instrumentalities.

Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:

. the issuer's right to borrow an amount limited to a specific line of credit
from the U.S. Treasury;

. the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

. the credit of the agency or instrumentality.

MORTGAGE-BACKED SECURITIES

The Fund may invest in mortgage-backed securities which are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. There are currently three basic
types of mortgage-backed securities that the Fund may purchase: (i) those issued
or guaranteed by the U.S. government or one of its agencies or
instrumentalities, such as Government National Mortgage Association ("Ginnie
Mae"), Federal National Mortgage Association ("Fannie Mae"), and Federal Home
Loan Mortgage Corporation ("Freddie Mac"); (ii) those issued by private issuers
that represent an interest in or are collateralized by mortgage-backed
securities issued or guaranteed by the U.S. government or one of its agencies or
instrumentalities; and (iii) those issued by private issuers that represent an
interest in or are collateralized by whole loans or mortgage-backed securities
without a government guarantee but usually having some form of private credit
enhancement.

The privately issued mortgage-backed securities provide for a periodic payment
consisting of both interest and/or principal. The interest portion of these
payments will be distributed by the Fund as income, and the capital portion will
be reinvested. See "Risks of Mortgage-Backed Securities" below for a description
of risks.

ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through mortgage
securities representing interests in adjustable rather than fixed interest rate
mortgages. The ARMS in which the Fund invests are issued by Ginnie Mae, Fannie
Mae, or Freddie Mac, and are actively traded. The underlying mortgages which
collateralize ARMS issued by Ginnie Mae are fully guaranteed by the Federal
Housing Administration or Veterans Administration, while those collateralizing
ARMS issued by Fannie Mae or Freddie Mac are typically conventional residential
mortgages conforming to strict underwriting size and maturity constraints. ARMS
may also be collateralized by whole loans or private pass-through securities.

Unlike conventional bonds, ARMS pay back principal over the life of the ARMS
rather than at maturity. Thus a holder of the ARMS, such as the Fund, would
receive monthly scheduled payments of principal and/or interest and may receive
unscheduled principal payments representing payments on the underlying
mortgages. At the time that a holder of the ARMS reinvests the payments and any
unscheduled prepayments of principal that it receives, the holder may receive a
rate of interest which is actually lower than the rate of interest paid on the
existing ARMS. As a consequence, ARMS may be a less effective means of "locking
in" long-term interest rates than other types of fixed-income securities.

Not unlike other fixed-income securities, the market value of ARMS will
generally vary inversely with changes in market interest rates. Thus, the market
value of ARMS generally declines when interest rates rise and generally rises
when interest rates decline.

While ARMS generally entail less risk of a decline during periods of rapidly
rising rates, ARMS may also have less potential for capital appreciation than
other similar investments (e.g., investments with comparable maturities)
because, as interest rates decline, the likelihood increases that mortgages will
be prepaid.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
CMOs are collateralized by

Ginnie Mae, Fannie Mae or Freddie Mac certificates, but may be collateralized by
whole loans or private pass-through securities.

The Fund will only invest in CMOs which, at the time of purchase, are rated AAA
by an NRSRO or are of comparable quality as determined by the Adviser, and which
may be: (i) collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (ii) collateralized by pools of
mortgages in which payment of principal and interest is guaranteed by the issuer
and such guarantee is collateralized by U.S. government securities; or (iii)
collateralized by pools of mortgages without a U.S. government guarantee as to
payment of principal and interest, but which have some form of credit
enhancement.

REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). The Fund may invest in
REMICs. REMICs are offerings of multiple class real estate mortgage-backed
securities which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations, or segregated pools of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interest." To qualify as a REMIC,
substantially all the assets of the entity must be in assets directly or
indirectly secured principally by real property.

The mortgage-related securities provide for a periodic payment consisting of
both interest and principal. The interest portion of these payments will be
distributed by the Fund as income, and the capital portion will be reinvested.

RISKS OF MORTGAGE-BACKED SECURITIES

Mortgage-backed securities (including ARMS, CMOs, and REMICs) and asset-backed
securities generally pay back principal and interest over the life of the
security. At the time the Fund reinvests the payments and any unscheduled
prepayments of principal received, the Fund may receive a rate of interest which
is actually lower than the rate of interest paid on these securities
("prepayment risks"). Mortgage-backed and asset-backed securities are subject to
higher prepayment risks than most other types of debt instruments with
prepayment risks because the underlying mortgage loans or the collateral
supporting asset-backed securities may be prepaid without penalty or premium.
Prepayment risks on mortgage-backed securities tend to increase during periods
of declining mortgage interest rates because many borrowers refinance their
mortgages to take advantage of the more favorable rates. Prepayments on
mortgage-backed securities are also affected by other factors, such as the
frequency with which people sell their homes or elect to make unscheduled
payments on their mortgages. Although asset-backed securities generally are less
likely to experience substantial prepayments than are mortgage-backed
securities, certain of the factors that affect the rate of prepayments on
mortgage-backed securities also affect the rate of prepayments on asset-backed
securities. Furthermore, if mortgage-backed securities are purchased at a
premium, mortgage foreclosures and unscheduled principal payments may result in
some loss of a holder's principal investment to the extent of the premium paid.
Conversely, if mortgage-backed securities are purchased at a discount, both a
scheduled payment of principal and an unscheduled prepayment of principal would
increase current and total returns and would accelerate the recognition of
income, which would be taxed as ordinary income when distributed to
shareholders.

ASSET-BACKED SECURITIES

The Fund may invest in asset-backed securities which have structural
characteristics similar to mortgage-backed securities but have underlying assets
that are not mortgage loans or interests in mortgage loans. The Fund may invest
in asset-backed securities which, at the time of purchase, are rated in the top
three rating categories by an NRSRO, including, but not limited to, interests in
pools of receivables, such as motor vehicle installment purchase obligations and
credit card receivables. These securities may be in the form of pass-through
instruments or asset-backed

bonds. The securities are issued by non-governmental entities and carry no
direct or indirect government guarantee.

RISKS OF ASSET-BACKED SECURITIES

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the benefit
of the same security interest in the related collateral. Credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. Most issuers of asset-backed securities backed by
motor vehicle installment purchase obligations permit the servicer of such
receivables to retain possession of the underlying obligations. If the servicer
sells these obligations to another party there is a risk that the purchaser
would acquire an interest superior to that of the holders of the related
asset-backed securities. Further, if a vehicle is registered in one state and is
then reregistered because the owner and obligor moves to another state, such
reregistration could defeat the original security interest in the vehicle in
certain cases. In addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state laws, the trustee for
the holders of asset-backed securities backed by automobile receivables may not
have a proper security interest in all of the obligations backing such
receivables. Therefore, there is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on these
securities.

SECURITIES OF FOREIGN ISSUERS

The Fund may invest in U.S. dollar-denominated and foreign currency denominated
equity securities of foreign issuers. There may be certain risks associated with
investing in foreign securities. These include risks of adverse political and
economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange controls or
other governmental restrictions, currency fluctuations, less uniformity in
accounting and reporting requirements, higher transaction costs and the
possibility that there will be less information on such securities and their
issuers available to the public. In addition, there are restrictions on foreign
investments in other jurisdictions and there tends to be difficulty in obtaining
judgments from abroad and affecting repatriation of capital invested abroad.
Delays could occur in settlement of foreign transactions, which could adversely
affect shareholder equity. Foreign securities may be subject to foreign taxes,
which reduce yield, and may be less marketable than comparable United States
securities. To the extent that securities purchased by the Fund are denominated
in currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value; the value of any interest earned,
gains and losses realized on the sale of securities; and net investment income
and capital gain, if any, to be distributed to shareholders by the Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of the
Fund's assets denominated in that currency will increase; correspondingly, if
the value of a foreign currency declines against the U.S. dollar, the value of
the Fund's assets in that currency will decrease. As a matter of practice, the
Fund will not invest in the securities of a foreign issuer if any risk
identified above appears to be substantial to the Adviser.

REPURCHASE AGREEMENTS

The Fund may engage in repurchase agreements, which are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell U.S.
government securities or other high quality, liquid securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure

to complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

ILLIQUID AND RESTRICTED SECURITIES

The Fund may invest up to 15% of its net assets in illiquid securities, which
may include restricted securities. Restricted securities are any securities in
which the Fund may otherwise invest pursuant to its investment objectives and
policies, but which are subject to restriction on resale under federal
securities laws. To the extent these securities are deemed to be illiquid, the
Fund will limit its purchases, together with other securities not determined by
the Directors to be liquid, to 15% of its net assets.

INVESTING IN SECURITIES OF OTHER
INVESTMENT COMPANIES

The Fund may invest in the securities of other investment companies. Generally,
the Fund will limit its investment in other investment companies to not more
than 3% of the total outstanding voting stock of any investment company, will
invest no more than 5% of its total assets in any one investment company, and
will invest no more than 10% of its total assets in investment companies in
general, unless permitted to exceed these limitations by an exemptive order of
the SEC or as otherwise permitted by the Investment Company Act of 1940. It
should be noted that investment companies incur certain expenses such as
advisory, custodian and transfer agency fees and, therefore, any investment by
the Fund in shares of another investment company may be subject to such
duplicate expenses.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio securities
on a short-term or long-term basis or both up to one-third of the value of its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the Adviser has determined are creditworthy
under guidelines established by the Directors and will receive collateral in the
form of cash, U.S. government securities or other liquid securities equal to at
least 100% of the value of the securities loaned.

There is the risk that, when lending portfolio securities, the securities may
not be available to the Fund on a timely basis and the Fund may, therefore, lose
the opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

REVERSE REPURCHASE AGREEMENTS

The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash.

DIVERSIFICATION

The Fund is a "diversified" investment company. Under the Investment Company Act
of 1940 and Internal Revenue Code of 1986, this means that with respect to 75%
of its total assets, a diversified fund may not invest more than 5% of its total
assets in the securities of any one issuer (except U.S. government obligations,
securities of other investment companies and cash items). The balance of a
diversified fund's assets is not subject to this limitation. Thus, a diversified
fund may invest up to 25% of its total assets in the securities of any one
issuer.

SHORT SALES

The Fund may sell securities short from time to time, subject to certain
restrictions. A short sale occurs when a security which the Fund does not own is
sold in anticipation of a decline in its price. If the decline occurs, shares
equal in number to those sold short can be purchased at the lower price. If the
price increases, the higher

price must be paid. The purchased shares are then returned to the original
lender. Risk arises because no loss limit can be placed on the transaction. When
the Fund enters into a short sale, assets that are equal to the market price of
the securities sold short or any lesser price at which the Fund can obtain such
securities, are segregated on the Fund's records and maintained until the Fund
meets its obligations under the short sale.

The Fund will not sell securities short unless (1) it owns, or has a right to
acquire, an equal amount of such securities, or (2) it has segregated an amount
of its other liquid assets equal to the lesser of the market value of the
securities sold short or the amount required to acquire such securities. The
segregated amount will not exceed 25% of the Fund's net assets. While in a short
position, the Fund will retain the securities, rights, or segregated assets.

PUT AND CALL OPTIONS

The Fund may purchase put options on its portfolio securities. These options
will be used as a hedge to attempt to protect securities which the Fund holds
against fluctuations in value. The Fund may also write put and call options on
all or any portion of its portfolio securities to generate income for the Fund.
The Fund will write put and call options on securities either held in its
portfolio or for which the Fund has the right to obtain without payment of
further consideration or for which it has segregated cash in the amount of any
additional consideration. The Fund also may purchase call options on securities
to protect against price movements in particular securities which the Fund
intends to purchase. A call option gives the Fund, in return for a premium, the
right (but not the obligation) to buy the underlying security from the seller at
a pre-determined price.

The Fund may generally purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of the options
since options on certain portfolio securities held by the Fund are not traded on
an exchange. The Fund purchases and writes options only with investment dealers
and other financial institutions (such as commercial banks or broker/dealers)
deemed creditworthy by the Adviser.

Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market while over-the-counter options may not.

If the Fund does not exercise an option it has purchased, then the Fund loses in
value the price it paid for the option premium. If the Fund writes (sells) an
option which is subsequently exercised, the premium received by the Fund from
the option purchaser may not exceed the increase (in the case of a call option)
or decrease (in the case of a put option ) in the value of the securities
underlying the option, in which case the difference represents a loss for the
Fund. However, if the option expires without being exercised, the Fund realizes
a gain in the amount of the premium it received.

FUTURES AND OPTIONS ON FUTURES

The Fund may purchase and sell financial and stock index futures contracts to
attempt to hedge all or a portion of its portfolio against changes in interest
rates or economic market conditions. Financial futures contracts generally
require the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract, and the buyer agrees to take delivery of
the instrument at the specified future time. Stock index futures contracts
generally involve cash settlement rather than delivery of the stocks comprising
the index.

The Fund may also write call options and purchase put options on financial or
stock index futures contracts as a hedge to attempt to protect securities in its
portfolio against decreases in value. When the Fund writes a call option on a
futures contract, it is undertaking the obligation of selling a futures contract
at a fixed price at any time during a specified period if the option is
exercised. Conversely, as purchaser of a put option on a futures contract, the
Fund is entitled (but not obligated) to sell a futures contract at the fixed
price during the life of the option.

Generally, the Fund may not purchase or sell futures contracts or related
options, for other than bona fide hedging purposes, if immediately thereafter
the sum of the amount of margin deposits on the Fund's existing futures
positions and premiums paid for related options would exceed 5% of the market
value of the Fund's net assets, after taking into account the unrealized profits
and losses on those contracts it has entered into; and, provided further, that
in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in computing such 5%. When the Fund
purchases futures contracts, an amount of cash and cash equivalents equal to the
underlying commodity value of the futures contracts (less any related margin
deposits) will be deposited in a segregated account with the Fund's custodian
(or the broker, if legally permitted) to collateralize the position and thereby
insure that the use of such futures contract is unleveraged.

RISKS OF FUTURES AND OPTIONS

When the Fund uses futures and options on futures as hedging devices, there is a
risk that the prices of the securities subject to the futures contracts may not
correlate with the prices of the securities in the Fund's portfolio. This may
cause the futures contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Adviser could be
incorrect in its expectations about the direction or extent of market factors
such as interest rate movements. In these events, the Fund may lose money on the
futures contract or option.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the Adviser will consider
liquidity before entering into options transactions, there is no assurance that
a liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market.

WARRANTS

The Fund has no present intent to invest more than 5% of its net assets in
warrants.

EQUITY RISKS

As with other mutual funds that invest in equity securities, the Fund is subject
to market risks. That is, the possibility exists that common stocks will decline
over short or even extended periods of time, and the United States equity market
tends to be cyclical, experiencing both periods when stock prices generally
increase and periods when stock prices generally decrease.

Because the Fund may invest in small-to-medium capitalization stocks, there are
some additional risk factors associated with investments in the Fund. In
particular, although their potential for growth may be greater, stocks in the
small-to-medium capitalization sector of the United States equity market tend to
be slightly more volatile in price than larger capitalization stocks, such as
those included in the S&P 500 Index. This is because, among other things,
small-to-medium-sized companies have less certain growth prospects than larger
companies, have a lower degree of liquidity in the equity market, and tend to
have a greater sensitivity to changing market conditions. Further, in addition
to exhibiting slightly higher volatility, the stocks of small-to-medium-sized
companies may, to some degree though not necessarily, fluctuate independently of
the stocks of larger companies. That is, the stocks of small-to-medium-sized
companies may decline in price as the price of large company stocks rises or
vice versa.

DEBT RISKS

In the debt market, prices move inversely to interest rates. A decline in market
interest rates results in a rise in the market prices of outstanding debt
obligations. Conversely, an increase in market interest rates results in a
decline in market prices of outstanding debt obligations. In either case, the
amount of change in market prices of debt obligations in response to changes in
market interest rates generally depends on the maturity of the debt obligations:
the debt obligations with the longest maturities will experience the greatest
market price changes.

The market value of debt obligations will fluctuate due to changes in economic
conditions and other market factors such as interest rates which are beyond the
control of the Adviser. The Adviser could be incorrect in its expectations

about the direction or extent of these market factors. Although debt obligations
with longer maturities offer potentially greater returns, they have greater
exposure to market price fluctuation. Consequently, to the extent the Fund is
significantly invested in debt obligations with longer maturities, there is a
greater possibility of fluctuation in the Fund's net asset value. However, the
Adviser will attempt to minimize the fluctuation of the Fund's net asset value
by anticipating the direction of interest rates and modifying investments
accordingly.

PORTFOLIO TURNOVER

Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities will be sold whenever the Fund's Adviser believes
it is appropriate to do so in light of the Fund's investment objective, without
regard to the length of time a particular security may have been held. However,
the Adviser contemplates that the Fund's portfolio turnover rate will not exceed
100%. Nevertheless, transactions for the Fund's portfolio will be based upon
investment considerations and will not be limited by any other considerations
when the Adviser deems it appropriate to make changes to the Fund's portfolio.

INVESTMENT LIMITATIONS

The Fund will not:

. borrow money directly or through reverse repurchase agreements (arrangements
in which the Fund sells a portfolio instrument for a percentage of its cash
value with an agreement to buy it back on a set date) or pledge securities
except, under certain circumstances, the Fund may borrow up to one-third of
the value of its total assets and pledge up to 15% of the value of its total
assets to secure such borrowings; and

. with respect to 75% of the value of its total assets, invest more than 5% of
its total assets in securities of one issuer other than cash, cash items,
securities of other investment companies or securities issued or guaranteed
by the government of the United States or its agencies or instrumentalities
and repurchase agreements collateralized by such securities, or acquire more
than 10% of the voting securities of any one issuer.

The above investment limitations cannot be changed without shareholder approval.

FUND MANAGEMENT,
DISTRIBUTION AND
ADMINISTRATION

BOARD OF DIRECTORS

THE FUND IS MANAGED BY A BOARD OF DIRECTORS.

The Directors are responsible for managing the business affairs for the Fund and
for exercising all the Fund's powers except those reserved for the shareholders.

INVESTMENT ADVISER

INVESTMENT DECISIONS FOR THE FUND ARE MADE BY M&T BANK, SUBJECT TO THE DIRECTION
BY THE DIRECTORS.

The Adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund for its services.

Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Directors, and could
result in severe penalties.

ADVISORY FEES

For the services M&T Bank provides and the expenses it assumes as investment
adviser, M&T Bank is entitled to receive a fee from the Fund, equal to an annual
rate of .70% of the Fund's average daily net assets. This fee is computed daily
and paid monthly. M&T Bank has agreed to pay all expenses it incurs in
connection with its advisory activities, other than the cost of securities
(including any brokerage commissions) purchased for the Fund. From time to time,
M&T Bank may voluntarily waive all or a portion of its advisory fees in order to
help the Fund maintain a competitive expense ratio.

ADVISER'S BACKGROUND

M&T Bank is the principal banking subsidiary of First Empire State Corporation,
a $13 billion bank holding company, as of December 31, 1996, headquartered in
Buffalo, New York. M&T Bank has 174 offices throughout New York State and an
office in Nassau, The Bahamas as of May 31, 1997.

M&T Bank was founded in 1856 and provides comprehensive banking and financial
services to individuals, governmental entities and businesses throughout New
York State. The Fund's investments are managed through the Trust & Investment
Services Division of M&T Bank. As of December 31, 1996, M&T Bank had $3.1
billion in assets under management for which it has investment discretion (which
includes employee benefits, personal trusts, estates, agencies and other
accounts). M&T Bank has served as investment adviser to various funds of the
Corporation since 1988. As of December 31, 1996, M&T Bank managed over $1.2
billion in net assets of the Corporation's money market funds. As part of its
regular banking operations, M&T Bank may make loans to public companies. Thus,
it may be possible, from time to time, for the Fund to hold or acquire the
securities of issuers which are also lending clients of M&T Bank. The lending
relationship will not be a factor in the selection of securities.

John E. Leslie III has been the Fund's portfolio manager since the Fund's
inception. Mr. Leslie joined M&T Bank in February 1996 as Vice President and
Senior Portfolio Manager. His investment experience includes two years with
Value

Line Asset Management, New York where he was a Senior Portfolio Manager
(1994-1996). From 1992 to 1994, Mr. Leslie was an independent consultant
designing quantitative equity valuation models and structured investment
products. Mr. Leslie obtained his B.A. in Finance from Suffolk University, his
M.B.A. from Babson College and is a Chartered Financial Analyst.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, M&T Bank looks for prompt execution of the order at a favorable
price. In working with dealers, M&T Bank will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, M&T Bank may give consideration to those firms
which have sold or are selling shares of the Fund and other funds distributed by
Federated Securities Corp. M&T Bank makes decisions on portfolio transactions
and selects brokers and dealers subject to review by the Directors and M&T Bank.

DISTRIBUTION OF FUND SHARES

FEDERATED SECURITIES CORP. IS THE PRINCIPAL DISTRIBUTOR FOR SHARES OF THE FUND.

Shares of the Fund are sold on a continuous basis by Federated Securities Corp.
It is a Pennsylvania corporation organized on November 14, 1969, and is also the
principal distributor for a number of other investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors, Pittsburgh,
Pennsylvania.

DISTRIBUTION PLAN

Under a distribution plan (referred to as the "Plan") adopted in accordance with
Rule 12b-1 promulgated under the Investment Company Act of 1940, the Fund may
pay to the distributor an amount computed at an annual rate of 0.25% of the
Fund's average daily net assets to finance any activity which is principally
intended to result in the sale of shares subject to the Plan. The distributor
may from time to time and for such periods as it deems appropriate, voluntarily
reduce its 12b-1 compensation under the Plan to the extent the expenses
attributable to shares of the Fund exceed such lower expense limitation as the
distributor may, by notice to the Corporation, voluntarily declare to be
effective. The Fund has no present intention of paying or accruing 12b-1 fees
during the fiscal year ending April 30, 1998.

Financial institutions will receive fees from the distributor based upon shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
distributor.

The Fund's Plan is a compensation type plan. As such, the Fund makes no payments
to the distributor except as described above. Therefore, the Fund does not pay
for unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Plan.

The distributor may select certain entities to provide sales and/or
administrative services as agents for holders of shares of the Fund. For a
description of administrative services, see "Administrative Arrangements" below.

SHAREHOLDER SERVICING ARRANGEMENTS

The Fund has adopted a Shareholder Services Plan, which is administered by
Federated Administrative Services. Under the Plan, M&T Bank may act as a
shareholder servicing agent (the "Shareholder Servicing Agent") for the Fund.
The Fund may pay the Shareholder Servicing Agent a fee based on the average
daily net asset value of shares for which it provides shareholder services.
These shareholder services include, but are not limited to, distributing
prospectuses and other information, providing shareholder assistance and
communicating or facilitating purchases and redemptions of shares. This fee will
be equal to 0.25% of the Fund's average daily net assets for which the

Shareholder Servicing Agent provides services. The Fund has no present intention
of paying or accruing shareholder servicing fees during the fiscal year ending
April 30, 1998.

ADMINISTRATIVE ARRANGEMENTS

The distributor may select brokers and dealers to provide distribution and
administrative services. The distributor may also select administrators
(including depository institutions such as commercial banks and savings banks)
to provide administrative services that are not provided by Federated
Administrative Services (see below). These administrative services include
distributing prospectuses and other information, providing accounting assistance
and shareholder communications, or otherwise facilitating shareholder purchases
and redemptions (sales) of Fund shares. The administrators appointed could
include affiliates of the advisers. Brokers, dealers, and administrators will
receive fees from the distributor based upon shares owned by their clients or
customers. The fees are calculated as a percentage of the average aggregate net
asset value of shareholder accounts during the period for which the brokers,
dealers, and administrators provide services. If the distributor pays any fees
for these services, the fees will be reimbursed by one of the advisers and not
the Fund.

ADMINISTRATION OF THE FUND

FEDERATED ADMINISTRATIVE SERVICES, A SUBSIDIARY OF FEDERATED INVESTORS,
PROVIDES THE FUND WITH CERTAIN ADMINISTRATIVE PERSONNEL AND
SERVICES NECESSARY TO OPERATE THE FUND.

ADMINISTRATIVE SERVICES

Such services include certain legal and accounting services. Federated
Administrative Services provides these services for an annual fee as specified
in the following table:

<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AGGREGATE DAILY NET ASSETS OF
FEE VISION GROUP OF FUNDS, INC.
<C> <S>
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% in excess of $750 million
</TABLE>

The administrative fee received during any year shall be at least $50,000 for
the Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee at any time.

YOUR GUIDE
TO USING
THE FUND

HOW THE FUND VALUES
ITS SHARES

THE FUND'S NET ASSET VALUE PER SHARE FLUCTUATES.

The net asset value for the Fund's shares is determined by adding the market
value of all securities and other assets of the Fund, subtracting the
liabilities of the Fund and dividing the remainder by the total number of the
Fund's shares outstanding.

MINIMUM INITIAL INVESTMENT

The minimum initial investment in the Fund is $500, unless the investment is in
a retirement plan or an IRA account, in which case the minimum initial
investment is $250. Subsequent investments must be in amounts of at least $25.
The minimum initial and subsequent investment amounts may be waived or lowered
from time to time, such as for customers participating in the automatic
investment services described below.

WHAT FUND SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:

<TABLE>
<CAPTION>
DEALER CONCES-
SALES CHARGE SALES CHARGE SION AS A PER-
AS A PERCENT- AS A PERCENT- CENTAGE OF PUB-
AMOUNT OF AGE OF PUBLIC AGE OF NET LIC OFFERING
TRANSACTION OFFERING PRICE INVESTED PRICE
<S> <C> <C> <C>
Less than
$50,000............ 5.50% 5.82% 5.00%
$50,000 but less
than $100,000...... 4.25% 4.44% 3.75%
$100,000 but less
than $250,000...... 3.25% 3.36% 2.75%
$250,000 but less
than $500,000...... 2.25% 2.30% 2.00%
$500,000 but less
than $1 million.... 2.00% 2.04% 1.75%
$1 million or
more............... 0.00% 0.00% 0.00%
</TABLE>

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on:

(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially
affected;

(ii) days during which no shares are tendered for redemption and no orders to
purchase shares are received; or

(iii) the following holidays: New Year's Day, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

In connection with the sale of Fund shares, Federated Securities Corp. may from
time to time offer certain items of nominal value to any shareholder or
investor.

SALES CHARGE REALLOWANCE

For sales of shares of the Fund, a broker/dealer will normally receive up to 90%
of the applicable sales charge. Any portion of the sales charge which is not
paid to a broker/dealer will be retained by the distributor. However, the
distributor will uniformly and periodically offer to pay broker/dealers up to
100% of the sales charge retained by it. Such payments may take the form of
cash, items of material value, or promotional incentives, such as payment of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at recreational-
type facilities. In some instances, these incentives will be made available only
to broker/dealers whose employees have sold or may sell significant amounts of
shares.

The distributor may pay fees to financial institutions out of the sales charge
in exchange for sales and/or administrative services performed on behalf of
their customers in connection with the initiation of customer accounts and
purchases of shares of the Fund.

In addition, the distributor will offer to pay broker/dealers an amount of up to
1.00% of the net asset value of shares purchased for an account of their client
or customer in an amount of $1 million or more.

The distributor and the Adviser, or affiliates thereof, at their own expense and
out of their own assets, may also provide other compensation to financial
institutions in connection with sales of shares of the Fund or as financial
assistance for providing substantial marketing, sales and operational support.
Compensation may include, but is not limited to, financial assistance to
financial institutions in connection with conferences, sales, or training
programs for their employees, seminars for the public, advertising or sales
campaigns, or other special events. In some instances, this compensation may be
predicated upon the amount of shares sold and/or upon the type and nature of
sales or operational support they furnish. Dealers may not use sales of the
Corporation's shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
other compensation shall be paid for by the Corporation, the Fund, or its
shareholders, nor will it change the price paid by investors for the purchase of
Fund shares.

PURCHASES AT NET ASSET VALUE

Shares of the Fund may be purchased, subject to applicable law and regulation
from time to time, at net asset value, without a sales charge, by the following
investors, their spouses and their immediate relatives: (i) current and retired
employees and directors of M&T Bank, First Empire State Corporation and their
subsidiaries; (ii) current and former Directors of the Corporation; (iii)
clients of the Trust & Investment Services Division of M&T Bank; (iv) employees
(including registered representatives) of a dealer which has a selling group
agreement with the Fund's distributor and consents to such purchases; (v)
current and retired employees of any sub-adviser to the Vision Group of Funds,
Inc.; and (vi) investors referred by any sub-adviser to the Vision Group of
Funds, Inc. Immediate relatives include grandparents, parents, siblings,
children, and grandchildren of a qualified investor, and the spouse of any
immediate relative.

The distributor will uniformly and periodically offer to pay cash payments as
incentives to broker/dealers whose customers or clients purchase shares of the
Fund under this "no-load" purchase provision. This payment will be made out of
the distributor's assets and not by the Corporation, the Fund, or its
shareholders.

A special application form which is available from the Shareholder Servicing
Agent, must be submitted with the initial purchase.

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF MUTUAL FUND SHARES OR ANNUITIES

Investors may purchase shares of the Fund at net asset value, without a sales
charge, with the proceeds from either: (i) the redemption of shares of a mutual
fund which was sold with a sales charge or commission; or (ii) fixed or variable
rate annuities. The purchase must be made within 60 days of the redemption, and
M&T Bank's Mutual Fund Services must be notified by the investor in writing, or
by the investor's financial institution, at the time the purchase is made, and
must present satisfactory evidence of the redemption. Redemptions of mutual fund
shares that are subject to a contingent deferred sales charge are not eligible
to purchase Fund shares under this method. The distributor will uniformly and
periodically offer to pay cash payments as incentives to broker/dealers whose
customers or clients purchase shares of the Fund under this "no-load" purchase
provision. This payment will be made out of the distributor's assets and not by
the Corporation, the Fund or its shareholders.

REDUCING THE SALES CHARGE

The sales charge can be reduced on the purchase of shares of the Fund through:

. quantity discounts and accumulated purchases;

. signing a 13-month letter of intent;

. using the reinvestment privilege; or concurrent purchases.

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES

As shown in the table under "What Fund Shares Cost," larger purchases reduce the
sales charge paid. The Fund will combine purchases made on the same day by the
investor, the investor's spouse, and the investor's children under age 21 when
it calculates the sales charge.

If an additional purchase of shares of the Fund is made, the Fund will consider
the previous purchases still invested in the Fund in calculating the applicable
sales charge rate. For example, if a shareholder already owns shares which were
purchased at the public offering price of $70,000 and then purchases $40,000
more at the current public offering price, the sales charge of the additional
purchase according to the schedule now in effect would be the rate imposed on a
$110,000 investment, not the rate imposed on a $40,000 investment.

To receive the sales charge reduction, M&T Bank's Mutual Fund Services or the
distributor must be notified by the shareholder in writing at the time the
purchase is made that Fund shares are already owned or that purchases are being
combined. The Fund will reduce the sales charge after it confirms the purchase.

LETTER OF INTENT

If a shareholder intends to purchase shares of the Fund equal in value to at
least $50,000 over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the Custodian to hold
5.50% of the total amount intended to be purchased in escrow (in shares of the
Fund) until such purchase is completed.

The 5.50% held in escrow will be applied to the shareholder's account at the end
of the 13-month period, unless the amount specified in the letter of intent is
not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.

This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days; however, these previous purchases will not receive the reduced sales
charge.

REINVESTMENT PRIVILEGE

If shares in the Fund have been redeemed, the shareholder has a one-time right
to reinvest, within 90 days, the redemption proceeds in the Fund at the
next-determined net asset value without any sales charge. M&T Bank's Mutual Fund
Services or the distributor must be notified by the shareholder in writing or by
the shareholder's financial institution of the reinvestment in order to
eliminate the sales charge. If the shareholder redeems his or her shares in the
Fund, there may be tax consequences.

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge reduction, a shareholder has the
privilege of combining concurrent purchases of two or more funds in the Vision
Group of Funds, Inc., the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $70,000 in one of the funds with
a sales charge, and $40,000 in another fund with a sales charge, the sales
charge imposed on each purchase would be reduced to the sales charge rate in
effect for a $110,000 investment in the respective fund.

To receive this sales charge reduction, M&T Bank's Mutual Fund Services or the
distributor must be notified by the agent placing the order at the time the
concurrent purchases are made. The sales charge will be reduced after the
purchase is confirmed.

HOW TO BUY SHARES

YOU CAN BUY SHARES OF THE FUND ON ANY BUSINESS DAY, EXCEPT ON DAYS WHICH THE NEW
YORK STOCK EXCHANGE OR M&T BANK IS CLOSED OR ON HOLIDAYS WHEN WIRE TRANSFERS ARE
RESTRICTED (COLUMBUS DAY, VETERANS' DAY AND MARTIN LUTHER KING DAY).

Shares may be purchased either by wire, mail or transfer. The Fund reserves the
right to reject any purchase request.

Texas residents must purchase shares through Federated Securities Corp. at
1-800-618-8573.

THROUGH THE BANK

You may purchase shares through M&T Bank. To do so, contact an account
representative at M&T Bank or those affiliates of M&T Bank which make shares
available, or M&T Bank's Mutual Fund Services at (800) 836-2211 (in the Buffalo
area, phone 842-4488).

THROUGH M&T SECURITIES, INC.

You may purchase shares of the Fund through any representative of M&T
Securities, Inc. ("M&T Securities") at M&T Bank as well as at separate M&T
Securities locations, or by calling 1-800-724-5445. M&T Securities (member NASD
and SIPC) is a wholly-owned registered broker-dealer subsidiary of M&T Bank.

THROUGH AUTHORIZED BROKER/DEALERS

An investor may place an order through authorized brokers and dealers to
purchase shares of the Fund. For additional details, contact your broker.

PAYMENT

Payment may be made by either check or federal funds or by debiting a customer's
account at M&T Bank or any of its affiliate banks. Purchase orders must be
received by 4:00 p.m. (Eastern time) in order to be credited that same day. For
settlement of an order to occur, payment must be received on the next business
day following the order.

BUYING SHARES BY WIRE

You can purchase shares of the Fund by Federal Reserve wire. This is referred to
as wiring federal funds, and it simply means that your bank sends money to the
Fund's bank through the Federal Reserve System. To purchase shares by Federal
Reserve wire, call M&T Bank's Mutual Fund Services or any representative of M&T
Securities before 4:00 p.m. (Eastern time) to place your order. The order is
considered immediately received, provided payment by federal funds is received
before 3:00 p.m. (Eastern time) the next business day.

BUYING SHARES BY MAIL

To buy shares of the Fund for the first time by mail, complete and sign an
account application form and mail it, together with a check made payable to
"Vision Equity Income Fund" in an amount of $500 or more, to the address below:

Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York, 14240-4556

Current shareholders can purchase shares by mail by sending a check to the same
address. Orders by mail are considered received after payment by check has been
converted into federal funds. This is normally the next business day after the
check has been received.

BUYING SHARES BY TRANSFER

To purchase shares of the Fund by transferring money from a bank account, you
must maintain a checking or NOW deposit account at M&T Bank or any of its
affiliate banks. To place an order, call M&T Bank's Mutual Fund Services or any
representative of M&T Securities before 4:00 p.m. (Eastern time). The money will
be transferred from your checking or NOW deposit account to your Fund account by
the next business day and your purchase of shares will be effected on the day
the order is placed.

CUSTOMER AGREEMENTS

Shareholders normally purchase shares through different types of customer
accounts at M&T Bank and its affiliates. You should read this prospectus
together with any agreements between

you and the institution to learn about the services provided, the fees charged
for those services, and any restrictions and limitations imposed.

SYSTEMATIC INVESTMENT PROGRAM

Once you have opened a Fund account, you can add to your investment on a regular
basis in amounts of $25 or more through automatic deductions from your checking
or NOW deposit account. The money may be withdrawn periodically and invested in
Fund shares at the next net asset value calculated after your order is received
plus any applicable sales charge. To sign up for this program, please call M&T
Bank's Mutual Fund Services for an application.

DIVIDENDS AND CAPITAL GAINS

The Fund declares and pays dividends quarterly. Capital gains realized by the
Fund, if any, will be distributed at least once every 12 months. Dividends and
capital gains will be automatically reinvested in additional shares of the Fund
on payment dates at the ex-dividend date's net asset value without a sales
charge, unless payments are requested by writing to the Fund or M&T Bank's
Mutual Fund Services. Dividends and capital gains can also be reinvested in
shares of any other fund comprising the Vision Group of Funds, Inc., subject to
any applicable investment requirements.

RETIREMENT PLANS

Shares of the Fund can be purchased as an investment for retirement plans or IRA
accounts. For further details, contact the Fund and consult a tax adviser.

CERTIFICATES AND CONFIRMATIONS

Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends paid.
The Fund will not issue share certificates.

HOW TO EXCHANGE SHARES

ALL SHAREHOLDERS IN ANY OF THE FUNDS ARE SHAREHOLDERS OF VISION GROUP OF FUNDS,
INC. AND HAVE ACCESS TO THE OTHER FUNDS IN THE CORPORATION (REFERRED TO AS
"PARTICIPATING FUNDS") THROUGH AN EXCHANGE PROGRAM. YOU MAY EXCHANGE SHARES OF
ANY OF THE FUNDS FOR SHARES OF OTHER PARTICIPATING FUNDS AT NET ASSET VALUE,
PLUS ANY APPLICABLE SALES CHARGE.

When exchanging into and out of Participating Funds with a sales charge and
Participating Funds without a sales charge, shareholders who have paid a sales
charge once upon purchasing shares of any Participating Fund, including those
shares acquired by the reinvestment of dividends, will not have to pay a sales
charge again on an exchange. When exchanging into and out of Participating Funds
with different sales charges, exchanges are made at net asset value. Shares of
Participating Funds with no sales charge acquired by direct purchase may be
exchanged for shares of other Participating Funds with a sales charge at net
asset value plus an applicable sales charge. However, shares of Participating
Funds with no sales charge that were acquired by the reinvestment of dividends
will not be subject to a sales charge upon an exchange into shares of a
Participating Fund with a sales charge. Instead, such exchanges will be made at
net asset value.

To be eligible for this exchange privilege, you must exchange shares with a net
asset value of at least the minimum initial investment required by the
Participating Fund into which you are exchanging if it is a new account. You may
exchange your shares only for shares of Participating Funds that may legally be
sold in your state of residence. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the Participating Fund into which an
exchange is to be made.

Once the transfer agent has received proper instructions and all necessary
supporting documents, shares submitted for exchange will be redeemed at the next
net asset value calculated. If you do not have an account in the Participating
Fund whose shares you want to acquire, you

must establish a new account. Unless you specify otherwise, this account will be
registered in the same name and have the same dividend and capital gains payment
options as you selected with your existing account. If the new account
registration (name, address, and taxpayer identification number) is not
identical to your existing account, you must provide a signature guarantee to
verify your signature. Please see the "Signature Guarantees" section later in
this prospectus for more information about signature guarantees.

Each exchange is considered a sale of shares of one fund and a purchase of
shares of another fund, and depending on the circumstances, may generate a short
or long-term capital gain or loss for federal income tax purposes.

The Fund reserves the right to modify or terminate the exchange privilege at any
time. Shareholders will be notified prior to any modification or termination.

To find out more about the exchange privilege, call M&T Bank's Mutual Fund
Services at the number listed below.

EXCHANGING SHARES BY TELEPHONE

You may exchange shares between Participating Funds by calling M&T Bank's Mutual
Fund Services at (800) 836-2211 (in the Buffalo area, phone 842-4488). To sign
up for telephone exchanges, you must select the telephone exchange option on the
new account application. It is recommended that you request this privilege on
your initial application. If you do not and later wish to take advantage of
telephone exchanges, you may call M&T Bank's Mutual Fund Services for
authorization forms.

You can only exchange shares by telephone between fund accounts with identical
shareholder registrations (names, addresses, and taxpayer identification
numbers).

Telephone exchange instructions must be received by M&T Bank's Mutual Fund
Services by 4:00 p.m. (Eastern time) and transmitted to Federated Shareholder
Services Company before 4:00 p.m. (Eastern time) for shares to be exchanged that
same day. You will not receive a dividend from the fund into which you are
exchanging on the date of the exchange.

You may have difficulty making exchanges by telephone in times of unusual
economic or market changes when the volume of telephone requests may be
exceptionally high. If you cannot contact M&T Bank's Mutual Fund Services by
telephone, please send a written exchange request by mail for next day delivery
to the Vision Group of Funds, Inc. at the address shown below.

If you have certificates for the shares you want to exchange, you cannot make a
telephone exchange. Instead, the certificates must be properly endorsed and
should be sent by registered or certified mail, along with your written exchange
request, to the Vision Group of Funds, Inc. at the address shown below. M&T
Bank's Mutual Fund Services will then forward the certificate to the transfer
agent, Federated Shareholder Services Company, and the shares will be deposited
into your account before the exchange is made.

Shareholders requesting the telephone exchange service authorize the Corporation
and its agents to act upon their telephonic instructions to exchange shares from
any account for which they have authorized such services. Exchange instructions
given by telephone may be electronically recorded for your protection. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.

EXCHANGING SHARES BY MAIL

You may exchange shares by mail by sending your written request to:

Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556

HOW TO REDEEM SHARES

THE FUND REDEEMS YOUR SHARES AT THE NET ASSET VALUE PER SHARE NEXT DETERMINED
AFTER THE FUND RECEIVES YOUR REDEMPTION REQUEST. WHEN FUND SHARES ARE REDEEMED,
THEY MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.

You may redeem shares only on days when the Fund computes its net asset value.
You cannot redeem shares on days when the New York Stock Exchange or M&T Bank
are closed, or on holidays when wire transfers are restricted (Columbus Day,
Veterans' Day, and Martin Luther King Day). While you may redeem various amounts
by telephone or written request, you can close your account only by written
request.

TELEPHONE REDEMPTIONS

You may redeem your shares by calling M&T Bank's Mutual Fund Services at (800)
836-2211 (in the Buffalo area, phone 842-4488) before 4:00 p.m. (Eastern time).
The proceeds will be wired the next business day directly to your account at M&T
Bank or an affiliate or to another account you previously designated at a
domestic commercial bank that is a member of the Federal Reserve System. M&T
Bank reserves the right to charge a fee for a wire transfer from a customer
checking account, which may contain redemption proceeds, to another commercial
bank.

You will be automatically eligible for telephone redemptions, unless you check
the box on the new account application form to decline this privilege. It is
recommended that you provide the necessary information for the telephone/ wire
redemption option on your initial application. If you do not do this and later
wish to take advantage of telephone redemptions, you must call M&T Bank's Mutual
Fund Services for authorization forms.

You may have difficulty redeeming shares by telephone in times of unusual
economic or market changes when the volume of telephone requests may be
exceptionally high. If you cannot contact M&T Bank's Mutual Fund Services by
telephone, please send a written redemption request by mail for next day
delivery to the Vision Group of Funds, Inc. at the address shown below.

The Fund reserves the right to modify or terminate the telephone redemption
privilege at any time. Shareholders will be notified prior to any modification
or termination.

If you hold shares in certificate form or hold Fund shares through an IRA
account, you cannot redeem those shares by phone, but instead must redeem them
in writing as explained below.

Shareholders who accept the telephone redemption service authorize the
Corporation and its agents to act upon their telephonic instructions to redeem
shares from any account for which they have authorized such services. Redemption
instructions given by telephone may be electronically recorded for your
protection. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.

REDEEMING SHARES BY MAIL

You may redeem shares by sending your written request to:

Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556

Please call M&T Bank's Mutual Fund Services for specific instructions before
redeeming by letter. Your written request must include your name, the Fund's
name, your account number, and the share or dollar amount you want to redeem. If
share certificates have been issued to you, those certificates must be properly
endorsed and should be sent by registered or certified mail along with your
redemption request.

SIGNATURE GUARANTEES

A signature guarantee verifies the authenticity of your signature. For your
protection, you must have your signature guaranteed on written redemption
requests in the following instances:

. if you are redeeming shares worth $50,000 or more;

. if you want a redemption of any amount sent to an address other than your
address on record with the Fund;

. if you want a redemption of any amount payable to someone other than yourself
as the shareholder of record; or

. if you want to transfer the registration of the Fund shares.

The signature guarantee must be provided by:

. a trust company or commercial bank whose deposits are insured by the Bank
Insurance

24
. Fund ("BIF"), which is administered by the Federal Deposit Insurance
Corporation ("FDIC");

. a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which also is administered by
the FDIC;

. a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchange; or

. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.

RECEIVING PAYMENT

Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request, provided the Fund or its agents have received payment for shares from
the shareholder.

SYSTEMATIC WITHDRAWAL PROGRAM

If you own Fund shares worth $10,000 or more, you can have regular payments of
$50 or more sent from your Fund account to you, another person you designate or
your checking or NOW deposit account. Fund shares are redeemed to provide
periodic payments in the amount you specify.

Depending on the amount you are withdrawing, the amount of dividends or any
capital gains distributions paid on the Fund shares, and any possible
fluctuations in the Fund's net asset value per share, these redemptions may
reduce and eventually exhaust your investment in the Fund. For this reason, you
should not consider systematic withdrawal payments as yield or income received
from your investment in the Fund. Due to the fact that shares are sold subject
to sales charge, it may not be advisable for shareholders to be purchasing
shares while participating in this program.

For more information and an application form for the Systematic Withdrawal
Program, call M&T Bank's Mutual Fund Services.

INVOLUNTARY REDEMPTIONS

Because of the high cost of maintaining accounts with low balances, the Fund may
redeem your shares and send you the proceeds if your account balance falls below
a minimum value of $250 due to shareholder redemptions. Shareholders who make
large or frequent withdrawals may be particularly vulnerable to this involuntary
redemption process. However, before shares are redeemed to close an account, the
shareholder will be notified in writing and given 30 days to purchase additional
shares to meet the minimum balance requirement.

Further, the Fund reserves the right to redeem shares involuntarily or make
payment for redemptions in the form of securities if it appears appropriate to
do so in light of the Fund's responsibilities under the Investment Company Act
of 1940.

TAX INFORMATION

BELOW IS A GENERAL DISCUSSION OF TAX CONSIDERATIONS FOR THE FUND. NO ATTEMPT HAS
BEEN MADE TO PRESENT A DETAILED EXPLANATION OF THE INCOME TAX TREATMENT OF THE
FUND OR ITS SHAREHOLDERS, AND THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE
FOR CAREFUL TAX PLANNING.

The tax consequences discussed here apply whether you receive dividends in cash
or reinvest them in additional shares. The Fund will send you tax information
annually regarding the federal income tax consequences of distributions made
during the year. You should definitely consult your own tax adviser about any
state or local taxes that may apply. The Fund will be treated as a separate
entity for federal income tax purposes. Income earned by the Fund, including any
capital gains or losses realized, is not combined with income earned on the
Corporation's other portfolios.

The Fund intends to qualify each year as a regulated investment company under
the Internal Revenue Code so that it is not required to pay federal income taxes
on the income and capital gains distributed to shareholders.

FEDERAL INCOME TAXES

Unless shareholders of the Fund are otherwise exempt from taxes, they are
required to pay federal income taxes on dividends and other distributions
received (including capital gains distributions, if any) from the Fund.

DESCRIPTION OF FUND SHARES

Vision Group of Funds, Inc. was organized as a Maryland corporation on February
23, 1988, and consists of eight available portfolios: Vision Money Market Fund,
Vision Treasury Money Market Fund, Vision New York Tax-Free Money Market Fund,
Vision U.S. Government Securities Fund, Vision Growth and Income Fund, Vision
New York Tax-Free Fund, Vision Capital Appreciation Fund and Vision Equity
Income Fund. The Corporation's Articles of Incorporation permit the Corporation
to offer separate series of shares in these funds or other future portfolios.

Each Fund share represents an equal proportionate interest in the Fund with
other shares and participates equally in the dividends and any other
distributions that are declared at the discretion of the Corporation's Board of
Directors.

VOTING RIGHTS AND OTHER INFORMATION

SHAREHOLDERS OF THE FUND ARE ENTITLED TO ONE VOTE FOR EACH FULL SHARE THEY HOLD
AND TO FRACTIONAL VOTES FOR ANY FRACTIONAL SHARES THEY HOLD.

Shareholders in the Fund generally vote in the aggregate and not by class,
unless the law expressly requires otherwise or the Board of Directors determines
that the matter to be voted upon affects only the interests of shareholders of a
particular class. (See the "Description of Fund Shares" in the Statement of
Additional Information for examples of when the Investment Company Act of 1940
requires that shareholders vote by class.)

The Fund is not required to hold annual shareholder meetings, unless matters
arise that require a vote of the shareholders under the Investment Company Act
of 1940. That law requires a vote of the shareholders to approve changes in the
Fund's investment advisory agreement, to replace the Fund's independent
certified public accountants and, under certain circumstances, to elect members
to the Corporation's Board of Directors.

Directors may be removed by the Corporation's Board of Directors or by a vote of
shareholders at a special meeting. The Corporation's Board of Directors will
promptly call a special meeting of shareholders upon the written request of
shareholders owning at least 10% of the Fund's outstanding shares.

As used in this prospectus, "assets belonging to the Fund" means the money
received by the

Corporation upon the issuance or sale of shares in the Fund, together with all
income, earnings, profits, and proceeds derived from the investment of that
money. This includes any proceeds from the sale, exchange, or liquidation of
these investments, any funds or payments derived from the reinvestment of these
proceeds, and a portion of the general assets of the Corporation that do not
otherwise belong to the Fund.

Assets belonging to the Fund are charged with the direct expenses and
liabilities of the Fund and with a share of the general expenses and liabilities
of the Corporation. The general expenses and liabilities of the Corporation are
allocated in proportion to the relative asset values of all the Corporation's
portfolios at the time the expense or liability is incurred.

The management of the Corporation determines the Fund's direct and allocable
liabilities at the time the expense or liability is incurred as well as the
Fund's allocable share of any general assets at the time the asset is acquired.
These determinations are reviewed and approved annually by the Corporation's
Board of Directors and are conclusive.

HOW THE FUND SHOWS PERFORMANCE

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices. The Fund may advertise its performance in
terms of yield and total return, as defined below. Of course, total return and
yield figures are based on past results and are not an indication of future
performance.

TOTAL RETURN

The average annual total return of the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the maximum offering price per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares purchased
at the beginning of the period with $1,000, less any applicable sales charge,
adjusted over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions.

YIELD

The yield of the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a 12-month period
and is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments required by
the Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

ADDRESSES

Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
(800) 836-2211 (716) 842-4488

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

INVESTMENT ADVISER
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14240

CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1119
Boston, Massachusetts 02103

ADMINISTRATOR
Federated Administrative Services
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, Massachusetts 02266-8600

INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219

THIS PAGE INTENTIONALLY LEFT BLANK

Vision
Equity Income
Fund

---------------------------------------------

Prospectus dated
September 25, 1997

[LOGO OF VISION GROUP OF FUNDS, INC.]

MANUFACTURERS AND TRADERS
TRUST COMPANY
[LOGO] Federated Investors ---------------------------------------
Investment Adviser
Federated Securities Corp., Distributor A subsidiary of First Empire State
Corporation

CUSIP 92830F802
G00157-02 (9/97) TRG00157-02

Vision Equity Income Fund

(A Portfolio of Vision Group of Funds, Inc.)
Supplement to Statement of Additional Information dated September 25, 1997

A. Please delete the last sentence of the section entitled "Portfolio
Turnover" on page 8 of the Statement of Additional Information and
replace it with the following sentence.

"For the period from September 26, 1997 (date of initial public
investment) to October 31, 1997, the Fund's portfolio turnover rate was
0%."

B. Please replace the first paragraph in the "Selling Short and Buying on
Margin" subsection of the "Investment Limitations" section on page 8 of
the Statement of Additional Information with the following paragraph.

"Selling Short and Buying on Margin

The Fund may sell securities short and obtain such short-term credits as
are necessary for clearance of purchases and sales of securities, but will
not purchase any securities on margin in connection with buying futures
contracts and put options, and writing covered call options."

C. Please insert the following as the second paragraph in the section
entitled "Fund Ownership" on page 12 of the Statement of Additional
Information.

"As of December 3, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: Reho & Co., Buffalo, New
York, owned approximately 999,528 shares (59.78%) and Tice & Co.,
Buffalo, New York, owned approximately 516,367 shares (30.88%)."

D. Please insert the following as the second paragraph in the section
entitled "Advisory Fees" on page 13 of the Statement of Additional
Information.

"For the period from September 26, 1997 (date of initial public
investment) to October 31, 1997, the adviser earned investment advisory
fees of $7,062."

E. Please insert the following information as a second paragraph under the
sub-section entitled "Administrative Services" on page 13 of the
Statement of Additional Information.

"From the Fund's effective date (September 24, 1997) to October 31, 1997,
the Fund incurred costs for administrative services of $4,521."

F. Please insert the following as the final paragraph of the section
entitled "Brokerage Transactions" on page 14 of the Statement of
Additional Information.

"For the period from September 26, 1997 (date of initial public
investment) to October 31, 1997, the Fund paid brokerage commissions in
the amount of $20,129."

G. Please insert the following as the second paragraph of the section entitled
"Total Return" on page 16 of the Statement of Additional Information.

"The Fund's cumulative total return for the period from September 26,
1997 (date of initial public investment) to October 31, 1997 was (7.19)%.
Cumulative total return reflects the Fund's total performance over a
specific period of time. This total return assumes and is reduced by the
payment of the maximum sales charge. The Fund's total return is
representative of only 1 month of investment activity since the Fund's
effective date."

H. Please insert the following as the first paragraph of the section entitled
"Yield" on page 16 of the Statement of Additional Information.

"The yield for the Fund for the thirty-day period ended October 31, 1997
was 1.25%."

December 31, 1997

MANUFACTURERS AND TRADERS
TRUST COMPANY
Investment Adviser
A subsidiary of First Empire State Corporation
Federated Securities Corp. is distributor for the Fund.

Cusip 92830F802
G00158-05 (12/97)

Vision Equity Income Fund
(A Portfolio of Vision Group of Funds, Inc.)

Statement of Additional Information

This Statement of Additional Information relates to the prospectus dated
September 25, 1997 of the Vision Equity Income Fund (the "Fund"), a
portfolio of the Vision Group of Funds, Inc.

This Statement of Additional Information is not a prospectus itself, but
should be read in conjunction with the Fund's current prospectus dated
September 25, 1997. This Statement of Additional Information is incorporated
into the Fund's prospectus by reference. To receive a copy of the
prospectus, or a paper copy of this Statement of Additional Information, if
you have received it electronically, write to Vision Group of Funds, Inc.,
P.O. Box 4556, Buffalo, NY 14240-4556, or call (800) 836-2211 or (716)
842-4488. Please retain this Statement of Additional Information for further
reference.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Statement of Additional Information dated September 25, 1997

MANUFACTURERS AND TRADERS

TRUST COMPANY

Investment Adviser

A subsidiary of First Empire State Corporation

Federated Securities Corp. is distributor for the Fund.

<PAGE>

Table of Contents
- --------------------------------------------------------------------------------

General Information About The Fund 1

Investment Objective 1

Investment Policies 1

Acceptable Investments 1
Corporate Debt Obligations 1
Zero Coupon Bonds 1
U.S. Government Securities 1
Mortgage-Backed Securities 2
Money Market Instruments 3
Securities of Foreign Issuers 3
Repurchase Agreements 3
When-Issued and Delayed Delivery Transactions 3
Illiquid and Restricted Securities 4
Lending of Portfolio Securities 4
Reverse Repurchase Agreements 4
Futures and Options Transactions 5
Warrants 8
Portfolio Turnover 8

Investment Limitations 8

Vision Group of Funds, Inc. Management10
Fund Ownership 12
Directors' Compensation 12
Director Liability 12

Investment Advisory Services 12
Adviser to the Fund 12
Advisory Fees 13

Other Services 13
Administrative Services 13
Custodian and Portfolio Accountant 13
Transfer Agent and Dividend Disbursing Agent 13
Independent Auditors 13

Brokerage Transactions 13

Description of Fund Shares 14

How to Buy Shares 14
Conversion to Federal Funds 14

How the Fund Values its Shares 15

How to Redeem Shares 15
Redemption in Kind 15

Determining Net Asset Value 15

Banking Laws 15

Tax Status 16
The Fund's Tax Status 16
Shareholders' Tax Status 16

Total Return 16

Yield 16

Performance Comparisons 17
Economic and Market Information 19

Appendix 20

<PAGE>

General Information About The Fund

The Fund is a portfolio in the Vision Group of Funds, Inc. (the "Corporation").
The Corporation was established as a Maryland Corporation under Articles of
Incorporation dated February 23, 1988.

Investment Objective

The investment objective of the Vision Equity Income Fund (the "Fund") is to
provide current income. The investment objective of the Fund cannot be changed
without approval of its shareholders. Capital appreciation is a secondary,
non-fundamental investment consideration.

Investment Policies

The prospectus discusses the Fund's investment policies. Supplemental
information is set out below concerning the types of securities and other
instruments in which the Fund may invest, the investment policies and strategies
that the Fund may utilize, and certain risks attendant to those investments,
policies and strategies.

Acceptable Investments

Corporate Debt Obligations

The Fund may invest in corporate debt obligations. Corporate debt obligations
may bear fixed, fixed and contingent, or variable rates of interest. They may
involve equity features such as conversion or exchange rights, warrants for the
acquisition of common stock of the same or a different issuer, participations
based on revenues, sales, or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered as a
unit).

Increasing rate securities, which currently do not make up a significant share
of the market in corporate debt obligations, are generally offered at an initial
interest rate which is at or above prevailing market rates. Interest rates are
reset periodically (most commonly every 90 days) at different levels on a
predetermined scale. These levels of interest are ordinarily set at
progressively higher increments over time. Some increasing rate securities may,
by agreement, revert to a fixed rate status. These securities may also contain
features which allow the issuer the option to convert the increasing rate of
interest to a fixed rate under such terms, conditions, and limitations as are
described in each issuer's prospectus.

Zero Coupon Bonds

The Fund may invest in zero coupon bonds, which may be in the form of zero
coupon convertible securities. Zero coupon bonds are debt securities which are
issued at a discount to their face amount and do not entitle the holder to any
periodic payments of interest prior to maturity. Rather, interest earned on zero
coupon bonds accretes at a stated yield until the security reaches its face
amount at maturity. Zero coupon convertible securities are convertible into a
specific number of shares of the issuer's common stock. Zero coupon convertible
bonds usually have put features that provide the holder with the opportunity to
put the bonds back to the issuer at a stated price before maturity. Generally,
the prices of zero coupon bonds may be more sensitive to market interest rate
fluctuations than conventional debt securities.

Federal income tax law requires the holder of a zero coupon bond to recognize
income from the security prior to the receipt of cash payments. To maintain its
qualification as regulated investment companies and avoid liability of federal
income taxes, the Fund will be required to distribute income accrued from zero
coupon bonds which the Fund owns, and may have to sell portfolio securities
(perhaps at disadvantageous times) in order to generate cash to satisfy these
distribution requirements.

U.S. Government Securities

The types of U.S. government securities in which the Fund may invest generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:

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o the full faith and credit of the U.S. Treasury;

o the issuer's right to borrow from the U.S. Treasury;

o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or

o the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

o Farm Credit Banks;

o The Student Loan Marketing Association;

o Federal Home Loan Banks;

o Federal Home Loan Mortgage Corporation; and

o Federal National Mortgage Association.

Mortgage-Backed Securities

Privately issued mortgage-related securities which the Fund may purchase
generally represent an ownership interest in federal agency mortgage
pass-through securities such as those issued by Governmental National Mortgage
Association. The terms and characteristics of the mortgage instruments may vary
among pass-through mortgage loan pools. The market for such mortgage-related
securities has expanded considerably since its inception. The size of the
primary issuance market and the active participation in the secondary market by
securities dealers and other investors makes government-related pools highly
liquid.

Resets of Interest

The interest rates paid on the ARMS, CMOs, and REMICs in which the Fund
may invest generally are readjusted at intervals of one year or less to an
increment over some predetermined interest rate index. There are two main
categories of indices: those based on U.S. Treasury securities and those
derived from a calculated measure, such as a cost of funds index or a
moving average of mortgage rates. Commonly utilized indices include the
one-year and five-year constant maturity Treasury Note rates, the
three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates on
longer-term Treasury securities, the National Median Cost of Funds, the
one-month or three-month London Interbank Offered Rate (LIBOR), the prime
rate of a specific bank, or commercial paper rates. Some indices, such as
the one-year constant maturity Treasury Note rate, closely mirror changes
in market interest rate levels. Other tend to lag changes in market rate
levels and tend to be somewhat less volatile.

To the extent that the adjusted interest rate on the mortgage security
reflects current market rates, the market value of an adjustable rate
mortgage security will tend to be less sensitive to interest rate changes
than a fixed rate debt security of the same stated maturity. Hence,
adjustable rate mortgage securities which use indices that lag changes in
market rates should experience greater price volatility than adjustable
rate mortgage securities that closely mirror the market. Certain residual
interest tranches of CMOs may have adjustable interest rates that deviate
significantly from prevailing market rates, even after the interest rate
is reset, and are subject to correspondingly increased price volatility.
In the event the Fund purchases such residual interest mortgage
securities, it will factor in the increased interest and price volatility
of such securities when determining its dollar-weighted average duration.

Caps and Floors

The underlying mortgages which collateralize the ARMS, CMOs, and REMICs in
which the Fund invests will frequently have caps and floors which limit
the maximum amount by which the loan rate to the residential borrower may
change up or down: (1) per reset or adjustment interval, and (2) over the
life of the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly principal and
interest payments rather than limiting interest rate changes. These
payment caps may result in negative amortization.

The value of mortgage securities in which the Fund invests may be affected
if market interest rates rise or fall faster and farther than the
allowable caps or floors on the underlying residential mortgage loans.
Additionally, even though the interest rates on the underlying residential
mortgages are adjustable, amortization and prepayments may occur, thereby
causing the effective maturities of the mortgage securities in which the
Fund invests to be shorter than the maturities stated in the underlying
mortgages.

Money Market Instruments

The Fund may invest in money market instruments such as:

o instruments of domestic and foreign banks and savings and loans if they
have capital, surplus, and undivided profits of over $100,000,000, or
if the principal amount of the instrument is federally insured;

o commercial paper rated, at the time of purchase, not less than A-1 by
Standard & Poor's Ratings Group ("S&P"), Prime-1 by Moody's Investors
Services, Inc. ("Moody's"), or F-1 by Fitch Investors Service, Inc.
("Fitch"), or if not rated are determined to be of comparable quality
by the Fund's investment adviser, Manufacturers and Traders Trust
Company ("M&T Bank") (see Appendix for a description of the basis of
those ratings);

o time and savings deposits (including certificates of deposit) in
commercial or savings banks whose accounts are insured by the Bank
Insurance Fund ("BIF"), or institutions whose accounts are insured by
the Savings Association Insurance Fund ("SAIF"), including certificates
of deposit issued by, and other time deposits in, foreign branches of
BIF-insured banks which, if negotiable, mature in six months or less or
if not negotiable, either mature in ninety days or less, or are
withdrawable upon notice not exceeding ninety days; and

o bankers' acceptances.

Securities of Foreign Issuers

The Fund may invest in securities of foreign issuers. Securities of foreign
issuers may include debt obligations of supranational entities, which include
international organizations designed or supported by governmental entities to
promote economic reconstruction or development, and international banking
institutions and related government agencies. Examples of these include, but are
not limited to, the International Bank for Reconstruction and Development (World
Bank), European Investment Bank and Inter American Development Bank.

Securities of a foreign issuer may present greater risks than investments in
U.S. securities, including higher transaction costs as well as the imposition of
additional taxes by foreign governments. In addition, investments in foreign
issuers may include additional risks associated with less complete financial
information about the issuers, less market liquidity, and political instability.
Future political and economic developments, the possible imposition of
withholding taxes on interest income, the possible seizure or nationalization of
foreign holdings, the possible establishment of exchange controls, or the
adoption of other governmental restrictions, might adversely affect the payment
of principal and interest on securities of foreign issuers. As a matter of
practice, the Fund will not invest in the securities of a foreign issuer if any
risk appears to M&T Bank to be substantial.

Repurchase Agreements

The Fund may enter into repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/ dealers, and other recognized financial
institutions sell U.S. government securities or certificates of deposit to the
Fund and agree at the time of sale to repurchase them at a mutually agreed upon
time and price within one year from the date of acquisition. The Fund or its
custodian will take possession of the securities subject to repurchase
agreements and these securities will be marked to market daily. To the extent
that the original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund may
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are found by M&T Bank to be
creditworthy pursuant to guidelines established by the Board of Directors.

When-Issued and Delayed Delivery Transactions

These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.

Illiquid and Restricted Securities

The Fund may invest in illiquid and restricted securities. The ability of the
Board of Directors to determine the liquidity of certain restricted securities
is permitted under a Securities and Exchange Commission staff position set forth
in the adopting release for Rule 144A under the Securities Act of 1933 (the
"Rule"). The Rule is a non-exclusive, safe-harbor for certain secondary market
transactions involving securities subject to restrictions on resale under
federal securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
The Rule was expected to further enhance the liquidity of the secondary market
for securities eligible for resale under the Rule. The Fund believes that the
staff of the Securities and Exchange Commission has left the question of
determining the liquidity of all restricted securities (eligible for resale
under the Rule) to the Corporation's Board.

Under the criteria currently established by the Directors, M&T Bank must
consider the following factors in determining the liquidity of restricted
securities: (i) the frequency of trades and quotes for the security; (ii) the
volatility of quotations and trade prices for the security; (iii) the number of
dealers willing to purchase or sell the security and the number of potential
purchasers; (iv) dealer undertakings to make a market in the security; (v) the
nature of the security and the nature of the marketplace trades; (vi) the rating
of the security and the financial condition and prospects of the issuer of the
security; and (vii) such other factors as may be relevant to a Fund's ability to
dispose of the security.

The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law, and is generally sold to institutional investors, such as the Fund, who
agrees that it is purchasing the paper for investment purposes and not with a
view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Fund believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Directors are quite liquid. The Fund intends,
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Directors, including Section 4(2) commercial paper,
as determined by M&T Bank, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Fund intends to not subject such paper to the
limitation applicable to restricted securities.

Lending of Portfolio Securities

The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any interest paid
on such securities. Loans are subject to termination at the option of the Fund
or the borrower. The Fund may pay reasonable administrative and custodial fees
in connection with a loan and may pay a negotiated portion of the interest
earned on the cash or equivalent collateral to the borrower or placing broker.
The Fund does not have the right to vote securities on loan, but would terminate
the loan and regain the right to vote if that were considered important with
respect to the investment.

Reverse Repurchase Agreements

The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.

When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction is settled.

Futures and Options Transactions

As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolios by buying
and selling futures contracts, buying put options on portfolio securities and
listed put options on futures contracts, and writing call options on futures
contracts. The Fund may also write covered call options on portfolio securities
to attempt to increase current income.

The Fund will maintain its position in securities, options and segregated cash
subject to puts and calls until the options are exercised, closed, or have
expired. An option position of futures transactions may be closed out
over-the-counter or on a nationally recognized exchange which provides a
secondary market for options of the same series. The Fund currently does not
intend to invest more than 5% of its total assets in options transactions.

Futures Contracts

The Fund may purchase and sell financial and stock futures contracts to
generate income or to hedge against the effects of changes in the value of
portfolio securities due to anticipated changes in interest rates and
market conditions without necessarily buying or selling the securities.
The Fund also may purchase and sell stock index futures to hedge against
changes in prices. The Fund will not engage in futures transactions for
speculative purposes. A futures contract is a firm commitment by two
parties: the seller who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the buyer who
agrees to take delivery of the security ("going long") at a certain time
in the future.

For example, in the fixed income securities market, prices move inversely
to interest rates. A rise in rates means a drop in price. Conversely, a
drop in rates means a rise in price. In order to hedge its holdings of
fixed income securities against a rise in market interest rates, the Fund
could enter into contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility that the
prices of its fixed income securities may decline during the Fund's
anticipated holding period. The Fund would "go long" (i.e., agree to
purchase securities in the future at a predetermined price) to hedge
against a decline in market interest rates.

Stock index futures contracts are based on indices that reflect the market
value of common stock of the issuers included in the indices. An index
futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to the differences
between the value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally written.

"Margin" in Futures Transactions

Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather, the
Fund is required to deposit an amount of "initial margin" in cash or U.S.
Treasury bills with its custodian (or the broker, if legally permitted).
The nature of initial margin in futures transactions is different from
that of margin in securities transactions in that futures contract initial
margin does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations
have been satisfied.

A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as "marking
to market." Variation margin does not represent a borrowing or loan by the
Fund but is instead settlement between the Fund and the broker of the
amount one would owe the other if the futures contract expired. In
computing its daily net asset value, the Fund will mark-to-market its open
futures positions. The Fund is also required to deposit and maintain
margin when it writes call options on futures contracts.

The Fund will comply with the following restrictions when purchasing and
selling futures contracts. To the extent required to comply with Commodity
Futures Trading Commission ("CFTC") Regulation 4.5 and thereby avoid
status as a "commodity pool operator," the Fund will not enter into a
futures contract for other than bona fide hedging purposes, or purchase an
option thereon, if immediately thereafter the initial margin deposits for
futures contracts held by it, plus premiums paid by it for open options on
futures contracts, would exceed 5% of the market value of the Fund's net
assets, after taking into account the unrealized profits and losses on
those contracts it has entered into; and, provided further, that in the
case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in computing such 5%. Second, since
the Fund does not constitute a commodity pool, it will not market itself
as such, nor serve as a vehicle for trading in the commodities futures or
commodity options markets. Finally, because the Fund will submit to the
CFTC special calls for information, the Fund will not register as a
commodities pool operator.

Put Options on Financial and Stock Index Futures Contracts

The Fund may purchase listed put options on financial and stock index
futures contracts. The Fund would purchase put options on futures
contracts to protect portfolio securities against decreases in value
resulting from an anticipated increase in market interest rates or changes
in stock prices. Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date at a
specified price, the purchase of a put option on a futures contract
entitles (but does not obligate) its purchaser to decide on or before a
future date whether to assume a short position at the specified price.

Generally, if the hedged portfolio securities decrease in value during the
term of an option, the related futures contracts will also decrease in
value and the option will increase in value. In such an event, the Fund
will normally close out its option by selling an identical option. If the
hedge is successful, the proceeds received by the Fund upon the sale of
the second option will be large enough to offset both the premium paid by
the Fund for the original option plus the decrease in value of the hedged
securities.

Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and the premium paid for the
contract will be lost.

Call Options on Financial and Stock Index Futures Contracts

In addition to purchasing put options on futures, the Fund may write
listed call options on financial and stock index futures contracts to
hedge its portfolio against an increase in market interest rates or
changes in stock market conditions. When the Fund writes a call option on
a futures contract, it is undertaking the obligation of assuming a short
futures position (selling a futures contract) at the fixed strike price at
any time during the life of the option if the option is exercised. As
market interest rates rise or market conditions change, causing the prices
of futures to go down, the Fund's obligation under a call option on a
future (to sell a futures contract) costs less to fulfill, causing the
value of the Fund's call option position to increase.

In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that
the Fund keeps the premium received for the option. This premium can
offset the drop in value of the Fund's fixed income portfolio which is
occurring as interest rates rise.

Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will be
less than the premium received by the Fund for the initial option. The net
premium income of the Fund will then offset the decrease in value of the
hedged securities.

The Fund will not maintain open positions in futures contracts it has sold
or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current
market value of its securities portfolio plus or minus the unrealized gain
or loss on those open positions, adjusted for the correlation of
volatility between the hedged securities and the futures contracts. If
this limitation is exceeded at any time, the Fund will take prompt action
to close out a sufficient number of open contracts to bring its open
futures and options positions within this limitation.

Purchasing Put Options On Portfolio Securities

The Fund may purchase put options on portfolio securities to protect
against price movements in particular securities in their portfolios. A
put option gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during the
term of the option. The Fund may purchase these put options as long as the
underlying stocks are held in its portfolio.

Writing Covered Put Options on Portfolio Securities

The Fund may also write put options to generate income and thereby protect
against price movements in the Fund's portfolio securities. As a writer of
a put option, the Fund has the obligation to purchase a security from the
purchaser of the option upon the exercise of the option. In the case of
put options, the Fund will segregate cash or U.S. Treasury obligations
with a value equal to or greater than the exercise price of the underlying
securities.

Writing Covered Call Options on Portfolio Securities

The Fund may also write covered call options on securities either held in
its portfolio or which it has the right to obtain without payment of
further consideration or for which it has segregated cash in the amount of
any additional consideration. As the writer of a call option, the Fund has
the obligation upon exercise of the option during the option period to
deliver the underlying security upon payment of the exercise price.
Covered call options generally do not present investment risks different
from those associated with a security purchase. For example, a security
may be sold before it reaches its maximum potential value, or it may be
retained even though its current market price has dropped below its
purchase price. Similarly, a covered call option presents these risks. For
example, when the option purchaser acquires the security at the
predetermined exercise price, the Fund could be giving up any capital
appreciation above the exercise price that is not offset by the option
premium paid by the option purchaser to the Fund. Conversely, if the
underlying security decreases in price and the option purchaser decides
not to carry out the transaction, the Fund keeps the premium and the Fund
can sell the security or hold onto it for future price appreciation. The
Fund may only sell call options either on securities held in its portfolio
or on securities which it has the right to obtain without payment of
further consideration or for which it has segregated cash in the amount of
any additional consideration. Writing of call options by the Fund is
intended to generate income for the Fund and thereby protect against price
movements in particular securities in the Fund's portfolio.

Over-the-Counter Options

The Fund may purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyer or writers of the
options for those options on portfolio securities held by the Fund and not
traded on an exchange.

Stock Index Options

The Fund may purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter market. A stock
index fluctuates with changes in the market values of the stock included
in the index.

The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in the Fund's portfolio correlate with
price movements of the stock index selected. Because the value of an index
option depends upon movements in the level of the index rather than the
price of a particular stock, whether the Fund will realize a gain or loss
from the purchase of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of
certain indices, in an industry or market segment, rather than movements
in the price of a particular stock. Accordingly, successful use by the
Fund of options on stock indices will be subject to the ability of M&T
Bank to predict correctly movements in the direction of the stock market
generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks.

Risks

When the Fund uses futures and options on futures as hedging devices,
there is a risk that the prices of the securities subject to the futures
contracts may not correlate with the prices of the securities in the
Fund's portfolio. This may cause the futures contract and any related
options to react differently than the portfolio securities to market
changes. In addition, M&T Bank could be incorrect in its expectations
about the direction or extent of market factors such as stock price
movements. In these events, the Fund may lose money on the futures
contract or option.

It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although M&T Bank will
consider liquidity before entering into these transactions, there is not
assurance that a liquid secondary market on an exchange or otherwise will
exist for any particular futures contract or option at any particular
time. The Fund's ability to establish and close out futures and options
positions depends on this secondary market. The inability to close out
these positions could have an adverse effect on the Fund's ability to
effectively hedge its portfolio.

To minimize risks, the Fund may not purchase or sell futures contracts or
related options, for other than bona fide hedging purposes, if immediately
thereafter the sum the amount of margin deposits on the Fund's existing
futures positions and premiums paid for related options would exceed 5% of
the market value of the Fund's total assets after taking into account the
unrealized profits and losses on those contracts it has entered into; and
provided further, that in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount may be excluded in computing
such 5%. When the Fund purchases futures contracts, an amount of cash and
cash equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use
of such futures contract is unleveraged. When the Fund sells futures
contracts, it will either own or have the right to receive the underlying
future or security, or will make deposits to collateralize the position as
discussed above.

Warrants

The Fund may invest in warrants. Warrants are basically options to purchase
common stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than a year to twenty years or may be
perpetual. However, most warrants have expiration dates after which they are
worthless. In addition, if the market price of the common stock does not exceed
the warrant's exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no dividends, and have
no rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
optioned common stock.

Portfolio Turnover

The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
its investment objective. Securities in its portfolio will be sold whenever M&T
Bank believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. M&T Bank and M&T Bank does not anticipate that the Fund's annual
portfolio rate will exceed 100% under normal market conditions.

Investment Limitations

Selling Short and Buying on Margin

The Fund may sell securities short but will not purchase any securities on
margin in connection with buying futures contracts and put options, and
writing covered call options and obtaining such short-term credits as are
necessary for clearance of purchases and sales of securities.

The deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.

The Fund may purchase and dispose of U.S. Government securities and CMOs
before they are issued and may also purchase and dispose of them on a
delayed delivery basis.

Issuing Senior Securities and Borrowing Money

The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Fund will
not purchase any securities while borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding.

Pledging Assets

The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, the Fund may mortgage,
pledge, or hypothecate assets having a market value not exceeding the
lesser of the dollar amounts borrowed or 15% of the value of its total
assets at the time of the borrowing. For purposes of this limitation, the
following are not deemed to be pledges: margin deposits for the purchase
and sale of futures contracts and related options and segregation or
collateral arrangements made in connection with options, futures, options
on futures, reverse repurchase agreements, lending of portfolio
securities, or the purchase of securities on a when-issued basis.

Underwriting

The Fund will not underwrite any issue of securities except as they may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.

Investing in Real Estate

The Fund will not purchase or sell real estate including limited
partnership interests although it may invest in securities of companies
whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.

Lending Cash or Securities

The Fund will not lend any of its assets except portfolio securities, the
market value of which does not exceed one-third of the value of the Fund's
total assets. This shall not prevent the Fund from purchasing or holding
U.S. government obligations, money market instruments, variable rate
demand notes, bonds, debentures, notes, certificates of indebtedness, or
other debt securities, entering into repurchase agreements, or engaging in
other transactions where permitted by the Fund's investment objective,
policies, and limitations.

Investing in Commodities

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell
futures contracts and related options.

Concentration of Investments

The Fund will not invest 25% or more of the value of its total assets in
any one industry, except that for temporary defensive purposes, it may
invest 25% or more of the value of its total assets in securities issued
or guaranteed by the U.S. government, its agencies, or instrumentalities.

Diversification of Investments

With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items, securities of other investment companies or
securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized
by such securities) if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer. The Fund will
not acquire more than 10% of the outstanding voting securities of any one
issuer.

The above investment limitations are fundamental policies of the Fund and cannot
be changed without shareholder approval. The following limitations, however, may
be changed by the Directors without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes effective.

Investing in Illiquid Securities

The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements providing for settlement in
more than seven days after notice, over-the-counter options, certain
restricted securities not determined by the Directors to be liquid, and
non-negotiable time deposits with maturities over seven days.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. The Fund has no present intent to borrow money in excess of 5% of
the value of its net assets during the coming fiscal year.

For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."

<PAGE>

Vision Group of Funds, Inc. Management

Officers and Directors are listed with their addresses, birthdates, present
positions with Vision Group of Funds, Inc., and principal occupations.

Randall I. Benderson
570 Delaware Avenue
Buffalo, NY

Birthdate: January 12, 1955

Director

Senior Vice President and Chief Operating Officer, Benderson Development
Company, Inc.

Joseph J. Castiglia
Roycroft Campus
21 South Grove Street, Suite 291

East Aurora, NY 14052

Birthdate: July 20, 1934

Director

Director, New York State Electric & Gas Corp.; Secewsow Environmental Services,
Inc.; Blue Cross & Blue Shield of Western New York; Buffalo Branch, Federal
Reserve Bank of New York; and Former President, Chief Executive Officer and Vice
Chairman, Pratt & Lambert United, Inc.

Daniel R. Gernatt, Jr.
Richardson & Taylor Hollow Roads
Collins, NY

Birthdate: July 14, 1940

Director

President and CFO of Gernatt Asphalt Products, Inc.; Executive Vice President,
Dan Gernatt Gravel Products, Inc.; Vice President, Countryside Sand & Gravel,
Inc.

George K. Hambleton, Jr.
670 Young Street
Tonawanda, NY

Birthdate: February 8, 1933

Director

Former President, Brand Name Sales, Inc.; President, Hambleton & Carr, Inc.

<PAGE>

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

President and Treasurer

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp., and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of other funds distributed by
Federated Securities Corp.; President, Executive Vice President and Treasurer of
other funds distributed by Federated Securities Corp.

Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA

Birthdate: March 23, 1960

Vice President and Assistant Treasurer

Vice President, Federated Administrative Services; Vice President and Assistant
Treasurer of other funds distributed by Federated Securities Corp.

Victor R. Siclari
Federated Investors Tower
Pittsburgh, PA

Birthdate: November 17, 1961

Secretary

Corporate Counsel and Vice President, Federated Administrative Services;
formerly Attorney, Morrison & Foerster (law firm).

<PAGE>

Fund Ownership

Officers and Directors own less than 1% of the Fund's outstanding shares.

Directors' Compensation

AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM
CORPORATION CORPORATION*#
Randall I. Benderson,
Director $9,500

Joseph J. Castiglia,
Director $10,000

Daniel R. Gernatt, Jr.,
Director $10,000

George K. Hambleton, Jr.,
Director $10,000

*Information is furnished for the fiscal year ended April 30, 1997. The
Corporation is the only investment company in the Fund Complex.

#The aggregate compensation is provided for the Corporation which is comprised
of eight portfolios.

Director Liability

With respect to the removal of a Director of the Corporation, the Corporation's
By-Laws provide, in accordance with applicable law, that a Director may be
removed from the Board at a meeting of shareholders called for that purpose upon
the majority vote of the shareholders of the Corporation entitled to vote at
such meeting. Such a meeting shall be called by the President or the Board of
Directors or at the request in writing of shareholders entitled to cast at least
ten percent (10%) of the votes entitled to be cast at such meeting. Such
shareholders' request shall state the purpose of the proposed meeting, and the
Corporation shall inform those shareholders of the reasonably estimated cost of
preparing and mailing a notice of the meeting to the other shareholders and, on
payment of these costs, shall notify each shareholder entitled to notice of the
meeting.

Investment Advisory Services

Adviser to the Fund

Investment advisory services are provided to the Fund by Manufacturers and
Traders Trust Company ("M&T Bank"). The advisory services provided and the
expenses assumed by M&T Bank, as well as the advisory fees payable to it, are
described in the Fund's prospectus.

The investment advisory agreement provides that M&T Bank shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with its performance under the advisory agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of M&T Bank in the performance of its
duties, or from reckless disregard by it of its duties and obligations
thereunder. Because of internal controls maintained by M&T Bank to restrict the
flow of non-public information, Fund investments are typically made without any
knowledge of M&T Bank's or its affiliates' lending relationships with an issuer.

Unless sooner terminated, the advisory agreement between the Fund and M&T Bank
will continue in effect from year to year if such continuance is approved at
least annually by the Corporation's Board of Directors, or by vote of a majority
of the outstanding shares of a Fund (as defined in the Prospectus), and by a
majority of the Directors who are not parties to the advisory agreement or
interested persons (as defined in the Investment Company Act of 1940) of any
party to the advisory agreement, by vote cast in person at a meeting called for
such purpose. The advisory agreement is terminable at any time on sixty days'
written notice without penalty by the Directors, by vote of a majority of the
outstanding shares of a Fund, or by M&T Bank. The advisory agreement also
terminates automatically in the event of its assignment, as defined in the
Investment Company Act of 1940.

Advisory Fees

For its advisory services, M&T Bank receives an annual investment advisory fee
from the Fund as described in the Prospectus.

Other Services

Administrative Services

Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
Prospectus.

Custodian and Portfolio Accountant

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund Federated Services Company, Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779 provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.

Transfer Agent and Dividend Disbursing Agent

Federated Shareholder Services Company, Pittsburgh, Pennsylvania, the Fund's
registered transfer agent, maintains all necessary shareholder records.

Independent Auditors

The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.

Brokerage Transactions

M&T Bank determines which securities are to be sold and purchased by the Fund
and which brokers are to be eligible to execute its portfolio transactions.
Portfolio securities of the Fund are normally purchased directly from the issuer
or from an underwriter or market maker for the securities. Purchases from
dealers serving as market makers may include the spread between the bid and
asking price. While M&T Bank generally seeks competitive spreads or commissions,
a Fund may not necessarily pay the lowest spread or commission available on each
transaction for reasons discussed below.

M&T Bank may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to M&T Bank
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by M&T Bank or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which M&T Bank or its affiliates might
otherwise have paid, it would tend to reduce their expenses. M&T Bank exercises
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.

The Fund will not execute portfolio transactions through, acquire portfolio
securities issued by, make savings deposits in, or enter into repurchase or
reverse repurchase agreements with M&T Bank, or its affiliates, and will not
give preference to M&T Bank's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements and reverse repurchase
agreements. While serving as investment adviser to the Fund, M&T Bank has agreed
to maintain its policy and practice of conducting M&T Bank's Trust and
Investment Services Division independently of its Commercial Department.

In making investment recommendations for the Fund, neither M&T Bank nor Trust
and Investment Services Division personnel of M&T Bank will inquire or take into
consideration whether the issuer of securities proposed for purchase or sale by
the Fund is a customer of the Commercial Department of M&T Bank and, in dealing
with its commercial customers, the Commercial Department will not inquire or
take into consideration whether securities of such customers are held by the
Fund.

Although investment decisions for the Fund are made independently from those of
the other accounts managed by M&T Bank, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by M&T Bank is prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by M&T Bank to be equitable to each. In
some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

Description of Fund Shares

The Corporation's Articles of Incorporation authorize the Board of Directors to
issue up to 10 billion full and fractional shares of Common Stock, of which
eight billion shares have been classified into eight classes of one billion
shares each. Two billion shares remain unclassified at this time. Shares of
Classes A, B, C, D, E, F, G and H Common Stock represent interests in Vision
Money Market Fund, Vision Treasury Money Market Fund, Vision New York Tax-Free
Money Market Fund, Vision U.S. Government Securities Fund, Vision New York
Municipal Income Fund, Vision Growth and Income Fund, Vision Capital
Appreciation Fund, and Vision Equity Income Fund, respectively.

The Board of Directors may classify or reclassify any unissued shares of the
Corporation into one or more additional classes by setting or changing in any
one or more respects their respective preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption.

Shares have no subscription or pre-emptive rights and only such conversion or
exchange rights as the Board may grant in its discretion. When issued for
payment as described in the Fund's Prospectus and this Statement of Additional
Information, the Fund's shares will be fully paid and non-assessable. In the
event of a liquidation or dissolution of the Corporation, shares of the Fund are
entitled to receive the assets available for distribution belonging to the Fund,
and a proportionate distribution, based upon the relative asset values of that
Fund and the Corporation's other portfolios, of any general assets not belonging
to any particular portfolio which are available for distribution.

Rule 18f-2 under the Investment Company Act of 1940 provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Corporation shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. A portfolio is not
affected by a matter unless it is clear that the interests of each portfolio in
the matter are identical, or that the matter does not affect any interest of the
portfolio. Under Rule 18f-2, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to a portfolio only if approved by a majority of the outstanding
shares of such portfolio. However, Rule 18f-2 provides that the ratification of
independent certified public accountants, the approval of principal underwriting
contracts and the election of Directors may be effectively acted upon by
shareholders of the Corporation voting without regard to class.

Notwithstanding any provision of Maryland law requiring a greater vote of the
Corporation shares (or of any class voting as a class) in connection with any
corporate action, unless otherwise provided by law (for example, by Rule 18f-2)
or by the Corporation's Articles of Incorporation, the Corporation may take or
authorize such action upon the favorable vote of the holders of more than 50% of
the outstanding common stock of the Fund and the Corporation's other portfolios
(voting together without regard to class).

How to Buy Shares

Shares of the Fund are sold at net asset value plus an applicable sales charge
on days on which the New York Stock Exchange and the Federal Reserve Wire System
are open for business. The procedure for purchasing shares of the Fund is
explained in the prospectus under "How to Buy Shares."

Conversion to Federal Funds

It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. M&T Bank and State Street Bank
act as the shareholders' agents in depositing checks and converting them to
federal funds.

<PAGE>

How the Fund Values its Shares

The market value of the Fund's portfolio securities are determined as follows:

o for equity securities, according to the last sales price on a national
securities exchange, if applicable;

o in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;

o for bond and other fixed income securities, as determined by an
independent pricing service;

o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service or, for
short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost; or

o for all other securities, at fair value as determined in good faith by
the Directors.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.

The Fund will value futures contracts, options on portfolio securities and
options on futures at their market values established by the applicable
exchanges at the close of trading on such exchanges, unless the Directors
determine in good faith that another method of valuing these positions is
necessary to appraise their fair value.

How to Redeem Shares

The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "How to Redeem Shares."

Redemption in Kind

Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio. To the extent available,
such securities will be readily marketable.

Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Directors determine to be fair and equitable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur transaction costs.

Determining Net Asset Value

Net asset value generally changes each day. The days on which net asset value is
calculated for shares of the Fund are described in the prospectus.

Banking Laws

The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such laws and regulations do not prohibit such a holding company or affiliate
from acting as investment adviser, transfer agent, or custodian to such an
investment company or from purchasing shares of such company as agent for and
upon the order of their customers. Some entities providing services to the Fund
are subject to such banking laws and regulations. They believe that they may
perform those services for the Fund contemplated by any agreement entered into
with the Fund without violating those laws or regulations. Changes in either
federal or state statutes and regulations relating to the permissable activities
of banks and their subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of present or future statutes and
regulations, could prevent these entities from continuing to perform all or a
part of the above services. If this happens, the Corporation's Board of
Directors would consider alternative means of continuing available services. It
is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.

Tax Status

The Fund's Tax Status

The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:

o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;

o derive less than 30% of its gross income from the sale of securities
held less than three months;

o invest in securities within certain statutory limits; and

o distribute to its shareholders at least 90% of its net income earned
during the year.

Shareholders' Tax Status

Shareholders are subject to federal income tax on dividends received as cash or
additional shares. The dividends received deduction for corporations will apply
to ordinary income distributions to the extent the distribution represents
amounts that would qualify for the dividends received deduction to the Fund if
the Fund were a regular corporation, and to the extent designated by the Fund as
so qualifying. Otherwise, these dividends, and any short-term capital gains are
taxable as ordinary income.

Capital Gains

Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If the
Fund realizes net long-term capital gains, it will distribute them at
least once every 12 months.

Total Return

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the maximum offering price per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares purchased
at the beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions. Any applicable redemption fee
is deducted from the ending value of the investment based on the lesser of the
original purchase price or the net asset value of shares redeemed.

Yield

The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders. To the
extent that financial institutions and broker/dealers charge fees in connection
with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.

<PAGE>

Performance Comparisons

The performance of shares of the Fund depends upon such variables as:

o portfolio quality;

o average portfolio maturity;

o type of instruments in which the portfolio is invested;

o changes in interest rates and market value of portfolio securities;

o changes in a Fund's expenses; and

o various other factors.

The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return as
described above.

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:

o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.

o Dow Jones Industrial Average ("DJIA") represents share prices of
selected blue chip industrial corporations. The DJIA indicates daily
changes in the average price of stock of these corporations. Because it
represents the top corporations of America, the DJIA index is a leading
economic indicator for the stock market as a whole.

o Lehman Brothers Government (LT) Index is an index composed of bonds
issued by the U.S. government or its agencies which have at least $1
million outstanding in principal and which have maturities of ten years
or longer. Index figures are total return figures calculated monthly.

o Lehman Brothers Government/Corporate Total Index is comprised of
approximately 5,000 issues which include non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporations; and
publicly issued, fixed-rate, non-convertible domestic bonds of
companies in industry, public utilities, and finance. Tracked by Lehman
Brothers, the index has an average maturity of nine years. It
calculates total returns for one month, three months, twelve months,
and ten year periods, and year-to-date.

o Lehman Brothers Aggregate Bond Index is a total return index measuring
both the capital price changes and income provided by the underlying
universe of securities, weighted by market value outstanding. The
Aggregate Bond Index is comprised of the Lehman Brothers Government
Bond Index, Corporate Bond Index, Mortgage-Backed Securities Index and
the Yankee Bond Index. These indices include: U.S. Treasury
obligations, including bonds and notes; U.S. agency obligations,
including those of the Farm Credit System, including the National Bank
for Cooperatives and Banks for Cooperatives; foreign obligations, U.S.
investment-grade corporate debt and mortgage-backed obligations. All
corporate debt included in the Aggregate Bond Index has a minimum
rating of BBB by S&P or Fitch, or a minimum rating of Baa by Moody's.

o Merrill Lynch Corporate And Government Index includes issues which must
be in the form of publicly placed, nonconvertible, coupon-bearing
domestic debt and must carry a term of maturity of at least one year.
Par amounts outstanding must be no less than $10 million at the start
and at the close of the performance measurement period. Corporate
instruments must be rated by S&P or by Moody's as investment grade
issues (i.e., BBB/Baa or better).

o Merrill Lynch Domestic Master Index includes issues which must be in
the form of publicly placed, nonconvertible, coupon-bearing domestic
debt and must carry a term to maturity of at least one year. Par
amounts outstanding must be no less than $10 million at the start and
at the close of the performance measurement period. The Domestic Master
Index is a broader index than the Merrill Lynch Corporate and
Government Index and includes, for example, mortgage related
securities. The mortgage market is divided by agency, type of mortgage
and coupon and the amount outstanding in each agency/type/coupon
subdivision must be no less than $200 million at the start and at the
close of the performance measurement period. Corporate instruments must
be rated by S&P or by Moody's as investment grade issues (i.e., BBB/Baa
or better).

o Salomon Brothers AAA-AA Corporate Index calculates total returns of
approximately 775 issues which include long-term, high grade domestic
corporate taxable bonds, rated AAA-AA with maturities of twelve years
or more and companies in industry, public utilities, and finance.

o Salomon Brothers Long-Term High Grade Corporate Bond Index is an
unmanaged index of long-term high grade corporate bonds issued by U.S.
corporations with maturities ranging from 10 to 20 years.

o Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index comprised of all the bonds issued by the Lehman
Brothers Government/Corporate Bond Index with maturities between 1 and
9.99 years. Total return is based on price appreciation/depreciation
and income as a percentage of the original investment. Indices are
rebalanced monthly by market capitalization.

o The Salomon Brothers Total Rate-of-Return Index for mortgage
pass-through securities reflects the entire mortgage pass-through
market and reflects their special characteristics. The index represents
data aggregated by mortgage pool and coupon within a given sector. A
market-weighted portfolio is constructed considering all newly created
pools and coupons.

o The Merrill Lynch Taxable Bond Indices include U.S. Treasury and agency
issues and were designed to keep pace with structural changes in the
fixed income market. The performance indicators capture all rating
changes, new issues, and any structural changes of the entire market.

o Lehman Brothers Government Index is an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government,
or any agency thereof, or any quasi-federal corporation and of
corporate debt guaranteed by the U.S. government. Only notes and bonds
with a minimum outstanding principal of $1 million and a minimum
maturity of one year are included.

o Standard & Poor's Daily Stock Price Indices of 500 And 400 Common
Stocks are composite indices of common stocks in industry,
transportation, and financial and public utility companies that can be
used to compare to the total returns of funds whose portfolios are
invested primarily in common stocks. In addition, the Standard & Poor's
indices assume reinvestment of all dividends paid by stocks listed on
its indices. Taxes due on any of these distributions are not included,
nor are brokerage or other fees calculated in the Standard & Poor's
figures.

o The S&P/BARRA Value Index and the S&P/BARRA Growth Index are
constructed by Standard & Poor's and BARRA, Inc., an investment
technology and consulting company, by separating the S&P 500 Index
into value stocks and growth stocks. The S&P/BARRA Growth and
S&P/BARRA Value Indices are constructed by dividing the stocks in the
S&P 500 Index according to their price-to-book ratios. The S&P/BARRA
Growth Index, contains companies with higher price-to-earnings ratios,
low dividends yields, and high earnings growth (concentrated in
electronics, computers, health care, and drugs). The Value Index
contains companies with lower price-to-book ratios and has 50% of the
capitalization of the S&P 500 Index. These stocks tend to have lower
price-to-earnings ratios, high dividend yields, and low historical and
predicted earnings growth (concentrated in energy, utility and
financial sectors). The S&P/BARRA Value and S&P/BARRA Growth Indices
are capitalization-weighted and rebalanced semi-annually. Standard &
Poor's/BARRA calculates these total return indices with dividends
reinvested.

o Russell 1000 Growth Index consists of those Russell 1000 securities
with a greater-than-average growth orientation. Securities in this
index tend to exhibit higher price-to-book and price-earnings ratios,
lower dividend yields and higher forecasted growth values.

o Russell 2000 Small Stock Index is a broadly diversified index
consisting of approximately 2,000 small capitalization common stocks
that can be used to compare to the total returns of funds whose
portfolios are invested primarily in small capitalization common
stocks.

o Russell Midcap Growth Index measures the performance of those Russell
Midcap companies with higher price-to-book ratios and higher forecasted
growth values. The stocks are also members of the Russell 1000 Growth
Index.

o Russell Midcap Value Index measures the performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted
growth values. The stocks are also members of the Russell 1000 Value
Index.

o Wilshire 5000 Equity Index consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available, and can be used to compare to the total returns of funds
whose portfolios are invested primarily in common stocks.

o Consumer Price Index is generally considered to be a measure of
inflation.

o New York Stock Exchange Composite Index is a market value weighted
index which relates all NYSE stocks to an aggregate market value as of
December 31, 1965, adjusted for capitalization changes.

o Value Line Composite Index consists of approximately 1,700 common
equity securities. It is based on a geometric average of relative price
changes of the component stocks and does not include income.

o NASDAQ Over-the-Counter Composite Index covers 4,500 stocks traded over
the counter. It represents many small company stocks but is heavily
influenced by about 100 of the largest NASDAQ stocks. It is a
value-weighted index calculated on price change only and does not
include income.

o AMEX Market Value Index covers approximately 850 American Stock
Exchange stocks and represents less than 5% of the market value of all
US stocks. The AMEX is a value-weighted index calculated on price
change only and does not include income.

o Lehman Brothers New York Tax-Exempt Index is a total return performance
benchmark for the New York long-term, investment grade, tax-exempt bond
market. Returns and attributes for this index are calculated
semi-monthly using approximately 22,000 municipal bonds classified as
general obligation bonds (state and local), revenue bonds (excluding
insured revenue bonds), insured bonds (includes all bond insurers with
Aaa/AAA ratings), and prerefunded bonds.

o Morningstar, Inc., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
l,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as federally insured bank
products, including time deposits, bank savings accounts, certificates of
deposit and Treasury bills, and to money market funds using the Lipper
Analytical Services money market instruments average. Unlike federally insured
bank products, the shares of the Fund are not insured. Unlike money market
funds, which attempt to maintain a stable offering price, the offering price of
the Fund's shares fluctuates. Advertisements may quote performance information
which does not reflect the effect of the sales load.

Economic and Market Information

Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Fund. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to more than 6,000 funds available.

<PAGE>

Appendix

Standard & Poor's Ratings Group Bond Ratings

AAA-Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA-Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A-Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB-Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

NR-Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

Plus (+) or minus (-): The ratings from AA to BBB may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

Moody's Investors Service, Inc. Bond Ratings

Aaa-Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa-Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A-Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa-Bonds which are rated Baa are considered as medium grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

NR-Not rated by Moody's.

Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Baa in its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the issue
ranks in the lower end of its generic rating category.

Fitch Investors Service, Inc. Long-Term Debt Ratings

AAA-Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA-Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB-Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

NR-NR indicates that Fitch does not rate the specific issue.

Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.

Standard & Poor's Ratings Group Municipal Note Ratings

SP-1-Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.

SP-2-Satisfactory capacity to pay principal and interest.

Moody's Investors Service, Inc. Short-Term Loan Ratings

MIG 1/VMIG 1-This designation denotes best quality. There is a present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.

MIG 2/VMIG 2-This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

Fitch Investors Service, Inc. Short-Term Debt Ratings

F-1+-Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1-Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated F-1+.

F-2-Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great for
issues assigned F-1+ and F-1 ratings.

Standard & Poor's Ratings Group Commercial Paper Ratings

A-1-This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess strong safety
characteristics are denoted with a plus sign (+) designation.

A-2-Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.

Moody's Investors Service, Inc. Commercial Paper Ratings

Prime1-Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
Leading market positions in well established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.

Prime-2-Issuers (or related supporting institutions) rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Cusip 92830F802
G01716-02 (9/97)

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:

(a) Financial Statements. (8) Filed in Part A.
(b) Exhibits:
(1) Conformed copy of Articles of Incorporation of the Registrant
(11); (i) Conformed copy of Articles Supplementary (8); (ii)
Conformed copy of Articles Supplementary dated May 29, 1996
(15);
(2) Copy of By-Laws of the Registrant (11);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Capital Stock of
the Registrant (8);
(i) Copy of Specimen Certificate for Shares of Capital Stock
of the Vision Capital Appreciation Fund (15);
(5) (i) Conformed copy of Investment Advisory Contract of the
Registrant (9);
(ii) Conformed copy of Sub-Advisory Contract (10); (iii)
Conformed copy of Exhibit B to Investment Advisory
Contract;(14) (iv) Conformed copy of Exhibit C to Investment
Advisory Contract; (19)

+ All Exhibits have been filed electronically.

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed September 3, l993. (File Nos. 33-20673
and 811-5514)

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed December 27, 1993 (File Nos. 33-20673
and 811-5514)

10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed March 31, 1994 (File Nos. 33-20673 and
811-5514)

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed June 27, 1994. (File Nos. 33-20673 and
811-5514)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed June 27, 1996. (File Nos. 33-20673 and
811-5514)

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed December 20, 1996. (File Nos. 33-20673
and 811-5514)

19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 on Form N-1A filed September 24, 1997 (File Nos. 33- 20673
and 811-5514)

<PAGE>

(6) (i) Conformed copy of Distributor's Contract of the
Registrant (9); (a) Conformed copy of Distribution
Plan of the Registrant (9);
(ii) Conformed copy of Exhibit D to the Distributor's
Contract; + (ii) Conformed copy of Administrative Services
Agreement of the Registrant (9); (iii) Conformed copy of
Shareholder Services Plan of Registrant (9);
(a) Copy of Exhibit A to Amended and Restated
Shareholder Services Plan; (18) (iv) Conformed copy of Exhibit
C to Distributor's Contract;(14) (v) Conformed copy of Amended
and Restated Shareholder Services Agreement (13); (vi) Copy of
Amendment No. 1 to Exhibit A to Shareholder Services
Agreement;(14) (vii) Copy of Amendment No. 2 to Exhibit A to
Shareholder Services Agreement; (18)

(7) Not applicable;

+ All Exhibits have been filed electronically.

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed December 27, 1993 (File Nos. 33-20673
and 811-5514)

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed May 3, 1996. (File Nos. 33-20673 and
811-5514)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed June 27, 1996. (File Nos. 33-20673 and
811-5514)

18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed August 6, 1997. (File Nos. 33-20673 and
811-5514)

<PAGE>

(8) Conformed copy of Custodian Agreement of the Registrant (12);
(i) Copy of Amendment No. 2 to Exhibit A to
Custodian Contract;(14)
(ii) Copy of Amendment No. 3 to Exhibit A to Custodian
Contract; (18)
(iii) Conformed copy of State Street Domestic Custody
Fee Schedule; +
(9) Conformed copy of Agreement for Fund Accounting Services and
Transfer Agency Services (16); (i) Copy of Exhibit 1 to
Agreement for Fund Accounting Services and Transfer Agency
Services; (18) (ii) Conformed copy of Amendment to
Administrative Services Agreement and the Agreement for Fund
Accounting Services and Transfer Agency Services; +
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered (11);
(11) Conformed copy of Consent of Independent Auditors; (17)
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding (11);
(14) Not applicable;

- ----------------------------------
+ All Exhibits have been filed electronically.

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed June 27, 1994. (File Nos. 33-20673 and
811-5514)

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed June 26, 1995. (File Nos. 33-20673 and
811-5514)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed June 27, 1996. (File Nos. 33-20673 and
811-5514)

16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed June 20, 1997. (File Nos. 33-20673 and
811-5514)

17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed June 27, 1997. (File Nos. 33-20673 and
811-5514)

18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed August 6, 1997. (File Nos. 33-20673 and
811-5514)

<PAGE>

(15) (i) Copy of Rule 12b-1 Plan (7);
(a) Conformed copy of Exhibit B to Rule 12b-1 Plan; (14)
(b) Conformed copy of Exhibit C to Rule
12b-1 Plan; +
(ii) Copy of Rule 12b-1 Agreement (7);
(a) Copy of Exhibit B to Rule 12b-1 Agreement; (14)
(b) Copy of Exhibit C to Rule
12b-1 Agreement; (18)
(iii) Copy of Dealer (Sales) Agreement (7);
(16) Copy of Schedule for Computation of Fund Performance Data (12);
(i) Copy of Schedule for Computation of Fund Performance Data
for the Vision Capital Appreciation Fund (15); (ii) Copy of
Schedule for Computation of Fund Performance Data for the
Vision Equity Income Fund; +
(17) Copy of Financial Data Schedules; (17) (18) Not Applicable (19)
Conformed copy of Power of Attorney (14);

Item 25. Persons Controlled by or Under Common Control with Registrant
None

- ----------------------------------
+ All Exhibits have been filed electronically.

7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed June 17, 1993. (File Nos. 33-20673 and
811-5514)

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed June 26, 1995. (File Nos. 33-20673 and
811-5514)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed June 27, 1996. (File Nos. 33-20673 and
811-5514)

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed December 20, 1996. (File Nos. 33-20673
and 811-5514)

18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed August 6, 1997. (File Nos. 33-20673 and
811-5514)

<PAGE>

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of December 3, 1997
-------------- -----------------------

Shares of capital stock
($0.001 per Share par value)

Vision Money Market Fund 11,978
Vision New York Tax-Free Money Market Fund 500
Vision Treasury Money Market Fund 727
Vision U.S. Government Securities Fund 945
Vision New York Municipal Income Fund
(formerly, Vision New York Tax-Free Fund) 1,416
Vision Growth and Income Fund 6,415
Vision Capital Appreciation Fund 3,154
Vision Equity Income Fund 181

Item 27. Indemnification: (7)

Item 28. Business and Other Connections of Investment Adviser:

(a) Manufacturers & Traders Trust Company ("M&T Bank") performs
investment advisory services for the Registrant. M&T Bank is the
principal banking subsidiary of First Empire State Corporation, a
$13 billion bank holding company, as of December 31, 1996,
headquartered in Buffalo, New York. As of May 31, 1997, M&T Bank has
174 offices throughout New York State and an office in Nassau, The
Bahamas.

M&T Bank was founded in 1856 and provides comprehensive banking and
financial services to individuals, governmental entities and
businesses throughout western New York. Registrant's investments are
managed through the Trust and Investment Services Division of M&T
Bank. As of December 31, 1996, M&T Bank had $3.1 billion in assets
under management for which it has investment discretion (which
includes employee benefits, personal trusts, estates, agencies and
other accounts). As of December 3l, 1996, M&T Bank managed over $1.2
billion in VISION money market mutual fund assets. Except for Vision
Group of Funds, Inc., M&T Bank does not presently provide investment
advisory services to any other registered investment companies. The
Funds' investments are managed through the Trust & Investment
Services Division of M&T Bank.

The principal executive Officers and Directors of M&T Bank are set
forth in the following tables. Unless otherwise noted, the position
listed under Other Substantial Business, Profession, Vocation or
Employment is with M&T Bank.
- ---------------------

7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed June 17, 1993. (File Nos. 33-20673 and
811-5514)

<PAGE>

(b)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment

Brent D. Baird Director Private Investor
1350 One M&T Plaza
Buffalo, NY 14203-2396

C. Angela Bontempo Director Senior V.P. & Exec. Dir.
Elm & Carlton Streets Roswell Park Cancer
Buffalo, NY 14263-0001 Institute

Robert T. Brady Director Chairman, President and
East Aurora, NY 14052-0018 C.E.O. Moog, Inc.

Atwood Collins, III Executive Officer President of the
350 Park Avenue New York City
6th Floor Division of
New York, NY 10022-6022 M&T Bank

Barber B. Conable, Jr. Director Former Member of
P.O. Box 218 Congress; Retired
Alexander, NY 14005-0218 President
The World Bank

Richard E. Garman Director President and Chief
2544 Clinton Street Executive Officer
Buffalo, NY 14224-1092 A.B.C. Paving Co., Inc.
and Buffalo Crushed
Stone, Inc.

James V. Glynn Director President
151 Buffalo Avenue Maid of the Mist
Suite 204 Corporation
Niagara Falls, NY 14303-1288

Brian E. Hickey Executive Officer Executive Vice President
44 Exchange Street and President-Rochester
3rd Floor Division-Manufacturers
Rochester, NY 14614-2097 and Traders Trust
Company

Patrick W.E. Hodgson Director President Cinnamon
248 Pall Mall Street Investments Limited
Suite 400
London, Ontario
CANADA N6A5P6

James L. Hoffman Executive Officer Executive Vice President
700 Corporate Blvd. and President-Hudson Suite 701
Newburgh, NY 12552-6046 Valley Division-
Manufacturers and
Traders Trust Company

<PAGE>

Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment

Samual T. Hubbard, Jr. Director President & CEO
1059 West Ridge Road The Alling and Cory
Rochester, NY 14615-2731 Company

Robert J. Irwin Advisory Director Chairman and CEO
Ellicott Station ASA Limited
P.O. Box 1210
Buffalo, NY 14205-1210

Wilfred J. Larson Director Retired President and
88 Oakland Place Chief Executive Officer
Buffalo, NY 14222-2030 Westwood-Squibb
Pharmaceuticals Inc.

Barbara L. Laughlin Executive Officer Executive Vice President
One M&T Plaza First Empire State
13th Floor Corporation and
Buffalo, NY 14203-2399 Manufacturers and
Traders Trust Company

Jorge G. Pereira Director Vice Chairman of the
350 Park Ave. Board First Empire State
6th Floor Corporation and
New York, NY 10022-6022 Manufacturers and
Traders Trust Company

John L. Pett Executive Officer Executive Vice President
One Fountain Plaza and Chief Credit Officer
9th Floor Manufacturers and
Buffalo, NY 14203-1495 Traders Trust Company

Michael P. Pinto Executive Officer Executive Vice President
One M&T Plaza and Chief Financial
5th Floor Officer Manufacturers
Buffalo, NY 14203-2399 and Traders Trust
Company

Donald P. Quinlan Director Retired Chairman of the
27 Pine Terrace Board and Chief
Orchard Park, NY 14127-3929 Executive Officer Graphic
Controls Corporation

William C. Rappolt Executive Officer Executive Vice President
One M&T Plaza and Treasurer
19th Floor First Empire State
Buffalo, NY 14203-2399 Corporation and
Manufacturers and
Traders Trust Company

Melinda R. Rich Director President
P.O. Box 245 Rich Entertainment
Buffalo, NY 14240-0245 Group;

Robert E. Sadler, Jr. Executive Officer President Manufacturers
One M&T Plaza and Traders Trust
19th Floor Company and
Buffalo, NY 14203-2399 Executive Vice President
First Empire State
Corporation
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment____

Mark J. Czarnecki Executive Officer Executive Vice President
One M&T Plaza First Empire State
9th Floor Corporation and
Buffalo, NY 14203-2399 Manufacturers and
Traders Trust Company
Raymond D. Stevens, Jr. Director Retired Chairman of
11 Summer Street the Board Pratt &
Suite 308 Lambert United, Inc.
Buffalo, NY 14209-2256

Herbert L. Washington Director President
3280 Monroe Avenue H.L.W. Fast Track, Inc.
Rochester, NY 14618-4608

John L. Wehle, Jr. Director Chairman of the
445 St. Paul Street Board, President &
Rochester, NY 14605-1775 Chief Executive
Officer, Genessee
Corporation

Robert G. Wilmers Director and Chairman of the Board,
One M&T Plaza Executive Officer President and Chief
19th Floor Executive Officer
Buffalo, NY 14203-2399 First Empire State
Corporation; and
Chairman of the Board
and Chief Executive
Officer Manufacturers
and Traders Trust
Company

Item 29. Principal Underwriters:

(a)...Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end investment
companies, including the Registrant:

111 Corcoran Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.; Federated
Stock Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities Fund:
1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S.
Government Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First
Priority Funds; Fixed Income Securities, Inc.; High Yield Cash Trust;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty
U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Marshall Funds, Inc.; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Obligations Trust II; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds;
SouthTrust Vulcan Funds; Star Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; The Planters Funds; The Virtus Funds; The Wachovia Funds; The
Wachovia Municipal Funds; Tower Mutual Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; Vision Group of Funds, Inc.;
and World Investment Series, Inc.

Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.

<PAGE>

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Richard B. Fisher Director, Chairman, Chief
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice President and
Federated Investors Tower President, Federated, Treasurer
Pittsburgh, PA 15222-3779 Securities Corp.

Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

George D. Riedel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Item 30. Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Vision Group of Funds, Inc. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600
("Transfer Agent, Dividend
Disbursing Agent and Portfolio
Recordkeeper")

Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, Pennsylvania 15222-3779

Manufacturers and Traders Trust One M&T Plaza
Company Buffalo, New York 14240
("Adviser")

State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, Massachusetts 02266-8600

Item 31. Management Services: Not applicable.

<PAGE>

Item 32. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees/Directors and the calling of special shareholder meetings
by shareholders.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VISION GROUP OF FUNDS, INC., has
duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 22nd day of December, 1997.

VISION GROUP OF FUNDS, INC.

BY: /s/Victor R. Siclari
Victor R. Siclari, Secretary
Attorney in Fact for Edward C. Gonzales
December 22, 1997

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By: /s/ Victor R. Siclari
Victor R. Siclari Attorney In Fact December 22, 1997
SECRETARY For the Persons
Listed Below

NAME TITLE

Edward C. Gonzales* President and Treasurer
(Chief Executive Officer
and Principal Financial and
Accounting Officer)

Randall I. Benderson* Director

Joseph J. Castiglia* Director

Daniel R. Gernatt, Jr.* Director

George K. Hambleton, Jr.* Director

* By Power of Attorney

Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

Exhibit D
to the
Distributor's Contract

VISION GROUP OF FUNDS, INC.
Vision Equity Income Fund

The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 1st day of June, 1993, between VISION GROUP OF
FUNDS, INC. and FEDERATED SECURITIES CORP. with respect to Classes of the Funds
set forth above.

1. The Corporation hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Classes ("Shares").
Pursuant to this appointment, FSC is authorized to select a group of
Broker/Dealers or Financial Institutions ("Institutions") to sell Shares at the
current offering price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render sales related services to the
Corporation and its shareholders.

2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual rate
of .25 of 1% of the average aggregate net asset value of the shares of the
Vision Equity Income Fund held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of any fee payable on the basis of the number of days that the
Agreement is in effect during the month.

3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Classes' expenses exceed such lower
expense limitation as FSC may, by notice to the Corporation, voluntarily declare
to be effective.

4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in its
sole discretion, may pay Institutions a periodic fee in respect of Shares owned
from time to time by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid shall be determined from time to
time by FSC in its sole discretion.

5. FSC will prepare reports to the Board of Directors of the Corporation
on a quarterly basis showing amounts expended hereunder including amounts paid
to Institutions and the purpose for such payments.

In consideration of the mutual covenants set forth in the Distributor's
Contract dated the 1st day of June, 1993 between Vision Group of Funds, Inc. and
Federated Securities Corp., Vision Group of Funds, Inc. executes and delivers
this Exhibit on behalf of the Funds, and with respect to the separate Classes of
Shares thereof, first set forth in this Exhibit.

Witness the due execution hereof this 1st day of September, 1997.

VISION GROUP OF FUNDS, INC.

By:/s/ Edward C. Gonzales
President

FEDERATED SECURITIES CORP.

By:/s/ Edward C. Gonzales
Exec. Vice President

Exhibit 8(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

STATE STREET
DOMESTIC CUSTODY

FEE SCHEDULE

I. Custody Services

Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate
actions.

ANNUAL FEES
<TABLE>
<CAPTION>

<S> <C>

ASSET

Per Fund .25 Basis Points

Wire Fees $3.00 per wire

Settlements:

o Each DTC Transaction $5.00
o Each Federal Reserve Book Entry Transaction $3.75
o Each Repo Transaction (All Repo) $3.75
o Each Physical Transaction (NY/Boston, Private Placement) $15.00
o Each Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
o Government Paydowns $5.00
o Maturity Collections $8.00
o PTC Transactions $6.00
</TABLE>

II. Special Services

Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.

III. Balance Credit

Municipal Funds
A balance credit equal to 75% of the average demand deposit account
balance in the custodian account for the month billed times the 30 day
T-Bill Rate on the last Monday of the month billed, will be applied
against the month's custodian bill.

Transfer Agent
A balance credit equal to 100% of the average balance in the transfer
agent demand deposit accounts, less the reserve requirement and applicable
related expenses, times 75% of the 30 average Fed Funds Rate.

IV. Payment

The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.

V. Term of Contract

The parties agree that this fee schedule shall become effective January 1,
1997.

VISION GROUP OF FUNDS, INC. STATE STREET BANK

BY: /s/ Charles L. Davis, Jr. BY: /s/ Michael E. Hagerty

TITLE: Vice President & Assistant Treasurer TITLE: Vice President

DATE: September 16, 1997 DATE: September 25, 1997
----------------------------------- ------------------

Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

Amendment to
Administrative Services Agreement
and the
Agreement for Fund Accounting Services
and Transfer Agency Services
for
Vision Group of Funds, Inc.

This Amendment to the Administrative Services Agreement and the Agreement
for Fund Accounting Services and Transfer Agency Services is made and entered
into as of the 1st day of December, 1997, by and between Vision Group of Funds,
Inc., Federated Services Company ("FSCo") and Federated Administrative Services
("FAS").

WHEREAS, Vision Group of Funds, Inc. entered into an Administrative
Services Agreement with FAS on June 1, 1993;

WHEREAS, Vision Group of Funds, Inc. entered into an Agreement for Fund
Accounting Services and Transfer Agency Services with FSCo, dated May 1, 1997,
as amended September 1, 1997; and

WHEREAS, Vision Group of Funds, Inc., FAS and FSCo have agreed to amend
the foregoing Agreements, in certain respects;

NOW, THEREFORE, the parties intending to be legally bound agree as
follows:

Section 6, Duration and Term of the Administrative Services Agreement, and
the first paragraph of Article 13, Term and Duration of the Agreement for Fund
Accounting Services and Transfer Agency Services are hereby deleted in their
entirety and replaced with the following:

The effective date shall be December 1, 1997. The expiration date
shall be November 30, 2000. Thereafter, this Agreement shall be
automatically renewed each year for an additional term of one year,
unless notice of termination has been delivered by either party to
the other no less than ninety (90) days before the beginning of any
such additional term.

Section 4, Compensation of the Administrative Services Agreement is
deleted in its entirety, and Section I of Schedule A, Fund Accounting Fee
Schedule and Section I of Schedule B, Transfer Agency Fees of the Agreement for
Fund Accounting Services and Transfer Agency Services are deleted in their
entirety and replaced with the following:

For the Administrative Services provided by FAS under the
Administrative Services Agreement and the Fund Accounting and
Transfer Agency Services provided by FSCo under the Agreement for
Fund Accounting Services

<PAGE>

and Transfer Agency Services, the Fund agrees to pay FSCo, as agent
for FAS and FSCo under the aforesaid Agreements, and FAS and FSCo
agree to accept as full compensation for the services they provide
under their respective Agreements, an annual fee calculated daily
and payable monthly as follows:

Average Daily Net Assets
of the
Maximum Fee Vision Group of Funds, Inc.

14 basis points on the first $1.4 billion 10 basis points on the next $750
million 7 basis points on assets in excess of $2.15 billion

WITNESS the due execution hereof this 1st day of December, 1997.

VISION GROUP OF FUNDS, INC.

By:/s/ Charles L. Davis, Jr.
Title: Vice President

FEDERATED SERVICES COMPANY

By:/s/ Thomas J. Ward
Title: Senior Vice President

FEDERATED ADMINISTRATIVE SERVICES

By:/s/ Victor R. Siclari
Title: Vice President

Exhibit 15(i)(b) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

EXHIBIT C
to the
Rule 12b-1 Plan, dated June 1, 1993

VISION GROUP OF FUNDS, INC.

Vision Equity Income Fund

This Plan is adopted by VISION GROUP OF FUNDS, INC. with respect to the
Class of Shares of the portfolio) of the Corporation set forth above.

In compensation for the services provided pursuant to this Plan, FSC will
be paid a monthly fee computed at the annual rate of .25 of 1% of the average
aggregate net asset value of Vision Equity Income Fund during the month.

Witness the due execution hereof this 1st day of September, 1997.

VISION GROUP OF FUNDS, INC.

By: /s/ Edward C. Gonzales
President

Exhibit 16(ii) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

<S> <C> <C> <C> <C> <C> <C> <C> <C.
Schedule for Computation Initial
of Fund Performance Data Invest of: $500
Offering
Vision Equity Income Price/
Share= $10.57
Return Since Inception
ending 10/31/97 NAV= $9.99

FYE: April 30
Begin Capital Reinvest Ending Total
DECLARED: QUARTERLY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: QUARTERLY Dates Shares /Share /Share /Share Shares Price Value
47.304 0.00000 47.304 $9.81 $464.05

$1,000 (1+T) = End Value
T = -7.19%

</TABLE>

<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------
Vision Equity Income Yield = $26,797.45 - $13,946.60 )+1)^6-1}=
2{(
-----------------------------------------------
Computation of SEC Yield 1,191,948 *( $10.38 - 0.00000 )
As of: October 31, 1997
SEC Yield = 1.25%

Dividend and/or Interest
Inc for the 30 days ended $26,797.45

Net Expenses for $13,946.60
the Period

Avg Daily Shares
Outstanding and entitled
to receive dividends 1,191,948

Maxium offering price $10.38
per share as of 10-31-97

Undistributed net income

Tax Equivalent Yield
(assumes individual
does not itemize
on Federal Return)

100 % minus the Federal
taxable % (100%-28%=72%)

30 SEC yield / by the tax
equiv % (0.00% / 72.0%)= 1.74%
</TABLE>