VISION GROUP OF FUNDS INC, 497, 1999-06-09

VISION GROUP OF FUNDS INC
497, 1999-06-09

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[LOGO OF VISION
GROUP OF FUNDS, INC.]

PROSPECTUS

VISION GROUP OF FUNDS, INC.
CLASS A SHARES

PROSPECTUS DATED JUNE 1, 1999

Vision Group of Funds, Inc. is an open-end management investment company (a
mutual fund) that offers you a choice of nine separate investment portfolios
with distinct investment objectives and policies. This prospectus relates to
Class A Shares of six of the nine portfolios ("Funds").

VISION U.S. GOVERNMENT SECURITIES FUND
VISION NEW YORK MUNICIPAL INCOME FUND

VISION GROWTH & INCOME FUND
VISION CAPITAL APPRECIATION FUND

VISION EQUITY INCOME FUND
VISION LARGE CAP GROWTH 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 EACH OF THE FUNDS, AND CAN HELP YOU
DECIDE WHICH OF THE FUNDS ARE SUITABLE INVESTMENTS FOR YOU. PLEASE READ THE
PROSPECTUS BEFORE YOU INVEST AND KEEP IT FOR FUTURE REFERENCE.

You can find additional facts about each of the Funds in their combined
Statement of Additional Information ("SAI") dated June 1, 1999, which has also
been filed with the Securities and Exchange Commission ("SEC"). The information
contained in the SAI is incorporated by reference into this prospectus. To
obtain a free copy of the SAI, or a paper copy of this prospectus, if you have
received it electronically, or to make other inquiries about any of these Funds,
simply call or write Vision Group of Funds, Inc. at the telephone number or
address below. The SAI, material incorporated by reference into this document,
and other information regarding the Funds is 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) 635-9368

TABLE OF CONTENTS

<TABLE>

<S> <C>
Synopsis 3
Summary of Fund Expenses 5
Financial Highlights 6
How the Funds Invest 8

Fund Objective and Policies 8
Investment Techniques, Features, and Limitations 16

Fund Management, Distribution and Administration 28
Board of Directors 28
Investment Adviser 28
Distribution of Fund Shares 30
Administration of the Funds 31

</TABLE>

<TABLE>

<S> <C>
Your Guide to Using the Funds 32

How the Funds Value Their Shares 32
What Fund Shares Cost 32
How to Buy Shares 35
How to Exchange Shares 36
How to Redeem Shares 38
Tax Information 40
Description of Fund Shares 41
Voting Rights and Other Information 41
How the Funds Show Performance 42
Appendix 44
Addresses 46

</TABLE>

SYNOPSIS

INVESTMENT OBJECTIVES AND POLICIES

Vision Group of Funds, Inc. (the "Corporation") offers you a convenient,
affordable way to participate in nine separate, professionally managed
portfolios. This prospectus describes six of the portfolios: the Vision U.S.
Government Securities Fund, Vision New York Municipal Income Fund, Vision Growth
& Income Fund, Vision Capital Appreciation Fund, Vision Equity Income Fund, and
Vision Large Cap Growth Fund. The three other money market portfolios, Vision
Money Market Fund, Vision Treasury Money Market Fund, and Vision New York Tax-
Free Money Market Fund, are described in a separate prospectus.

- --------------------------------------------------------------------------------
VISION U.S. GOVERNMENT
SECURITIES FUND

("U.S. GOVERNMENT SECURITIES
FUND") IS A DIVERSIFIED
PORTFOLIO WHICH SEEKS CURRENT
INCOME BY INVESTING PRIMARILY
IN SECURITIES THAT ARE
GUARANTEED AS TO PAYMENT OF
PRINCIPAL AND INTEREST BY THE
U.S. GOVERNMENT, ITS AGENCIES
OR INSTRUMENTALITIES. CAPITAL
APPRECIATION IS A SECONDARY
INVESTMENT CONSIDERATION. (SEE
"HOW THE FUNDS INVEST.")

VISION NEW YORK MUNICIPAL
INCOME FUND

("NEW YORK MUNICIPAL INCOME
FUND") SEEKS CURRENT INCOME
WHICH IS EXEMPT FROM FEDERAL
REGULAR INCOME TAX AND THE
PERSONAL INCOME TAXES IMPOSED
BY THE STATE OF NEW YORK AND
NEW YORK MUNICIPALITIES AND IS
CONSISTENT WITH THE
PRESERVATION OF CAPITAL. (SEE
"HOW THE FUNDS INVEST.")

VISION GROWTH & INCOME FUND

("GROWTH & INCOME FUND") IS A
DIVERSIFIED PORTFOLIO WHICH
SEEKS LONG-TERM GROWTH OF
CAPITAL AND INCOME. THE GROWTH
& INCOME FUND PURSUES ITS
INVESTMENT OBJECTIVE BY
INVESTING IN A DIVERSIFIED
PORTFOLIO CONSISTING PRIMARILY
OF EQUITY SECURITIES (E.G.,

COMMON STOCK,
CONVERTIBLE SECURITIES),
ALTHOUGH IT MAY ALSO INVEST IN
DEBT SECURITIES (E.G., BONDS,
NOTES). (SEE "HOW THE FUNDS

INVEST.")

VISION CAPITAL APPRECIATION

FUND

("CAPITAL APPRECIATION FUND")
IS A DIVERSIFIED PORTFOLIO
WHICH SEEKS TO PRODUCE LONG-
TERM CAPITAL APPRECIATION BY
INVESTING IN A DIVERSIFIED
PORTFOLIO CONSISTING PRIMARILY
OF COMMON STOCKS THAT THE
ADVISER BELIEVES OFFER
OPPORTUNITY FOR GROWTH OF
CAPITAL, ALTHOUGH IT MAY ALSO
INVEST IN OTHER SECURITIES
HAVING SOME OF THE
CHARACTERISTICS OF COMMON
STOCKS, SUCH AS CONVERTIBLE
PREFERRED STOCKS, CONVERTIBLE
BONDS AND WARRANTS. (SEE "HOW
THE FUNDS INVEST.")

VISION EQUITY INCOME FUND

("EQUITY INCOME FUND") IS A
DIVERSIFIED PORTFOLIO WHICH
SEEKS TO PROVIDE CURRENT
INCOME. CAPITAL APPRECIATION IS
A SECONDARY, NON-FUNDAMENTAL
CONSIDERATION. THE EQUITY
INCOME 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, CONVERTIBLE
SECURITIES). THE EQUITY INCOME
FUND ALSO MAY INVEST IN FOREIGN
EQUITY SECURITIES AND DEBT
OBLIGATIONS. (SEE "HOW THE
FUNDS INVEST.")

VISION LARGE CAP GROWTH FUND

("LARGE CAP GROWTH FUND") IS A
DIVERSIFIED PORTFOLIO WHICH
SEEKS CAPITAL APPRECIATION. THE
LARGE CAP GROWTH FUND PURSUES
ITS INVESTMENT OBJECTIVE BY
INVESTING IN A DIVERSIFIED
PORTFOLIO CONSISTING PRIMARILY
OF EQUITY SECURITIES (PRIMARILY
COMMON STOCKS OF THE LARGEST
GROWTH COMPANIES TRADED IN THE
U.S. STOCK MARKETS). THE LARGE
CAP GROWTH FUND ALSO MAY INVEST
IN FOREIGN EQUITY SECURITIES,
PRIMARILY THROUGH AMERICAN
DEPOSITARY RECEIPTS. (SEE "HOW
THE FUNDS INVEST.")

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

BUYING AND REDEEMING FUND SHARES

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

MANAGEMENT OF THE FUNDS

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

SHAREHOLDER SERVICES

When you become a shareholder, you can easily get information about your
account, and about the Funds and their services by calling M&T Bank's Mutual
Fund Services at (800) 836-2211 (in the Buffalo area, phone (716) 635-9368).

RISK FACTORS

An investment in the Funds involves certain risks that are explained more fully
in the sections of the prospectus discussing each Fund's investment techniques.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses that
rely on computers, like the Funds.

While it is impossible to determine in advance all of the risks to the Funds,
any of the Funds could experience interruptions in basic financial and
operational functions. Fund shareholders could experience errors or disruptions
in Fund share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of a Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities each Fund
may purchase.

However, this may be difficult with certain issuers. For example, a fund dealing
with foreign service providers or investing in foreign securities, will have
difficulty determining the Year 2000 readiness of those entities. This is
especially true of entities or issuers in emerging markets.

The financial impact of these issues for the Funds is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Funds.

SUMMARY OF FUND EXPENSES--CLASS A SHARES Every mutual
fund incurs expenses in conducting operations, managing invest-

ments and providing services to shareholders. The following summary breaks out
the Funds' expenses for their Class A Shares. You should consider this expense
information, along with other information provided in the prospectus, in mak-
ing your investment decision.

U.S. NEW YORK GROWTH LARGE
GOVERNMENT MUNICIPAL & CAPITAL EQUITY CAP

SHAREHOLDER TRANSACTION SECURITIES INCOME INCOME APPRECIATION INCOME GROWTH

EXPENSES FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load
Imposed on Purchases
(as a percentage

of offering price) 4.50% 4.50% 5.50% 5.50% 5.50% 5.50%
Maximum Sales Load
Imposed on Reinvested
Dividends (as a
percentage of offering

price) None None None None None None
Contingent Deferred
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds,

as applicable) None None None None None None
Redemption Fees (as a
percentage of amount
redeemed, if

applicable) None None None None None None
Exchange Fee None None None None None None
ANNUAL OPERATING

EXPENSES
(as a percentage of
average net assets)

Management Fees (after
waiver, if applicable)

(1) 0.65% 0.50% 0.70% 0.85% 0.70% 0.85%
12b-1 Fees (2) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses (3) 0.27% 0.32% 0.51% 0.65% 0.31% 0.69%
Shareholder Servicing

Agent Fee (4) 0.00% 0.00% 0.25% 0.25% 0.00% 0.00%
- --------------------------------------------------------------------------------
Total Operating Expenses
(after waivers if

applicable) (5) 0.92% 0.82% 1.21% 1.50% 1.01% 1.54%
The purpose of this
table is to assist an investor in understanding the various costs and expenses
that a shareholder of the Funds will bear either directly or indirectly. For
more complete descriptions of the various costs and expenses, see "Fund
Management, Distribution and Administration" in the prospectus. Wire-
transferred redemptions of less than $5,000 may be subject to additional fees.

EXAMPLE
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
load. As noted in the table above, the Funds charge no redemption fees.

1 Year.................. $ 54 $ 53 $ 67 $ 69 $ 65 $ 70
3 Years................. $ 73 $ 70 $ 91 $100 $ 85 $101
5 Years................. $ 94 $ 88 $118 $132 $108 N/A
10 Years................ $153 $142 $194 $224 $172 N/A
</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.

(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee for the U.S.
Government Securities Fund and the New York Municipal Income Fund is 0.70%.

(2) The Funds have no present intention of paying or accruing 12b-1 fees. If the
Funds were paying or accruing 12b-1 fees, they would be able to pay up to
0.25% of each Funds' daily average assets for 12b-1 fees. See "Fund
Management, Distribution and Administration."

(3) Other expenses for the Capital Appreciation Fund were 0.66% absent the
voluntary waivers of the administrative fees by the administrator. The
administrator can terminate this voluntary waivers at any time at its sole
discretion.

(4) The U.S. Government Securities Fund, New York Municipal Income Fund, Equity
Income Fund, and Large Cap Growth Fund have no present intention of paying
or accruing shareholder servicing fees. If the Funds were paying or accruing
shareholder servicing fees, they would be able to pay up to 0.25% of each
Funds' daily average assets for shareholder servicing fees. See "Fund
Management, Distribution and Administration."

(5) The Total Fund Operating Expenses for the U.S. Government Securities Fund,
New York Municipal Income Fund, and Equity Income Fund in the table above
are based on expenses expected during the fiscal year ending April 30, 1999
and were 1.03%, 0.96%, and 1.08% respectively for the fiscal year ended
April 30, 1998. The Total Operating Expenses would have been 1.12% for the
U.S. Government Securities Fund, 1.27% for the New York Municipal Income
Fund, 1.51% for the Capital Appreciation Fund, and 1.60% for the Equity
Income Fund absent the voluntary waivers described above. The Total Fund
Operating Expenses for the Large Cap Growth Fund are based on expenses
expected during the fiscal year ending April 30, 2000.

FINANCIAL HIGHLIGHTS

- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Ernst & Young LLP, the Funds'
independent auditors. Their report dated June 17, 1998, on the Funds' financial
statements for the fiscal year ended April 30, 1998, and on the following table
for the periods presented, is included in the Annual Report, which is
incorporated by reference into the SAI. This table should be read in conjunction
with the Funds' financial statements and notes thereto, which may be obtained
from the Funds. Since the date of this prospectus (effective June 1, 1999), the
following funds have designated their outstanding Shares as Class A Shares:
Vision U.S. Government Securities Fund, Vision New York Municipal Income Fund,
Vision Growth & Income Fund, Vision Capital Appreciation Fund and Vision Equity
Income Fund. In addition, as of the date of this prospectus, Vision Large Cap
Growth Fund began publicly offering its Class A Shares for sale and, therefore,
has no prior performance.

NET DISTRIBUTIONS
NET ASSET INVESTMENT NET REALIZED DISTRIBUTIONS IN EXCESS OF DISTRIBUTIONS

YEAR VALUE, INCOME AND UNREALIZED TOTAL FROM FROM NET NET FROM NET
ENDED BEGINNING (OPERATING GAIN (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED TOTAL

APRIL 30, OF PERIOD LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS DISTRIBUTIONS

- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES FUND
1994(a) $10.00 0.34 (0.75) (0.41) (0.34) -- -- (0.34)
1995 $ 9.25 0.56 (0.16) 0.40 (0.56) -- -- (0.56)
1996 $ 9.09 0.52 0.22 0.74 (0.52) -- -- (0.52)
1997 $ 9.31 0.58 (0.03) 0.55 (0.58) -- -- (0.58)
1998 $ 9.28 0.60 0.34 0.94 (0.60) (0.01)(i) -- (0.61)
NEW YORK MUNICIPAL INCOME FUND (FORMERLY, NEW YORK TAX-FREE FUND)

1994(a) $10.00 0.20 (0.39) (0.19) (0.20) -- -- (0.20)
1995 $ 9.61 0.46 0.06 0.52 (0.46) -- -- (0.46)
1996 $ 9.67 0.46 0.23 0.69 (0.46) -- -- (0.46)
1997 $ 9.90 0.48 0.18 0.66 (0.48) -- -- (0.48)
1998 $10.08 0.46 0.38 0.84 (0.46) -- (0.04) (0.50)
GROWTH AND INCOME FUND

1994(e) $10.00 0.07 (0.08) (0.01) (0.06) -- -- (0.06)
1995 $ 9.93 0.21 0.43 0.64 (0.22) -- -- (0.22)
1996 $10.35 0.13 2.98 3.11 (0.11) -- -- (0.11)
1997 $13.35 0.13 2.35 2.48 (0.13) -- (0.59) (0.72)
1998 $15.11 0.11 4.34 4.45 (0.09) -- (3.34) (3.43)
CAPITAL APPRECIATION FUND

1997(f) $10.00 0.02(h) 1.35 1.37 (0.02) (0.03)(i) (0.06) (0.11)
1998 $11.26 (0.07) 4.44 4.37 -- -- (0.86) (0.86)
EQUITY INCOME FUND

1998(j) $ 9.99 0.08 1.47 1.55 (0.07) -- -- (0.07)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from September 22, 1993 (date of initial
public investment) to April 30, 1994.

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

(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

(e) Reflects operations for the period from November 29, 1993 (date of initial
public investment) to April 30, 1994.

(f) Reflects operations for the period from July 3, 1996 (date of initial public
investment) to April 30, 1997.

(g) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.

(h) Per share information presented is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares
outstanding during the period.

(i) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal tax purposes.

(j) Reflects operations for the period from September 26, 1997 (date of initial
public investment) to April 30, 1998.

Further information about the Funds' performance is contained in the Funds'
Annual Report for the fiscal year ended April 30, 1998, which can be obtained
free of charge.

FINANCIAL HIGHLIGHTS--CONTINUED

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

RATIOS TO AVERAGE NET ASSETS

--------------------------------------------
NET NET ASSETS,

NET ASSET INVESTMENT EXPENSE END AVERAGE
VALUE, END TOTAL INCOME WAIVER/ OF PERIOD COMMISSION PORTFOLIO
OF PERIOD RETURN(B) EXPENSES (OPERATING LOSS) REIMBURSEMENT(D) (000 OMITTED) RATE PAID(G) TURNOVER

- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.25 (4.23%) 0.00%(c) 6.11%(c) 1.86%(c) $ 24,468 -- 320%
$ 9.09 4.59% 0.43% 6.20% 1.01% $ 29,573 -- 78%
$ 9.31 8.10% 1.16% 5.41% 0.17% $ 34,492 -- 132%
$ 9.28 6.05% 1.11% 6.23% 0.20% $ 44,485 -- 121%
$ 9.61 10.42% 1.03% 6.30% 0.09% $ 53,922 -- 70%
$ 9.61 (1.22%) 0.00%(c) 4.79%(c) 1.78%(c) $ 25,225 -- 21%
$ 9.67 5.58% 0.40% 4.80% 1.12% $ 27,346 -- 51%
$ 9.90 7.18% 1.04% 4.60% 0.34% $ 32,621 -- 113%
$10.08 6.76% 1.01% 4.74% 0.38% $ 35,480 -- 79%
$10.42 8.37% 0.96% 4.35% 0.31% $ 43,456 -- 45%
$ 9.93 (0.12%) 0.00%(c) 2.24%(c) 2.15%(c) $ 22,944 -- 27%
$10.35 6.61% 0.47% 2.16% 0.96% $ 39,358 -- 79%
$13.35 30.18% 1.16% 1.09% -- $ 65,119 -- 77%
$15.11 18.61% 1.14% 0.87% -- $114,090 $0.0549 134%
$16.13 31.40% 1.21% 0.65% -- $143,404 $0.0542 88%
$11.26 13.97% 0.88%(c) 0.18%(c) 0.96%(c) $ 33,440 $0.0628 41%
$14.77 40.07% 1.50% (0.64%) 0.01% $ 75,095 $0.0547 86%
$11.47 15.51% 1.08%(c) 1.41%(c) 0.52%(c) $ 37,403 $0.0707 11%
- -------------------------------------------------------------------------------------------------------
</TABLE>

HOW THE FUNDS INVEST

FUND OBJECTIVE AND POLICIES

The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without shareholder approval. While a Fund
cannot assure that it will achieve its investment objective, it attempts to do
so by following the investment policies described below.

Unless indicated otherwise, the investment policies of a Fund may be changed by
the Board of Directors ("Directors") without shareholder approval. However,
shareholders will be notified before any material change in these policies
becomes effective. Additional information about investments, investment
limitations and strategies, and certain investment policies appears in the
"Investment Techniques, Features, and Limitations" section of this prospectus.

VISION U.S. GOVERNMENT SECURITIES FUND

INVESTMENT OBJECTIVE

The investment objective of the U.S. Government Securities Fund (referred to in
this section as the "Fund") is current income.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing, under normal market
circumstances, at least 65% of its total assets in a diversified portfolio
consisting of securities that are guaranteed as to payment of principal and
interest by the U.S. government or its agencies or instrumentalities. Capital
appreciation is a secondary, non-fundamental investment consideration. The Fund
anticipates that most of its assets will be invested in fixed income securities
having maturities greater than one year. Certain mortgage-backed securities,
including Adjustable Rate Mortgage Securities ("ARMS") and Collater- alized
Mortgage Obligations ("CMOs"), are included within the definition of "U.S.
Government Securities." Depending upon market conditions, the Fund may invest a
substantial portion of its assets in mortgage-backed securities. For a
description of these securities and the following list of Acceptable
Investments, see the "Investment Techniques, Features, and Limitations" section.

ACCEPTABLE INVESTMENTS

The Fund's investments include:

. U.S. government securities;

. mortgage-backed securities that directly or indirectly represent a partici-
pation in, or are secured by and payable from, mortgage loans on real
property;

. asset-backed securities that are similar to mortgage-backed securities, but
have underlying assets that are not mortgage loans or interests in mortgage
loans;

. taxable municipal securities;

. domestic issues of corporate debt obligations, including demand master
notes, rated at the time of purchase Aaa, Aa, or A by Moody's Investors
Service, Inc. ("Moody's"), or AAA, AA, or A by Standard & Poor's ("S&P") or
by Fitch IBCA, Inc. ("Fitch"), or, if unrated, of comparable quality as de-
termined by the Adviser;

. commercial paper that at the time of purchase is rated not less than P-1,
A-1, or F-1 by Moody's, S&P, or Fitch, respectively, or, if unrated, of
comparable quality as determined by the Adviser;

. securities of other investment companies; and

. money market instruments, including time and savings deposits (including
certificates of deposit) in commercial or savings banks, bankers'
acceptances, and repurchase agreements collateralized by high quality, liquid
investments.

VISION NEW YORK MUNICIPAL INCOME FUND

INVESTMENT OBJECTIVE

The investment objective of the New York Municipal Income Fund (referred to in
this section as the "Fund") is to provide current income which is exempt from
federal regular income tax and the personal income taxes imposed by the State of
New York and New York municipalities and is consistent with the preservation of
capital.

Interest income of the Fund that is exempt from the income taxes described above
retains its exempt status when distributed to the Fund's shareholders. Income
distributed by the Fund may not necessarily be exempt from state or municipal
taxes in states other than New York.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing primarily in securities,
the interest of which is exempt from federal regular income tax and personal
income taxes imposed by the State of New York and New York municipalities. The
Fund invests in these securities to earn income consistent with the preservation
of capital. Under normal market conditions, at least 80% of the Fund's net
assets will be invested in securities the interest on which is exempt from
federal regular income tax. However, the interest on these securities may be
subject to the federal alternative minimum tax or "AMT." Under normal market
conditions, at least 65% of the value of the Fund's total assets will be
invested in obligations issued by or on behalf of the State of New York, its
political subdivisions or agencies the interest of which is exempt from the
personal income tax imposed by the State of New York and New York
municipalities. For a description of these securities and the following list of
Acceptable Investments, see the "Investment Techniques, Features, and
Limitations" section.

ACCEPTABLE INVESTMENTS

The Fund's investments include:

. obligations issued by or on behalf of the State of New York, its political
subdivisions, or agencies ("New York municipal securities");

. debt obligations of any state, territory, or possession of the United
States, including the District of Columbia, or any political subdivision of
any of these; and

. participation interests, as described below, in any of the above obligations,
the interest from which is, in the opinion of bond counsel for the issuers or
in the opinion of officers of the Corporation or the opinion of the Adviser,
exempt from both federal income tax and the personal income taxes imposed by
the State of New York and New York municipalities.

The Fund also may invest in municipal leases, variable amount demand master
notes, securities of other investment companies, temporary investments and
certain other investments as well as engage in certain investment techniques as
noted in this prospectus.

MATURITY

The maturity of debt securities may be considered long (more than 10 years),
intermediate (3 to 10 years), or short-term (less than 3 years). The proportion
invested by the Fund in each category can be expected to vary depending upon the
evaluation of market patterns and trends by the Adviser. However, the Fund
anticipates that, under normal circumstances, at least 65% of its total assets
will be invested in fixed income securities having maturities of greater than
one year.

RATING CHARACTERISTICS

The Fund may buy municipal securities which, at the time of purchase, are
"investment grade," which are one of the top four rating categories of a
nationally recognized statistical rating organization ("NRSRO"). For example,
investment grade bonds are those that are rated Aaa, Aa, A, or Baa by Moody's,
or AAA, AA, A, or BBB by S&P or by Fitch. In certain cases, the Adviser may
purchase securities which are unrated if it determines that they are of
comparable quality to the investment grade securities described above. If any
security purchased by the Fund is subsequently downgraded below investment
grade, the Fund is not required to sell or otherwise dispose of the security,
but may consider doing so. It should be noted that bonds receiving the lowest of
the four investment grade ratings listed above (e.g., Baa or BBB) have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments on such bonds than higher rated bonds. A description of
the rating categories is contained in the Appendix to this Prospectus.

AMT OBLIGATIONS

Interest on certain private activity municipal bonds issued after August 7,
1986, is a tax preference item for purposes of computing the federal alternative
minimum tax ("AMT"), although interest on these bonds is not subject to federal
income tax. These bonds are referred to as "AMT bonds" or "AMT obligations". The
Fund, in pursuing its investment objectives and policies, may invest more than
20% of its assets in such AMT obligations.

TEMPORARY INVESTMENTS

As noted above, under normal circumstances, the Fund invests its assets so that
at least 80% of its net assets are invested in securities that pay interest
exempt from federal regular income tax and at least 65% of its total assets are
invested in securities the interest on which is exempt from the personal income
taxes imposed by the State of New York and New York municipalities. From time to
time, when the Adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term non-New York municipal
tax-exempt obligations or taxable temporary investments. These temporary
investments include: obligations issued by or on behalf of municipal or
corporate issuers; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; money market instruments; commercial paper;
certificates of deposit, bankers' acceptances or other instruments issued by a
U.S. branch of a domestic bank, or savings and loan association with capital,
surplus, and undivided profits in excess of $1 billion at the time of purchase;
shares of other investment companies; repurchase agreements; and reverse
repurchase agreements. Although the Fund is permitted to make taxable, temporary
investments, there is no current intention of generating income subject to
federal regular income tax or personal income taxes imposed by the State of New
York or New York municipalities.

INVESTMENT RISKS

Yields on New York municipal securities depend on a variety of factors,
including, but not limited to: the general conditions of the short-term
municipal note market and the municipal bond market; the size of the particular
offering; the maturity of the obligations; and the rating of the issue. Further,
any adverse economic conditions or developments affecting the State, counties,
municipalities or City of New York could impact the Fund's portfolio. The
ability of the Fund to achieve its investment objective also depends on the
continuing ability of the issuers of New York municipal securities and
participation interests, or the guarantors of either, to meet their obligations
for the payment of interest and principal when due. Investing in New York
municipal securities which meet the Fund's quality standards may not be possible
if the State, counties, municipalities and City of New York do not maintain
their current credit ratings. An expanded discussion of the current economic
risks associated with the purchase of New York municipal securities is contained
in the SAI.

VISION GROWTH &
INCOME FUND

INVESTMENT OBJECTIVE

The investment objective of the Growth & Income Fund (referred to in this
section as the "Fund") is to provide long-term growth of capital and income.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing in a diversified
portfolio consisting primarily of equity securities (e.g., common stock,
convertible securities) and debt securities (e.g., bonds, notes). The Adviser
will select equity securities to achieve growth and will select fixed-income,
convertible securities and other interest-paying debt securities to obtain
income. However, either category of equity or debt securities may be purchased
for growth of capital and/or income. The Adviser will invest in companies on the
basis of traditional research techniques, including assessment of the com-
panies' earnings and dividend growth prospects, sound management techniques,
ability to finance expected growth, and on the basis of a company's undervalu-
ation 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 growth elements and present opportunities for income.

Under normal market conditions, at least 65% of the value of the Fund's total
assets will be invested in equity and debt securities that are expected to
produce growth of capital and/or income. However, as a matter of operating
policy, the Adviser intends to invest at least 65% of the Fund's total assets in
equity securities that are expected to produce growth of capital and/or income.

In selecting investments, the Adviser intends to invest at least 65% of the
Fund's total assets in mid-size (mid-cap) companies that are regarded as
"undervalued." It is anticipated that the Fund's portfolio securities in the
aggregate will have an average weighted market capitalization of $1 billion to
$10 billion at the time of investment, which could be considered the mid-capi-
talization sector of the market.

The Adviser will focus on mid-cap companies because they offer the potential for
greater growth than more conservative, large company stocks, with generally less
volatility than more aggressive, smaller-company stocks. Mid-cap companies are
often beyond the new or emerging phase of their life cycles, yet still are
dynamic enough to be more responsive and adaptive to changing needs than
large-cap companies. As a result, mid-cap companies can offer greater potential
for growth than large-cap companies, 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 may invest in
large-cap companies and, to a lesser extent, small-cap companies when consistent
with the Fund's investment objective of long-term growth of capital and income.

The Adviser also will focus on companies that are undervalued. 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 lower price/earnings
ratio and a higher dividend yield than competitors, and thereby offer greater
income and growth potential.

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. 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 ("NYSE") or American Stock Exchange ("AMEX"), or other domestic
stock exchange, or are traded in the over-the-counter markets and are con-
sidered by the Adviser to have an established market;

. convertible securities;

. investments in American Depository Receipts ("ADRs") of foreign companies
traded on the NYSE or in the over-the-counter market. The Fund may not in-
vest 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
("Non-ADRs");

. domestic issues of corporate debt obligations (including convertible bonds
and debentures) rated, at the time of purchase, investment grade by a NRSRO
(e.g., Baa or higher by Moody's, or BBB or higher by S&P or 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;

. 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
commercial or savings banks, and bankers' acceptances; and

. warrants.

VISION CAPITAL
APPRECIATION FUND

INVESTMENT OBJECTIVE

The investment objective of the Capital Appreciation Fund (referred to in this
section as the "Fund") is to produce long-term capital appreciation. Current
income is a secondary, non-fundamental investment consideration.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing in a diversified
portfolio comprised primarily of common stocks or other securities that have
some of the characteristics of common stocks, such as convertible preferred
stocks, convertible bonds, and warrants. The principal factor in selecting
convertible securities will be the potential opportunity to benefit from
movement in stock price (growth). Under normal market conditions, the Fund
intends to have at least 75% of its total assets invested in securities which
the Adviser believes offer opportunity for capital appreciation. Current income
is a secondary, non-fundamental investment consideration. The Adviser will
generally select common stocks of well-financed issuers (e.g., issuers that
generate sufficient cash flow to support their growth needs or have sufficient
credit quality to obtain financing to support their growth) which have
demonstrated profitability in the past or have the potential for profitability
in the future. It is anticipated that the Fund's portfolio securities in the
aggregate will have an average weighted market capitalization of $1 billion to
$10 billion at the time of investment, which could be considered the
mid-capitaliza- tion sector of the market. The Adviser, may, however, select for
purchase common stocks of well-known companies with individual market
capitalizations of over $10 billion, as well as companies that have individual
market capitalizations as low as $250 million, if it believes such common stocks
offer particular opportunities for long-term capital appreciation (growth). At
least 65% of the Fund's total assets will be in mid-capitalization securities
that are regarded as having growth opportunities.

In selecting investments for growth, the Adviser will consider various financial
characteristics of the issuer, including historical sales and net income,
debt/equity and price/earnings ratios and growth rates. Certain qualitative
factors such as product dominance, management experience, and research and
development commitment will be evaluated. 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.

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
NYSE or AMEX, or other domestic stock exchange, or are traded in the over-
the-counter markets and are considered by the Adviser to have an estab-
lished market;

. convertible securities;

. investments in ADRs of foreign companies traded on the New York or American
Stock Exchange, or other domestic stock exchanges, or in the over-the-counter
market. The Fund may not invest more than 25% of its total assets in ADRs and
may not invest more than 5% of its total assets in foreign securities other
than ADRs;

. domestic issues of corporate debt obligations (including convertible bonds
and debentures) rated, at the time of purchase, investment grade by an NRSRO
(e.g., Baa or higher by Moody's, or BBB or higher by S&P or Fitch), or, if
unrated, of comparable quality as determined by the Adviser;

. U.S. government securities;

. asset backed securities:

. securities of other investment companies;

. for temporary defensive purposes, the Fund may invest up to 25% 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; and

. warrants.

VISION EQUITY INCOME FUND

INVESTMENT OBJECTIVE

The investment objective of the Equity Income Fund (referred to in this section
as the "Fund") is to provide current income. Capital appreciation is a
secondary, non-fundamental consideration.

INVESTMENT POLICIES

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). 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 a company's 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 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 to a lesser extent whether the
securities offer the opportunity for capital appreciation. In selecting
investments, the Adviser intends to invest at least 65% of the Fund's total
assets in 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 and which are regarded as "undervalued". 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 may be 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. Such 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 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
NYSE or AMEX or other domestic stock exchange or are traded in the over-
the-counter markets;

. convertible securities;

. investments in 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,
which may include securities traded on the NYSE, AMEX or other domestic stock
exchanges ("Non-ADRs");

. corporate debt obligations (including convertible bonds and debentures)
rated, at the time of purchase, investment grade by an NRSRO (e.g., Baa or
higher by Moody's, or BBB or higher by S&P or 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 may 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 or foreign commercial or savings banks, and bankers' acceptances;

. warrants;

. futures contracts; and

. options.

VISION LARGE CAP
GROWTH FUND

INVESTMENT OBJECTIVE

The investment objective of the Large Cap Growth Fund (referred to in this
section as the "Fund") is to provide capital appreciation.

INVESTMENT POLICIES

Under normal market conditions, the Fund intends to invest at least 65% of the
value of its total assets in large-cap equity securities that are expected to
produce growth or capital appreciation. The Fund will also consider to a lesser
extent whether the securities offer the opportunity for current income.

The Fund pursues its objective by investing in equity securities, primarily
common stocks, of the largest growth companies traded in the U.S. stock markets.
The Fund's portfolio will hold between 40 and 75 stocks, and the primary
universe for individual stock selection will be the S&P 500 Index. It is
anticipated that the Fund will maintain positions in many of the stocks
representing the largest holdings within the S&P 500 Index and S&P Barra Growth
Index. The Fund will attempt to be invested across all the major economic
sectors as defined by the S&P 500 Index. It is expected that the Fund, as a
whole, will have the overall portfolio characteristics that define it as a
"large cap growth." Large capitalization companies have a market capitalization
of $10 billion or more at the time of investment. The Adviser also may invest,
to a lesser extent, in mid-cap or small-cap companies which are generally
companies with a market capitalization under $10 billion. In selecting portfolio
investments, the Adviser will analyze each company's fundamentals with an
emphasis on factors pertaining to growth. In selecting investments for growth,
the Adviser will consider various financial characteristics of the issuer,
including historical sales and net income, debt/equity and price-/earnings
ratios and growth rates. Certain qualitative factors such as product dominance,
management experience, and research and development commitment will be
evaluated. Portfolio securities will be sold when the Adviser determines they no
longer meet the Fund's objective, are removed from the S&P 500 Index, or if the
Adviser determines that there is a better investment opportunity in other
stocks.

The Fund will employ tax management techniques which are designed to minimize
capital gains distributions while maximizing after-tax returns. For example, the
Fund will generally buy securities that it intends to hold over the long term,
and avoid short-term trading. In deciding which securities to sell, the Fund's
Adviser will consider their capital gain or loss situation, and may attempt to
offset capital gains by selling securities that have gone down in value or that
have the highest cost basis. Also, the Adviser generally will consider selling
any security that has not met its expectations for growth, in which case the
capital gain would be relatively small. If the Adviser is successful in applying
this strategy it would result in shareholders realizing the largest amount of
capital gains when they sell their Shares.

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
NYSE or AMEX or other domestic stock exchange or are traded in the over-
the-counter markets;

. convertible securities;

. securities (including ADRs) of foreign companies traded on the NYSE or AMEX
or other domestic stock exchange or in the over-the-counter market;

. U.S. government securities;

. securities of other investment companies;

. mortgage-backed securities;

. asset-backed securities;

. warrants;

. futures contracts; and

. options.

INVESTMENT TECHNIQUES,
FEATURES, AND

LIMITATIONS

EQUITY SECURITIES

The Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and
Large Cap Growth Fund may invest in equity securities, which represent a share
of an issuer's earnings and assets, after the issuer pays its liabilities. The
Fund cannot predict the income it will receive from equity securities because
issuers generally have discretion as to the payment of any dividends or
distributions. However, equity securities offer greater potential for
appreciation than many other types of securities, because their value increases
directly with the value of the issuer's business.

COMMON STOCKS. Common stocks are the most prevalent type of equity security.
Common stocks receive the issuer's earnings after the issuer pays its creditors
and any preferred stockholders. As a result, changes in an issuer's earnings
directly influence the value of its common stock.

PREFERRED STOCKS. Preferred stocks have the right to receive specified dividends
or distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on common
stock. Preferred stocks may also permit the issuer to redeem the stock.

REAL ESTATE INVESTMENT TRUSTS (REITS). REITs are real estate investment trusts
that lease, operate and finance commercial real estate. Risks associated with
REITs include the fact that equity and mortgage REITs are dependent upon
management skill and are not diversified and are, therefore, subject to the risk
of financing single projects or unlimited number of projects. They are also
subject to heavy cash flow dependency, defaults of borrowers and self-liquida-
tion. Additional, equity REITs may be affected by any changes in the value of
the underlying property owned by the REITs and mortgage REITs may be affected by
the quality of any credit extended. REITs are exempt from federal corporate
income tax if they limit their operations and distribute most of their income.
Such tax requirements limit a REIT's ability to respond to changes in the
commercial real estate market.

WARRANTS. Warrants are an option to buy the issuer's equity securities at a
specified (exercise) price at a specified future (expiration) date. If warrants
are not exercised before such date (for example, because the stock price does
not rise above the specified exercise price), the warrants become worthless. The
Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and Large
Cap Growth Fund may each purchase warrants, but none of these Funds except
Capital Appreciation Fund has a present intent to invest more than 5% of its net
assets in warrants.

DEPOSITARY RECEIPTS

The Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and
Large Cap Growth Fund may invest in depositary receipts, which represent
interests in underlying securities issued by a foreign company. Depositary
receipts are not traded in the same market as the underlying security. The
foreign securities underlying American Depositary Receipts ("ADRs") are traded
in the United States. ADRs provide a way to buy shares of foreign-based
companies in the United States rather than in overseas markets. ADRs are also
traded in U.S. dollars, eliminating the need for foreign exchange transactions.
Deposi- tary Receipts involve many of the same risks of investing directly in
foreign securities.

CONVERTIBLE SECURITIES

The Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and
Large Cap Growth Fund may invest in convertible securities. Convertible
securities include a spectrum of securities which can be exchanged for or
converted into common stock. Convertible securities may include, but are not
limited to: convertible bonds or debentures; convertible preferred stock; units
consisting of usable bonds and warrants; or securities which cap or otherwise
limit returns to the convertible security holder.

A 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 objectives. Otherwise the Funds may hold or
trade convertible securities. In selecting convertible securities for the Funds,
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 conditions that affect
the issuer's profits, and the issuer's management capability and practices.

Convertible securities may be rated below investment grade or are not rated at
all because they generally are junior to debt obligations but senior to common
equity securities in terms of priority of payments from, or rights to assets of,
the issuer. Convertible securities rated below investment grade may be subject
to some of the same risks as those inherent in corporate debt obligations that
are rated below investment grade (junk bonds), including reduced
creditworthiness and increased risk of default.

Junk bonds also tend to have more price volatility and carry more risk to
principal income than higher-rated securities. Lower-rated securities tend to
reflect short-term corporate and market developments to a greater extent than
higher-rated securities which react primarily to fluctuations in the general
level of interest rates.

CORPORATE DEBT OBLIGATIONS

The Funds may invest in corporate debt obligations, including corporate bonds,
notes, and debentures, which may have floating or fixed rates of interest. In
the case of an investment by the U.S. Government Securities Fund, these
obligations will be rated by an NRSRO at the time of purchase in the top three
rating categories. In the case of an investment by any of the other Funds, these
investments will be in the top four rating categories (investment grade). If the
obligations are unrated, they will be of comparable quality to the rated
obligations permissible for purchase, as determined by the Adviser. If any
security purchased by a Fund is subsequently downgraded, the Adviser will
evaluate the security and determine, on a case by case basis, 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. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to pay principal
and interest payments on these obligations compared to higher rated obligations.
A description of the rating categories is contained in the Appendix to this
Prospectus.

The interest rate paid by an outstanding debt obligation affects its value to
investors. If market rates of interest rise after a debt obligation is issued,
that outstanding debt obligation will not be as attractive to investors as a
newly issued, higher-paying security, and an investor may only be willing to buy
the outstanding obligation if it is sold at a discount. Conversely, if market
rates of interest fall, the market price of that outstanding debt obligation may
rise. Generally, the amount of change in the market price of debt obligations in
response to changes in market rates of interest depends on the maturity of the
debt obligation; debt obligations with the longest maturities generally
experience the greatest market price changes. Many corporate debt obligations,
including many lower-rated bonds, permit the issuers to call the security and
thereby redeem their obligations earlier than the stated maturity dates. Issuers
are more likely to call bonds during periods of declining interest rates. In
these cases, if a Fund owns a bond which is called, the Fund will receive its
return of principal earlier than expected and would likely have to reinvest the
proceeds at lower interest rates, thus reducing income to the Fund.

FIXED RATE CORPORATE DEBT OBLIGATIONS. The Funds 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 of
the expectation that they will be called or redeemed within a short period of
time. A fixed rate security with short-term characteristics would include a
fixed income security priced close to the price at which it may be called by the
issuer for redemption or a fixed income security approaching maturity. 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 the rate of interest paid by floating rate securities is subject to
periodic adjustments based on a designated interest rate index. 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 Funds 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) by or based on a specified
interest rate index 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, commercial paper rates, or the
longer-term rates on U.S. Treasury securities.

VARIABLE RATE DEMAND NOTES

All of the Funds except Capital Appreciation Fund may purchase variable rate
demand notes, which are long-term corporate debt instruments that have variable
or floating interest rates and provide the Funds 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 Funds to demand the repurchase of the security on not more than seven
days' prior notice. Other notes only permit the Funds to tender the security at
the time of each interest rate adjustment or at other fixed intervals.

ZERO COUPON BONDS

The U.S. Government Securities Fund, New York Municipal Income Fund, Growth &
Income Fund, Capital Appreciation Fund, Equity Income Fund, and Large Cap Growth
Fund may invest in zero coupon bonds, which are debt securities issued at a
discount to their face amount and do not entitle the holder to any periodic
payments of interest prior to maturity.

U.S. GOVERNMENT SECURITIES

The Funds 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 instrumen-
talities 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 ob-
ligations of an agency or instrumentality; or

. the credit of the agency or instrumentality.

MORTGAGE-BACKED SECURITIES

The U.S. Government Securities Fund, Growth & Income Fund, Equity Income Fund
and Large Cap Growth 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 Funds 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 in- strumentalities; 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 U.S. Government Securities Fund may
also purchase privately issued securities which are 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.

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 Funds as income, and the capital portion
will be reinvested. See "Risks of Mortgage-Backed Securities" below for a
description of risks.

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 Funds as income, and the capital portion will be reinvested.

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 U.S. Government
Securities Fund, Growth & Income Fund, Equity Income Fund and Large Cap Growth
Fund may invest 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 collat-
eralized by whole loans or private pass-through 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 col-
lateralized 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 U.S. Government Securities Fund, Growth & Income Fund, Equity Income Fund
and Large Cap Growth 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 U.S. Government
Securities Fund, Growth & Income Fund, Equity Income Fund and Large Cap Growth
Fund may invest in REMICs. REMICs are offerings of multiple class real estate
mortgage-backed securities which qualify and elect REMIC 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.

RISKS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed securities (including ARMS,
CMOs, and REMICs) and asset-backed securities (described below) generally pay
back principal and interest over the life of the security. At times when market
rates of interest are falling, debt obligations underlying mort- gage-backed and
asset-backed securities may be prepaid by borrowers who are refinancing their
debts at the lower current rate. Prepayments of debt obligations underlying
mortgage-backed and asset-backed securities in which the Fund has invested
results in a sooner-than anticipated return of principal to the Fund. There is a
risk that, when a Fund reinvests these prepayments of principal, the new
investments may not pay as high a rate of interest as the Fund had been earning
on the original investment before it was prepaid. This is referred to as
"prepayment risk." 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 mort- gage-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.

As a consequence, mortgage-backed securities may be a less effective means of
"locking in" long-term interest rates than other types of fixed-income
securities.

ASSET-BACKED SECURITIES

The U.S. Government Securities Fund, Capital Appreciation Fund, Growth & Income
Fund, Equity Income Fund and Large Cap Growth 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 U.S. Government Securities Fund, Equity Income Fund and
Large Cap Growth Fund may invest in asset-backed securities which, at the time
of purchase, are rated in the top three rating categories by an NRSRO, and the
Capital Appreciation Fund and Growth & Income Fund may invest in asset-backed
securities which, at the time of purchase, are rated in the top four rating
categories (investment grade) 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
additional risks that are not presented by mortgage-backed securities, as
described above. Primarily, asset-backed 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 (e.g., automobile loans) permit
the entity servicing the obligations to retain possession of the underlying
notes. If the servicer sells these notes 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 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 asset-backed security issue 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.

MUNICIPAL SECURITIES

The U.S. Government Securities Fund may invest in taxable municipal securities
and the New York Municipal Income Fund will purchase New York municipal
securities. Both types of municipal securities are generally issued to finance
public works such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.

Municipal securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.

The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the is-
suer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.

Yields on taxable municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Funds to
achieve their respective investment objectives also may depend on the continuing
ability of the issuers of municipal securities and demand features, or the
credit enhancers of either, to meet their obligations for the payment of
interest and principal when due.

MORAL OBLIGATION BONDS. Moral obligation bonds are normally issued by special
purpose authorities. If an issuer of a moral obligation bond is unable to meet
its interest and principal payments from current revenues, it may draw on a
reserve fund. The state or municipality that created the issuer has given a
moral pledge to appropriate funds to replenish the reserve fund. But that pledge
is only a moral commitment, not a legal obligation of the state or municipality.

PARTICIPATION INTERESTS. The New York Municipal Income Fund may purchase
participation interests from financial institutions such as commercial banks,
savings and loan associations, and insurance companies. These participation
interests give the Fund an undivided interest in municipal securities. The
financial institutions from which the Fund purchases participation interests
frequently provide or secure irrevocable letters of credit or guarantees to
assure that the participation interests are of high quality. The Directors of
the Corporation or, pursuant to delegated authority, the Adviser, will determine
whether participation interests meet the prescribed quality standards for the
Fund.

VARIABLE RATE MUNICIPAL SECURITIES. Some of the municipal securities which the
New York Municipal Income Fund purchases may have variable interest rates.
Variable interest rates are ordinarily based on a published interest rate,
interest rate index or a similar standard, such as the 91-day U.S. Treasury bill
rate. Many variable rate municipal securities are subject to payment of
principal on demand by the Fund in not more than seven days. All variable rate
municipal securities will meet the quality standards described above. The
Adviser has been instructed by the Corporation's Directors to monitor the
pricing, quality, and liquidity of the variable rate municipal securities,
including participation interests held by the Fund, on the basis of published
financial information and reports of the rating agencies and other analytical
services.

MUNICIPAL LEASES. The New York Municipal Income Fund may purchase municipal
leases, which are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities and, in some
cases, may be illiquid. They may take the form of a lease, an installment
purchase contract, a conditional sales contract or a participation certificate
in any of the above.

VARIABLE AMOUNT DEMAND MASTER NOTES. The New York Municipal Income Fund is able
to purchase variable amount demand master notes. Variable amount demand master
notes represent a borrowing arrangement between an issuer (borrower) and an
institutional lender such as the Fund (lender). These notes are payable upon
demand. The lender typically has the right to increase the amount under the note
at any time up to the full amount provided by the note agreement. Both the
lender and the borrower have the right to reduce the amount of outstanding
indebtedness at any time. In some instances, however, the lender and the
borrower may agree that the amount of outstanding indebtedness remain fixed.
Variable amount demand master notes provide that the interest rate on the amount
outstanding varies depending upon a stated short-term interest rate index.

MUNICIPAL BOND INSURANCE. The New York Municipal Income Fund may purchase
municipal securities covered by insurance which guarantees the timely payment of
principal at maturity and interest on such securities. These insured municipal
securities are either (1) covered by an insurance policy applicable to a
particular security, which is either obtained by the issuer of the security or
by a third party ("Issuer-Obtained Insurance") or (2) insured under master
insurance policies issued by municipal bond insurers, which may be purchased by
the Fund (the "Policies").

The New York Municipal Income Fund will obtain municipal bond insurance when
purchasing municipal securities which would not otherwise meet the Fund's
quality standards. The Fund may also obtain municipal bond insurance when, in
the opinion of the Adviser, such insurance would benefit the Fund, for example,
through improvement of portfolio quality or increased liquidity of certain
securities. The Adviser anticipates that not more than 50% of the Fund's net
assets will be invested in municipal securities which are insured. Issuer-
Obtained Insurance Policies are non-cancellable and continue in force as long as
the municipal securities are outstanding and their respective insurers remain in
business. If a municipal security is covered by Issuer-Obtained Insurance, then
such security need not be insured by the Policies purchased by the Fund.

The New York Municipal Income Fund may purchase two types of Policies issued by
municipal bond insurers. One type of Policy covers certain municipal securities
only during the period in which they are in the Fund's portfolio. In the event
that a municipal security covered by such a Policy is sold from the Fund, the
insurer of the relevant Policy will be liable only for those payments of
interest and principal which are then due and owing at the time of sale.

The other type of Policy covers municipal securities not only while they remain
in the Fund's portfolio but also until their final maturity even if they are
sold out of the Fund's portfolio, so that the coverage may benefit all
subsequent holders of those municipal securities. The Fund will obtain insurance
which covers municipal securities until final maturity even after they are sold
out of the Fund's portfolio only if, in the judgment of the Adviser, the Fund
would expect to receive net proceeds from the sale of those securities, after
deducting the cost of such permanent insurance and related fees, significantly
in excess of the proceeds it would expect to receive if such municipal
securities were sold without insurance.

Payments received from municipal bond insurers may not be tax-exempt income to
shareholders of the Fund.

SECURITIES OF FOREIGN ISSUERS

The Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and
Large Cap Growth Fund may invest in U.S. dollar-denominated and foreign currency
denominated 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 effecting 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 Funds are denominated
in currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect a 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 a Fund. If the
value of a foreign currency rises in comparison to the U.S. dollar, the value of
a Fund's assets denominated in that currency will increase; correspondingly, if
the value of a foreign currency declines in comparison to the U.S. dollar, the
value of a Fund's assets in that currency will decrease. As a matter of
practice, the Funds will not invest in the securities of a foreign issuer if any
risk identified above appears to the Adviser to be substantial.

REPURCHASE AGREEMENTS

Each of the Funds 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 Funds
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 a Fund, the Fund could receive less than the repurchase price on
any sale of such securities.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

Each of the Funds may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause a 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 Funds may dispose of a commitment prior to
settlement if the Adviser deems it appropriate to do so. In addition, a 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 Funds may realize short-term profits or
losses upon the sale of such commitments.

ILLIQUID AND RESTRICTED SECURITIES

Each of the Funds may invest in restricted securities. Restricted securities are
any securities in which the Fund may invest pursuant to its investment objective
and policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Directors, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, each Fund will limit its purchase, together
with other illiquid securities including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days after
notice, to 15% of its net assets.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

Each of the Funds may invest its assets in securities of other investment
companies as an efficient means of carrying out its investment policies. It
should be noted that investment companies incur certain expenses, such as
management fees, and, therefore, any investment by a Fund in shares of other
investment companies may be subject to such duplicate expenses.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, each of the Funds 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. A 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 files for bankruptcy or becomes insolvent,
disposition of the securities may be delayed pending court action.

REVERSE REPURCHASE AGREEMENTS

Each of the Funds may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash.

DIVERSIFICATION

Each of the Funds (except the New York Municipal Income 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, the Fund
may not invest more than 5% of its total assets in the securities of any one
issuer (except U.S. government obligations). The balance of the Fund's assets is
not subject to this limitation. The Fund may invest up to 25% of its total
assets in the securities of any one issuer. The New York Municipal Income Fund
is a "non-diversified" investment company under the Investment Company Act of
1940 and intends to qualify as a regulated investment company under the Internal
Revenue Code of 1986. In order to do so, with respect to 50% of its total
assets, the Fund may not invest more than 5% of its total assets in the
securities of any one issuer (except U.S. government obligations). The balance
of the Fund's assets is not subject to this limitation. However, under the
Internal Revenue Code, a regulated investment company at the close of each
quarter of the taxable year may not hold more than 25% of its assets in
securities of any one issuer (other than U.S. government securities or the
securities of other regulated investment companies). Thus, the New York
Municipal Income Fund may invest up to 25% of its total assets in the securities
of any two issuers. An investment in the Fund, therefore, will entail greater
risk than would exist in a diversified portfolio of securities because the
higher percentage of investments among fewer issuers may result in greater
fluctuation in the total market values of the Fund's portfolio. Any economic,
political, or regulatory developments affecting the value of any of the
securities in the Fund's portfolio will have a greater impact on the total value
of the portfolio than would be the case if the portfolio were diversified among
more issuers.

SHORT SALES

The Funds may sell securities short from time to time, subject to certain
restrictions. A short sale occurs when the Fund sells a security it does not own
in anticipation of a decline in the price of that security. If the decline
occurs, the Fund can purchase at a lower price shares equal in number to those
sold short. If the price increases, the Fund must pay the higher price. The
purchased shares are then returned to the original lender. Risk arises because
no loss limit can be placed on the transaction. When a 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. No Fund will 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 each Fund's net assets. While in a
short position, the Fund will retain the securities, rights, or segregated
assets.

PUT AND CALL OPTIONS

Each of the Funds 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. Each of the Funds may also write put and
call options on all or any portion of its portfolio securities to generate
income. A Fund will write put and call options on securities either held in its
portfolio or which it has the right to obtain without payment of further
consideration or which it has segregated cash in the amount of any additional
consideration. Each of the Funds also may purchase call options on securities to
protect against price movements in particular securities which a Fund intends to
purchase. The Fund pays a premium to acquire a call option, which gives the Fund
the right (but not the obligation) to buy the underlying security from the
seller at a pre-determined price. The Funds 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 Funds purchase
and write options only with investment dealers and other financial institutions
(such as commercial banks or broker/dealers) deemed credit- worthy 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 a Fund does not exercise an option it has purchased, then the Fund loses in
value the price it paid for the option. 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

Each of the Funds may purchase and sell financial futures, and the Growth &
Income Fund, Capital Appreciation Fund, Equity Income Fund and Large Cap Growth
Fund may each purchase and sell stock index futures contracts. These
transactions are used by a Fund 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.

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

Generally, a 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. 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 a 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 a 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. A Fund's ability
to establish and close out futures and options positions depends on this
secondary market.

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, and therefore a
Fund's net asset value, 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 changes. Although debt obligations with longer
maturities offer potentially greater returns, they have greater exposure to
market price fluctuation. Consequently, to the extent a 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 changes and modifying investments
accordingly.

EQUITY RISKS

As with other mutual funds that invest in equity or equity-like securities, the
Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and Large
Cap Growth Fund are 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.

SMALL AND MID-CAP STOCKS. There are additional risk factors associated with
investments in the small-to-medium capitalization stocks. In particular,
although their potential for growth may be greater, stocks in the small-to-me-
dium 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 Standard & Poor's 500 Index ("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. Therefore, the Funds that invest in
small-to-mid-cap stocks could be slightly more volatile than, and may fluctuate
independently of, broad stock market indices such as the S&P 500 Index.

SECTOR SELECTION. Companies with similar characteristics may be grouped together
in broad categories called sectors. Sector risk is the possibility that a
certain sector may underperform other sectors or the market as a whole. As the
Adviser allocates more of a Fund's portfolio holdings to a particular sector, a
Fund's performance will be more susceptible to any economic, business, or other
developments which generally affect that sector.

"GROWTH VERSUS VALUE" INVESTMENT STYLES. Due to their relatively high
valuations, growth stocks are typically more volatile than value stocks. For
instance, the price of a growth stock may experience a larger decline on a
forecast of lower earnings, a negative fundamental development, or an adverse
market development. Further, growth stocks may not pay dividends or may pay
lower dividends than value stocks. Value stocks typically act just the opposite
of growth stocks. This means that growth stocks depend more on price changes for
returns and may be more adversely affected in a down market compared to value
stocks that pay higher dividends. Conversely, value stocks depend less on price
changes for returns and may lag behind growth stocks in an up market.

PORTFOLIO TURNOVER

Although none of the Funds intends to invest for the purpose of seeking
short-term profits, securities will be sold whenever the Funds' Adviser believes
it is appropriate to do so in light of a Fund's investment objective, without
regard to the length of time a particular security may have been held. A higher
rate of portfolio turnover involves correspondingly greater transaction expenses
which must be borne directly by a Fund and, thus, indirectly by its
shareholders. In addition, a high rate of portfolio turnover may result in the
realization of larger amounts of capital gains which, when distributed to a
Fund's shareholders, are taxable to them. Nevertheless, transactions for a
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 a Fund's portfolio. In the case of the Large Cap Growth Fund,
however, the Adviser will attempt to manage the portfolio investments to
minimize and/or defer (to the extent possible and consistent with the Fund's
investment objective) the tax consequences for shareholders who hold the Fund's
Shares.

INVESTMENT LIMITATIONS

All of the Funds have the following common investment limitations. The Funds
will not:

. borrow money directly or through reverse repurchase agreements (arrangements
in which a 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, a 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.

The U.S. Government Securities Fund, Growth & Income Fund, Capital Appreciation
Fund, Equity Income Fund and Large Cap Growth Fund will not:

. with respect to 75% of the value of that Fund's 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 (in the case of the Large Cap
Growth Fund) 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 FUNDS ARE MANAGED BY A
BOARD OF DIRECTORS.

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

The Directors are responsible for managing the business affairs of the Funds and
for exercising all the Funds' powers, except those reserved for the
shareholders.

INVESTMENT ADVISER

- -------------------------------------------------------------------------------
INVESTMENT DECISIONS FOR THE
FUNDS ARE MADE BY M&T BANK,
SUBJECT TO THE DIRECTION OF THE

DIRECTORS.

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

The Adviser continually conducts investment research and supervision for the
Funds and is responsible for all purchases and sales of portfolio instruments.
The Adviser receives an annual fee from each of the Funds for its services.

Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Funds and their portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Funds' 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 Funds; 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 equal to a percentage of each
Fund's average daily net assets as follows: 0.70% for the U.S. Government
Securities Fund, New York Municipal Income Fund, Growth & Income Fund and Equity
Income Fund; and 0.85% for the Capital Appreciation Fund and Large Cap Growth
Fund. These fees are computed daily and paid at least 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 a Fund. From time to time, M&T Bank may voluntarily waive all or a
portion of its advisory fees in order to help a Fund maintain a competitive
expense ratio.

ADVISER'S BACKGROUND

M&T Bank is the principal banking subsidiary of M&T Bank Corporation, a regional
bank holding company in existence since 1969 with headquarters in Buffalo, New
York. As of December 31, 1998, M&T Bank Corporation had $20.6 billion in
consolidated assets. M&T Bank has over 247 offices throughout New York State and
Northeastern Pennsylvania, including Western New York, the Rochester region, the
Southern Tier, the Hudson Valley region, New York City, Albany and Syracuse and
an office in Nassau, The Bahamas as of December 31, 1998. Prior to May 29, 1998,
M&T Bank Corporation was known as First Empire State Corporation.

M&T Bank was founded in 1856 and provides comprehensive banking and financial
services to individuals, governmental entities and businesses throughout New
York State. As of December 31, 1998, M&T Bank had over $4.5 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, 1998, M&T Bank managed $1.51 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 Funds 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.

PORTFOLIO MANAGEMENT TEAM

The U.S. Government Securities Fund and New York Municipal Income Fund are
managed by Thomas R. Pierce. Mr. Pierce has been the portfolio manager of the
U.S. Government Securities Fund and New York Municipal Income Fund since March
1995. Mr. Pierce joined M&T Bank in January 1995 as Vice President from Merit
Investment Advisors where he acted as Director of Fixed Income Product and
Trading since 1993. For the period from 1987 to 1993, Mr. Pierce served as
Fixed Income Manager at ANB Investment Management Company, where he directed
the management of $3.5 billion of active and passive fixed income portfolios.
Mr. Pierce is a Chartered Financial Analyst and has a B.A. in Economics from
Washington University, and an M.B.A. from the University of Chicago.

Robert J. Truesdell has supervised the investment management of the U.S.
Government Securities Fund and New York Municipal Income Fund since their
inception. From August 1994 through February 1995, he also served as the
portfolio manager of these Funds. In addition to his responsibilities with
respect to these Funds, Mr. Truesdell manages individual investment accounts and
oversees the investment activities of M&T Bank's money market and fixed income
products as well as the money market funds in the Vision Group of Funds, Inc.
Mr. Truesdell joined M&T Bank as Vice President and Fixed Income Manager in
1988. In addition to the Vision money market funds, he also manages individual
investment management accounts. Mr. Truesdell holds an M.B.A. in Accounting from
the State University of New York at Buffalo.

The Growth & Income Fund and Large Cap Growth Fund are managed by John J.
Clark, III. Mr. Clark has been the portfolio manager of the Growth & Income
Fund since September, 1998 and of the Large Cap Growth Fund since its incep-
tion in June 1999. Mr. Clark joined M&T Bank as Vice President and Senior
Portfolio Manager of M&T Capital Advisors Group in April 1998. Most of his 16-
plus years of investment experience took place at Cornell University where he
was part of the in-house investment organization where he helped to manage the
University's endowment. Immediately prior to joining M&T Bank, Mr. Clark was
with Marine Midland Bank as a Senior Portfolio Manager from 1994 to April
1998. Mr. Clark obtained his B.S. from Cornell University and M.B.A. from Vir-
ginia Commonwealth University and is also a Chartered Financial Analyst.

The Capital Appreciation Fund has been managed since its inception in July,
1996 by John F. Moore, assisted by Brian D. Bell. Mr. Moore joined M&T Bank in
October 1995 as Senior Vice President and Chief Investment Officer. His 19
years of investment experience includes five years (1991-1995) with Value Line
Asset Management in New York, where he was the Director of Asset Management
and Senior Portfolio Manager. Mr. Moore obtained his B.A. and M.B.A. from the
University of North Carolina. Prior to joining M&T Bank in November 1998, Mr.
Bell was a research analyst with OCI Asset Management and Columbus Circle In-
vestors for three years each. During his six years of investment experience,
Mr. Bell focused on fundamental and quantitative research on numerous growth
companies and economic sectors. Mr. Bell obtained his B.S. from Rochester In-
stitute of Technology and is currently working on a M.B.A. at the University
of Rochester and on his Chartered Financial Analyst designation.

The Equity Income Fund has been managed since its inception in September, 1997
by John E. Leslie III. 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 Portfo-
lio Manager (1994-1996). From 1992 to 1994, Mr. Leslie was an independent con-
sultant designing quantitative equity valuation models and structured invest-
ment 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 Funds 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 FUNDS.

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

Shares of the Funds 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 an indirect, wholly owned subsidiary of Federated Investors,
Inc., 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, each of the
Funds may pay to the distributor an amount computed at an annual rate of 0.25%
of the Fund's average daily net assets on Class A Shares to finance any activity
which is principally intended to result in the sale of Class A 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 Class A Shares of the Funds exceed such
lower expense limitation as the distributor may, by notice to the Corporation,
voluntarily declare to be effective. The Funds have no present intention of
paying or accruing 12b-1 fees on Class A Shares.

Financial institutions will receive fees from the distributor based upon Class A
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 Funds' Plan is a compensation type plan. As such, the Funds make no payments
to the distributor except as described above. Therefore, the Funds do not pay
for unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Funds, 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 Funds
under the Plan.

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

SHAREHOLDER SERVICING ARRANGEMENTS

The Funds have adopted a Shareholder Services Plan, which is administered by
Federated Administrative Services. Under the Plan, M&T Bank acts as a
shareholder servicing agent (the "Shareholder Servicing Agent") for the Funds.
The Funds may pay the Shareholder Servicing Agent a fee based on the average
daily net asset value of Class A 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 Class
A Shares. This fee will be equal to 0.25% of each Fund's average daily net
assets on Class A Shares for which the Shareholder Servicing Agent provides
services. U.S. Government Securities Fund, New York Municipal Income Fund,
Equity Income Fund and Large Cap Growth Fund have no present intention of paying
or accruing shareholder servicing fees on their Class A Shares.

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 any Fund Shares. The administrators appointed could
include affiliates of the Adviser. 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 the Adviser and not the
Funds.

ADMINISTRATION OF THE FUNDS

- --------------------------------------------------------------------------------
FEDERATED ADMINISTRATIVE
SERVICES ("FAS") PROVIDES THE

FUNDS WITH CERTAIN

ADMINISTRATIVE PERSONNEL AND
SERVICES NECESSARY TO OPERATE
THE FUNDS. FEDERATED SERVICES
COMPANY ("FEDERATED SERVICES")
PROVIDES THE FUNDS WITH CERTAIN
FINANCIAL, ADMINISTRATIVE,
TRANSFER AGENCY AND FUND
ACCOUNTING SERVICES. FAS AND
FEDERATED SERVICES ARE INDIRECT
WHOLLY OWNED SUBSIDIARIES OF
FEDERATED INVESTORS, INC. THESE
SERVICES ARE PROVIDED FOR AN
AGGREGATE ANNUAL FEE AS

SPECIFIED BELOW:

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

MAXIMUM AGGREGATE DAILY NET ASSETS OF
FEE VISION GROUP OF FUNDS, INC.

------- ------------------------------------
<S> <C>

0.140% on the first $1.4 billion
0.100% on the next $750 million

0.07% on assets in excess of $2.15 billion

</TABLE>

YOUR GUIDE
TO USING
THE FUNDS

HOW THE FUNDS VALUE
THEIR SHARES

- -------------------------------------------------------------------------------
A FUND'S NET ASSET VALUE PER
SHARE FLUCTUATES.

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

The net asset value ("NAV") for a 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.

The NAV per share of each Fund 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:

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

. days during which no Shares are tendered for redemption and no orders to
purchase Shares are received; or

. the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presi-
dents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanks-

giving Day and Christmas Day.

MINIMUM INITIAL INVESTMENT

The minimum initial investment in each 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

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

CLASS A SHARES

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

U.S. GOVERNMENT SECURITIES FUND AND NEW YORK MUNICIPAL INCOME FUND

DEALER

SALES CHARGE CONCESSION
AS A SALES CHARGE AS A

PERCENTAGE AS A PERCENTAGE
OF PUBLIC PERCENTAGE OF PUBLIC

OFFERING OF NET OFFERING

AMOUNT OF TRANSACTION PRICE INVESTED PRICE

--------------------- ------------ ------------ ----------
<S> <C> <C> <C>
Less than $100,000......................... 4.50% 4.71% 4.00%
$100,000 but less than $250,000............ 3.75% 3.90% 3.25%
$250,000 but less than $500,000............ 3.00% 3.09% 2.75%
$500,000 but less than $1 million.......... 2.00% 2.04% 1.75%
$1 million or more......................... 0.00% 0.00% 0.00%
</TABLE>

GROWTH & INCOME FUND, CAPITAL APPRECIATION FUND, EQUITY INCOME FUND AND LARGE
CAP GROWTH FUND

DEALER

SALES CHARGE CONCESSION
AS A SALES CHARGE AS A

PERCENTAGE AS A PERCENTAGE
OF PUBLIC PERCENTAGE OF PUBLIC

OFFERING OF NET OFFERING

AMOUNT OF TRANSACTION 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>

PURCHASES AT NET ASSET VALUE

Class A Shares of each of the Funds may be purchased 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, M&T Bank
Corporation and their subsidiaries; (ii) current and former Directors of the
Corporation; (iii) clients of the M&T Capital Advisers and Trust Groups of M&T
Bank; (iv) employees (including registered representatives) of a dealer which
has a selling group agreement with the Funds' distributor and consents to such
purchases; (v) current and retired employees of any sub-adviser to the M&T
Funds, Inc.; and (vi) investors referred by any sub-adviser to the M&T Funds,
Inc. Immediate relatives include grandparents, parents, siblings, children, and
grandchildren of a qualified investor, and the spouse of any immediate relative.
A special application form which is available from the Shareholder Servicing
Agent, must be submitted with the initial purchase.

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

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF MUTUAL FUND SHARES OR ANNUITIES

Investors may purchase Class A Shares of each of the Funds 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 be presented 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 a
Fund under this "no-load" purchase provision. This payment will be made out of
the distributor's assets and not by the Corporation, the Funds or a Fund's
shareholders.

REDUCING THE SALES CHARGE

The Sales charge can be reduced on the purchase of Class A Shares of the Funds
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 tables under "What Fund Shares Cost," larger purchases of Class
A Shares reduce the sales charge paid. The Funds will combine purchases of Class
A Shares 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 Class A Shares of any of the Funds is made, the
Fund will consider the previous purchases of Class A Shares still invested in
the Fund in calculating the applicable sales charge rate. For example, if a
shareholder already owns Class A 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 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 Class A 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 Class A Shares of the U.S. Government
Securities Fund or New York Municipal Income Fund equal in value to at least
$100,000 over the next 13 months, or Class A Shares of the Growth & Income Fund,
Capital Appreciation Fund, Equity Income Fund or Large Cap Growth 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 in escrow (in Shares) 4.50% of the total price of the Shares of the U.S.
Government Securities Fund or New York Municipal Income Fund, or 5.50% of the
total price of the Shares of the Growth & Income Fund, Capital Appreciation
Fund, Equity Income Fund or Large Cap Growth Fund, as the case may be, intended
to be purchased until such purchase is completed.

The amount 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 Class A Shares in the Funds have been redeemed, the shareholder has a
one-time right to reinvest, within 90 days, the redemption proceeds in Class A
Shares of the Funds 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 Funds, 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 Class A Shares 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
Class A Shares of 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.

SALES CHARGE REALLOWANCE

For sales of Class A Shares of the Funds, 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 Funds 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.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

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 Class A Shares of the Funds.

In addition, the distributor will offer to pay broker/dealers an amount of up to
1.00% of the net asset value of Class A 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 Class A Shares of the Funds 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 Funds, or a Fund's
shareholders, nor will it change the price paid by investors for the purchase of
Fund Shares.

HOW TO BUY SHARES

- -------------------------------------------------------------------------------
YOU CAN BUY SHARES OF THE FUNDS 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,
JR.

DAY).

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

Shares may be purchased through M&T Bank, M&T Securities, Inc. or through au-
thorized broker/dealers. Payment may be made either by wire, mail or trans-
fer. The Funds reserve the right to reject any purchase request.

THROUGH THE BANK

To purchase Shares through M&T Bank contact an account representative at M&T
Bank or 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, (716) 635-9368). For
purchases through Automated Clearing House ("ACH"), the purchase order must be
received by 3:00 p.m. (Eastern time).

THROUGH M&T SECURITIES, INC.

You may purchase Shares 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 Funds. For additional details, contact your broker.

PAYMENT

Payment may be made by either check or federal funds or by debiting a custom-
er'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 within three business
days following the order.

BUYING SHARES BY WIRE

You can purchase Shares of the Funds by Federal Reserve wire. This is referred
to as wiring federal funds, and it simply means that your bank sends money to
the Funds' 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 Funds for the first time by mail, complete and sign an
account application form and mail it, together with a check made payable to
(Name of the Fund and Class of Shares) 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 Funds 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 U.S. Government Fund and New York Municipal Income Fund declare dividends
daily and pay them monthly. The Growth & Income Fund, Equity Income Fund and
Large Cap Growth Fund declare and pay dividends quarterly. The Capital
Appreciation Fund declares and pays dividends annually. Capital gains realized
by the Funds, if any, will be distributed at least once every 12 months.
Dividends and capital gains will be automatically reinvested in additional
Shares of the Funds on payment dates at the ex-dividend date's net asset value
without a sales charge, unless payments are requested by writing to the Funds or
M&T Bank's Mutual Fund Services. Dividends and capital gains can also be
reinvested in Shares of the same class of any other fund comprising the Vision
Group of Funds, Inc., subject to any applicable minimum investment requirements.

RETIREMENT PLANS

Shares of the Funds can be purchased as an investment for retirement plans or
IRA accounts. For further details, contact the Funds 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 Funds no longer issue share certificates.

HOW TO EXCHANGE SHARES

- -------------------------------------------------------------------------------
YOU MAY PURCHASE SHARES THROUGH
AN EXCHANGE FROM THE SAME SHARE
CLASS OF ANOTHER FUND IN VISION
GROUP OF FUNDS, INC. AT NET

ASSET VALUE, PLUS ANY APPLICABLE SALES CHARGE. IN ADDITION, YOU MAY EXCHANGE
CLASS A SHARES OF THE FUNDS INTO CLASS A SHARES OF FEDERATED INTERNATIONAL
EQUITY FUND AT NET ASSET VALUE, PLUS ANY APPLICABLE SALES CHARGE.

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

In order to exchange Shares, you must:

. meet the minimum initial investment requirements (if the exchange results
in the establishment of a new account);

. establish an account into the fund you want to acquire if you do not have
an account in that fund;

. receive a prospectus for the fund into which you wish to exchange; and

. only exchange into funds that may be legally sold in your state of
residence.

If you establish a new account for an exchange into another fund, the account
will be registered in the same name and have the same dividend and capital gains
payment options as you selected for your existing account. If the new account
registration is different from your existing account, you must provide a
signature guarantee to verify your signature. See "Signature Guarantees" for
more information.

EXCHANGES AT NET ASSET VALUE

If you exchange between funds with different sales charges, the exchange will be
made at net asset value. If you paid a sales charge once (including Shares
acquired through reinvestment of dividends and capital gains) you will not have
to pay the sales charge again upon exchange. This is true even if you exchange
out of a Fund with a sales charge; then into a Fund without a sales charge and
back into a Fund with a sales charge.

EXCHANGES SUBJECT TO A SALES CHARGE

If you purchased into a Fund without a sales charge and exchange into a Fund
with a sales charge, you will be assessed the applicable sales charge when you
make the exchange. However, the sales charge will not be applied to any Shares
that you acquired through reinvestment of dividends and capital gains.

GENERAL EXCHANGE INFORMATION

Once the transfer agent has received proper instructions and documentation,
Shares submitted for exchange will be redeemed at the next net asset value
calculated.

A Fund may modify or terminate the exchange privilege at any time; shareholders
will be notified prior to such change. A Fund's management or adviser may
determine from the amount, frequency, and pattern of exchanges that a
shareholder is engaged in excessive trading that is detrimental to the Fund and
other shareholders. If this occurs, the Fund may terminate the availability of
the exchanges to that shareholder and may bar that shareholder from purchasing
other funds.

For additional information about the exchange privilege, call M&T Bank's Mutual
Fund Services at the number listed below.

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.

EXCHANGING SHARES BY TELEPHONE

You may exchange Shares between Funds by calling M&T Bank's Mutual Fund Services
at (800) 836-2211 (in Buffalo, (716) 635-9368). You will be automatically
eligible for telephone exchanges, 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 redemption option on your initial
application. If you do not do this 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 of the same
share class 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.

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 Funds, the Funds 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

All written requests should state: Fund Name and the Share Class name; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount of the transaction. An exchange
request should also state the name of the Fund into which the exchange is to be
made. All owners of the account must sign the request exactly as the Shares are
registered.

SYSTEMATIC EXCHANGE PROGRAM

If you desire to automatically exchange Shares of a predetermined amount from
one Fund into another Fund on a monthly, quarterly or annual basis, you may take
advantage of a systematic exchange privilege. Exchanges are subject to
investment minimums, limitations, and any applicable sales charges, as described
above. The minimum amount that may be exchanged is $25. Shareholders interested
in participating in this program should contact M&T Bank's Mutual Fund Services
for more information.

HOW TO REDEEM SHARES

- -------------------------------------------------------------------------------
THE FUNDS REDEEM YOUR SHARES AT

THE NET ASSET VALUE PER SHARE
NEXT DETERMINED AFTER THE FUNDS
RECEIVE 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 a Fund computes its net asset value. You
cannot redeem Shares on days when the New York Stock Exchange or M&T Bank is
closed, or on holidays when wire transfers are restricted (e.g., Columbus Day,
Veterans' Day and Martin Luther King, Jr. 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 FUND SHARES
BY TELEPHONE, UNLESS YOU
DECLINE THE PRIVILEGE ON YOUR

ACCOUNT APPLICATION.

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

You may redeem your Fund Shares by calling M&T Bank's Mutual Fund Services at
(800) 836-2211 (in the Buffalo area, phone (716) 635-9368) 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 of M&T Bank 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 Funds reserve 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 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 Funds, they 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 and share class, your account number, and the share or dollar amount you
want to redeem.

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 a Fund;

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

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

The signature guarantee must be provided by:

. a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit Insur-
ance 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 Funds do not accept signatures guaranteed by a notary public.

The Funds and their transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Funds and their 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 Funds or their agents have received payment for Shares
from the shareholder.

SYSTEMATIC WITHDRAWAL PROGRAM FOR CLASS A SHARES

If you own Class A 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. Class A 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 Class A Shares, and any possible
fluctuations in a Fund's net asset value per share, these redemptions may reduce
and eventually exhaust your investment in a fund. For this reason, you should
not consider systematic withdrawal payments as yield or income received from
your investment in a Fund. Due to the fact that Class A Shares are sold subject
to a sales charge, it may not be advisable for shareholders to be purchasing
Class A 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 Funds
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, each 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 a Fund's responsibilities under the Investment Company Act of
1940.

TAX INFORMATION

Below is a general discussion of tax considerations for the Funds. No attempt
has been made to present a detailed explanation of the income tax treatment of
the Funds or their shareholders, and this discussion is not intended as a
substitute for careful tax planning.

The tax consequences discussed here apply whether you receive dividends and
capital gains in cash or reinvest them in additional Shares. The Funds 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.

Each Fund will be treated as a separate entity for federal income tax purposes.
Income earned by a Fund, including any capital gains or losses realized, is not
combined with income earned on the Corporation's other portfolios.

Each 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

Shareholders are required to pay federal income taxes on Fund dividends and
other distributions received (including capital gains distributions, if any),
unless shareholders are exempt from taxes or receive tax-exempt dividends on New
York Municipal Income Fund, as described below.

STATE AND LOCAL TAXES

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

NEW YORK MUNICIPAL INCOME FUND

FEDERAL TAXES

Shareholders are not required to pay federal regular income tax on any dividends
received from the Fund that represent net interest received from tax-ex- empt
municipal bonds, although tax-exempt interest will increase the taxable income
of certain recipients of social security benefits. However, under the Tax Reform
Act of 1986, dividends representing net interest income earned on some municipal
bonds may be included in calculating the federal alternative minimum tax for
individuals and corporations. The alternative minimum tax, up to 28% of
alternative minimum taxable income for individuals, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.

The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.

Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional Shares. Information on the tax status of dividends and distributions
is provided annually.

NEW YORK TAXES

Under existing New York laws, shareholders of the New York Municipal Income Fund
will not be subject to New York State or New York City personal income taxes on
dividends to the extent that such dividends qualify as "exempt interest
dividends" under the internal Revenue Code of 1986 and represent interest income
attributable to obligations of the State of New York and its political
subdivisions, as well as certain other obligations, the interest on which is
exempt from New York State and New York City personal income taxes, such as, for
example, certain obligations of the Commonwealth of Puerto Rico. To the extent
that distributions are derived from other income, such distributions will be
subject to New York State or New York City personal income tax.

The New York Municipal Income Fund cannot predict in advance the exact portion
of its dividends that will be exempt from New York State and New York City
personal income taxes. However, the Fund will report to shareholders at least
annually what percentage of the dividends it actually paid is exempt from such
taxes.

Dividends paid by the New York Municipal Income Fund are exempt from the New
York City unincorporated business tax to the same extent that they are exempt
from the New York City personal income tax.

Dividends paid by the Fund are not excluded from net income in determining New
York State or New York City franchise taxes on corporations or financial
institutions.

STATE AND LOCAL TAXES

Income from the New York Municipal Income Fund is not necessarily free from
taxes in states other than New York. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.

THE TAX TREATMENT OF TEMPORARY INVESTMENTS

Dividends paid by the New York Municipal Income Fund that are attributable to
the net interest earned on some temporary investments (previously discussed in
the "Temporary Investments" section) and any realized net short-term capital
gains are taxed as ordinary income.

DESCRIPTION OF FUND SHARES

Vision Group of Funds, Inc. was organized as a Maryland corporation on Febru-
ary 23, 1988, and consists of nine investment 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 New York Municipal Income
Fund, Vision Growth & Income Fund, Vision Capital Appreciation Fund, Vision
Equity Income Fund, and Vision Large Cap Growth Fund. The Corporation's Articles
of Incorporation permit the Corporation to offer separate series of Shares in
these funds or other future portfolios. Vision Money Market Fund and Vision
Treasury Money Market Fund offer two classes of Shares, Class A Shares and Class
S Shares. Vision New York Tax-Free Money Market Fund, Vision U.S. Government
Securities Fund, Vision New York Municipal Income Fund, Vision Growth & Income
Fund, Vision Capital Appreciation Fund, Vision Equity Income Fund, and Vision
Large Cap Growth Fund currently offer one class of Shares, Class A Shares.

VOTING RIGHTS AND OTHER INFORMATION

- -------------------------------------------------------------------------------
SHAREHOLDERS OF THE FUNDS ARE

ENTITLED TO ONE VOTE FOR EACH

FULL SHARE THEY HOLD AND TO

FRACTIONAL VOTES FOR ANY

FRACTIONAL SHARES THEY HOLD,
EXCEPT THAT IN MATTERS
AFFECTING ONLY A PARTICULAR
FUND OR CLASS, ONLY SHARES OF
THAT FUND OR CLASS ARE ENTITLED

TO VOTE.

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

Shareholders in each Fund generally vote in the aggregate and not by class,
unless the law expressly requires otherwise or the Directors determine 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 SAI for examples
of when the Investment Company Act of 1940 requires that shareholders vote by
class.) As of May 21, 1999, Reho & Co., Buffalo, NY, acting in various
capacities for numerous accounts was the owner of record of 2,344,106 Shares
(37.00%) of the Government Fund, 1,989,654 Shares (33.74%) of the Growth &
Income Fund, and 1,105,193 Shares (39.79%) of the Capital Appreciation Fund and
therefore, may for certain purposes be deemed to control these Funds and be able
to affect the outcome of certain matters presented for a vote of shareholders.
As of May 21, 1999, Tice & Co., Buffalo, NY, acting in various capacities for
numerous accounts, was the owner of record of 1,740,448 Shares (27.46%) of the
Government 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. In each case, the ownership represents Shares that were
re-designated Class A Shares as of the date of this prospectus.

The Funds are 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
Funds' investment advisory agreement, to replace the Funds' independent
certified public accountants and, under certain circumstances, to elect members
to the Board of Directors. Directors may be removed by a vote of shareholders at
a special meeting. The Directors will promptly call a special meeting of
shareholders upon the written request of shareholders owning at least 10% of any
Fund's outstanding Shares.

As used in this prospectus, "assets belonging to a Fund" means the money
received by the Corporation upon the issuance or sale of Shares in a 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 rein-
vestment of these proceeds, and a portion of the general assets of the
corporation that do not otherwise belong to a Fund.

Assets belonging to a Fund are charged with the direct expenses and liabilities
of that Fund and with a share of the general expenses and liabilities of the
Corporation. Likewise, assets belonging to a Class are charged with different
expenses and liabilities of that Class and with a share of the general expenses
and liabilities of the Fund. 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 a Fund's direct and allocable
liabilities at the time the expense or liability is incurred as well as a Fund's
allocable share of any general assets at the time the asset is acquired. These
determinations are reviewed and approved annually by the Directors and are
conclusive.

HOW THE FUNDS SHOW PERFORMANCE

From time to time, advertisements for the Funds may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Funds' performance to certain indices. The Funds may advertise their performance
in terms of total return, yield, and tax-equivalent yield (New York Municipal
Income Fund only), as defined below. Of course, total return, yield, and
tax-equivalent yield figures are based on past results and are not an indication
of future performance.

TOTAL RETURN

The average annual total return of Class A Shares 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 Class A Shares is determined by dividing the net investment income
per share (as defined by the SEC) earned by Class A Shares over a thirty-day
period by the maximum offering price per share of Class A Shares 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 reinvested every
six months. The yield does not necessarily reflect income actually earned by
Class A Shares because of certain adjustments required by the SEC and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.

TAX-EQUIVALENT YIELD
(NEW YORK MUNICIPAL INCOME FUND ONLY)

The Tax-Equivalent Yield of the New York Municipal Income Fund is calculated
similarly to the yield. However, it is adjusted to show the taxable yield that
the New York Municipal Income Fund would have had to earn to equal its actual
yield, assuming a specific tax rate, and assuming that income is 100% tax
exempt. The tax-equivalent yield is computed by dividing the tax-free yield by
the result of one minus the combined federal and state tax rate. For example, if
an investor is in the 31% federal income tax bracket, and the rate for state
taxes is 6.85%, assuming the tax-free yield is 5.0%, the investor would have to
receive 8.04% from a taxable investment to equal that tax-free yield (5.0%
divided by 1 -- (.31 +.0685) = 8.04%).

APPENDIX

STANDARD & POOR'S ("S&P") CORPORATE BOND RATING DEFINITIONS

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.

BB, B, CCC, CC--Debt rated "BB," "B," "CCC," and "CC" is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.

CI--The rating "CI" is reserved for income bonds on which no interest is being
paid.

D--Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS

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 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.

Ba--Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca--Bonds which are rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated "C" are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH ICBA, INC. CORPORATE BOND 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 credit 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 ob-
ligor'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.

BB--"BB" ratings indicate that there is a possibility of credit risk developing,
particularly as the result of adverse economic change over time; however,
business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.

B--"B" ratings indicate that significant credit risk is present, but a limited
margin of safety remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a sustained,
favorable business and economic environment.

CCC, CC, C--Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon sustained, favorable business or economic
developments. A "CC" rating indicates that default of some kind appears
probable. "C" ratings signal imminent default.

DDD, DD, and D--are not meeting current obligations and are extremely specula-
tive. "DDD" designates the highest potential for recovery of amounts outstand-
ing on any securities involved. For U.S. corporates, for example, "DD" indi-
cates expected recovery of 50%--90% of such outstandings, and "D" the lowest
recovery potential, i.e. below 50%.

FITCH IBCA, INC. COMMERCIAL PAPER 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 for timely payment only slightly less in degree than issues rated
F-1+.

ADDRESSES

Vision Group of Funds, Inc.
P.O. Box 4556

Buffalo, New York 14240-4556
(800) 836-2211 (716) 635-9368

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower

1001 Liberty Tower
Pittsburgh, Pennsylvania 15222-3779

INVESTMENT ADVISER

Manufacturers and Traders Trust Company
One M&T Plaza

Buffalo, New York 14203

ADMINISTRATOR

Federated Administrative Services
Federated Investors Tower

1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8609

Boston, Massachusetts 02266-8609

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8609

Boston, Massachusetts 02266-8609

INDEPENDENT AUDITORS

Ernst & Young LLP
One Oxford Centre

Pittsburgh, Pennsylvania 15219

Vision
U.S. Government
Securities Fund

------------------------------------
Vision
New York Municipal

Income Fund

------------------------------------
Vision

Growth & Income Fund

------------------------------------
Vision
Capital Appreciation Fund

------------------------------------
Vision
Equity Income Fund

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

Vision

Large Cap Growth Fund

------------------------------------
CLASS A SHARES

Prospectus dated
June 1, 1999

[LOGO OF VISION
GROUP OF FUNDS, INC.]

Federated Securities Corp. Manufacturers And Traders
Distributor Trust Company
Federated Investors Tower -----------------------------------
Pittsburgh, PA 15222-3779 Investment Adviser

A subsidiary of M&T Bank Corporation

92830F406 92830F505 92830F604 92830F703 92830F802 92830F851 G00157-01
(6/99)

[RECYCLED LOGO APPEARS HERE]

STATEMENT OF ADDITIONAL INFORMATION

VISION GROUP OF FUNDS, INC.

STATEMENT DATED JUNE 1, 1999

VISION U.S. GOVERNMENT SECURITIES FUND

VISION NEW YORK MUNICIPAL INCOME FUND

VISION GROWTH & INCOME FUND

VISION CAPITAL APPRECIATION FUND

VISION EQUITY INCOME FUND

VISION LARGE CAP GROWTH FUND

CLASS A SHARES

This Statement of Additional Information (SAI) relates to the prospectus of six
portfolios of the Vision Group of Funds, Inc., referred to as the Vision U.S.
Government Securities Fund, Vision New York Municipal Income Fund, Vision Growth
& Income Fund, Vision Capital Appreciation Fund, Vision Equity Income Fund, and
Vision Large Cap Growth Fund (collectively, the "Funds" or individually, a
"Fund").

This SAI is not a prospectus itself, but should be read in conjunction with the
Funds' current prospectus dated June 1, 1999. This SAI is incorporated into the
Funds' prospectus by reference. To receive a copy of the prospectus for the
Funds, or a paper copy of this SAI, if you have received it electronically,
write to Vision Funds, Inc., P.O. Box 4556, Buffalo, NY 14240-4556, or call
(800) 836-2211 or (716) 635-9368. Please retain this SAI for future reference.

VISION GROUP OF FUNDS, INC.
P.O. BOX 4556
BUFFALO, NEW YORK 1420-4556

MANUFACTURERS AND TRADERS

TRUST COMPANY

Investment Adviser
A subsidiary of M&T Bank Corporation

Federated Securities Corp. is distributor for the Funds.

Cusips
92830F406
92830F505
92830F604
92830F703
92830F802
92830F851

G01716-07 (6/99)

<PAGE>

TABLE OF CONTENTS

GENERAL INFORMATION ABOUT THE FUNDS.........................1

INVESTMENT OBJECTIVES AND POLICIES..........................1

INVESTMENT LIMITATIONS......................................11

VISION GROUP OF FUNDS, INC. MANAGEMENT......................14

INVESTMENT ADVISORY SERVICES................................16

OTHER SERVICES..............................................17

BROKERAGE TRANSACTIONS......................................18

DESCRIPTION OF FUND SHARES..................................19

HOW TO BUY SHARES...........................................19

DETERMINING MARKET VALUE OF SECURITIES......................20

REDEEMING FUND SHARES.......................................20

DETERMINING NET ASSET VALUE.................................20

BANKING LAWS................................................21

TAX STATUS..................................................21

TOTAL RETURN................................................21

YIELD.......................................................22

TAX-EQUIVALENT YIELD........................................22

PERFORMANCE COMPARISONS.....................................23

FINANCIAL STATEMENTS........................................26

<PAGE>

GENERAL INFORMATION ABOUT THE FUNDS

The Funds are portfolios 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.

Shares of the Funds are currently offered in one class, Class A Shares
("Shares").

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each of the Funds cannot be changed without approval
of its shareholders.

The investment objective of VISION U.S. GOVERNMENT SECURITIES FUND (the
"Government Fund") is to provide current income. Capital appreciation is a
secondary investment consideration of the Government Fund. Current income
includes, in general, discount earned on U.S. Treasury bills and agency discount
notes, interest earned on all other U.S. government securities, and short-term
capital gains.

The investment objective of VISION NEW YORK MUNICIPAL INCOME FUND (the "NY
Municipal Income Fund") is to provide current income which is exempt from
federal regular income tax and personal income taxes imposed by the State of New
York and New York municipalities and is consistent with the preservation of
capital.

The investment objective of VISION GROWTH & INCOME FUND (the "Growth & Income
Fund") is to provide long-term growth of capital and income.

The investment objective of VISION CAPITAL APPRECIATION FUND (the "Capital
Appreciation Fund") is to provide long-term capital appreciation. Current income
is a secondary, non-fundamental investment consideration.

The investment objective of VISION EQUITY INCOME FUND (the "Equity Income Fund")
is to provide current income. Capital appreciation is a secondary,
non-fundamental consideration.

The investment objective of VISION LARGE CAP GROWTH FUND (the "Large Cap Growth
Fund") is to provide capital appreciation.

TYPES OF ACCEPTABLE INVESTMENTS AND TECHNIQUES

MUNICIPAL SECURITIES

As described in the prospectus, the Government Fund and the NY Municipal Income
Fund may invest in municipal securities. Municipal securities include debt
obligations issued by governmental entities to obtain funds for various public
purposes, including the construction of a wide range of public facilities, the
refunding of outstanding obligations, the payment of general operating expenses
and the extension of loans to public institutions and facilities. Additionally,
industrial development bonds, another type of municipal security, are issued by
or on behalf of public authorities to finance various privately-operated
facilities. The NY Municipal Income Fund may purchase industrial development
bonds if the interest paid thereon is exempt from federal income tax.

There are, of course, variations in the quality of municipal securities both
within a particular classification and between classifications, and the yields
on municipal securities depend upon a variety of factors, including general
money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. The ratings of Moody's
Investors Service Inc. ("Moody's"), Fitch IBCA, Inc. ("Fitch"), and Standard &
Poor's ("S&P") described in the Appendix to the prospectus represent their
opinions as the quality of municipal securities. It should be emphasized,
however, that ratings are general and are not absolute standards of quality, and
municipal securities with the same maturity, interest rate and rating may have
different yields while municipal securities of the same maturity and interest
rate with different ratings may have the same yield. Subsequent to its purchase
by the Funds, an issue of municipal securities may cease to be rated or its
rating may be reduced below the minimum rating required for purchase by the
Funds. Manufacturers and Traders Trust Company ("M&T Bank"), the investment
adviser to the Funds, will consider such an event in determining whether the
Funds should continue to hold the obligations.

The payment of principal and interest on most municipal securities purchased by
the Funds will depend upon the ability of the issuers to meet their obligations.
An issuer's obligations under its municipal securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the payment
of interest on and principal of its municipal securities may be materially
adversely affected by litigation or other conditions. For purposes of this SAI
and the Government and the NY Municipal Income Fund's prospectus, the District
of Columbia, each state, each of their political subdivisions, agencies,
instrumentalities and authorities and each multi-state agency of which a state
is a member is considered to be an "issuer." Further, the nongovernmental user
of facilities financed by industrial development bonds is considered to be an
"issuer." With respect to those municipal securities that are supported by a
bank guarantee, insurance policy or other credit facility, the bank or other
institution (or governmental agency) providing the guarantee, insurance or
credit facility may also be considered to be an "issuer" in connection with the
guarantee, insurance or facility.

Among other types of municipal securities, the Funds may purchase short-term
general obligation notes, tax anticipation notes, bond anticipation notes,
revenue anticipation notes, tax-exempt commercial paper, construction loan notes
and other forms of short-term loans. Such instruments are issued with a
short-term maturity in anticipation of the receipt of tax funds, the proceeds of
bond placements or other revenues. In addition, the Funds may invest in other
types of tax-exempt instruments (taxable with respect to the Government Fund),
such as municipal bonds and industrial development bonds.

Examples of municipal securities which the Government Fund and the NY Municipal
Income Fund (limited to New York municipal securities) may purchase include:

o governmental lease certificates of participation issued by state or
municipal authorities where payment is secured by installment payments for
equipment, buildings, or other facilities being leased by the state or
municipality. Government lease certificates purchased by the Funds will not
contain nonappropriation clauses;

o municipal notes and tax-exempt commercial paper;

o serial bonds sold with a series of maturity dates;

o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes;

o bond anticipation notes sold in anticipation of the issuance of long-term
bonds;

o revenue anticipation notes sold in expectation of receipt of federal income
available under the Federal Revenue Sharing Program;

o pre-refunded municipal bonds whose timely payment of interest and principal
is ensured by an escrow of U.S. government obligations; and

o general obligation bonds.

VARIABLE-RATE MUNICIPAL SECURITIES

The NY Municipal Income Fund may purchase variable-rate municipal
securities. Variable-interest rates generally reduce changes in the market
value of municipal securities from their original purchase prices.
Accordingly, as interest rates decrease or increase, the potential for
capital appreciation or depreciation is less for variable-rate municipal
securities than for fixed-income obligations. Many municipal securities with
variable-interest rates purchased by these Funds are subject to repayment of
principal (usually within seven days) on the these Funds demand. The terms
of these variable-rate demand instruments require payment of principal and
accrued interest from the issuer of the municipal obligations, the issuer of
the participation interests, or a guarantor of either issuer.

PARTICIPATION INTERESTS

The NY Municipal Income Fund may purchase municipal securities in the form
of participation interests. The financial institutions from which the Fund
purchases participation interests frequently provide or secure from another
financial institution irrevocable letters of credit or guarantees and give
the Fund the right to demand payment of the principal amounts of the
participation interests plus accrued interest on short notice (usually
within seven days).

MUNICIPAL LEASES

The NY Municipal Income Fund may purchase municipal securities in the form
of participation interests which represent undivided proportional interests
in lease payments by a governmental or non-profit entity. The lease payments
and other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations
may be subject to periodic appropriation. If the entity does not appropriate
funds for future lease payments, the entity cannot be compelled to make such
payments. Furthermore, a lease may provide that the certificate trustee
cannot accelerate lease obligations upon default. The trustee would only be
able to enforce lease payments as they became due. In the event of a default
or failure of appropriation, it is unlikely that the trustee would be able
to obtain an acceptable substitute source of payment.

When determining whether municipal leases purchased by the NY Municipal
Income Fund will be classified as a liquid or an illiquid security, the
Board of Directors ("Directors") has directed the Fund's adviser to consider
certain factors such as: the frequency of trades and quotes for the
security; the volatility of quotations and trade prices for the security;
the number of dealers willing to purchase or sell the security and the
number of potential purchasers; dealer undertaking to make a market in the
security; the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer); the rating of the
security and the financial condition and prospects of the issuer of the
security; whether the lease can be terminated by the lessee; the potential
recovery, if any, from a sale of the leased property upon termination of the
lease; the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects); the likelihood that
the lessee will discontinue appropriating funding for the lease property
because the property is no longer deemed essential to its operations (e.g.,
the potential for an "event of nonappropriation"); any credit enhancement or
legal recourse provided upon an event of nonappropriation or other
termination of the lease; and such other factors as may be relevant to the
Fund's ability to dispose of the security.

ILLIQUID AND RESTRICTED SECURITIES

The ability of the 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 Directors consider the following criteria in determining the
liquidity of certain restricted securities:

o the frequency of trades and quotes for the security;

o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;

o dealer undertakings to make a market in the security; and

o the nature of the security and the nature of the marketplace trades.
Investing in Securities of Other Investment Companies

Each of the Funds may invest in the securities of affiliated and
unaffiliated money market funds as an efficient means of managing the Funds'
uninvested cash.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

Each of the Funds may invest in the securities of affiliated and unaffiliated
money market funds as an efficient means of managing the Funds' uninvested cash.

CORPORATE DEBT SECURITIES

Each of the Funds may invest in corporate debt securities. Corporate debt
securities 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 securities, 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.

RATINGS

The corporate debt obligations in which the Government Fund may invest will be
rated at the time of purchase in the top three rating categories of a nationally
recognized statistical rating organization and top four categories (investment
grade) for the other Funds, or if unrated, of comparable quality as determined
by the Fund's adviser. If any security purchased by a Fund is subsequently
downgraded, securities will be evaluated on a case by case basis by the Fund's
adviser. The Fund's 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) have 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 Prospectus.

ZERO COUPON BONDS

The Government Fund, NY Municipal Income Fund, Growth & Income Fund, Capital
Appreciation Fund, Large Cap Growth Fund and Equity Income Fund may invest in
zero coupon bonds, which are debt securities issued at a discount to their face
amount that 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. 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
their qualification as regulated investment companies and avoid liability of
federal income taxes, the Funds will be required to distribute income accrued
from zero coupon bonds which each Fund owns, and may have to sell portfolio
securities (perhaps at disadvantageous times) in order to generate cash to
satisfy these distribution requirements.

MORTGAGE-RELATED SECURITIES

Privately issued mortgage-related securities which the Government Fund may
purchase generally represent an ownership interest in federal agency mortgage
pass-through securities such as those issued by Government 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
Government Fund, Growth & Income Fund, Equity Income Fund and Large Cap
Growth 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. Others 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 Government Fund, Growth & Income Fund, Equity Income Fund and
Large Cap Growth Fund invest 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 Funds invest to
be shorter than the maturities stated in the underlying mortgages.

LENDING OF PORTFOLIO SECURITIES

The collateral received when the Funds lend portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to a 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 Funds 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
Funds do 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.

INSURANCE ON MUNICIPAL SECURITIES

The NY Municipal Income Fund may purchase Policies from MBIA Corp. ("MBIA"),
AMBAC Indemnity Corporation ("AMBAC"), and Financial Guaranty Insurance Company
("FGIC"), or any other municipal bond insurer which is rated Aaa by Moody's or
AAA by S&P. Each Policy guarantees the timely payment of principal and interest
on those municipal securities it insures. The Policies will have the same
general characteristics and features. A municipal security will be eligible for
coverage if it meets certain requirements set forth in a Policy. In the event
interest or principal on an insured municipal security is not paid when due, the
insurer covering the security will be obligated under its Policy to make such
payment not later than 30 days after it has been notified by the NY Municipal
Income Fund that such non-payment has occurred. The insurance feature reduces
financial risk, but the cost thereof and the restrictions on investments imposed
by the guidelines in the insurance policies reduce the yield to shareholders.

MBIA, AMBAC, and FGIC will not have the right to withdraw coverage on securities
insured by their Policies so long as such securities remain in the Fund's
portfolio, nor may MBIA, AMBAC, or FGIC cancel their Policies for any reason
except failure to pay premiums when due. MBIA, AMBAC, and FGIC will reserve the
right at any time upon 90 days' written notice to the NY Municipal Income Fund
to refuse to insure any additional municipal securities purchased by the NY
Municipal Income Fund after the effective date of such notice. The Board of
Directors will reserve the right to terminate any of the Policies if it
determines that the benefits to the NY Municipal Income Fund of having its
portfolio insured under such Policy are not justified by the expense involved.

Additionally, the Directors reserve the right to enter into contracts with
insurance carriers other than MBIA, AMBAC, or FGIC if such carriers are rated
AAA by S&P or Aaa by Moody's.

Under the Policies, municipal bond insurers unconditionally guarantee to the NY
Municipal Income Fund the timely payment of principal and interest on the
insured municipal securities when and as such payments shall become due but
shall not be paid by the issuer, except that in the event of any acceleration of
the due date of the principal by reason of mandatory or optional redemption
(other than acceleration by reason of mandatory sinking fund payments), default
or otherwise, the payments guaranteed will be made in such amounts and at such
times as payments of principal would have been due had there not been such
acceleration. The municipal bond insurers will be responsible for such payments
less any amounts received by the NY Municipal Income Fund from any trustee for
the municipal bond issuers or from any other source. The Policies do not
guarantee payment on an accelerated basis, the payment of any redemption
premium, the value for the Shares of the NY Municipal Income Fund, or payments
of any tender purchase price upon the tender of the municipal securities. The
Policies also do not insure against nonpayment of principal of or interest on
the securities resulting from the insolvency, negligence or any other act or
omission of the trustee or other paying agent for the securities. However, with
respect to small issue industrial development municipal bonds and pollution
control revenue municipal bonds covered by the Policies, the municipal bond
insurers guarantee the full and complete payments required to be made by or on
behalf of an issuer of such municipal securities if there occurs any change in
the tax-exempt status of interest on such municipal securities, including
principal, interest or premium payments, if any, as and when required to be made
by or on behalf of the issuer pursuant to the terms of such municipal
securities. A "when-issued" municipal security will be covered under the
Policies upon the settlement date of the issuer of such "when-issued" municipal
security. In determining whether to insure municipal securities held by the NY
Municipal Income Fund, each municipal bond insurer has applied its own standard,
which corresponds generally to the standards it has established for determining
the insurability of new issues of municipal securities. This insurance is
intended to reduce financial risk, but the cost thereof and compliance with
investment restrictions imposed under the Policies will reduce the yield to
shareholders of the NY Municipal Income Fund.

If a Policy terminates as to municipal securities sold by the NY Municipal
Income Fund on the date of sale, in which event municipal bond insurers will be
liable only for those payments of principal and interest that are then due and
owing, the provision for insurance will not enhance the marketability of
securities held by the NY Municipal Income Fund, whether or not the securities
are in default or subject to significant risk of default, unless the option to
obtain permanent insurance is exercised. On the other hand, since
Issuer-Obtained Insurance will remain in effect as long as the insured municipal
securities are outstanding, such insurance may enhance the marketability of
municipal securities covered thereby, but the exact effect, if any, on
marketability cannot be estimated. The NY Municipal Income Fund generally
intends to retain any securities that are in default or subject to significant
risk of default and to place a value on the insurance, which ordinarily will be
the difference between the market value of the defaulted security and the market
value of similar securities of minimum investment grade (i.e., rated "Baa" by
Moody's or "BBB" by S&P) that are not in default. To the extent that the NY
Municipal Income Fund holds defaulted securities, it may be limited in its
ability to manage its investment and to purchase other municipal securities.
Except as described above with respect to securities that are in default or
subject to significant risk of default, the NY Municipal Income Fund will not
place any value on the insurance in valuing the municipal securities that it
holds.

MBIA CORP.

MBIA Corp. ("MBIA") insures municipal bonds. The address of MBIA is 113
King Street, Armonk, New York, 10504, and its telephone number is (914)
273-4545. As of March 5, 1999, S&P has rated the claims-paying ability of MBIA
"AAA."

AMBAC INDEMNITY CORPORATION

AMBAC Indemnity Corporation ("AMBAC") is a wholly-owned subsidiary of AMBAC,
Inc., a financial holding company which is owned by the public. AMBAC
provides financial guarantee insurance, investment and financial products
and health care information services. The Company provides services to both
public and private customers throughout the United States. The address of
AMBAC's administrative offices is One State Street Plaza, New York, New York
10004, and its telephone number is (212) 668-0340. As of March 5, 1999, S&P
has rated the claims-paying ability of AMBAC "AAA."

FINANCIAL GUARANTY INSURANCE COMPANY

Financial Guaranty Insurance Company ("Financial Guaranty") is a
wholly-owned subsidiary of FGIC Corporation, a Delaware holding company.
FGIC Corporation is wholly-owned by General Electric Capital Corporation.
Financial Guaranty insures municipal bonds and certain non-municipal
structured debt obligations. The address of Financial Guaranty is 175 Water
St., New York, New York 10038-4972, and its telephone number is (800)
352-0001. As of March 5, 1999, S&P has rated the claims-paying ability of
Financial Guaranty "AAA."

FUTURES AND OPTIONS TRANSACTIONS

As a means of reducing fluctuations in the net asset value of Shares of the
Funds, each of the Funds 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 Funds may also write covered call options on portfolio securities to attempt
to increase current income.

Each 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. Each Fund currently does not
intend to invest more than 5% of its total assets in options transactions.

FUTURES CONTRACTS

The Funds may purchase and sell financial futures contracts 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 Funds 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, price moves 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, a 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" (agree to purchase securities in the future at a
predetermined price) to hedge against a decline in market interest rates.

"MARGIN" IN FUTURES TRANSACTIONS

Unlike the purchase or sale of a security, a 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 a 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
Funds are also required to deposit and maintain margin when they write call
options on futures contracts.

Each 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," each 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 a 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 a 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 each Fund will submit to the CFTC special calls for
information, none of the Funds will register as a commodities pool operator.

PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS

Each of the Funds may purchase listed put options on financial futures
contracts. The Growth & Income Fund, Capital Appreciation Fund, Equity
Income and Large Cap Growth Fund may also purchase listed put options on
stock index futures contracts. The Funds 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 Funds will
normally close out its option by selling an identical option. If the hedge
is successful, the proceeds received by the Funds upon the sale of the
second option will be large enough to offset both the premium paid by the
Funds for the original option plus the decrease in value of the hedged
securities.

Alternatively, a 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, each Fund may write listed
call options on financial futures contracts (and stock index futures
contracts for the Growth & Income Fund, Capital Appreciation Fund, Equity
Income Fund and Large Cap Growth Fund) to hedge its portfolio against an
increase in market interest rates or changes in stock market conditions.
When a 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, 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 one of the Funds, 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.

A 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 Funds may purchase put options on portfolio securities to protect
against price movements in particular securities in their portfolios. A put
option gives a 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 Funds may purchase these put options as long as they
are listed on a recognized options exchange and the underlying stocks are
held in its portfolio.

WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES

A 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, a 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,
a 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 a
Fund. Conversely, if the underlying security decreases in price and the
option purchaser decides not to carry out the transaction, a Fund keeps the
premium and a Fund can sell the security or hold onto it for future price
appreciation. A 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. The call options which a Fund writes
and sells must be listed on a recognized options exchange. Writing of call
options by a 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 Funds 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 Funds and not
traded on an exchange.

STOCK INDEX OPTIONS

The Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and
Large Cap Growth 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 a 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 of 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 these Funds 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 Funds use 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 perfectly with the prices of the securities in a 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 Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as 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 the Fund's investment
adviser will consider liquidity before entering into these 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. A 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 a Fund's ability to
effectively hedge its portfolio.

To minimize risks, each 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 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. When a 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.

SECURITIES OF FOREIGN ISSUERS

The Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and
Large Cap Growth 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 InterAmerican 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 Funds will not invest in the securities of a foreign issuer if any
risk appears to the Adviser to be substantial.

SHORT SALES

The Funds may sell securities short from time to time, subject to certain
restrictions. A short sale occurs when a security which a 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 a 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 a
Fund can obtain such securities, are segregated on a Fund's records and
maintained until a Fund meets its obligations under the short sale.

No Fund will 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. While
in a short position, the Funds will retain the securities, rights, or segregated
assets.

WARRANTS

The Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and
Large Cap Growth 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.

DURATION

Duration is a commonly used measure of the potential volatility in the price of
a bond, or other fixed income security, or in a portfolio of fixed income
securities, prior to maturity. Volatility is the magnitude of the change in the
price of a bond relative to a given change in the market rate of interest. A
bond's price volatility depends on three primary variables: the bond's coupon
rate; maturity date; and the level of market yields of similar fixed income
securities. Generally, bonds with lower coupons or longer maturities will be
more volatile than bonds with higher coupons or shorter maturities. Duration
combines these variables into a single measure.

Duration is calculated by dividing the sum of the time-weighted values of the
cash flows of a bond or bonds, including interest and principal payments, by the
sum the present values of the cash flows. When a Fund invests in mortgage
pass-through securities, its duration will be calculated in a manner which
requires assumptions to be made regarding future principal prepayments. A more
complete description of this calculation is available upon request.

TEMPORARY INVESTMENTS

As stated in the prospectus, the NY Municipal Income Fund may invest a portion
of assets on a temporary basis for temporary purposes in short-term taxable
money market instruments ("Temporary Investments"). Temporary Investments in
which the NY Municipal Income Fund may invest include instruments within the
listed classes. Although the NY Municipal Income Fund has retained the
flexibility of investing up to 20% of its total assets in these Temporary
Investments during non-defensive periods (and greater amounts during temporary
defensive periods), the NY Municipal Income Fund anticipates that it would not
invest more than 5% of its net assets in any one of the classes of temporary
investments.

MONEY MARKET INSTRUMENTS

The Funds 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-2 by S&P,
Prime-2 by Moody's, or F-2 by Fitch, or if not rated are determined to be of
comparable quality by the Funds' investment adviser (see Appendix to the
Prospectus 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.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are made to secure what is considered to be an advantageous
price or yield for the Funds. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Funds sufficient
to make payment for the securities to be purchased are segregated on the Funds'
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Funds do 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 the Funds' assets.

REPURCHASE AGREEMENTS

The Funds 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
Funds 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 Funds or their
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 a 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 Funds believe that under the regular procedures
normally in effect for custody of the Funds' portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Funds and allow retention or disposition of such securities. The Funds may
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are found by a Fund's adviser to be
creditworthy pursuant to guidelines established by the Board of Directors.

REVERSE REPURCHASE AGREEMENTS

The Funds may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, a 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 Funds 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
Funds will be able to avoid selling portfolio instruments at a disadvantageous
time.

When effecting reverse repurchase agreements, liquid assets of a 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.

PORTFOLIO TURNOVER

The Funds 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
a Fund's investment objective. Securities in its portfolio will be sold whenever
a Fund's investment adviser believes it is appropriate to do so in light of a
Fund's investment objectives, without regard to the length of time a particular
security may have been held. However, the Large Cap Growth Fund will employ tax
management techniques that may result in a lower portfolio turnover rate, as
described in the Prospectus. For the fiscal years ended April 30, 1998 and 1997,
the Government Fund's, NY Municipal Income Fund's, and Growth & Income Fund's
portfolio turnover rates were 70% and 121%, 45% and 79%, and 88% and 134%,
respectively. For the fiscal year ended April 30, 1998, and the period from July
3, 1996 (date of initial public investment) to April 30, 1997, the portfolio
turnover rates of the Capital Appreciation Fund were 86% and 41%. For the period
from September 25, 1997 (date of initial public investment) to April 30, 1998,
the portfolio turnover rate of the Equity Income Fund was 11%.

The Growth & Income Fund's higher rate of portfolio turnover during the last
fiscal year is the direct result of the repositioning of the portfolio in
companies with better future growth prospects. It is anticipated that the
current turnover rate will moderate.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Funds will not sell any securities short nor purchase any securities on
margin, except as described below and other than in connection with buying
financial futures contracts, put options on financial futures, put options on
portfolio securities, and writing covered call options, but may obtain such
short-term credits as are necessary for clearance of purchases and sales of
securities.

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

No Fund will sell securities short unless the Fund (1) owns, or has a right to
acquire, an equal amount of such securities, or (2) has segregated an amount of
its other 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 respective Fund's net assets. While in a short
position, each Fund will retain the securities, rights, or segregated assets.

Each 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 Funds will not issue senior securities except that the Funds may borrow
money and engage in reverse repurchase agreements in amounts up to one-third of
the value of their net assets, including the amounts borrowed. The Funds 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 Funds to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Funds will not purchase any securities
while borrowings (including reverse repurchase agreements) in excess of 5% of
their respective total assets are outstanding.

PLEDGING ASSETS

The Funds will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, the Funds 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 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 activities or the purchase of securities on a when-issued basis.

UNDERWRITING

The Funds 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 their investment objectives, policies,
and limitations.

INVESTING IN REAL ESTATE

The Funds will not purchase or sell real estate including limited partnership
interests although they 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 Funds will not lend any of their assets except portfolio securities, the
market value of which does not exceed one-third of the value of the Funds'
respective total assets. This shall not prevent the Funds 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 Funds' respective investment objectives,
policies, and limitations.

INVESTING IN COMMODITIES

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

CONCENTRATION OF INVESTMENTS

The Funds will not invest 25% or more of the value of their total assets in any
one industry, except that the Government Fund, Growth & Income Fund, Capital
Appreciation Fund, Equity Income Fund, and Large Cap Growth Fund and, for
temporary defensive purposes, the NY Municipal Income Fund may invest 25% or
more of the value of its total assets in cash or cash items (including
instruments issued by a U.S. branch of a domestic bank or savings and loan
association and bankers' acceptances), securities issued or guaranteed by the
U.S. government, its agencies, or instrumentalities, and repurchase agreements
collateralized by such securities.

In addition, the NY Municipal Income Fund may invest more than 25% of the value
of its total assets in obligations issued by any state, territory, or possession
of the United States, the District of Columbia or any of their authorities,
agencies, instrumentalities or political subdivisions.

DIVERSIFICATION OF INVESTMENTS

With respect to securities comprising 75% of the value of its total assets, the
Funds (other than the NY Municipal Income Fund) will not purchase securities
issued by any one issuer (other than cash, cash items, securities of other
investment companies (in the case of Large Cap Growth Fund), 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. Also, the Funds will not acquire more than 10%
of the outstanding voting securities of any one issuer.

INVESTING IN EXEMPT-INTEREST OBLIGATIONS

The NY Municipal Income Fund will not invest less than 80% of its net
assets in securities the interest on which is exempt from federal regular income
tax, except during temporary defensive periods.

THE ABOVE INVESTMENT LIMITATIONS CANNOT BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
THE FOLLOWING LIMITATION, 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 RESTRICTED AND ILLIQUID SECURITIES

The Funds will not invest more than 15% of the value of their respective net
assets in illiquid securities including certain restricted securities not
determined to be liquid under criteria established by the Directors
non-negotiable time deposits and repurchase agreements providing for settlement
in more than seven days after notice.

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. None of the Funds has any 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 Funds consider 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."

For purposes of the Funds' concentration policy, the Adviser may classify
issuers by industry based on classifications that distinguish between various
economic characteristics. For instance, the telecommunications industry may be
separated into cable companies, cellular companies and other types of
telecommunications companies, and be regulated or unregulated companies.

NEW YORK INVESTMENT RISKS

The NY Municipal Income Fund invests in obligations of New York (the "State")
issuers which result in the NY Municipal Income Fund's performance being subject
to risks associated with the overall conditions present within the State. The
following information is a general summary of the State's financial condition
and a brief summary of the prevailing economic conditions. This information is
based on various sources that are believed to be reliable but should not be
considered as a complete description of all relevant information.

The State has achieved fiscal balance for the last few years after large
deficits in the middle and late 1980's. Growing social service needs, education
and Medicare expenditures have been the areas of largest growth while prudent
program cuts and increases in revenues through service fees has enabled the
State's budget to remain within balance for the last few years. The State also
benefits from a high level of per capita income that is well above the national
average and from significant amounts of international trade. While the State
still has a large accumulated deficit as a percentage of its overall budget, the
fiscal performance in recent years has demonstrated a changed political
environment that has resulted in realistic revenue and expenditure projections
to achieve financially favorable results. The recent budgets have included
personal income tax cuts and emphasized cost control. Budgets in recent years
have been delayed due to disagreements between the Governor and the New York
State legislature.

New York's economy is large and diverse. While several upstate counties benefit
from agriculture, manufacturing and high technology industries, New York City
nonetheless still dominates the State's economy through its international
importance in economic sectors such as advertising, finance, and banking. The
State's economy has been slow to recover after the late 1980's recession that
resulted in the loss of over 400,000 jobs in the New York City metropolitan area
alone. Any major changes to the financial condition of New York City would
ultimately have an affect on the State.

Obligations of issuers within the State are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights of and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by the U.S. Congress, state legislators, or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations, or upon the ability of the
State or its political subdivisions to levy taxes. There is also the possibility
that, as a result of litigation or other conditions (including delays in
adopting budgets), the power or ability of any issuer to pay, when due, the
principal of and interest on its municipal securities may be materially
affected.

A substantial principal amount of bonds issued by various State agencies and
authorities are either guaranteed by the State or supported by the State through
lease-purchase arrangements, or other contractual or moral obligation
provisions. Moral obligation commitments by the State impose no immediate
financial obligations on the State and require appropriations by the legislature
before any payments can be made. Failure of the State to appropriate necessary
amounts or to take other action to permit the authorities and agencies to meet
their obligations could result in defaults on such obligations. If a default
were to occur, it would likely have a significant adverse impact on the market
price of obligations of the State and its authorities and agencies. In recent
years, the State has had to appropriate large amounts of funds to enable State
agencies to meet their financial obligations and, in some cases, prevent
default. Additional assistance is expected to be required in current and future
fiscal years since certain localities and authorities continue to experience
financial difficulties.

To the extent State agencies and local governments require State assistance to
meet their financial obligations, the ability of the state of New York to meet
its own obligations as they become due or to obtain additional financing could
be adversely affected. This financial situation could result not only in
defaults of State and agency obligations but also impairment of the
marketability of securities issued by the State, its agencies and local
governments.

The current ratings on New York State general obligation debt are A-2 by Moody's
and A by S&P.

The NY Municipal Income Fund's concentration in municipal securities issued by
the state and its political subdivisions provides a greater level of risk than a
fund which is diversified across numerous states and municipal entities. The
ability of the state or its municipalities to meet their obligations will depend
on the availability of tax and other revenues; economic, political, and
demographic conditions within the state; and the underlying fiscal condition of
the state, its counties, and its municipalities.

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

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.; Sevenson Environmental Services,
Inc.; Blue Cross & Blue Shield of Western 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

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

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.; Vice Chairman, Federated Investors, Inc.; 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.

Beth S. Broderick
Federated Investors Tower

Pittsburgh, PA

Birthdate: August 2, 1965

Vice President and Assistant Treasurer

Assistant Vice President & Client Services Officer, Mutual Fund Services
Division, Federated Services Company.

Victor R. Siclari
Federated Investors Tower

Pittsburgh, PA

Birthdate: November 17, 1961

Secretary

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

FUND OWNERSHIP

As of May 21, the Officers and Directors owned less than 1% of the Funds'
outstanding Shares.

As of May 21, 1999, the following shareholder of record owned 5% or more of
the outstanding Class A Shares of the NY Municipal Income Fund: Tice & Co.,
Buffalo, NY, owned approximately 942,420, Shares (18.70%).

As of May 21, 1999, the following shareholders of record owned 5% or more of the
outstanding Class A Shares of the Growth & Income Fund: Reho & Co., Buffalo, NY,
owned approximately 1,989,655 Shares (33.74%); and Tice & Co., Buffalo, NY owned
approximately 451,995 Shares (7.66%).

As of May 21, 1999, the following shareholders of record owned 5% or more of the
outstanding Class A Shares of the Government Fund: Krauss & Company, Buffalo,
NY, owned approximately 865,481 Shares (13.66%); Reho & Co., Buffalo, NY, owned
approximately 2,344,106 (37.00%); Tice & Co., Buffalo, NY, owned approximately
1,740,448 Shares (27.46%).

As of May 21, 1999, the following shareholders of record owned 5% or more of the
outstanding Class A Shares of the Capital Appreciation Fund: Reho & Co.,
Buffalo, NY, owned approximately 1,105,193 Shares (39.79%); Krauss & Company,
Buffalo, NY, owned approximately 181,492 Shares (6.54%); and Tice & Co.,
Buffalo, NY owned approximately 142,202 Shares (5.12%).

As of May 21, 1999, the following shareholders of record owned 5% or more of the
outstanding Class A Shares of the Equity Income Fund: Krauss & Company, Buffalo,
NY, owned approximately 824,386 Shares (22.19%); Reho & Co., Buffalo, NY, owned
approximately 1,093,856 Shares (29.44%); and Tice & Co., Buffalo, NY, owned
approximately 759,014 Shares (20.43%).

<PAGE>

DIRECTORS' COMPENSATION

AGGREGATE

NAME, COMPENSATION
POSITION WITH FROM
CORPORATION CORPORATION*#

Randall I. Benderson, Director $8,000

Joseph J. Castiglia, Director $8,000

Daniel R. Gernatt, Jr., Director $7,500

George K. Hambleton, Jr., Director $8,000

*Information is furnished for the fiscal year ended April 30, 1999. The
Corporation is the only investment company in the Fund Complex.

#The aggregate compensation is provided for the Corporation which was
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 FUNDS

Investment advisory services are provided to the Funds 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 Funds' 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 Funds 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 a 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
as described in the Prospectus.

For the fiscal years ended April 30, 1998, 1997, and 1996, for the Government
Fund, NY Municipal Income Fund and Growth & Income Fund, M&T Bank earned
advisory fees of $378,409, $258,550, and $227,041; $279,035, $234,511, and
$209,254; and $968,660, $308,825, and $102,300 respectively, of which $45,997,
$61,752, and $48,652; $117,123, $115,657, and $91,153; and $0, $0, and $541,
respectively, were voluntarily waived.

In addition, for the fiscal years ended April 30, 1998, 1997, and 1996, for the
Government Fund, NY Municipal Income Fund, and Growth & Income Fund, M&T Bank
reimbursed $0, $0, and $0; $0, $0, and $0; and $0, $0, and $0, respectively, of
other operating expenses.

For the fiscal year ended April 30, 1998, and the period from July 3, 1996 (date
of initial public investment) to April 30, 1997, for the Capital Appreciation
Fund, M&T Bank earned advisory fees of $453,674 and $137,485, of which $0 and
$63,215 were voluntarily waived. In addition, for the fiscal year ended April
30, 1998, and the period from July 3, 1996 (date of initial public investment)
to April 30, 1997, for the Capital Appreciation Fund, M&T Bank reimbursed $0 and
$67,000 of other operating expenses.

For the period from September 25, 1997 (date of initial public investment) to
April 30, 1998, for the Equity Income Fund, M&T Bank earned advisory fees of
$83,847, of which $53,453 was voluntarily waived. In addition, for the period
from September 25, 1997 (date of initial public investment) to April 30, 1998,
for the Equity Income Fund, M&T Bank reimbursed $0 of other operating expenses.

Prior to January 1, 1997, Harbor Capital Management ("Harbor") served as the
Growth & Income Fund's sub-adviser. For the fiscal year ended April 30, 1996,
Harbor earned $255,750. For the period from April 30, 1996 to December 31, 1996,
Harbor earned $297,904.

OTHER SERVICES

ADMINISTRATIVE SERVICES

Federated Administrative Services ("FAS"), a subsidiary of Federated Investors,
Inc., provides administrative personnel and services to the Funds. Federated
Services Company provides the Funds with certain financial, administrative,
transfer agency and Fund accounting services. These services are provided for an
aggregate annual fee as described in the Prospectus. For the period from
December 1, 1997 to April 30, 1998, the Government Fund, NY Municipal Income
Fund, Growth & Income Fund, Capital Appreciation Fund and Equity Income Fund
incurred costs for administrative services of $33,699; $23,384; $78,952;
$35,341; and $12,991, respectively.

Prior to December 1, 1997, FAS was paid by the Funds based on the following fee
schedule:

- ---------------------------------- ---------------------------------------------
MAXIMUM ADMINISTRATIVE FEE AGGREGATE DAILY NET ASSETS OF THE
CORPORATION

- ---------------------------------- ---------------------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on asset in excess of $750 million
- ---------------------------------- ---------------------------------------------

The minimum administrative fee received during any year was $50,000 per Fund.

For the period from May 1, 1997 to November 30, 1997, and the fiscal years ended
April 30, 1997, and 1996, the Government Fund, NY Municipal Income Fund, and
Growth & Income Fund incurred costs for administrative services of $30,378,
$50,000, and $49,999; $29,317, $50,000, and $50,001; $81,883, $90,371, and
$58,037;, respectively, of which $571, $11,168, and $9,295; $6,213, $14,660, and
$10,672; and $0, $0, and $0, respectively, were voluntarily waived.

For the period from May 1, 1997 to November 30, 1997, and the period from July
3, 1996 (date of initial public investment) to April 30, 1997, the Capital
Appreciation Fund incurred costs for administrative services of $30,516, and
$41,371, of which $2,685 and $24,932, were voluntarily waived. For the period
from September 25, 1997 (date of initial public investment) to November 30,
1997, the Equity Income Fund incurred costs for administrative services of
$8,630, of which $8,630, was voluntarily waived.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

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

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

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

<PAGE>

INDEPENDENT AUDITORS

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

BROKERAGE TRANSACTIONS

Pursuant to the Funds' advisory agreement, 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 Funds 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.

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser 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. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Directors. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Funds or to the adviser 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 the adviser or its affiliates in advising the Fund and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
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 Funds 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 Funds, M&T Bank has
agreed to maintain its policy and practice of conducting its Capital Advisers
and Trust Groups independently of its Commercial Department.

The Funds' advisory agreement provides that, in making investment
recommendations for the Funds, Capital Advisers and Trust Groups personnel will
not inquire or take into consideration whether the issuer of securities proposed
for purchase or sale by the Funds is a customer of the Commercial Department
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 Funds.

Although investment decisions for the Funds are made independently from those of
the other accounts managed by M&T Bank, investments of the type the Funds may
make may also be made by those other accounts. When the Funds and one or more
other accounts managed by M&T Bank are 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 Funds or the size of the position obtained or disposed of by the Funds. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Funds.

For the fiscal years ended April 30, 1998, 1997, and 1996, the Government Fund
and NY Municipal Income Fund paid no brokerage commissions on brokerage
transactions.

For the fiscal years ended April 30, 1998, 1997, and 1996, the Growth &
Income Fund paid $259,177, $304,622, and $128,098, respectively, in commissions
on brokerage transactions.

For the fiscal year ended April 30, 1998, and the period from July 3, 1996 (date
of initial public investment) to April 30, 1997, the Capital Appreciation Fund
paid brokerage commissions in the amount of $113,127 and $62,973, respectively.

For the period from September 25, 1997 (date of initial public investment)
to April 30, 1998, the Equity Income Fund paid brokerage commissions in the
amount of $46,309.

<PAGE>

DESCRIPTION OF FUND SHARES

The Corporation's Articles of Incorporation authorize the Board of Directors to
issue up to twenty billion full and fractional Shares of Common Stock, of which
fifteen billion Shares have been classified into eleven classes. Five billion
Shares remain unclassified at this time. Authorized classes of Shares for each
Fund and amounts are as follows:

- ------------------------------------------- -------------------------------
FUND NAME AUTHORIZED CLASS AND AMOUNT

- ------------------------------------------- -------------------------------
Vision Money Market Fund 2 billion Class A Shares
2 billion Class S Shares
- ------------------------------------------- -------------------------------
Vision Treasury Money Market Fund 2 billion Class A Shares
2 billion Class S Shares
- ------------------------------------------- -------------------------------
Vision New York Tax-Free Money Market Fund 1 billion Class A Shares

- ------------------------------------------- -------------------------------
Vision U.S. Government Securities Fund 1 billion Class A Shares

- ------------------------------------------- -------------------------------
Vision New York Municipal Income Fund 1 billion Class A Shares

- ------------------------------------------- -------------------------------
Vision Growth & Income Fund 1 billion Class A Shares
- ------------------------------------------- -------------------------------
Vision Capital Appreciation Fund 1 billion Class A Shares
- ------------------------------------------- -------------------------------
Vision Equity Income Fund 1 billion Class A Shares
- ------------------------------------------- -------------------------------
Vision Large Cap Growth Fund 1 billion Class A Shares

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 of Directors may grant in its discretion. When
issued for payment as described in the Funds' Prospectus and this SAI, the
Funds' 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 respective
Shares of a 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 or class of Shares 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
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 also 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. All Shares of all classes of each Fund in the Corporation have equal
voting rights, except in matters affecting only a particular Fund or class of
Shares, only Shares of that Fund or class of Shares are entitled to vote.

Notwithstanding any provision of Maryland law requiring a greater vote of the
Corporation's 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 Funds are sold at net asset value plus a sales charge on days on
which the New York Stock Exchange and the Federal Reserve wire system are open
for business. The procedures for purchasing Shares of the Funds are explained in
the Funds' prospectus under "How to Buy Shares."

CONVERSION TO FEDERAL FUNDS

It is the Funds' 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.

DETERMINING MARKET VALUE OF SECURITIES

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

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

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

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

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

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 Funds will value futures contracts, options and put options on financial
futures at their market values established by the exchanges at the close of
option trading on such exchanges, unless the Directors determine in good faith
that another method of valuing option positions is necessary.

REDEEMING FUND SHARES

The Funds redeem Shares at the next computed net asset value after a Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "How to Redeem Shares." Although State Street Bank does not
charge for telephone redemptions, it reserves the right to charge a fee for the
cost of wire-transferred redemptions of less than $5,000.

REDEMPTION IN KIND

Although the Funds intend to redeem Shares in cash, they reserve the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from a 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.

EXCHANGING SECURITIES FOR FUND SHARES

The Funds may accept securities in exchange for Fund Shares. The Funds will
allow such exchanges only upon prior approval of the Fund and a determination by
the Fund and the Adviser that the securities to be exchanged are acceptable. Any
securities exchanged must meet the investment objective and policies of a Fund
and must have a readily ascertainable market value. The market value of any
securities exchanged in an initial investment, plus any cash, must be at least
equal to the minimum investment in the Funds. The Funds acquire the exchanged
securities for investment and not for resale. Any interest accrued or dividends
declared but not paid on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription or other rights
attached to the securities become the property of the Funds, along with the
securities. If an exchange is permitted, it will be treated as a sale for
federal income tax purposes. Depending upon the cost basis of the securities
exchanged for Fund Shares, a gain or loss may be realized by the investor.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value is
calculated for Shares of the Funds 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 permissible 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 FUNDS' TAX STATUS

The Funds will pay no federal income tax because they expect 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, a 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 invest in securities within certain statutory limits; and

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

CORPORATE SHAREHOLDER INFORMATION

In the case of a corporate shareholder, dividends of the Fund which represent
interest on municipal bonds will become subject to the 20% corporate alternative
minimum tax because the dividends are included in a corporation's "adjusted
current earnings." The corporate alternative minimum tax treats 75% of the
excess of a taxpayer's pre-tax "adjusted current earnings" over the taxpayer's
alternative minimum taxable income as a tax preference item. "Adjusted current
earnings" is based upon the concept of a corporation's "earnings and profits."
Since "earnings and profits" generally includes the full amount of any Fund
dividend, and alternative minimum taxable income does not include the portion of
the Fund's dividend attributable to municipal obligation bonds, which are not
private activity bonds, the difference will be included in the calculation of
the corporation's alternative minimum tax.

SHAREHOLDERS' TAX STATUS

No portion of any income dividend paid by the Funds is eligible for the
dividends received deduction available to corporations. These dividends (to the
extent taxable), and any short-term capital gains, are taxable as ordinary
income.

Net income for dividend purposes includes (1) interest and dividends accrued and
discount earned on a Fund's assets (including both original issue and market
discount), less (2) amortization of any premium and accrued expenses directly
attributable to such Fund, and the general expenses (e.g. legal, accounting and
directors' fees) of the Corporation prorated to each Fund on the basis of its
relative net assets.

CAPITAL GAINS

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

TOTAL RETURN

The Government Fund's average annual total returns for the one-year period
ended April 30, 1998, and for the period from September 22, 1993 (date of
initial public investment) to April 30, 1998, were 5.42% and 4.24%,
respectively.

The NY Municipal Income Fund's average annual total returns for the
one-year period ended April 30, 1998, and for the period from September 22, 1993
(date of initial public investment) to April 30, 1998, were 3.54% and 4.69%,
respectively.

The Growth & Income Fund's average annual total returns for the one-year
period ended April 30, 1998 and for the period from November 29, 1993 (date of
initial public investment) to April 30, 1998, were 24.17% and 17.52%,
respectively.

The Capital Appreciation Fund's average annual total return for the
one-year period ended April 30, 1998 and for the period from July 3, 1996 (date
of initial public investment) to April 30, 1998, were 32.31% and 25.22%,
respectively.

The Equity Income Fund's cumulative total return for the period from September
25, 1997 (date of initial public investment) to April 30, 1998, was 9.17%.

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 Equity Income Fund's total return is representative of
only seven months of investment activity since the Fund's effective date.

The average annual total return for the Shares 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 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, adjusted over the period by any additional
Shares, assuming the monthly reinvestment of all dividends and distributions.

YIELD

The yields for the Government Fund, NY Municipal Income Fund, Growth & Income
Fund, Capital Appreciation Fund, and Equity Income Fund for the thirty-day
period ended April 30, 1998, were 5.22%, 4.00%, 0.60%, 0.00%, and 1.55%,
respectively.

The yield for the Funds 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 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.

To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a Fund,
the performance will be reduced for those shareholders paying those fees.

TAX-EQUIVALENT YIELD

The tax-equivalent yield for the NY Municipal Income Fund for the thirty-day
period ended April 30, 1998, was 6.14%. The tax-equivalent yield of the NY
Municipal Income Fund is calculated similarly to the yield, but is adjusted to
reflect the taxable yield that the Fund would have had to earn to equal its
actual yield, assuming a combined federal and state marginal tax rate of
34.850%.

TAX-EQUIVALENCY TABLE

The NY Municipal Income Fund may also use a tax-equivalency table in advertising
and sales literature. The interest earned by the municipal obligations in the NY
Municipal Income Fund's portfolio generally remains free from federal income
tax,* and often is free from state and local taxes as well. As the following
table indicates, a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable yields.

<PAGE>

TAXABLE YIELD EQUIVALENT FOR 1999 - STATE OF NEW YORK

TAX BRACKET:
<S> <C> <C> <C> <C> <C>
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%

COMBINED FEDERAL AND STATE 21.850% 34.850% 37.850% 42.850% 46.450%
- -------------------------------------------------------------------------------------------------
Joint Return $1-43,050 $43,051-104,05$104,051-158,550$158,551-283,1Over
283,150

Single Return $1-25,750 $25,751-62,450$62,451-130,250 $130,251-283,1Over
283,150
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:

1.50% 1.92% 2.30% 2.41% 2.62% 2.80%
2.00% 2.56% 3.07% 3.22% 3.50% 3.73%
2.50% 3.20% 3.84% 4.02% 4.37% 4.67%
3.00% 3.84% 4.60% 4.83% 5.25% 5.60%
3.50% 4.48% 5.37% 5.63% 6.12% 6.54%
4.00% 5.12% 6.14% 6.44% 7.00% 7.47%
4.50% 5.76% 6.91% 7.24% 7.87% 8.40%
5.00% 6.40% 7.67% 8.05% 8.75% 9.34%
5.50% 7.04% 8.44% 8.85% 9.62% 10.27%
6.00% 7.68% 9.21% 9.65% 10.50% 11.20%

</TABLE>

NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN CALCULATING THE
TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE AND LOCAL TAXES PAID ON
COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO INCREASE FEDERAL DEDUCTIONS.

PERFORMANCE COMPARISONS

The performance of Shares of the Funds 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 Funds' performances fluctuate 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 each 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 Funds use 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. From time to time, the Government Fund and the NY Municipal Income
Fund will quote their Lipper rankings in the "General U.S. Government Funds"
and the "New York Municipal Bond Funds" categories, respectively, in
advertising and sales literature. (All Funds)

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. (Growth & Income Fund, Capital Appreciation
Fund, Equity Income Fund and Large Cap Growth Fund)

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. (Government
Fund)

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. (Government
Fund)

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. (Government Fund)

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).
(Government Fund)

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). (Government Fund)

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. (Government
Fund)

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. (Government Fund)

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. (Government
Fund)

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. (Government Fund)

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. (Government Fund)

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. (Growth & Income Fund, Capital
Appreciation Fund, Equity Income Fund and Large Cap Growth Fund)

o S&P/BARRA LARGE VALUE INDEX AND S&P/BARRA LARGE GROWTH INDEX are constructed
by sorting the S&P 500 based on their price/book ratios, with the low
price/book companies forming the value index and the high price/book
companies making up the growth index.

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. (Capital Appreciation Fund)

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. (Growth & Income Fund and
Capital Appreciation Fund)

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. (Growth & Income Fund
and Capital Appreciation Fund)

o CONSUMER PRICE INDEX is generally considered to be a measure of inflation.
(Growth & Income Fund, Capital Appreciation Fund, Equity Income Fund and
Large Cap Growth Fund)

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. (Growth & Income Fund,
Capital Appreciation Fund Equity Income Fund and Large Cap Growth Fund)

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. (Growth & Income Fund,
Capital Appreciation Fund Equity Income Fund and Large Cap Growth Fund)

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. (Growth &
Income Fund and Capital Appreciation Fund)

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. (Growth & Income Fund and Capital Appreciation Fund)

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. (NY Municipal Income Fund)

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. (All Funds)

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Funds' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Funds can
compare their 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 Funds are not insured. Unlike money market
funds, which attempt to maintain a stable net asset value, the net asset value
of the Funds' Shares fluctuates. Advertisements may quote performance
information which does not reflect the effect of the sales load.

<PAGE>

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Funds 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 the Funds' portfolio managers and their views and analysis on
how such developments could affect the Funds. 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 $5 trillion to the more than 7,300 funds available.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended April 30, 1998 are
incorporated herein by reference to the Funds' Annual Report dated April 30,
1998 and the un-audited financial statements for the six-month reporting period
ended October 31, 1998 are incorporated herein by reference to the Funds'
Semi-Annual Report dated October 31, 1998. (File Nos. 33-20673 and 811-5514).
Free copies of the Annual Report and Semi-Annual Report will proceed or
accompany this SAI.