THE MEDALIST FUNDS
(FORMERLY THE SIGNET SELECT
FUNDS)
TRUST SHARES
PROSPECTUS
NOVEMBER 30, 1993
REPRINTED AUGUST 15, 1994
- THE U.S. GOVERNMENT SECURITIES
FUND
- THE STOCK FUND
- THE VIRGINIA MUNICIPAL BOND FUND
- THE MARYLAND MUNICIPAL BOND FUND
- THE TREASURY MONEY MARKET FUND
- THE MONEY MARKET FUND
THE MEDALIST FUNDS
(FORMERLY THE SIGNET SELECT FUNDS)
TRUST SHARES
PROSPECTUS
The Medalist Funds (the "Trust"), an open-end, management investment company (a
mutual fund) is comprised of the six separate investment portfolios set forth
below (collectively, the "Funds," individually, a "Fund"), and The Tax-Free
Money Market Fund, each having a distinct investment objective and policies. The
Funds are offered in Trust Shares (the "Shares") as described in this
prospectus. Each of the Funds has also established a second class of shares
known as Investment Shares.
- The U.S. Government Securities Fund (formerly U.S. Government Income
Fund)
- The Stock Fund (formerly Value Equity Fund)
- The Virginia Municipal Bond Fund
- The Maryland Municipal Bond Fund
- The Treasury Money Market Fund
- The Money Market Fund
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF SIGNET
TRUST COMPANY OR SIGNET BANK, ARE NOT ENDORSED OR GUARANTEED BY SIGNET TRUST
COMPANY OR SIGNET BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES OF THE U.S. GOVERNMENT SECURITIES FUND, THE STOCK FUND,
THE VIRGINIA MUNICIPAL BOND FUND, AND THE MARYLAND MUNICIPAL BOND FUND INVOLVES
INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE TREASURY MONEY
MARKET FUND AND THE MONEY MARKET FUND ATTEMPT TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THESE FUNDS WILL BE
ABLE TO DO SO.
This prospectus relates only to the Trust Shares of the Funds and contains the
information you should read and know before you invest in any of the Funds. Keep
this prospectus for future reference.
The Funds have also filed a Combined Statement of Additional Information for the
Shares of the Funds dated November 30, 1993, with the Securities and Exchange
Commission. The information contained in the Combined Statement of Additional
Information is incorporated by reference into this prospectus. You may request a
copy of the Combined Statement of Additional Information free of charge, obtain
other information, or make inquiries about any of the Funds by writing to the
Trust or calling 804-771-7470.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated November 30, 1993
Reprinted August 15, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
Special Considerations 1
SUMMARY OF FUND EXPENSES--TRUST SHARES 2
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 3
- ------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND 9
- ------------------------------------------------------
The U.S. Government Securities Fund 9
Acceptable Investments 9
CMOs 9
ARMS 10
The Stock Fund 10
Acceptable Investments 10
Common Stocks 10
Other Corporate Securities 10
Commercial Paper 10
Bank Instruments 10
U.S. Government Securities 10
Put and Call Options 10
Financial Futures and Options on Futures 11
Risks 11
Portfolio Turnover 11
Investment Considerations 11
The Virginia Municipal Bond Fund 12
Acceptable Investments 12
Characteristics 12
The Maryland Municipal Bond Fund 12
Acceptable Investments 12
Characteristics 13
The Treasury Money Market Fund 13
Acceptable Investments 13
Regulatory Compliance 13
The Money Market Fund 13
Acceptable Investments 13
Variable Rate Demand Notes 14
Bank Instruments 14
Short-Term Credit Facilities 14
Asset-Backed Securities 14
Ratings 14
Credit Enhancement 14
Demand Features 14
Regulatory Compliance 15
Investment Limitations 15
PORTFOLIO INVESTMENTS AND STRATEGIES 15
- ------------------------------------------------------
Borrowing Money 15
Selling Short 15
Restricted and Illiquid Securities 15
When-Issued and Delayed Delivery Transactions 16
Investing in Securities of Other
Investment Companies 16
Diversification 16
Investing in New Issuers 16
Repurchase Agreements 16
Lending of Portfolio Securities 17
Acquiring Securities 17
Investment Risks 17
Participation Interests 17
Variable Rate Municipal Securities 17
Municipal Leases 17
Temporary Investments 18
Virginia and Maryland Municipal Securities 18
Investment Risks 18
Futures Contracts and Options to Buy or
Sell Such Contracts 18
Non-Diversification 18
THE MEDALIST FUNDS INFORMATION 19
- ------------------------------------------------------
Management of the Trust 19
Board of Trustees 19
Investment Adviser 19
Advisory Fees 19
Adviser's Background 19
Distribution of Trust Shares of the Funds 20
Administrative Arrangements 20
Administration of the Funds 20
Administrative Services 20
Custodian 20
Transfer Agent and Dividend Disbursing Agent 20
Legal Counsel 20
Independent Auditors 20
Expenses of the Funds and Trust Shares 20
Brokerage Transactions 21
NET ASSET VALUE 21
- ------------------------------------------------------
INVESTING IN TRUST SHARES 21
- ------------------------------------------------------
Share Purchases 21
By Check 22
By Wire 22
Minimum Investment Required 22
What Shares Cost 22
Certificates and Confirmations 22
Dividends 22
Capital Gains 23
REDEEMING TRUST SHARES 23
- ------------------------------------------------------
By Telephone 23
By Mail 23
Redemption Before Purchase Instruments Clear 24
Redemption in Kind 24
SHAREHOLDER INFORMATION 24
- ------------------------------------------------------
Voting Rights 24
Massachusetts Partnership Law 25
EFFECT OF BANKING LAWS 25
- ------------------------------------------------------
TAX INFORMATION 26
- ------------------------------------------------------
Federal Income Tax 26
The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund 26
Virginia Taxes 27
Maryland Taxes 27
Other State and Local Taxes 27
PERFORMANCE INFORMATION 27
- ------------------------------------------------------
OTHER CLASSES OF SHARES 28
- ------------------------------------------------------
ADDRESSES
- ------------------------------------------------------
SYNOPSIS
- --------------------------------------------------------------------------------
The Trust, an open-end, management investment company, was established as a
Massachusetts business trust under a Declaration of Trust dated June 20, 1990.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Trustees have established two classes of shares,
Trust Shares and Investment Shares. This prospectus relates only to the Trust
Shares of the Trust.
As of the date of this prospectus, the Trust is comprised of The Tax-Free Money
Market Fund (offered by separate prospectus) and the following six portfolios:
- The U.S. Government Securities Fund--seeks to provide current income by
investing in a professionally managed, diversified portfolio limited
primarily to U.S. government securities;
- The Stock Fund--seeks to provide growth of capital and income by
investing in common stocks of high quality companies;
- The Virginia Municipal Bond Fund--seeks to provide current income which
is exempt from federal regular income tax and the personal income tax
imposed by the Commonwealth of Virginia by investing in a portfolio of
Virginia municipal securities;
- The Maryland Municipal Bond Fund--seeks to provide current income which
is exempt from federal regular income tax and the personal income tax
imposed by the State of Maryland by investing in a portfolio of Maryland
municipal securities;
- The Treasury Money Market Fund--seeks to provide current income
consistent with stability of principal by investing in short-term U.S.
Treasury obligations; and
- The Money Market Fund--seeks to provide current income consistent with
stability of principal by investing in money market instruments.
For information on how to purchase Shares of any of the Funds please refer to
"Investing in Trust Shares." A minimum initial investment of $10,000 is required
for each Fund. Shares of each Fund are sold and redeemed at net asset value.
Information on redeeming Shares may be found under "Redeeming Trust Shares." The
Funds are advised by Signet Asset Management.
SPECIAL CONSIDERATIONS
Investors should be aware of the following general considerations: the market
value of fixed-income securities, which constitute a major part of the
investments of several Funds, may vary inversely in response to changes in
prevailing interest rates. One or more Funds may make certain investments and
employ certain investment techniques that involve other risks, including
entering into repurchase agreements, lending portfolio securities and entering
into futures contracts and related options as hedges. These risks and those
associated with investing in mortgage-backed securities, when-issued securities,
options, variable rate securities and equity securities are described under
"Investment Objective and Policies of Each Fund" and "Portfolio Investments and
Strategies."
SUMMARY OF FUND EXPENSES--TRUST SHARES
- --------------------------------------------------------------------------------
The following Fee Table and Example summarize the various costs and expenses
that a shareholder of Trust Shares will bear, either directly or indirectly.
<TABLE>
<CAPTION>
THE THE THE THE
THE TREASURY MARYLAND VIRGINIA U.S.
MONEY MONEY MUNICIPAL MUNICIPAL THE GOVERNMENT
MARKET MARKET BOND BOND STOCK SECURITIES
FUND FUND FUND FUND FUND FUND
------- --------- ---------- ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses............ None None None None None None
</TABLE>
ANNUAL TRUST SHARES OPERATING EXPENSES (AS A PERCENTAGE OF PROJECTED AVERAGE NET
ASSETS)
<TABLE>
<CAPTION>
TOTAL TRUST SHARES
TRUST OPERATING
NET SHARES EXPENSES NET OF ANY
MANAGEMENT 12B-1 OTHER WAIVERS OR
FEES(1) FEES EXPENSES(2) REIMBURSEMENTS(3)
----------- ------- ------------ --------------------
<S> <C> <C> <C> <C>
The Money Market Fund.............................. 0.25% None 0.30% 0.55%
The Treasury Money Market Fund..................... 0.30% None 0.28% 0.58%
The Maryland Municipal Bond Fund................... 0.21% None 0.70% 0.91%
The Virginia Municipal Bond Fund................... 0.47% None 0.44% 0.91%
The Stock Fund..................................... 0.54% None 0.42% 0.96%
The U.S. Government Securities Fund................ 0.44% None 0.30% 0.74%
</TABLE>
(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 Money Market
Fund, The Treasury Money Market Fund, The Maryland Municipal Bond Fund, The
Virginia Municipal Bond Fund, The Stock Fund, and The U.S. Government
Securities Fund is 0.50%, 0.50%, 0.75%, 0.75%, 0.75% and 0.75%,
respectively.
(2) Includes administration fees. See "Management of the Trust--Administration
of the Funds."
(3) The total Trust Shares operating expenses for The Money Market Fund, The
Treasury Money Market Fund, The Maryland Municipal Bond Fund, The Virginia
Municipal Bond Fund, The Stock Fund and The U.S. Government Securities Fund
would have been 0.80%, 0.78%, 1.45%, 1.19%, 1.17% and 1.05%, respectively,
absent the waiver of management fees.
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period. The Funds
charge no redemption fees for Trust Shares.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
The Money Market Fund...................................................... $ 6 $ 18 $ 31 $ 69
The Treasury Money Market Fund............................................. $ 6 $ 19 $ 32 $ 73
The Maryland Municipal Bond Fund........................................... $ 9 $ 29 $ 50 $ 112
The Virginia Municipal Bond Fund........................................... $ 9 $ 29 $ 50 $ 112
The Stock Fund............................................................. $10 $ 31 $ 53 $ 118
The U.S. Government Securities Fund........................................ $ 8 $ 24 $ 41 $ 92
</TABLE>
THE PURPOSE OF THE FOREGOING EXAMPLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING
THE VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF TRUST SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR A MORE COMPLETE DESCRIPTION OF THE VARIOUS
COSTS AND EXPENSES, SEE "THE MEDALIST FUNDS INFORMATION" AND "INVESTING IN TRUST
SHARES." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO
ADDITIONAL FEES.
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING SEPTEMBER 30, 1994.
The information set forth in the foregoing table and Example relates only to
Trust Shares of the Funds. The Funds also offer another class of shares called
Investment Shares. Investment Shares are subject to certain of the same expenses
with the addition of a maximum redemption fee of 2.00%, and a 12b-1 fee of 0.25
of 1% of the Investment Shares' average daily net assets of The Maryland
Municipal Bond Fund, The Virginia Municipal Bond Fund, The Stock Fund and The
U.S. Government Securities Fund, and 0.35 of 1% of the Investment Shares'
average daily net assets of The Money Market Fund and The Treasury Money Market
Fund. See "Other Classes of Shares."
THE U.S. GOVERNMENT SECURITIES FUND
(FORMERLY U.S. GOVERNMENT INCOME FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
TRUST SHARES 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.95 $10.54 $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.67 0.75 0.78
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.03 0.50 0.54
- ------------------------------------------------------------------------------ ----- ----- -----
Total from investment operations 0.70 1.25 1.32
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.67) (0.75) (0.78)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.08) (0.09) --
- ------------------------------------------------------------------------------ ----- ----- -----
Total distributions (0.75) (0.84) (0.78)
- ------------------------------------------------------------------------------ ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.90 $10.95 $10.54
- ------------------------------------------------------------------------------ ----- ----- -----
TOTAL RETURN** 6.94% 12.42% 14.00%(a)
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 0.63% 0.52% 0.64%(b)
- ------------------------------------------------------------------------------
Net investment income 6.17% 7.01% 8.03%(b)
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.43% 0.65% 0.93%(b)
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $112,334 $95,610 $27,565
- ------------------------------------------------------------------------------
Portfolio turnover rate (d) 297% 201% 101%
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
INVESTMENT SHARES 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.95 $10.54 $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.66 0.75 0.78
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.03 0.50 0.54
- ------------------------------------------------------------------------------ ----- ----- -----
Total from investment operations 0.69 1.25 1.32
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.66) (0.75) (0.78)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.08) (0.09) --
- ------------------------------------------------------------------------------ ----- ----- -----
Total distributions (0.74) (0.84) (0.78)
- ------------------------------------------------------------------------------ ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.90 $10.95 $10.54
- ------------------------------------------------------------------------------ ----- ----- -----
TOTAL RETURN** 6.82% 12.42% 14.00%(a)
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 0.77% 0.52% 0.64%(b)
- ------------------------------------------------------------------------------
Net investment income 5.91% 7.01% 8.03%(b)
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.43% 0.65% 0.93%(b)
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $119,187 $40,274 $10
- ------------------------------------------------------------------------------
Portfolio turnover rate (d) 297% 201% 101%
- ------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(d) Represents portfolio turnover for the entire Fund.
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE STOCK FUND
(FORMERLY VALUE EQUITY FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
TRUST SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.02 $11.86 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.28 0.26 0.32
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.51 0.46 1.85
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 0.79 0.72 2.17
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.26) (0.25) (0.31)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.16) (0.31) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.42) (0.56) (0.31)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $12.39 $12.02 $11.86
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 6.42% 6.31% 22.68%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.66% 0.95% 0.80%(b)
- -------------------------------------------------------------------------------
Net investment income 2.09% 2.25% 3.05%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.55% 0.34% 0.38%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $65,841 $49,581 $37,032
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 67% 38% 84%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
INVESTMENT SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.02 $11.86 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.24 0.26 0.32
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.54 0.46 1.85
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 0.78 0.72 2.17
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.25) (0.25) (0.31)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.16) (0.31) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.41) (0.56) (0.31)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $12.39 $12.02 $11.86
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 6.31% 6.31% 22.68%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.87% 0.95% 0.80%(b)
- -------------------------------------------------------------------------------
Net investment income 1.81% 2.25% 3.05%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.55% 0.34% 0.38%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $18,691 $2,290 $488
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 67% 38% 84%
- -------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment), to September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(d) Represents portfolio turnover for the entire Fund.
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE VIRGINIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
TRUST SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.46 $10.18 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.53 0.54 0.57
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.89 0.29 0.18
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 1.42 0.83 0.75
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.53) (0.54) (0.57)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.09) (0.01) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.62) (0.55) (0.57)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.26 $10.46 $10.18
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 13.62% 8.51% 7.64%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.75% 0.83% 0.47%(b)
- -------------------------------------------------------------------------------
Net investment income 4.85% 5.14% 6.08%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.50% 0.86% 1.70%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $41,204 $20,852 $8,546
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 17% 51% 27%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
INVESTMENT SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.46 $10.18 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.51 0.54 0.57
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.89 0.29 0.18
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 1.40 0.83 0.75
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.51) (0.54) (0.57)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.09) (0.01) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.60) (0.55) (0.57)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.26 $10.46 $10.18
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 13.49% 8.51% 7.64%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.90% 0.83% 0.47%(b)
- -------------------------------------------------------------------------------
Net investment income 4.68% 5.14% 6.08%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.50% 0.86% 1.70%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $63,492 $20,883 $6,031
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 17% 51% 27%
- -------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 24, 1990 (date of initial
public investment), to September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
ratios shown above (Note 5).
(d) Represents portfolio turnover for the entire Fund.
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE MARYLAND MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
TRUST SHARES 1993 1992 1991*
- --------------------------------------------------------------------------------- ------- ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.39 $10.10 $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.50 0.54 0.53
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.85 0.29 0.10
- ------------------------------------------------------------------------------ ----- ----- -----
Total from investment operations 1.35 0.83 0.63
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.50) (0.54) (0.53)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions -- -- --
- ------------------------------------------------------------------------------ ----- ----- -----
Total distributions (0.50) (0.54) (0.53)
- ------------------------------------------------------------------------------ ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.24 $10.39 $10.10
- ------------------------------------------------------------------------------ ----- ----- -----
TOTAL RETURN** 13.37% 8.31% 6.64%(a)
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 0.86% 0.59% 0.60%(b)
- ------------------------------------------------------------------------------
Net investment income 4.64% 5.11% 5.66%(b)
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.77% 1.91% 1.05%(b)
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,014 $6,004 $556
- ------------------------------------------------------------------------------
Portfolio turnover rate (d) 23% 34% 35%
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
INVESTMENT SHARES 1993 1992 1991*
- --------------------------------------------------------------------------------- ------- ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.39 $10.10 $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.49 0.54 0.53
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.85 0.29 0.10
- ------------------------------------------------------------------------------ ----- ----- -----
Total from investment operations 1.34 0.83 0.63
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.49) (0.54) (0.53)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions -- -- --
- ------------------------------------------------------------------------------ ----- ----- -----
Total distributions (0.49) (0.54) (0.53)
- ------------------------------------------------------------------------------ ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.24 $10.39 $10.10
- ------------------------------------------------------------------------------ ----- ----- -----
TOTAL RETURN** 13.24% 8.31% 6.64%(a)
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 1.00% 0.59% 0.60%(b)
- ------------------------------------------------------------------------------
Net investment income 4.50% 5.11% 5.66%(b)
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.77% 1.91% 1.05%(b)
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $33,907 $14,053 $2,940
- ------------------------------------------------------------------------------
Portfolio turnover rate (d) 23% 34% 35%
- ------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1990 (date of initial
public investment) to September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(d) Represents portfolio turnover for the entire Fund.
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
TRUST SHARES 1993 1992 1991*
- ----------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- -----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------
Net investment income 0.03 0.04 0.06
- ----------------------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.04) (0.06)
- ----------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ----------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 2.64% 3.61% 5.90%(a)
- -----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------
Expenses 0.58% 0.70% 0.51%(b)
- -----------------------------------------------------------------
Net investment income 2.60% 3.49% 5.65%(b)
- -----------------------------------------------------------------
Expense waiver/reimbursement (c) 0.20% 0.11% 0.27%(b)
- -----------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------
Net assets, end of period (000 omitted) $152,921 $163,451 $129,959
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
INVESTMENT SHARES 1993 1992 1991*
- ----------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- -----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------
Net investment income 0.02 0.04 0.06
- ----------------------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Dividends to shareholders from net investment income (0.02) (0.04) (0.06)
- ----------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ----------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 2.52% 3.61% 5.90%(a)
- -----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------
Expenses 0.70% 0.70% 0.51%(b)
- -----------------------------------------------------------------
Net investment income 2.47% 3.49% 5.65%(b)
- -----------------------------------------------------------------
Expense waiver/reimbursement (c) 0.20% 0.11% 0.27%(b)
- -----------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------
Net assets, end of period (000 omitted) $20,382 $12,960 $548
- -----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment), to
September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes to Financial Statements)
THE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
TRUST SHARES 1993 1992 1991*
- ------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- -------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------
Net investment income 0.03 0.04 0.06
- ------------------------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
- -------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.04) (0.06)
- ------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 2.89% 3.79% 5.92%(a)
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 0.50% 0.64% 0.51%(b)
- -------------------------------------------------------------------
Net investment income 2.83% 3.64% 5.99%(b)
- -------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.30% 0.29% 0.36%(b)
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $134,397 $136,616 $57,432
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
INVESTMENT SHARES 1993 1992 1991*
- ------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- -------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------
Net investment income 0.03 0.04 0.06
- ------------------------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
- -------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.04) (0.06)
- ------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 2.77% 3.79% 5.92%(a)
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 0.64% 0.64% 0.51%(b)
- -------------------------------------------------------------------
Net investment income 2.68% 3.64% 5.99%(b)
- -------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.30% 0.29% 0.36%(b)
- -------------------------------------------------------------------
SUPPLEMENT DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $9,905 $5,803 $1
- -------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 23, 1990 (date of initial
public investment), to
September 30, 1991.
** Based on net asset value.
(a) Cumulative total return.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes to Financial Statements)
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND
- --------------------------------------------------------------------------------
The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.
Unless indicated otherwise, the investment policies of a Fund may be changed by
the Trustees without approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
Additional information about investment limitations, strategies that one or more
Funds may employ, and certain investment policies mentioned below, appear in the
"Portfolio Investments and Strategies" section of this Prospectus and in the
Combined Statement of Additional Information.
THE U.S. GOVERNMENT SECURITIES FUND
The investment objective of The U.S. Government Securities Fund is to provide
current income.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in securities which are primary or direct obligations of the U.S.
government or its instrumentalities or which are guaranteed by the U.S.
government, its agencies, or instrumentalities. The Fund may also invest in
certain collateralized mortgage obligations ("CMOs") and adjustable rate
mortgage securities ("ARMS"), both of which represent or are supported by direct
or indirect obligations of the U.S. government or its instrumentalities. The
Fund will invest, under normal circumstances, at least 65% of the value of its
total assets in U.S. government securities (including such CMOs and ARMS).
The U.S. government securities in which the Fund invests include:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and
- obligations of U.S. government agencies or instrumentalities, such as
Federal Home Loan Banks, Farmers' Home Administration, Federal Farm
Credit Banks; Federal National Mortgage Association, Government National
Mortgage Association, and Federal Home Loan Mortgage Corporation.
The obligations of U.S. government agencies or instrumentalities which the Fund
may buy are backed, in a variety of ways, by the U.S. government or its agencies
or instrumentalities. Some of these obligations such as Government National
Mortgage Association mortgage-backed securities and obligations of the Farmers
Home Administration, are backed by the full faith and credit of the U.S.
Treasury. Obligations of the Farmers' Home Administration are also backed by the
issuer's right to borrow from the U.S. Treasury. Obligations of Federal Home
Loan Banks and the Farmers Home Administration are backed by the discretionary
authority of the U.S. government to purchase certain obligations of agencies or
instrumentalities. Obligations of Federal Home Loan Banks, Farmers Home
Administration, Federal Farm Credit Banks, Federal National Mortgage
Association, and Federal Home Loan Mortgage Corporation are backed by the credit
of the agency or instrumentality issuing the obligations.
CMOS. The Fund may also invest in CMOs which are rated AAA or better by a
nationally recognized rating agency and which are issued by private entities
such as investment banking firms and companies related to the construction
industry. The CMOs in which the Fund may invest may be: (i) 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; (ii) privately issued securities which
are collateralized by pools of mortgages in which payment of principal and
interest are guaranteed by the issuer and such guarantee is collateralized by
U.S. government securities; and (iii) other privately issued securities in which
the proceeds of the issuance are invested in mortgage-backed securities and
payment of the principal and interest are supported by the credit of an agency
or instrumentality of the U.S. government. The mortgage-related securities
provide for a periodic payment consisting of both interest and principal. The
interest portion of these payments will be distributed by the Fund as income,
and the capital portion will be reinvested.
ARMS. ARMS are pass-through mortgage securities with adjustable rather than
fixed interest rates. The ARMS in which the Fund invests are issued by
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), and Federal Home Loan Mortgage Corporation ("FHLMC") and
are actively traded. The underlying mortgages which collateralize ARMS issued by
GNMA are fully guaranteed by the Federal Housing Administration ("FHA") or
Veterans Administration ("VA"), while those collateralizing ARMS issued by FHLMC
or FNMA are typically conventional residential mortgages conforming to strict
underwriting size and maturity constraints.
Unlike conventional bonds, ARMS pay back principal over the life of the ARMS
rather than at maturity. Thus, a holder of the ARMS, such as the Fund, would
receive monthly scheduled payments of principal and interest, and may receive
unscheduled principal payments representing payments on the underlying
mortgages. At the time that a holder of the ARMS reinvests the payments and any
unscheduled prepayments of principal that it receives, the holder may receive a
rate of interest which is actually lower than the rate of interest paid on the
existing ARMS. As a consequence, ARMS may be a less effective means of "locking
in" long-term interest rates than other types of U.S. government securities.
THE STOCK FUND
The investment objective of The Stock Fund is to provide growth of capital and
income.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
in common stocks of large, medium and small capitalization companies which are
either listed on the New York or American Stock Exchange or trade in the
over-the-counter markets. The Fund's investment approach is based upon the
conviction that, over the long term, the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of publicly held corporations. The securities in which the
Fund invests include, but are not limited to, the following securities.
COMMON STOCKS. The Fund invests primarily in common stocks of companies
selected by the Fund's investment adviser on the basis of investment research
techniques, including assessment of earnings and dividend growth prospects of
the companies. Factors such as product position, market share, potential
earnings growth, or asset values will be considered by the investment adviser.
At least 65% of the Fund's portfolio will be invested in common stocks, unless
it is in a defensive position.
OTHER CORPORATE SECURITIES. The Fund may invest in preferred stocks, corporate
bonds, notes, warrants, rights, and convertible securities of these companies.
COMMERCIAL PAPER. The Fund may invest in commercial paper rated A-1 by Standard
& Poor's Corporation ("S&P"), or Prime-1 by Moody's Investors Service, Inc.
("Moody's"), or F-1 by Fitch Investors Services ("Fitch") and money market
instruments (including commercial paper) which are unrated but of comparable
quality, including Canadian Commercial Paper ("CCPs") and Europaper.
BANK INSTRUMENTS. The Fund may invest in instruments of domestic and foreign
banks and savings and loans (such as certificates of deposit, demand and time
deposits, savings shares, and bankers' acceptances) if they have capital,
surplus, and undivided profits over $100,000,000, or if the principal amount of
the instrument is insured by the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation ("FDIC") or the
Savings Association Insurance Fund ("SAIF"), which is administered by the FDIC.
These instruments may include Eurodollar Certificates of Deposit ("ECDs"),
Yankee Certificates of Deposit ("Yankee CDs"), Eurodollar Time Deposits ("ETDs")
and American Depository Receipts ("ADRs"). ADRs are receipts typically issued by
an American bank or trust company that evidences ownership of underlying
securities issued by a foreign issuer.
U.S. GOVERNMENT SECURITIES. The Fund may invest in securities issued and/or
guaranteed as to payment of principal and interest by the U.S. government, its
agencies or instrumentalities including those obligations purchased on a
when-issued or delayed delivered basis.
PUT AND CALL OPTIONS. The Fund may purchase put options on its portfolio
securities. These options will be used as a hedge to attempt to protect
securities which the Fund holds against decreases in value. The Fund may also
write covered call options on all or any portion of its portfolio to generate
income for the Fund. The Fund will write 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 or U.S. government securities in the amount of any additional
consideration.
The Fund may purchase and write over-the-counter options on portfolio securities
in negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund are not traded on an
exchange. The Fund purchases and writes options only with investment dealers and
other financial institutions (such as commercial banks or savings and loan
associations) deemed creditworthy by the Fund's 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. The Fund will not buy call
options or write put options without further notification to shareholders.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio against
changes in stock prices. Financial futures contracts call for 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.
The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling a futures contract at a
fixed price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.
The Fund may not purchase or sell futures contracts or related options 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 total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged.
RISKS. When the Fund uses financial futures and options on financial
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 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 Fund's investment
adviser could be incorrect in its expectations about the direction or
extent of market factors such as stock price movements. In these events,
the Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into options transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The adviser anticipates that the Fund's annual portfolio
turnover rate for the 1994 and subsequent fiscal years will be significantly
higher than the Fund's turnover rates of 67% and 38% recorded in its 1993 and
1992 fiscal years. A high portfolio turnover rate may lead to increased costs
and may also result in higher taxes paid by the Fund's shareholders.
INVESTMENT CONSIDERATIONS. As with other mutual funds that invest primarily in
equity securities, the Fund is subject to market risks. That is, the possibility
exists that common stocks will decline over short or even extended periods of
time. The United States equity market tends to be cyclical,
experiencing both periods when stock prices generally increase and periods when
stock prices generally decrease. However, because the Fund invests a portion of
its assets in small capitalization stocks, there are some additional risk
factors associated with investments in the Fund. In particular, stocks in the
small capitalization sector of the United States equity market have historically
been more volatile in price than larger capitalization stocks, such as those
included in the Standard & Poor's 500 Composite Stock Price Index ("Standard &
Poor's 500 Index"). This is because, among other things, small 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 economic conditions.
THE VIRGINIA MUNICIPAL BOND FUND
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income tax imposed by
the Commonwealth of Virginia. (Federal regular income tax does not include the
federal individual alternative minimum tax or the federal alternative minimum
tax for corporations.)
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
in a professionally managed portfolio of securities at least 65% of which are
comprised of Virginia municipal bonds. The Fund will invest its assets so that,
under normal circumstances, at least 80% of its annual interest income is exempt
from federal regular and Virginia state income taxes or that at least 80% of its
net assets are invested in obligations, the interest income from which is exempt
from federal regular and Virginia state income taxes.
The Virginia municipal securities in which the Fund invests are debt
obligations, including industrial development bonds, issued on behalf of the
Commonwealth of Virginia, its political subdivisions or agencies. In addition,
the Fund may invest in debt obligations issued by or on behalf of any state,
territory or possession of the United States, including the District of
Columbia, or any political subdivision or agency or any of these and
participation interests 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 Fund and/or the investment adviser to the Fund, exempt from federal
regular income tax and the personal income tax imposed by the Commonwealth of
Virginia.
CHARACTERISTICS. The debt securities in which the Fund invests will only be
rated investment grade or of comparable quality at the time of purchase.
The Virginia municipal securities which the Fund buys have essentially the
same characteristics assigned by Moody's and S&P to investment grade bonds.
Investment grade bonds are rated Baa, A, Aa, Aaa by Moody's or BBB, A, AA,
AAA by S&P. Bonds rated "Baa" by Moody's or "BBB" by S&P have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds. In certain cases, the Fund's adviser may
choose bonds which are unrated, if it judges the bonds to have the same
characteristics as investment grade bonds. If a security's rating is
reduced below the required minimum after the Fund has purchased it, the
Fund is not required to sell the security, but may consider doing so. A
description of the ratings categories is contained in the Appendix to the
Combined Statement of Additional Information.
THE MARYLAND MUNICIPAL BOND FUND
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income tax imposed by
the State of Maryland. (Federal regular income tax does not include the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.)
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
in a professionally-managed portfolio of securities at least 65% of which is
comprised of Maryland municipal bonds. The Fund will invest its assets so that,
under normal circumstances, at least 80% of its annual interest income is exempt
from federal regular and Maryland state income taxes or that at least 80% of its
net assets are invested in obligations, the interest income from which is exempt
from federal regular and Maryland state income taxes.
The Maryland municipal securities in which the Fund invests are debt
obligations, including industrial development bonds, issued on behalf of the
State of Maryland, its political subdivisions or agencies. In
addition, the Fund may invest in debt obligations issued by or on behalf of any
state, territory or possession of the United States, including the District of
Columbia, or any political subdivision or agency of any of these and
participation interests 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 Fund and/or the investment adviser to the Fund, exempt from federal
regular income tax and the personal income tax imposed by the State of Maryland.
CHARACTERISTICS. The debt securities in which the Fund invests will only be
rated investment grade or of comparable quality at the time of purchase.
The Maryland municipal securities which the Fund buys have essentially the
same characteristics assigned by Moody's and S&P to investment grade bonds.
Investment grade bonds are rated Baa, A, Aa, Aaa by Moody's, or BBB, A, AA,
AAA by S&P. Bonds rated "Baa" by Moody's or "BBB" by S&P or have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. In certain cases,
the Fund's adviser may choose bonds which are unrated, if it judges the
bonds to have the same characteristics as investment grade bonds. If a
security's rating is reduced below the required minimum after the Fund has
purchased it, the Fund is not required to sell the security, but may
consider doing so. A description of the ratings categories is contained in
the Appendix to the Combined Statement of Additional Information.
THE TREASURY MONEY MARKET FUND
The investment objective of The Treasury Money Market Fund is to provide current
income consistent with stability of principal.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
only in a portfolio of short-term U.S. Treasury obligations which are issued by
the U.S. government and are fully guaranteed as to principal and interest by the
United States. They mature in 397 days or less from the date of acquisition
unless they are purchased under a repurchase agreement that provides for
repurchase by the seller within one year from the date of acquisition. The
average maturity of these securities computed on a dollar-weighted basis, will
be 90 days or less.
REGULATORY COMPLIANCE. The Fund may follow non-fundamental operational policies
that are more restrictive than its fundamental investment limitations, as set
forth in this prospectus and its Combined Statement of Additional Information,
in order to comply with applicable laws and regulations, including the
provisions of and regulations under the Investment Company Act of 1940, as
amended. In particular, the Fund will comply with the various requirements of
Rule 2a-7, which regulates money market mutual funds. The Fund will determine
the effective maturity of its investments, as well as its ability to consider a
security as having received the requisite short-term ratings by nationally
recognized statistical rating organizations ("NRSROs"), according to Rule 2a-7.
The Fund may change these operational policies to reflect changes in the laws
and regulations without the approval of its shareholders.
THE MONEY MARKET FUND
The investment objective of The Money Market Fund is to provide current income
consistent with stability of principal.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of money market instruments maturing in 397
days or less. The average maturity of these securities, computed on a
dollar-weighted basis, will be 90 days or less. The Fund invests in high quality
money market instruments that are either rated in the highest short-term rating
category by one or more NRSROs or of comparable quality to securities having
such ratings. Examples of these instruments include, but are not limited to:
- domestic issues of corporate debt obligations, including variable rate
demand notes;
- commercial paper (including Canadian Commercial Paper and Europaper);
- certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
- short-term credit facilities, such as demand notes;
- asset-backed securities;
- obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities"); and
- other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities
to trade at par. The interest rate may float or be adjusted at regular
intervals (ranging from daily to annually), and is normally based on an
interest index or a stated percentage of a prime rate or another published
rate. Most variable rate demand notes allow the Fund to demand the
repurchase of the security on not more than seven days' prior notice. Other
notes only permit the Fund to tender the security at the time of each
interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest adjustment or the date on which the
Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million or insured by BIF or SAIF. Bank Instruments may include ECDs,
Yankee CDs and ETDs. The Fund will treat securities credit enhanced with a
bank's letter of credit as Bank Instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations
in, short-term revolving credit facilities with corporate borrowers. Demand
notes and other short-term credit arrangements usually provide for floating
or variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial
interest in a special purpose trust, limited partnership interests or
commercial paper or other debt securities issued by a special purpose
corporation. Although the securities often have some form of credit or
liquidity enhancement, payments on the securities depend predominately upon
collections of the loans and receivables held by the issuer.
RATINGS. An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated, A-1 or A-1+ by
S&P, Prime-1 by Moody's or F-1 (+ or --) by Fitch are all considered rated in
the highest short-term rating category. The Fund will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in the highest short-term rating category; currently, such
securities must be rated by two NRSROs in their highest rating category. See
"Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have been
credit enhanced by a guaranty, letter of credit or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. Generally, the Fund
will not treat credit enhanced securities as having been issued by the credit
enhancer for diversification purposes. However, under certain circumstances
applicable regulations may require the Fund to treat the securities as having
been issued by both the issuer and credit enhancer. The bankruptcy, receivership
or default of the credit enhancer will adversely affect the quality and
marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these
arrangements to provide the Fund with liquidity and not to protect against
changes in the market value of the underlying securities. The bankruptcy,
receivership or default by the issuer of the demand feature, or a default on the
underlying security or other event that terminates the demand feature before its
exercise, will adversely affect the liquidity of the underlying security. Demand
features that are exercisable even after a payment default on the underlying
security may be treated as a form of credit enhancement.
REGULATORY COMPLIANCE. The Fund may follow non-fundamental operational policies
that are more restrictive than its fundamental investment limitations, as set
forth in this prospectus and its Combined Statement of Additional Information,
in order to comply with applicable laws and regulations, including the
provisions of and regulations under the Investment Company Act of 1940, as
amended. In particular, the Fund will comply with the various requirements of
Rule 2a-7, which regulates money market mutual funds. For example, with limited
exceptions, Rule 2a-7 prohibits the investment of more than 5% of the Fund's
total assets in the securities of any one issuer, although the Fund's investment
limitation only requires such 5% diversification with respect to 75% of its
assets. The Fund will invest more than 5% of its assets in any one issuer only
under the circumstances permitted by Rule 2a-7. The Fund will also determine the
effective maturity of its investments, as well as its ability to consider a
security as having received the requisite short-term ratings by NRSROs,
according to Rule 2a-7. The Fund may change these operational policies to
reflect changes in the laws and regulations without the approval of its
shareholders.
INVESTMENT LIMITATIONS
The Funds' investment limitations are discussed below under "Borrowing Money",
"Selling Short", "Restricted and Illiquid Securities", "Diversification",
"Investing in New Issuers", and "Acquiring Securities."
PORTFOLIO INVESTMENTS AND STRATEGIES
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BORROWING MONEY
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 money
up to one-third of the value of its total assets and pledge up to 15% of the
value of those assets to secure such borrowings. This policy cannot be changed
without the approval of holders of a majority of a Fund's Shares.
SELLING SHORT
With respect to The U.S. Government Securities Fund and The Stock Fund, the
Funds will not make short sales of securities, except in certain limited
circumstances. This policy cannot be changed without the approval of holders of
a majority of a Fund's Shares.
RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in restricted securities. Restricted securities are any
securities in which a Fund may invest pursuant to its investment objective and
policies but which are subject to restriction on resale under federal securities
law. The Funds will not invest more than 10% of the value of their assets in
securities subject to restrictions on resale under the Securities Act of 1933
(except for certain restricted securities which meet the criteria for liquidity
as established by the Board of Trustees). In the case of The U.S. Government
Securities Fund, The Stock Fund and The Money Market Fund this exception
specifically extends to commercial paper issued under Section 4(2) of the
Securities Act of 1933. This policy cannot be changed without the approval of
holders of a majority of a Fund's Shares.
The U.S. Government Securities Fund, The Stock Fund and The Money Market Fund
may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law, and is generally sold to institutional investors, such as one of these
Funds, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Funds believe that Section 4(2) commercial
paper and certain other restricted securities, which meet the criteria for
liquidity established by the Trustees, are quite liquid. Therefore, the Funds
intend to treat these securities as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because these
securities are liquid, the Funds will not subject such securities to the
limitation otherwise applicable to restricted securities.
The U.S. Government Securities Fund and The Stock Fund will not invest more than
15% of their net assets in illiquid securities, including repurchase agreements
providing for settlement more than seven days after notice and certain
securities determined by the Trustees not to be liquid. The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund will not invest more than 15% of
the value of their net assets in illiquid securities including repurchase
agreements providing for settlement in more than seven days after notice,
certain securities determined by the Trustees not to be liquid, participation
interests and variable rate municipal securities without a demand feature or
with a demand feature of longer than seven days and which the adviser believes
cannot be sold within seven days. The Treasury Money Market Fund will not invest
more than 10% of its net assets in illiquid securities, including repurchase
agreements providing for settlement more than seven days after notice and
certain securities not determined by the Trustees to be liquid. The Money Market
Fund will not invest more than 10% of its net assets in illiquid securities,
including certain restricted securities not determined by the Trustees to be
liquid, non-negotiable time deposits, and repurchase agreements providing
settlement in more than seven days after notice.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Fund may purchase securities on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, a Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause a Fund to miss a price or yield considered to be advantageous.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds may invest in the securities of other investment companies, but will
not own more than 3% of the total outstanding voting stock of any investment
company, invest more than 5% of total assets in any one investment company, or
invest more than 10% of total assets in investment companies in general. The
Funds will invest in other investment companies primarily for the purpose of
investing short-term cash which has not yet been invested in other portfolio
instruments. The adviser will waive its investment advisory fee on assets
invested in securities of open-end investment companies.
The Funds may also hold cash in such proportions as the Fund's adviser may
determine.
DIVERSIFICATION
With respect to 75% of the value of total assets, The U.S. Government Securities
Fund, The Stock Fund and The Money Market Fund will not invest more than 5% in
securities of any one issuer other than cash or securities issued or guaranteed
by the government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities. These policies cannot
be changed without the approval of holders of a majority of a Fund's Shares.
INVESTING IN NEW ISSUERS
The U.S. Government Securities Fund, The Stock Fund and The Money Market Fund
will not invest more than 5% of their total assets in securities of issuers that
have records of less than three years of continuous operations including the
operation of any predecessor. The Virginia Municipal Bond Fund and The Maryland
Municipal Bond Fund will not invest more than 5% of their total assets in
industrial development bonds, the principal and interest of which are paid by
companies (or guarantors, where applicable) which have an operating history of
less than three years.
REPURCHASE AGREEMENTS
The securities in which the Funds invest may be purchased pursuant to repurchase
agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other securities to a Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent that the
original
seller does not repurchase the securities from a Fund, that Fund could receive
more or less than the repurchase price on any sale of such securities.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, The U.S. Government Securities Fund, The
Stock Fund, The Treasury Money Market Fund and The Money Market Fund, may lend
portfolio securities on a short-term or a long-term basis up to one-third of the
value of their respective 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
investment adviser has determined are creditworthy under guidelines established
by the Board of Trustees and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the securities
loaned.
ACQUIRING SECURITIES
The U.S. Government Securities Fund and The Stock Fund will not acquire more
than 10% of the outstanding voting securities of any one issuer. This policy
cannot be changed without the approval of holders of a majority of the Fund's
shares.
INVESTMENT RISKS
The Stock Fund and The Money Market Fund's ECDs, ETDs, Yankee CDs, and Europaper
are subject to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may adversely
affect the payment of principal or interest, foreign withholding or other taxes
on interest income, difficulties in obtaining or enforcing a judgment against
the issuing entity, and the possible impact of interruptions in the flow of
international currency transactions. Different risks may also exist for ECDs,
ETDs, and Yankee CDs because the banks issuing these instruments, or their
domestic or foreign branches, are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements, loan
limitations, examinations, accounting, auditing, recordkeeping, and the public
availability of information. These factors will be carefully considered by the
Fund's adviser in selecting investments for the Fund.
PARTICIPATION INTERESTS
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund may
purchase participation interests from financial institutions such as commercial
banks, savings and loan associations and insurance companies. These
participation interests give the Funds an undivided interest in municipal
securities. The financial institutions from which the Funds purchase
participation interests frequently provide or secure irrevocable letters of
credit or guarantees to assure that the participation interests are of good
quality. The Board of Trustees will determine that participation interests meet
the prescribed quality standards for the Funds.
VARIABLE RATE MUNICIPAL SECURITIES
Some of the municipal securities which The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund purchase may have variable interest rates. Variable
interest rates are ordinarily stated as a percentage of the prime rate of a bank
or some similar standard, such as the 91-day U.S. Treasury bill rate. Many
variable rate municipal securities are subject to repayment of principal on
demand by the Funds (usually in not more than seven days). While some variable
rate municipal securities without this demand feature may not be considered
liquid by the Fund's adviser, the Fund's investment limitations provide that it
will invest no more than 15% of its total assets in illiquid securities. All
variable rate municipal securities will meet the quality standards for the
Funds. The investment adviser has been instructed by the Board of Trustees to
monitor the pricing, quality and liquidity of the variable rate municipal
securities, including participation interests, held by the Funds on the basis of
published financial information and reports of the rating agencies and other
analytical services.
MUNICIPAL LEASES
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund may
purchase municipal securities in the form of municipal leases which are
obligations issued by state and local governments or authorities to finance the
acquisition of equipment and facilities and may be considered to be illiquid.
Municipal leases may take the form of a lease, an installment purchase contract,
a conditional sales contract, or a participation certificate in any of the
above.
TEMPORARY INVESTMENTS
From time to time, during periods of other than normal market conditions, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund may invest in
short-term tax-exempt or taxable temporary investments. These temporary
investments include: notes issued by or on behalf of municipal or corporate
issuers; tax-free commercial paper; other temporary municipal securities;
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities; other debt securities; commercial paper; certificates of
deposit of banks; and repurchase agreements (arrangements in which an
organization selling a Fund a security agrees at the time of sale to repurchase
it at a mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those it considers to
be of good quality.
Although each Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax
or Virginia or Maryland personal income tax.
VIRGINIA AND MARYLAND MUNICIPAL SECURITIES
Virginia and Maryland 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.
Virginia and Maryland 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
issuer'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.
INVESTMENT RISKS. Yields on Virginia and Maryland municipal securities depend on
a variety of factors, including: the general conditions of 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 Commonwealth of Virginia, the state of Maryland or
their municipalities could impact a Fund's portfolio. The ability of a Fund to
achieve its investment objective also depends on the continuing ability of the
issuers of Virginia and Maryland 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 Virginia and Maryland
municipal securities which meet a Fund's quality standards may not be possible
if the Commonwealth of Virginia, the state of Maryland or their municipalities
do not maintain their current credit ratings. In addition, certain Virginia or
Maryland constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in adverse
consequences affecting Virginia and Maryland municipal securities.
FUTURES CONTRACTS AND OPTIONS TO BUY OR SELL SUCH CONTRACTS
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund reserve
the right to enter into interest rate futures contracts as a hedge without
shareholder action. Before the Funds begin using this investment technique,
shareholders will be notified.
NON-DIVERSIFICATION
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund are
non-diversified investment companies, as defined by the Investment Company Act
of 1940, as amended. As such, there
is no limit on the percentage of assets which can be invested in any single
issuer. An investment in the Funds, therefore, will entail greater risk than
would exist in a diversified investment company because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of each Fund's portfolio. Any economic, political or regulatory
developments affecting the value of the securities in each 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.
To meet federal tax requirements for qualifications as a "regulated investment
company" the Funds will limit their investments so at the close of each quarter
of each fiscal year: (a) with regard to at least 50% of their respective total
assets no more than 5% of their respective total assets are invested in the
securities of a single issuer, and (b) no more than 25% of their respective
total assets are invested in the securities of a single issuer.
THE MEDALIST FUNDS INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Board of Trustees (the "Board" or the "Trustees") is
responsible for managing the business affairs of the Trust and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Signet Asset
Management, the Trust's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for each Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the assets of
each Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee at
annual rates equal to percentages of the relevant Fund's average net assets
as follows: The Treasury Money Market Fund and The Money Market Fund--.50%;
The U.S. Government Securities Fund, The Stock Fund, The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund--.75%. The fee paid by The
U.S. Government Securities Fund, The Stock Fund, The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund, while higher than the
advisory fee paid by other mutual funds in general, is comparable to fees
paid by other mutual funds with similar objectives and policies. The
investment advisory contract provides for the voluntary waiver of expenses
by the Adviser from time to time. The Adviser can terminate this voluntary
waiver of expenses at any time with respect to a Fund at its sole
discretion. The Adviser has also undertaken to reimburse the Funds for
operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Signet Asset Management is a division of Signet
Trust Company, a wholly-owned subsidiary of Signet Banking Corporation.
Signet Banking Corporation is a multi-state, multi-bank holding company
which has provided investment management services since 1956. Signet Trust
Company, established in 1975, provides trust and fiduciary services to
individuals, corporations and tax-exempt organizations throughout Virginia
and neighboring states. As of September 30, 1993, Signet Trust Company had
$2.6 billion in total trust assets. Signet Asset Management has investment
authority over $1.6 billion of the $2.6 billion. The Adviser has managed
Signet Select Funds since their inception in 1990. The Adviser manages
three equity common trust funds with $47.5 million in assets and three
fixed income common trust funds with $204.7 million in assets.
E. Christian Goetz has managed The U.S. Government Securities Fund since
August, 1991. Mr. Goetz is a Chartered Financial Analyst, and is currently
Vice President of Signet Trust Company and Director of Fixed Income
Investments for Signet Asset Management, where he has been a fixed income
portfolio manager since 1990. Prior to joining Signet Asset Management, Mr.
Goetz had been a foreign and domestic bond portfolio manager with Central
Fidelity Bank, Richmond, Virginia, since 1988.
Garry M. Allen has managed The Stock Fund since July 1994. Mr. Allen is a
Chartered Financial Analyst, and has since March 1994 been Senior Vice
President of Signet Trust Company and Chief Investment Officer for Signet
Asset Management. Prior to joining Signet Asset Management, Mr.
Allen had been Managing Director of U.S. Equities (November 1990 to March
1994) and Director, International Asset Management (June 1985 to November
1990) of Virginia Retirement System.
Elizabeth D. Swartz has managed The Maryland Municipal Bond Fund, and The
Virginia Municipal Bond Fund, since February 1992. Ms. Swartz is currently
Investment Officer of Signet Trust Company and Fixed Income Portfolio
Manager for Signet Asset Management. Prior to joining Signet Asset
Management in 1991, Ms. Swartz had been a fixed income portfolio manager
with Sovran Bank, Richmond, Virginia, since 1987.
DISTRIBUTION OF TRUST SHARES OF THE FUNDS
Federated Securities Corp. is the principal distributor for Shares of the Funds.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATIVE ARRANGEMENTS. The distributor may pay financial institutions a
fee based upon the average net asset value of Shares of their customers invested
in the Trust for providing administrative services. This fee, if paid, will be
reimbursed by the Adviser and not the Trust.
ADMINISTRATION OF THE FUNDS
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Funds with certain administrative personnel
and services necessary to operate each Fund and the separate classes. Such
services include shareholder servicing and certain legal and accounting
services. Federated Administrative Services provides these at an annual rate as
specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
----------------------------------- -----------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may voluntarily waive a portion of
its fee.
CUSTODIAN. Signet Trust Company, Richmond, Virginia, is custodian for the
securities and cash of the Funds. Under the Custodian Agreement, Signet Trust
Company holds the Funds' portfolio securities in safekeeping and keeps all
necessary records and documents relating to its duties.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the Shares of the Funds and
dividend disbursing agent for the Funds.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Funds are Deloitte &
Touche, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUNDS AND TRUST SHARES
Each Fund pays all of its own expenses and its allocable share of the Trust's
expenses.
The Trust's expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust; Trustees fees; auditors' fees; the cost of
meetings of Trustees; legal fees of the Trust; association membership dues and
such nonrecurring and extraordinary items as may arise.
Each Fund's expenses for which holders of Shares may pay their allocable portion
include, but are not limited to: registering each Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such nonrecurring and extraordinary items as may
arise.
At present, no expenses are allocated to Trust Shares as a class. However, the
Board of Trustees reserves the right to allocate certain other expenses to the
shareholders of a particular class as they deem appropriate ("Class Expenses").
In any case, Class Expenses would be limited to: transfer agent fees as
identified by the transfer agent as attributable to holders of Shares; printing
and postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and
registration fees paid to states; expenses related to administrative personnel
and services as required to support holders of Shares of each Fund; legal fees
relating solely to Shares; and Trustees' fees incurred as a result of issues
relating solely to Shares.
BROKERAGE TRANSACTIONS. With respect to The U.S. Government Securities Fund and
The Stock Fund, 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
utilize 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, the Adviser may give
consideration to those firms which have sold or are selling shares of the Trust.
The Adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Board of Trustees.
NET ASSET VALUE
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With respect to The Treasury Money Market Fund and The Money Market Fund, each
Fund attempts to stabilize the net asset value of its Shares at $1.00 by valuing
its portfolio securities using the amortized cost method. The net asset value
for Shares is determined by adding the interest of the Shares in the value of
all securities and other assets of the Fund, subtracting the interest of the
Shares in the liabilities of the Fund and those attributable to Shares and
dividing the remainder by the total number of Shares outstanding. Of course, The
Treasury Money Market Fund and The Money Market Fund cannot guarantee that their
net asset value will always remain at $1.00 per Share.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund net asset
value per Share fluctuates and is determined by adding the interest of the
Shares in the market value of all securities and other assets of the Fund,
subtracting the interest of the Shares in the liabilities of the Fund and those
attributable to Shares, and dividing the remainder by the total number of Shares
outstanding. The net asset value for Shares may exceed that of Investment Shares
due to the variance in daily net income realized by each class. Such variance
will reflect only accrued net income to which the shareholders of a particular
class are entitled.
INVESTING IN TRUST SHARES
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SHARE PURCHASES
Shares of the Funds are sold on days on which the New York Stock Exchange is
open for business except on Lee-Jackson-King Day, Columbus Day and Veterans'
Day. Shares of the Funds may be purchased through Signet Trust Company. In
connection with the sale of Shares of the Funds, the distributor may from time
to time offer certain items of nominal value to any shareholder or investor. The
Funds reserve the right to reject any purchase request.
With respect to The Treasury Money Market Fund and The Money Market Fund, an
investor may write or call Signet Trust Company to place an order to purchase
Shares of the Funds. (Call 804-771-7470). Purchase orders must be received by
Signet Trust Company before 4:00 p.m. (Eastern time). Payment for Shares of the
Funds may be made by check or by wire. Orders are considered received after
payment by check is converted into federal funds and received by Signet Trust
Company. Payment must be received by Signet Trust Company on the next business
day after placing the order. For orders received by 11:00 a.m. (Eastern time),
shareholders will begin earning dividends on that day provided payment by wire
is received by Signet Trust Company by 2:00 p.m. (Eastern time) on that day.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, an investor
may write or call Signet Trust Company to
place an order to purchase Shares of the Fund. (Call 804-771-7470). Purchase
orders must be received by Signet Trust Company before 4:00 p.m. (Eastern time).
Payment for Shares of the Funds may be made by check or by wire. Payment must be
received by Signet Trust Company the next business day.
BY CHECK. Purchases of Shares by check must be made payable to Signet Trust
Company and sent to Signet Trust Company, 7 North Eighth Street, Richmond, VA
23219.
BY WIRE. With respect to The Treasury Money Market Fund and The Money Market
Fund, payment by wire must be received by Signet Trust Company before 2:00 p.m.
(Eastern time) by the next business day after placing the order. With respect to
The U.S. Government Securities Fund, The Stock Fund, The Virginia Municipal Bond
Fund and The Maryland Municipal Bond Fund, payment by wire must be received by
Signet Trust Company the next business day. Shares of the Funds cannot be
purchased by Federal Reserve Wire on Columbus Day, Veterans' Day or
Lee-Jackson-King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $10,000.
WHAT SHARES COST
Shares of the Funds are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Funds.
On Monday through Friday, The U.S. Government Securities Fund, The Stock Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund calculate
net asset value at 4:00 p.m. (Eastern time), while The Treasury Money Market
Fund and The Money Market Fund calculate net asset value at 1:00 p.m. (Eastern
time), and 4:00 p.m. (Eastern time), except on: (i) 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; (ii) days during which no shares of a
Fund are tendered for redemption and no orders to purchase shares are received;
or (iii) the following holidays: New Year's Day, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued unless
requested by contacting Signet Trust Company in writing.
With respect to The Treasury Money Market Fund and The Money Market Fund,
monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month. With respect to The U.S.
Government Securities Fund, The Stock Fund, The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund, detailed confirmations of each purchase or
redemption are sent to each shareholder. In addition, monthly confirmations are
sent to report dividends paid during that month.
DIVIDENDS
With respect to The U.S. Government Securities Fund, The Virginia Municipal Bond
Fund, The Maryland Municipal Bond Fund, The Treasury Money Market Fund and The
Money Market Fund, dividends are declared daily and paid monthly.
With respect to The Treasury Money Market Fund and The Money Market Fund, Shares
purchased by wire before 2:00 p.m. (Eastern time) begin earning dividends that
day. Shares purchased by check begin earning dividends on the day after the
check is converted by Signet Trust Company into federal funds.
With respect to The Stock Fund, dividends are declared and paid quarterly.
Unless cash payments are requested by shareholders in writing to a Fund,
dividends are automatically reinvested in additional Shares of the Fund on
payment dates at the ex-dividend date net asset value without a sales charge.
CAPITAL GAINS
With respect to The Treasury Money Market Fund and The Money Market Fund,
capital gains, if any, 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.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, capital gains
realized by a Fund, if any, will be distributed at least once every 12 months.
REDEEMING TRUST SHARES
- --------------------------------------------------------------------------------
Each Fund redeems Shares at their net asset value next determined after Signet
Trust Company receives the redemption request. Redemptions will be made on days
on which a Fund computes its net asset value. Telephone or written requests for
redemption must be received in proper form by Signet Trust Company.
BY TELEPHONE. A shareholder may redeem Shares of a Fund by calling Signet Trust
Company to request the redemption. (Call 804-771-7470) Shares will be redeemed
at the net asset value next determined after a Fund receives the redemption
request from Signet Trust Company.
With respect to The Treasury Money Market Fund and The Money Market Fund,
redemption requests received before 11:00 a.m. (Eastern time) will be wired the
same day, but will not be entitled to that day's dividend. A redemption request
must be received by Signet Trust Company before 4:00 p.m. (Eastern time).
Redemption requests through registered broker/dealers must be received by Signet
Trust Company before 3:00 p.m. (Eastern time). Signet Trust Company is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to a Fund. Other registered broker/dealers may
charge customary fees and commissions for this service.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, a redemption
request must be received by Signet Trust Company before 4:00 p.m. (Eastern time)
in order for Shares to be redeemed at that day's net asset value. Redemption
requests through registered broker/dealers must be received by Signet Trust
Company before 3:00 p.m. (Eastern time) in order for Shares to be redeemed at
that day's net asset value. Signet Trust Company is responsible for promptly
submitting redemption requests and providing proper written redemption
instructions to a Fund. Other registered broker/dealers may charge customary
fees and commissions for this service.
If, at any time, a Fund should determine it necessary to terminate or modify
this method of redemption, shareholders would be promptly notified.
An authorization form permitting a Fund to accept telephone redemption requests
must first be completed. It is recommended that investors request this privilege
at the time of their initial application. If not completed at the time of
initial application, authorization forms and information on this service can be
obtained through Signet Trust Company. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by a Fund, it may be liable
for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered.
BY MAIL. Shareholders may redeem Shares of a Fund by sending a written request
to Signet Trust Company. The written request should include the shareholder's
name, the Fund name, the class of shares, the account number, and the Share or
dollar amount requested. If share certificates have been issued, they must be
properly endorsed and should be sent by registered or certified mail with the
written request to Signet Trust Company.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with a Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by BIF
which is administered by the FDIC;
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the SAIF, which is administered by the FDIC; 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.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When Shares of a Fund are purchased by check, or through the Automated Clearing
House ("ACH"), the proceeds from the redemption of those Shares are not
available, and the Shares may not be exchanged, until Signet Trust Company is
reasonably certain that the purchase check has cleared, which could take up to
ten calendar days.
REDEMPTION IN KIND
The Trust is obligated to redeem Shares solely in cash up to $250,000 or 1% of
any class' net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as net asset value is determined. The portfolio
instruments will be selected in a manner that the Trustees deem 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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only shareholders of that Fund or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the operation of the Trust or a Fund and for
the election of Trustees under certain circumstances.
As of November 9, 1993, Signet Trust Company, Richmond, Virginia, acting in
various capacities for numerous accounts, was the owner of record of 10,986,813
shares (99.99%) of The U.S. Government Securities Fund--Trust Shares; 5,202,317
shares (99.99%) of The Stock Fund--Trust Shares; 3,771,697 shares (99.99%) of
The Virginia Municipal Bond Fund--Trust Shares; 1,058,305 shares (99.99%) of The
Maryland Municipal Bond Fund--Trust Shares; 143,210,919 shares (99.99%) of The
Treasury Money Market Fund--Trust Shares; and 138,542,690 shares (99.99%) of The
Money Market Fund--Trust Shares, and therefore, may for certain purposes, be
deemed to control the Funds and be able to affect the outcome of certain matters
presented for a vote of shareholders.
As of November 9, 1993, Stephens Inc., Little Rock, Arkansas, acting as
shareholder for the benefit of individual investors, was the owner of record of
4,749,681 shares (41.66%) of The U.S. Government Securities Fund--Investment
Shares; 3,229,374 shares (49.59%) of The Virginia Municipal Bond
Fund--Investment Shares; 1,542,904 shares (49.41%) of The Maryland Municipal
Bond Fund--Investment Shares; 20,745,412 shares (98.43%) of The Treasury Money
Market Fund--Investment Shares; and 9,040,547 shares (84.04%) of The Money
Market Fund--Investment Shares, and therefore, may, for certain purposes, be
deemed to control the funds and be able to affect the outcome of certain matters
presented for a vote of shareholders.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign.
In the unlikely event a shareholder is held personally liable for obligations of
the Trust, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust cannot meet its obligations to indemnify shareholders and pay
judgments against them from its assets.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, or distributing securities. However, such banking
laws and regulations do not prohibit such a holding company affiliate or banks
generally from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of such a customer. Signet Trust Company is subject to such
banking laws and regulations.
Signet Trust Company believes, based on the advice of its counsel, that Signet
Asset Management may perform the services for any Fund contemplated by its
advisory agreement with the Trust without violation of the Glass-Steagall Act or
other applicable banking 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 such or future statutes and regulations, could
prevent Signet Asset Management from continuing to perform all or a part of the
above services for its customers and/or a Fund. If it were prohibited from
engaging in these customer-related activities, the Trustees would consider
alternative advisers and means of continuing available investment services. In
such event, changes in the operation of a Fund may occur, including possible
termination of any automatic or other Fund share investment and redemption
services then being provided by Signet Asset Management. It is not expected that
existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Signet Asset Management is found)
as a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Funds anticipate that they will pay no federal income tax because each Fund
expects to meet requirements of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies.
Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by a Fund
will not be combined for tax purposes with those realized by any of the other
Funds.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Treasury Money Market Fund and The Money Market Fund, unless otherwise exempt,
shareholders are required to pay federal income tax on any dividends and other
distributions received. This applies whether dividends and distributions are
received in cash or as additional shares.
Shareholders of The U.S. Government Securities Fund, The Stock Fund, The
Treasury Money Market Fund and The Money Market Fund are urged to consult their
own tax advisers regarding the status of their accounts under state and local
tax laws.
THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL
BOND FUND FEDERAL INCOME TAX
With respect to The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund, shareholders are not required to pay the federal regular income tax on any
dividends received from a Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on some municipal bonds may be included in
calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, 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. A Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, while neither
Fund has a present intention of purchasing any private activity bonds, should
either Fund purchase any such bonds, a portion of that Fund's dividends may be
treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of either Fund
which represent interest on municipal bonds may be 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 a Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of either 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.
VIRGINIA TAXES. Income to the Fund that is exempt from Virginia state income
taxes and income taxes imposed by Virginia municipalities will retain its exempt
status when distributed to Virginia shareholders.
Shares of the Fund will not be subject to Virginia state or local personal
property taxes.
MARYLAND TAXES. Holders of the Fund who are individuals, corporations, estates
or trusts and who are subject to Maryland state and local income tax will not be
subject to tax in Maryland on Fund dividends to the extent that such dividends
qualify as exempt-interest dividends of a regulated investment company under
Section 852(b)(5) of the Internal Revenue Code of 1986, as amended (the "Code"),
and are attributable to (i) interest on tax-exempt obligations of the State of
Maryland or its political subdivisions or authorities, (ii) interest on
obligations of the United States or an authority, commission, instrumentality,
possession or territory of the United States, or (iii) gain realized by the Fund
from the sale or exchange of bonds issued by Maryland, a political subdivision
of Maryland, or the United States government (excluding obligations issued by
the District of Columbia, a territory or possession of the United States, or a
department, agency, instrumentality, or political subdivision of the District,
territory or possession).
To the extent that distributions of the Fund are attributable to sources other
than those described above, such as (i) interest on obligations issued by states
other than Maryland or (ii) income from repurchase contracts, such distributions
will not be exempt from Maryland state and local income taxes. In addition, gain
realized by a shareholder upon a redemption or exchange of Fund shares will be
subject to Maryland taxation.
Maryland presently includes in taxable net income items of tax preferences as
defined in the Code. Interest paid on certain private activity bonds constitutes
a tax preference. Accordingly, subject to a threshold amount, 50% of any
distributions of the Fund attributable to such private activity bonds will not
be exempt from Maryland state and local income taxes.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the Fund to purchase or carry shares of The Maryland Municipal Bond Fund will
not be deductible for Maryland state and local income tax purposes to the extent
such interest is allocable to exempt-interest dividends.
Shares of the Fund will not be subject to the Maryland personal property tax.
OTHER STATE AND LOCAL TAXES. With respect to The Virginia Municipal Bond Fund
and The Maryland Municipal Bond Fund, distributions representing net interest
received on tax-exempt municipal securities are not necessarily free from income
taxes of any other state or local taxing authority. State laws differ on this
issue and shareholders are urged to consult their own tax advisers.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, The U.S. Government Securities Fund and The Stock Fund may
advertise total return and yield. The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund may advertise total return, yield and
tax-equivalent yield. The Treasury Money Market Fund and The Money Market Fund
may advertise yield and effective yield.
Total return represents the change, over a specified period of time, in the
value of an investment in a Fund after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares of The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund is calculated
by dividing the net investment income per Share (as defined by the Securities
and Exchange Commission) earned by Shares over a thirty-day period by the
maximum offering price per share of Shares of a Fund on the last day of the
period. This number is then annualized using semi-annual compounding. The yield
does not necessarily reflect income actually earned by Shares and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
The yields of Shares of The Treasury Money Market Fund and The Money Market Fund
represent the annualized rate of income earned on an investment in Shares over a
seven-day period. It is the
annualized dividends earned during the period on the investment, shown as a
percentage of the investment. The effective yield is calculated similarly to the
yield, but, when annualized, the income earned on an investment in Shares is
assumed to be reinvested daily. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
The tax equivalent yield of the Shares for The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that the Shares would have had to earn to
equal its actual yield, assuming a specific tax rate. The tax-equivalent yield
does not necessarily reflect income actually earned by Shares and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
Shares are sold without any sales load or other similar non-recurring charges.
With respect to The U.S. Government Securities Fund and The Stock Fund, total
return and yield will be calculated separately for Trust Shares and Investment
Shares. Because Investment Shares may be subject to a redemption fee and are
subject to a 12b-1 fee, the total return and yield for Trust Shares for the same
period will exceed that of Investment Shares.
With respect to The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund, total return, yield and tax-equivalent yield will be calculated separately
for Trust Shares and Investment Shares. Because Investment Shares may be subject
to a redemption fee and are subject to a 12b-1 fee, the total return and yield
for Trust Shares for the same period will exceed that of Investment Shares.
With respect to The Treasury Money Market Fund and The Money Market Fund, yield
and effective yield will be calculated separately for Trust Shares and
Investment Shares. Because Investment Shares are subject to 12b-1 fees the yield
and effective yield for Trust Shares, for the same period, will exceed that of
Investment Shares.
From time to time, the Funds may advertise their performances using certain
reporting services and compare their performances to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Investment Shares, the other class of shares offered by the Funds, are sold to
customers of Signet Bank, N.A. and Signet Financial Services, Inc. at net asset
value at a minimum initial investment of $1,000. Under certain circumstances,
Investment Shares may be subject to a 2.00% redemption fee. Investment Shares
may be exchanged for Investment Shares of the Funds at net asset value.
Investment Shares are distributed to such institutions pursuant to a Rule 12b-1
Plan whereby brokers and administrators are paid a fee of .35 of 1% for The
Treasury Money Market Fund and The Money Market Fund and .25 of 1% for The U.S.
Government Securities Fund, The Stock Fund, The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund of the Investment Shares' average net asset
value.
The amount of dividends payable to Shares will exceed those payable to
Investment Shares by the difference between class expenses and distribution
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of each of the Funds.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The U.S. Government Securities Fund Federated Investors Tower
The Stock Fund Pittsburgh, Pennsylvania 15222-3779
The Treasury Money Market Fund
The Money Market Fund
The Virginia Municipal Bond Fund
The Maryland Municipal Bond Fund
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Signet Asset Management 7 North Eighth Street
Richmond, Virginia 23219
- ------------------------------------------------------------------------------------------------
Custodian
Signet Trust Company 7 North Eighth Street
Richmond, Virginia 23219
- ------------------------------------------------------------------------------------------------
Transfer Agent, and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 2500 One PPG Place
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
</TABLE>
SIGNET
ASSET MANAGEMENT
A Division of Signet Trust Company
Investment Adviser
FEDERATED SECURITIES CORP. IS THE DISTRIBUTOR OF THE FUNDS.
2102608A-1 (8/94)
THE MEDALIST FUNDS
(FORMERLY THE SIGNET SELECT FUNDS)
INVESTMENT SHARES
PROSPECTUS
The Medalist Funds (the "Trust"), an open-end management investment company (a
mutual fund), is comprised of the six separate investment portfolios set forth
below (collectively, the "Funds," individually, a "Fund"), and The Tax-Free
Money Market Fund, each having a distinct investment objective and policies. The
Funds are offered in Investment Shares (the "Shares") as described in this
prospectus. Each of the Funds has also established a second class of shares
known as Trust Shares.
- The U.S. Government Securities Fund (formerly U.S. Government Income
Fund)
- The Stock Fund (formerly Value Equity Fund)
- The Virginia Municipal Bond Fund
- The Maryland Municipal Bond Fund
- The Treasury Money Market Fund
- The Money Market Fund
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF SIGNET
TRUST COMPANY OR SIGNET BANK, ARE NOT ENDORSED OR GUARANTEED BY SIGNET TRUST
COMPANY OR SIGNET BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES OF THE U.S. GOVERNMENT SECURITIES FUND, THE STOCK FUND,
THE VIRGINIA MUNICIPAL BOND FUND, AND THE MARYLAND MUNICIPAL BOND FUND INVOLVES
INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE TREASURY MONEY
MARKET FUND AND THE MONEY MARKET FUND ATTEMPT TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THESE FUNDS WILL BE
ABLE TO DO SO.
This prospectus relates only to the Investment Shares of the Funds and contains
the information you should read and know before you invest in any of the Funds.
Keep this prospectus for future reference.
The Funds have also filed a Combined Statement of Additional Information for the
Shares of the Funds dated November 30, 1993, with the Securities and Exchange
Commission. The information contained in the Combined Statement of Additional
Information is incorporated by reference into this prospectus. You may request a
copy of the Combined Statement of Additional Information free of charge, obtain
other information, or make inquiries about any of the Funds by writing to the
Trust or calling toll-free 1-800-723-9512.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated November 30, 1993
Reprinted August 15, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
Special Considerations 1
SUMMARY OF FUND EXPENSES--INVESTMENT SHARES 2
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 3
- ------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND 9
- ------------------------------------------------------
The U.S. Government Securities Fund 9
Acceptable Investments 9
CMOs 9
ARMS 9
The Stock Fund 10
Acceptable Investments 10
Common Stocks 10
Other Corporate Securities 10
Commercial Paper 10
Bank Instruments 10
U.S. Government Securities 10
Put and Call Options 10
Financial Futures and Options on Futures 11
Risks 11
Portfolio Turnover 11
Investment Considerations 11
The Virginia Municipal Bond Fund 12
Acceptable Investments 12
Characteristics 12
The Maryland Municipal Bond Fund 12
Acceptable Investments 12
Characteristics 13
The Treasury Money Market Fund 13
Acceptable Investments 13
Regulatory Compliance 13
The Money Market Fund 13
Acceptable Investments 13
Variable Rate Demand Notes 14
Bank Instruments 14
Short-Term Credit Facilities 14
Asset-Backed Securities 14
Ratings 14
Credit Enhancement 14
Demand Features 14
Regulatory Compliance 15
Investment Limitations 15
PORTFOLIO INVESTMENTS AND STRATEGIES 15
- ------------------------------------------------------
Borrowing Money 15
Selling Short 15
Restricted and Illiquid Securities 15
When-Issued and Delayed Delivery Transactions 16
Investing in Securities of Other
Investment Companies 16
Diversification 16
Investing in New Issuers 16
Repurchase Agreements 16
Lending of Portfolio Securities 17
Acquiring Securities 17
Investment Risks 17
Participation Interests 17
Variable Rate Municipal Securities 17
Municipal Leases 17
Temporary Investments 18
Virginia and Maryland Municipal Securities 18
Investment Risks 18
Futures Contracts and Options to Buy or
Sell Such Contracts 18
Non-Diversification 18
THE MEDALIST FUNDS INFORMATION 19
- ------------------------------------------------------
Management of the Trust 19
Board of Trustees 19
Investment Adviser 19
Advisory Fees 19
Adviser's Background 19
Distribution of Investment Shares of the Funds 20
Distribution Plan 20
Administrative Arrangements 20
Administration of the Funds 20
Administrative Services 20
Custodian 21
Transfer Agent and Dividend Disbursing Agent 21
Legal Counsel 21
Independent Auditors 21
Expenses of the Funds and Investment Shares 21
Brokerage Transactions 21
NET ASSET VALUE 21
- ------------------------------------------------------
INVESTING IN INVESTMENT SHARES 22
- ------------------------------------------------------
Share Purchases 22
By Check 22
By Wire 22
Systematic Investment Program 22
Minimum Investment Required 22
What Shares Cost 23
Certificates and Confirmations 23
Dividends 23
Capital Gains 23
EXCHANGE PRIVILEGE 23
- ------------------------------------------------------
By Telephone 24
REDEEMING INVESTMENT SHARES 24
- ------------------------------------------------------
By Telephone 24
By Mail 25
Redemption Fee 25
Redemption Before Purchase Instruments Clear 26
Systematic Withdrawal Program 26
Accounts with Low Balances 27
Redemption in Kind 27
SHAREHOLDER INFORMATION 27
- ------------------------------------------------------
Voting Rights 27
Massachusetts Partnership Law 28
EFFECT OF BANKING LAWS 28
- ------------------------------------------------------
TAX INFORMATION 28
- ------------------------------------------------------
Federal Income Tax 28
The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund
Federal Income Tax 29
Virginia Taxes 29
Maryland Taxes 29
Other State and Local Taxes 30
PERFORMANCE INFORMATION 30
- ------------------------------------------------------
OTHER CLASSES OF SHARES 31
- ------------------------------------------------------
ADDRESSES 32
- ------------------------------------------------------
SYNOPSIS
- --------------------------------------------------------------------------------
The Trust, an open-end, management investment company, was established as a
Massachusetts business trust under a Declaration of Trust dated June 20, 1990.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Trustees have established two classes of shares,
Investment Shares and Trust Shares. This prospectus relates only to the
Investment Shares of the Trust.
As of the date of this prospectus, the Trust is comprised of The Tax-Free Money
Market Fund (offered by separate prospectus) and the following six Funds:
- The U.S. Government Securities Fund--seeks to provide current income by
investing in a professionally managed, diversified portfolio limited
primarily to U.S. government securities;
- The Stock Fund--seeks to provide growth of capital and income by
investing in common stocks;
- The Virginia Municipal Bond Fund--seeks to provide current income which
is exempt from federal regular income tax and the personal income tax
imposed by the Commonwealth of Virginia by investing in a portfolio of
Virginia municipal securities;
- The Maryland Municipal Bond Fund--seeks to provide current income which
is exempt from federal regular income tax and the personal income tax
imposed by the State of Maryland by investing in a portfolio of Maryland
municipal securities;
- The Treasury Money Market Fund--seeks to provide current income
consistent with stability of principal by investing in short-term U.S.
Treasury obligations; and
- The Money Market Fund--seeks to provide current income consistent with
stability of principal by investing in money market instruments.
For information on how to purchase Shares of any of the Funds please refer to
"Investing in Investment Shares." A minimum initial investment of $1,000 is
required for each Fund. A redemption fee may be imposed on all Shares of The
U.S. Government Securities Fund, The Stock Fund, The Virginia Municipal Bond
Fund and The Maryland Municipal Bond Fund purchased after October 1, 1992 (other
than Shares purchased through reinvestment of dividends and capital gains
distributions), which are redeemed within five years of their purchase dates.
Information on redeeming Shares may be found under "Redeeming Investment
Shares." The Funds are advised by Signet Asset Management.
SPECIAL CONSIDERATIONS
Investors should be aware of the following general considerations: the market
value of fixed-income securities, which constitute a major part of the
investments of several Funds, may vary inversely in response to changes in
prevailing interest rates. One or more Funds may make certain investments and
employ certain investment techniques that involve other risks, including
entering into repurchase agreements, lending portfolio securities and entering
into futures contracts and related options as hedges. These risks and those
associated with investing in mortgage-backed securities, when-issued securities,
options, variable rate securities and equity securities are described under
"Investment Objective and Policies of Each Fund" and "Portfolio Investments and
Strategies."
SUMMARY OF FUND EXPENSES--INVESTMENT SHARES
- --------------------------------------------------------------------------------
The following Fee Table and Example summarize the various costs and expenses
that a shareholder of Investment Shares will bear, either directly or
indirectly.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
THE THE THE THE
THE TREASURY MARYLAND VIRGINIA U.S.
MONEY MONEY MUNICIPAL MUNICIPAL THE GOVERNMENT
MARKET MARKET BOND BOND STOCK SECURITIES
FUND FUND FUND FUND FUND FUND
------- --------- ---------- ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Redemption Fees (as a percentage of amount
redeemed, if applicable)(1)............... None None 2.00% 2.00% 2.00% 2.00%
</TABLE>
ANNUAL INVESTMENT SHARES OPERATING EXPENSES (AS A PERCENTAGE OF PROJECTED
AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
SHARES OPERATING
NET EXPENSES NET OF ANY
MANAGEMENT 12B-1 OTHER WAIVERS OR
FEES(2) FEES(3) EXPENSES(4) REIMBURSEMENTS(5)
----------- -------- ------------ --------------------
<S> <C> <C> <C> <C>
The Money Market Fund............................. 0.25% 0.25% 0.30% 0.80%
The Treasury Money Market Fund.................... 0.30% 0.25% 0.28% 0.83%
The Maryland Municipal Bond Fund.................. 0.21% 0.25% 0.70% 1.16%
The Virginia Municipal Bond Fund.................. 0.47% 0.25% 0.44% 1.16%
The Stock Fund.................................... 0.54% 0.25% 0.42% 1.21%
The U.S. Government Securities Fund............... 0.44% 0.25% 0.30% 0.99%
</TABLE>
(1) A redemption fee of 2% will be imposed on The Money Market Fund and The
Treasury Money Market Fund only in limited circumstances in which Shares
being redeemed are acquired in exchange for Investment Shares in those
Medalist Funds which charge a redemption fee. The redemption fee charged is
2.00% of the lesser of the original purchase price or the net asset value of
Shares redeemed within five years of purchase date.
(2) 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 Money Market
Fund, The Treasury Money Market Fund, The Maryland Municipal Bond Fund, The
Virginia Municipal Bond Fund, The Stock Fund, and The U.S. Government
Securities Fund is 0.50%, 0.50%, 0.75%, 0.75%, 0.75% and 0.75%,
respectively.
(3) Fees paid by Investment Shares of each Fund for distribution and/or
administrative services provided with respect to Investment Shares. Total
payments of up to .25 of 1% (except The Money Market Fund and The Treasury
Money Market Fund which are 0.35 of 1%) of the average daily net assets
attributable to Investment Shares are permitted under the Distribution
Plans. See "Management of the Trust--Distribution Plans."
(4) Includes administration fees. See "Management of the Trust--Administration
of the Funds."
(5) The total Investment Shares operating expenses for The Money Market Fund,
The Treasury Money Market Fund, The Maryland Municipal Bond Fund, The
Virginia Municipal Bond Fund, The Stock Fund and The U.S. Government
Securities Fund would have been 1.05%, 1.03%, 1.70%, 1.44%, 1.42% and 1.30%,
respectively, absent the waiver of management fees.
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 1 YEAR(+) 3 YEARS 3 YEARS(+) 5 YEARS 5 YEARS(+) 10 YEARS(+)
------- ---------- -------- ----------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Money Market Fund................ $ 8 $ 8 $ 26 $26 $ 44 $44 $ 99
The Treasury Money Market Fund....... $ 8 $ 8 $ 26 $26 $ 46 $46 $103
The Maryland Municipal Bond Fund..... $33 $ 12 $ 59 $37 $ 88 $64 $141
The Virginia Municipal Bond Fund..... $33 $ 12 $ 59 $37 $ 88 $64 $141
The Stock Fund....................... $33 $ 12 $ 61 $38 $ 91 $67 $147
The U.S. Government Securities
Fund............................... $31 $ 10 $ 54 $32 $ 79 $55 $121
</TABLE>
+ Reflects expenses on the same investment, assuming no redemption.
The purpose of the foregoing Example is to assist an investor in understanding
the various costs and expenses that a shareholder of Investment Shares will
bear, either directly or indirectly. For a more complete description of the
various costs and expenses, see "The Medalist Funds Information" and "Investing
in Investment Shares." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
The above example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. This example
is based on estimated data for the Fund's fiscal year ending September 30, 1994.
The information set forth in the foregoing table and Example relates only to
Investment Shares of the Funds. The Funds also offer another class of shares
called Trust Shares. Trust Shares are subject to certain of the same expenses,
except they bear no redemption fee or 12b-1 fee. See "Other Classes of Shares."
THE U.S. GOVERNMENT SECURITIES FUND
(FORMERLY U.S. GOVERNMENT INCOME FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
INVESTMENT SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.95 $10.54 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.66 0.75 0.78
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.03 0.50 0.54
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 0.69 1.25 1.32
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.66) (0.75) (0.78)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (0.08) (0.09) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.74) (0.84) (0.78)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.90 $10.95 $10.54
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 6.82% 12.42% 14.00%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.77% 0.52% 0.64%(b)
- -------------------------------------------------------------------------------
Net investment income 5.91% 7.01% 8.03%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.43% 0.65% 0.93%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $119,187 $40,274 $10
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 297% 201% 101%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
TRUST SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.95 $10.54 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.67 0.75 0.78
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.03 0.50 0.54
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 0.70 1.25 1.32
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.67) (0.75) (0.78)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (0.08) (0.09) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.75) (0.84) (0.78)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.90 $10.95 $10.54
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 6.94% 12.42% 14.00%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.63% 0.52% 0.64%(b)
- -------------------------------------------------------------------------------
Net investment income 6.17% 7.01% 8.03%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.43% 0.65% 0.93%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $112,334 $95,610 $27,565
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 297% 201% 101%
- -------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment), to September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(d) Represents portfolio turnover for the entire Fund.
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE STOCK FUND
(FORMERLY VALUE EQUITY FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
INVESTMENT SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.02 $11.86 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.24 0.26 0.32
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.54 0.46 1.85
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 0.78 0.72 2.17
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.25) (0.25) (0.31)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.16) (0.31) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.41) (0.56) (0.31)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $12.39 $12.02 $11.86
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 6.31% 6.31% 22.68%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.87% 0.95% 0.80%(b)
- -------------------------------------------------------------------------------
Net investment income 1.81% 2.25% 3.05%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.55% 0.34% 0.38%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $18,691 $2,290 $488
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 67% 38% 84%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
TRUST SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.02 $11.86 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.28 0.26 0.32
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.51 0.46 1.85
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 0.79 0.72 2.17
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.26) (0.25) (0.31)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.16) (0.31) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.42) (0.56) (0.31)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $12.39 $12.02 $11.86
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 6.42% 6.31% 22.68%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.66% 0.95% 0.80%(b)
- -------------------------------------------------------------------------------
Net investment income 2.09% 2.25% 3.05%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.55% 0.34% 0.38%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $65,841 $49,581 $37,032
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 67% 38% 84%
- -------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment), to September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(d) Represents portfolio turnover for the entire Fund.
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE VIRGINIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
INVESTMENT SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.46 $10.18 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.51 0.54 0.57
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.89 0.29 0.18
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 1.40 0.83 0.75
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.51) (0.54) (0.57)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.09) (0.01) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.60) (0.55) (0.57)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.26 $10.46 $10.18
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 13.49% 8.51% 7.64%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.90% 0.83% 0.47%(b)
- -------------------------------------------------------------------------------
Net investment income 4.68% 5.14% 6.08%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.50% 0.86% 1.70%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $63,492 $20,883 $6,031
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 17% 51% 27%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
TRUST SHARES 1993 1992 1991*
- ---------------------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.46 $10.18 $10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.53 0.54 0.57
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.89 0.29 0.18
- ------------------------------------------------------------------------------- ----- ----- -----
Total from investment operations 1.42 0.83 0.75
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.53) (0.54) (0.57)
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.09) (0.01) --
- ------------------------------------------------------------------------------- ----- ----- -----
Total distributions (0.62) (0.55) (0.57)
- ------------------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.26 $10.46 $10.18
- ------------------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 13.62% 8.51% 7.64%(a)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.75% 0.83% 0.47%(b)
- -------------------------------------------------------------------------------
Net investment income 4.85% 5.14% 6.08%(b)
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.50% 0.86% 1.70%(b)
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $41,204 $20,852 $8,546
- -------------------------------------------------------------------------------
Portfolio turnover rate (d) 17% 51% 27%
- -------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 24, 1990 (date of initial
public investment), to September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
ratios shown above (Note 5).
(d) Represents portfolio turnover for the entire Fund.
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE MARYLAND MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
INVESTMENT SHARES 1993 1992 1991*
- --------------------------------------------------------------------------------- ------- ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.39 $10.10 $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.49 0.54 0.53
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.85 0.29 0.10
- ------------------------------------------------------------------------------ ----- ----- -----
Total from investment operations 1.34 0.83 0.63
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.49) (0.54) (0.53)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions -- -- --
- ------------------------------------------------------------------------------ ----- ----- -----
Total distributions (0.49) (0.54) (0.53)
- ------------------------------------------------------------------------------ ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.24 $10.39 $10.10
- ------------------------------------------------------------------------------ ----- ----- -----
TOTAL RETURN** 13.24% 8.31% 6.64%(a)
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 1.00% 0.59% 0.60%(b)
- ------------------------------------------------------------------------------
Net investment income 4.50% 5.11% 5.66%(b)
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.77% 1.91% 1.05%(b)
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $33,907 $14,053 $2,940
- ------------------------------------------------------------------------------
Portfolio turnover rate (d) 23% 34% 35%
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
TRUST SHARES 1993 1992 1991*
- --------------------------------------------------------------------------------- ------- ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.39 $10.10 $10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.50 0.54 0.53
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.85 0.29 0.10
- ------------------------------------------------------------------------------ ----- ----- -----
Total from investment operations 1.35 0.83 0.63
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.50) (0.54) (0.53)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions -- -- --
- ------------------------------------------------------------------------------ ----- ----- -----
Total distributions (0.50) (0.54) (0.53)
- ------------------------------------------------------------------------------ ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.24 $10.39 $10.10
- ------------------------------------------------------------------------------ ----- ----- -----
TOTAL RETURN** 13.37% 8.31% 6.64%(a)
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 0.86% 0.59% 0.60%(b)
- ------------------------------------------------------------------------------
Net investment income 4.64% 5.11% 5.66%(b)
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.77% 1.91% 1.05%(b)
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,014 $6,004 $556
- ------------------------------------------------------------------------------
Portfolio turnover rate (d) 23% 34% 35%
- ------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1990 (date of initial
public investment) to September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(d) Represents portfolio turnover for the entire Fund.
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
INVESTMENT SHARES 1993 1992 1991*
- ------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- -------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------
Net investment income 0.02 0.04 0.06
- ------------------------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
- -------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02) (0.04) (0.06)
- ------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 2.52% 3.61% 5.90%(a)
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 0.70% 0.70% 0.51%(b)
- -------------------------------------------------------------------
Net investment income 2.47% 3.49% 5.65%(b)
- -------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.20% 0.11% 0.27%(b)
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $20,382 $12,960 $548
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
TRUST SHARES 1993 1992 1991*
- ------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- -------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------
Net investment income 0.03 0.04 0.06
- ------------------------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
- -------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.04) (0.06)
- ------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 2.64% 3.61% 5.90%(a)
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 0.58% 0.70% 0.51%(b)
- -------------------------------------------------------------------
Net investment income 2.60% 3.49% 5.65%(b)
- -------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.20% 0.11% 0.27%(b)
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $152,921 $163,451 $129,959
- -------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment), to
September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
THE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche, the Fund's
independent auditors. Their report dated November 18, 1993 is included in the
Statement of Additional Information. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
INVESTMENT SHARES 1993 1992 1991*
- --------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------
Net investment income 0.03 0.04 0.06
- --------------------------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.04) (0.06)
- --------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- --------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 2.77% 3.79% 5.92%(a)
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------
Expenses 0.64% 0.64% 0.51%(b)
- ---------------------------------------------------------------------
Net investment income 2.68% 3.64% 5.99%(b)
- ---------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.30% 0.29% 0.36%(b)
- ---------------------------------------------------------------------
SUPPLEMENT DATA
- ---------------------------------------------------------------------
Net assets, end of period (000 omitted) $9,905 $5,803 $1
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
TRUST SHARES 1993 1992 1991*
- --------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------
Net investment income 0.03 0.04 0.06
- --------------------------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.04) (0.06)
- --------------------------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- --------------------------------------------------------------------- ----- ----- -----
TOTAL RETURN** 2.89% 3.79% 5.92%(a)
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------
Expenses 0.50% 0.64% 0.51%(b)
- ---------------------------------------------------------------------
Net investment income 2.83% 3.64% 5.99%(b)
- ---------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.30% 0.29% 0.36%(b)
- ---------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------
Net assets, end of period (000 omitted) $134,397 $136,616 $57,432
- ---------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 23, 1990 (date of initial
public investment), to
September 30, 1991.
** Based on net asset value.
(a) Cumulative total return based on net asset value.
(b) Computed on an annualized basis.
(c) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes to Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1993, which can be obtained free of charge.
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND
- --------------------------------------------------------------------------------
The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.
Unless indicated otherwise, the investment policies of a Fund may be changed by
the Trustees without approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
Additional information about investment limitations, strategies that one or more
Funds may employ, and certain investment policies mentioned below, appear in the
"Portfolio Investments and Strategies" section of this Prospectus and in the
Combined Statement of Additional Information.
THE U.S. GOVERNMENT SECURITIES FUND
The investment objective of The U.S. Government Securities Fund is to provide
current income.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in securities which are primary or direct obligations of the U.S.
government or its instrumentalities or which are guaranteed by the U.S.
government, its agencies, or instrumentalities. The Fund may also invest in
certain collateralized mortgage obligations ("CMOs") and adjustable rate
mortgage securities ("ARMS"), both of which represent or are supported by direct
or indirect obligations of the U.S. government or its instrumentalities. The
Fund will invest, under normal circumstances, at least 65% of the value of its
total assets in U.S. government securities (including such CMOs and ARMS).
The U.S. government securities in which the Fund invests include:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and
- obligations of U.S. government agencies or instrumentalities, such as
Federal Home Loan Banks, Farmers' Home Administration, Federal Farm
Credit Banks; Federal National Mortgage Association, Government
National Mortgage Association and Federal Home Loan Mortgage Corporation.
The obligations of U.S. government agencies or instrumentalities which the Fund
may buy are backed, in a variety of ways, by the U.S. government or its agencies
or instrumentalities. Some of these obligations such as Government National
Mortgage Association mortgage-backed securities and obligations of the Farmers
Home Administration, are backed by the full faith and credit of the U.S.
Treasury. Obligations of the Farmers' Home Administration are also backed by the
issuer's right to borrow from the U.S. Treasury. Obligations of Federal Home
Loan Banks and the Farmers Home Administration are backed by the discretionary
authority of the U.S. government to purchase certain obligations of agencies or
instrumentalities. Obligations of Federal Home Loan Banks, Farmers Home
Administration, Federal Farm Credit Banks, Federal National Mortgage
Association, and Federal Home Loan Mortgage Corporation are backed by the credit
of the agency or instrumentality issuing the obligations.
CMOS. The Fund may also invest in CMOs which are rated AAA or better by a
nationally recognized rating agency and which are issued by private entities
such as investment banking firms and companies related to the construction
industry. The CMOs in which the Fund may invest may be: (i) 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; (ii) privately issued securities which
are collateralized by pools of mortgages in which payment of principal and
interest are guaranteed by the issuer and such guarantee is collateralized by
U.S. government securities; and (iii) other privately issued securities in which
the proceeds of the issuance are invested in mortgage-backed securities and
payment of the principal and interest are supported by the credit of an agency
or instrumentality of the U.S. government. The mortgage-related securities
provide for a periodic payment consisting of both interest and principal. The
interest portion of these payments will be distributed by the Fund as income,
and the capital portion will be reinvested.
ARMS. ARMS are pass-through mortgage securities with adjustable rather than
fixed interest rates. The ARMS in which the Fund invests are issued by
Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), and Federal Home Loan
Mortgage Corporation ("FHLMC") and are actively traded. The underlying mortgages
which collateralize ARMS issued by GNMA are fully guaranteed by the Federal
Housing Administration ("FHA") or Veterans Administration ("VA"), while those
collateralizing ARMS issued by FHLMC or FNMA are typically conventional
residential mortgages conforming to strict underwriting size and maturity
constraints.
Unlike conventional bonds, ARMS pay back principal over the life of the ARMS
rather than at maturity. Thus, a holder of the ARMS, such as the Fund, would
receive monthly scheduled payments of principal and interest, and may receive
unscheduled principal payments representing payments on the underlying
mortgages. At the time that a holder of the ARMS reinvests the payments and any
unscheduled prepayments of principal that it receives, the holder may receive a
rate of interest which is actually lower than the rate of interest paid on the
existing ARMS. As a consequence, ARMS may be a less effective means of "locking
in" long-term interest rates than other types of U.S. government securities.
THE STOCK FUND
The investment objective of The Stock Fund is to provide growth of capital and
income.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
in common stocks of large, medium and small capitalization companies which are
either listed on the New York or American Stock Exchange or trade in the
over-the-counter markets. The Fund's investment approach is based upon the
conviction that, over the long term, the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of publicly held corporations. The securities in which the
Fund invests include, but are not limited to, the following securities.
COMMON STOCKS. The Fund invests primarily in common stocks of companies
selected by the Fund's investment adviser on the basis of investment research
techniques, including assessment of earnings and dividend growth prospects of
the companies. Factors such as product position, market share, potential
earnings growth, or asset values will be considered by the investment adviser.
At least 65% of the Fund's portfolio will be invested in common stocks, unless
it is in a defensive position.
OTHER CORPORATE SECURITIES. The Fund may invest in preferred stocks, corporate
bonds, notes, warrants, rights, and convertible securities of these companies.
COMMERCIAL PAPER. The Fund may invest in commercial paper rated A-1 by Standard
& Poor's Corporation ("S&P"), or Prime-1 by Moody's Investors Service, Inc.
("Moody's"), or F-1 by Fitch Investors Services ("Fitch") and money market
instruments (including commercial paper) which are unrated but of comparable
quality, including Canadian Commercial Paper ("CCPs") and Europaper.
BANK INSTRUMENTS. The Fund may invest in instruments of domestic and foreign
banks and savings and loans (such as certificates of deposit, demand and time
deposits, savings shares, and bankers' acceptances) if they have capital,
surplus, and undivided profits over $100,000,000, or if the principal amount of
the instrument is insured by the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation ("FDIC") or the
Savings Association Insurance Fund ("SAIF"), which is administered by the FDIC.
These instruments may include Eurodollar Certificates of Deposit ("ECDs"),
Yankee Certificates of Deposit ("Yankee CDs"), Eurodollar Time Deposits ("ETDs")
and American Depository Receipts ("ADRs"). ADRs are receipts typically issued by
an American bank or trust company that evidences ownership of underlying
securities issued by a foreign issuer.
U.S. GOVERNMENT SECURITIES. The Fund may invest in securities issued and/or
guaranteed as to payment of principal and interest by the U.S. government, its
agencies or instrumentalities including those obligations purchased on a
when-issued or delayed delivered basis.
PUT AND CALL OPTIONS. The Fund may purchase put options on its portfolio
securities. These options will be used as a hedge to attempt to protect
securities which the Fund holds against decreases in value. The Fund may also
write covered call options on all or any portion of its portfolio to generate
income for the Fund. The Fund will write 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 or U.S. government securities
in the amount of any additional consideration.
The Fund may purchase and write over-the-counter options on portfolio securities
in negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund are not traded on an
exchange. The Fund purchases and writes options only with investment dealers and
other financial institutions (such as commercial banks or savings and loan
associations) deemed creditworthy by the Fund's 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. The Fund will not buy call
options or write put options without further notification to shareholders.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio against
changes in stock prices. Financial futures contracts call for 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.
The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling a futures contract at a
fixed price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.
The Fund may not purchase or sell futures contracts or related options 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 total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged.
RISKS. When the Fund uses financial futures and options on financial
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 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 Fund's investment
adviser could be incorrect in its expectations about the direction or
extent of market factors such as stock price movements. In these events,
the Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into options transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The adviser anticipates that the Fund's annual portfolio
turnover rate for the 1994 and subsequent fiscal years will be significantly
higher than the Fund's turnover rates of 67% and 38% recorded in its 1993 and
1992 fiscal years. A high portfolio turnover rate may lead to increased costs
and may also result in higher taxes paid by the Fund's shareholders.
INVESTMENT CONSIDERATIONS. As with other mutual funds that invest primarily in
equity securities, the Fund is subject to market risks. That is, the possibility
exists that common stocks will decline over short or even extended periods of
time. The United States equity market tends to be cyclical, experiencing both
periods when stock prices generally increase and periods when stock prices
generally decrease. However, because the Fund invests a portion of its assets in
small capitalization
stocks, there are some additional risk factors associated with investments in
the Fund. In particular, stocks in the small capitalization sector of the United
States equity market have historically been more volatile in price than larger
capitalization stocks, such as those included in the Standard & Poor's 500
Composite Stock Price Index ("Standard & Poor's 500 Index). This is because,
among other things, small 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 economic conditions.
THE VIRGINIA MUNICIPAL BOND FUND
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income tax imposed by
the Commonwealth of Virginia. (Federal regular income tax does not include the
federal individual alternative minimum tax or the federal alternative minimum
tax for corporations.)
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
in a professionally managed portfolio of securities at least 65% of which are
comprised of Virginia municipal bonds. The Fund will invest its assets so that,
under normal circumstances, at least 80% of its annual interest income is exempt
from federal regular and Virginia state income taxes or that at least 80% of its
net assets are invested in obligations, the interest income from which is exempt
from federal regular and Virginia state income taxes.
The Virginia municipal securities in which the Fund invests are debt
obligations, including industrial development bonds, issued on behalf of the
Commonwealth of Virginia, its political subdivisions or agencies. In addition,
the Fund may invest in debt obligations issued by or on behalf of any state,
territory or possession of the United States, including the District of
Columbia, or any political subdivision or agency or any of these and
participation interests 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 Fund and/or the investment adviser to the Fund, exempt from federal
regular income tax and the personal income tax imposed by the Commonwealth of
Virginia.
CHARACTERISTICS. The debt securities in which the Fund invests will only be
rated investment grade or of comparable quality at the time of purchase.
The Virginia municipal securities which the Fund buys have essentially the
same characteristics assigned by Moody's and S&P to investment grade bonds.
Investment grade bonds are rated Baa, A, Aa, Aaa by Moody's, or BBB, A, AA,
AAA by S&P. Bonds rated "Baa" by Moody's or "BBB" by S&P have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds. In certain cases, the Fund's adviser may
choose bonds which are unrated, if it judges the bonds to have the same
characteristics as investment grade bonds. If a security's rating is
reduced below the required minimum after the Fund has purchased it, the
Fund is not required to sell the security, but may consider doing so. A
description of the ratings categories is contained in the Appendix to the
Combined Statement of Additional Information.
THE MARYLAND MUNICIPAL BOND FUND
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income tax imposed by
the State of Maryland. (Federal regular income tax does not include the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.)
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
in a professionally-managed portfolio of securities at least 65% of which is
comprised of Maryland municipal bonds. The Fund will invest its assets so that,
under normal circumstances, at least 80% of its annual interest income is exempt
from federal regular and Maryland state income taxes or that at least 80% of its
net assets are invested in obligations, the interest income from which is exempt
from federal regular and Maryland state income taxes.
The Maryland municipal securities in which the Fund invests are debt
obligations, including industrial development bonds, issued on behalf of the
State of Maryland, its political subdivisions or agencies. In addition, the Fund
may invest in debt obligations issued by or on behalf of any state, territory or
possession of the United States, including the District of Columbia, or any
political subdivision or
agency of any of these and participation interests 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 Fund and/or the investment adviser
to the Fund, exempt from federal regular income tax and the personal income tax
imposed by the State of Maryland.
CHARACTERISTICS. The debt securities in which the Fund invests will only be
rated investment grade or of comparable quality at the time of purchase.
The Maryland municipal securities which the Fund buys have essentially the
same characteristics assigned by Moody's and S&P to investment grade bonds.
Investment grade bonds are rated Baa, A, Aa, Aaa by Moody's, or BBB, A, AA,
AAA by S&P. Bonds rated "Baa" by Moody's or "BBB" by S&P or have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. In certain cases,
the Fund's adviser may choose bonds which are unrated, if it judges the
bonds to have the same characteristics as investment grade bonds. If a
security's rating is reduced below the required minimum after the Fund has
purchased it, the Fund is not required to sell the security, but may
consider doing so. A description of the ratings categories is contained in
the Appendix to the Combined Statement of Additional Information.
THE TREASURY MONEY MARKET FUND
The investment objective of The Treasury Money Market Fund is to provide current
income consistent with stability of principal.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
only in a portfolio of short-term U.S. Treasury obligations which are issued by
the U.S. government and are fully guaranteed as to principal and interest by the
United States. They mature in 397 days or less from the date of acquisition
unless they are purchased under a repurchase agreement that provides for
repurchase by the seller within one year from the date of acquisition. The
average maturity of these securities computed on a dollar-weighted basis, will
be 90 days or less.
REGULATORY COMPLIANCE. The Fund may follow non-fundamental operational policies
that are more restrictive than its fundamental investment limitations, as set
forth in this prospectus and the Combined Statement of Additional Information,
in order to comply with applicable laws and regulations, including the
provisions of and regulations under the Investment Company Act of 1940, as
amended. In particular, the Fund will comply with the various requirements of
Rule 2a-7, which regulates money market mutual funds. The Fund will determine
the effective maturity of its investments, as well as its ability to consider a
security as having received the requisite short-term ratings by nationally
recognized statistical rating organizations ("NRSROs"), according to Rule 2a-7.
The Fund may change these operational policies to reflect changes in the laws
and regulations without the approval of its shareholders.
THE MONEY MARKET FUND
The investment objective of The Money Market Fund is to provide current income
consistent with stability of principal.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of money market instruments maturing in 397
days or less. The average maturity of these securities, computed on a
dollar-weighted basis, will be 90 days or less. The Fund invests in high quality
money market instruments that are either rated in the highest short-term rating
category by one or more NRSROs or of comparable quality to securities having
such ratings. Examples of these instruments include, but are not limited to:
- domestic issues of corporate debt obligations, including variable rate
demand notes;
- commercial paper (including Canadian Commercial Paper and Europaper);
- certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
- short-term credit facilities, such as demand notes;
- asset-backed securities;
- obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities"); and
- other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities
to trade at par. The interest rate may float or be adjusted at regular
intervals (ranging from daily to annually), and is normally based on an
interest index or a stated percentage of a prime rate or another published
rate. Most variable rate demand notes allow the Fund to demand the
repurchase of the security on not more than seven days' prior notice. Other
notes only permit the Fund to tender the security at the time of each
interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest adjustment or the date on which the
Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million or insured by BIF or SAIF. Bank Instruments may include ECDs,
Yankee CDs and ETDs. The Fund will treat securities credit enhanced with a
bank's letter of credit as Bank Instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations
in, short-term revolving credit facilities with corporate borrowers. Demand
notes and other short-term credit arrangements usually provide for floating
or variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial
interest in a special purpose trust, limited partnership interests or
commercial paper or other debt securities issued by a special purpose
corporation. Although the securities often have some form of credit or
liquidity enhancement, payments on the securities depend predominately upon
collections of the loans and receivables held by the issuer.
RATINGS. An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by S&P,
Prime-1 by Moody's or F-1 (+ or --) by Fitch are all considered rated in the
highest short-term rating category. The Fund will follow applicable regulations
in determining whether a security rated by more than one NRSRO can be treated as
being in the highest short-term rating category; currently, such securities must
be rated by two NRSROs in their highest rating category. See "Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have been
credit enhanced by a guaranty, letter of credit or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. Generally, the Fund
will not treat credit enhanced securities as having been issued by the credit
enhancer for diversification purposes. However, under certain circumstances
applicable regulations may require the Fund to treat the securities as having
been issued by both the issuer and credit enhancer. The bankruptcy, receivership
or default of the credit enhancer will adversely affect the quality and
marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value
of the underlying securities. The bankruptcy, receivership or default by the
issuer of the demand feature, or a default on the underlying security or other
event that terminates the demand feature before its exercise, will adversely
affect the liquidity of the underlying security. Demand Features that are
exercisable even after a payment default on the underlying security may be
treated as a form of credit enhancement.
REGULATORY COMPLIANCE. The Fund may follow non-fundamental operational policies
that are more restrictive than its fundamental investment limitations, as set
forth in this prospectus and the Combined Statement of Additional Information,
in order to comply with applicable laws and regulations, including the
provisions of and regulations under the Investment Company Act of 1940, as
amended. In particular, the Fund will comply with the various requirements of
Rule 2a-7, which regulates money market mutual funds. For example, with limited
exceptions, Rule 2a-7 prohibits the investment of more than 5% of the Fund's
total assets in the securities of any one issuer, although the Fund's investment
limitation only requires such 5% diversification with respect to 75% of its
assets. The Fund will invest more than 5% of its assets in any one issuer only
under the circumstances permitted by Rule 2a-7. The Fund will also determine the
effective maturity of its investments, as well as its ability to consider a
security as having received the requisite short-term ratings by NRSROs,
according to Rule 2a-7. The Fund may change these operational policies to
reflect changes in the laws and regulations without the approval of its
shareholders.
INVESTMENT LIMITATIONS
The Funds' investment limitations are discussed below under "Borrowing Money",
"Selling Short", "Restricted and Illiquid Securities", "Diversification",
"Investing in New Issuers", and "Acquiring Securities."
PORTFOLIO INVESTMENTS AND STRATEGIES
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BORROWING MONEY
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 money
up to one-third of the value of its total assets and pledge up to 15% of the
value of those assets to secure such borrowings. This policy cannot be changed
without the approval of holders of a majority of a Fund's Shares.
SELLING SHORT
With respect to The U.S. Government Securities Fund and The Stock Fund, the
Funds will not make short sales of securities, except in certain limited
circumstances. This policy cannot be changed without the approval of holders of
a majority of a Fund's Shares.
RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in restricted securities. Restricted securities are any
securities in which a Fund may invest pursuant to its investment objective and
policies, but which are subject to restriction on resale under federal
securities law. The Funds will not invest more than 10% of the value of their
assets in securities subject to restrictions on resale under the Securities Act
of 1933 (except for certain restricted securities which meet the criteria for
liquidity as established by the Board of Trustees). In the case of The U.S.
Government Securities Fund, The Stock Fund and The Money Market Fund this
exception specifically extends to commercial paper issued under Section 4(2) of
the Securities Act of 1933. This policy cannot be changed without the approval
of holders of a majority of a Fund's Shares.
The U.S. Government Securities Fund, The Stock Fund and The Money Market Fund
may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law, and is generally sold to institutional investors, such as one of these
Funds, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to other
institutional investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Funds believe that Section 4(2) commercial paper and
certain other restricted securities, which meet the criteria for liquidity
established by the Trustees, are quite liquid. Therefore, the Funds intend to
treat these securities as liquid and not subject to the investment limitation
applicable to illiquid securities. In addition, because these securities are
liquid, the Funds will not subject such securities to the limitation otherwise
applicable to restricted securities.
The U.S. Government Securities Fund and The Stock Fund will not invest more than
15 % of their net assets in illiquid securities, including repurchase agreements
providing for settlement more than seven days after notice and certain
securities determined by the Trustees not to be liquid. The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund will not invest more than 15% of
the value of their net assets in illiquid securities including repurchase
agreements providing for settlement in more than seven days after notice,
certain securities determined by the Trustees not to be liquid, participation
interests and variable rate municipal securities without a demand feature or
with a demand feature of longer than seven days and which the adviser believes
cannot be sold within seven days. The Treasury Money Market Fund will not invest
more than 10% of its net assets in illiquid securities, including repurchase
agreements providing for settlement more than seven days after notice and
certain securities not determined by the Trustees to be liquid. The Money Market
Fund will not invest more than 10% of its net assets in illiquid securities,
including certain restricted securities not determined by the Trustees to be
liquid, non-negotiable time deposits, and repurchase agreements providing
settlement in more than seven days after notice.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Fund may purchase securities on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, a Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause a Fund to miss a price or yield considered to be advantageous.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds may invest in the securities of other investment companies, but will
not own more than 3% of the total outstanding voting stock of any investment
company, invest more than 5% of total assets in any one investment company, or
invest more than 10% of total assets in investment companies in general. The
Funds will invest in other investment companies primarily for the purpose of
investing short-term cash which has not yet been invested in other portfolio
instruments. The adviser will waive its investment advisory fee on assets
invested in securities of open-end investment companies.
The Funds may also hold cash in such proportions as the Fund's adviser may
determine.
DIVERSIFICATION
With respect to 75% of the value of total assets, The U.S. Government Securities
Fund, The Stock Fund and The Money Market Fund will not invest more than 5% in
securities of any one issuer other than cash or securities issued or guaranteed
by the government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities. These policies cannot
be changed without the approval of holders of a majority of a Fund's Shares.
INVESTING IN NEW ISSUERS
The U.S. Government Securities Fund, The Stock Fund and The Money Market Fund
will not invest more than 5% of their total assets in securities of issuers that
have records of less than three years of continuous operations including the
operation of any predecessor. The Virginia Municipal Bond Fund and The Maryland
Municipal Bond Fund will not invest more than 5% of their total assets in
industrial development bonds, the principal and interest of which are paid by
companies (or guarantors, where applicable) which have an operating history of
less than three years.
REPURCHASE AGREEMENTS
The securities in which the Funds invest may be purchased pursuant to repurchase
agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other securities to a Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent that the
original
seller does not repurchase the securities from a Fund, that Fund could receive
more or less than the repurchase price on any sale of such securities.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, The U.S. Government Securities Fund, The
Stock Fund, The Treasury Money Market Fund and The Money Market Fund, may lend
portfolio securities on a short-term or a long-term basis up to one-third of the
value of their respective 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
investment adviser has determined are creditworthy under guidelines established
by the Board of Trustees and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the securities
loaned.
ACQUIRING SECURITIES
The U.S. Government Securities Fund and The Stock Fund will not acquire more
than 10% of the outstanding voting securities of any one issuer. This policy
cannot be changed without the approval of holders of a majority of the Fund's
shares.
INVESTMENT RISKS
The Stock Fund and The Money Market Fund's ECDs, ETDs, Yankee CDs, and Europaper
are subject to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may adversely
affect the payment of principal or interest, foreign withholding or other taxes
on interest income, difficulties in obtaining or enforcing a judgment against
the issuing entity, and the possible impact of interruptions in the flow of
international currency transactions. Different risks may also exist for ECDs,
ETDs, and Yankee CDs because the banks issuing these instruments, or their
domestic or foreign branches, are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements, loan
limitations, examinations, accounting, auditing, recordkeeping, and the public
availability of information. These factors will be carefully considered by the
Fund's adviser in selecting investments for the Fund.
PARTICIPATION INTERESTS
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund may
purchase participation interests from financial institutions such as commercial
banks, savings and loan associations and insurance companies. These
participation interests give the Funds an undivided interest in municipal
securities. The financial institutions from which the Funds purchase
participation interests frequently provide or secure irrevocable letters of
credit or guarantees to assure that the participation interests are of good
quality. The Board of Trustees will determine that participation interests meet
the prescribed quality standards for the Funds.
VARIABLE RATE MUNICIPAL SECURITIES
Some of the municipal securities which The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund purchase may have variable interest rates. Variable
interest rates are ordinarily stated as a percentage of the prime rate of a bank
or some similar standard, such as the 91-day U.S. Treasury bill rate. Many
variable rate municipal securities are subject to repayment of principal on
demand by the Funds (usually in not more than seven days). While some variable
rate municipal securities without this demand feature may not be considered
liquid by the Fund's adviser, the Fund's investment limitations provide that it
will invest no more than 15% of its total assets in illiquid securities. All
variable rate municipal securities will meet the quality standards for the
Funds. The investment adviser has been instructed by the Board of Trustees to
monitor the pricing, quality and liquidity of the variable rate municipal
securities, including participation interests, held by the Funds on the basis of
published financial information and reports of the rating agencies and other
analytical services.
MUNICIPAL LEASES
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund may
purchase municipal securities in the form of municipal leases which are
obligations issued by state and local governments or authorities to finance the
acquisition of equipment and facilities and may be considered to be illiquid.
Municipal leases may take the form of a lease, an installment purchase contract,
a conditional sales contract, or a participation certificate in any of the
above.
TEMPORARY INVESTMENTS
From time to time, during periods of other than normal market conditions, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund may invest in
short-term tax-exempt or taxable temporary investments. These temporary
investments include: notes issued by or on behalf of municipal or corporate
issuers; tax-free commercial paper; other temporary municipal securities;
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities; other debt securities; commercial paper; certificates of
deposit of banks; and repurchase agreements (arrangements in which an
organization selling a Fund a security agrees at the time of sale to repurchase
it at a mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those it considers to
be of good quality.
Although each Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax
or Virginia or Maryland personal income tax.
VIRGINIA AND MARYLAND MUNICIPAL SECURITIES
Virginia and Maryland 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.
Virginia and Maryland 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
issuer'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.
INVESTMENT RISKS. Yields on Virginia and Maryland municipal securities depend on
a variety of factors, including: the general conditions of 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 Commonwealth of Virginia, the state of Maryland or
their municipalities could impact a Fund's portfolio. The ability of a Fund to
achieve its investment objective also depends on the continuing ability of the
issuers of Virginia and Maryland 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 Virginia and Maryland
municipal securities which meet a Fund's quality standards may not be possible
if the Commonwealth of Virginia, the state of Maryland or their municipalities
do not maintain their current credit ratings. In addition, certain Virginia or
Maryland constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in adverse
consequences affecting Virginia and Maryland municipal securities.
FUTURES CONTRACTS AND OPTIONS TO BUY OR SELL SUCH CONTRACTS
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund reserve
the right to enter into interest rate futures contracts as a hedge without
shareholder action. Before the Funds begin using this investment technique,
shareholders will be notified.
NON-DIVERSIFICATION
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund are
non-diversified investment companies (as defined by the Investment Company Act
of 1940, as amended). As such,
there is no limit on the percentage of assets which can be invested in any
single issuer. An investment in the Funds, therefore, will entail greater risk
than would exist in a diversified investment company because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of each Fund's portfolio. Any economic, political or
regulatory developments affecting the value of the securities in each 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.
To meet federal tax requirements for qualifications as a "regulated investment
company" the Funds will limit their investments so at the close of each quarter
of each fiscal year: (a) with regard to at least 50% of their respective total
assets no more than 5% of their respective total assets are invested in the
securities of a single issuer, and (b) no more than 25% of their respective
total assets are invested in the securities of a single issuer.
THE MEDALIST FUNDS INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Board of Trustees (the "Board" or the "Trustees") is
responsible for managing the business affairs of the Trust and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Signet Asset
Management, the Trust's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for each Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the assets of
each Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee at
annual rates equal to percentages of the relevant Fund's average net assets
as follows: The Treasury Money Market Fund and The Money Market Fund--.50%;
and The U.S. Government Securities Fund, The Stock Fund, The Virginia
Municipal Bond Fund and The Maryland Municipal Bond Fund--.75%. The fee
paid by The U.S. Government Securities Fund, The Stock Fund, The Virginia
Municipal Bond Fund and The Maryland Municipal Bond Fund, while higher than
the advisory fee paid by other mutual funds in general, is comparable to
fees paid by other mutual funds with similar objectives and policies. The
investment advisory contract provides for the voluntary waiver of expenses
by the Adviser from time to time. The Adviser can terminate this voluntary
waiver of expenses at any time with respect to a Fund at its sole
discretion. The Adviser has also undertaken to reimburse the Funds for
operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Signet Asset Management is a division of Signet
Trust Company, a wholly-owned subsidiary of Signet Banking Corporation.
Signet Banking Corporation is a multi-state, multi-bank holding company
which has provided investment management services since 1956. Signet Trust
Company, established in 1975, provides trust and fiduciary services to
individuals, corporations and tax-exempt organizations throughout Virginia
and neighboring states. As of September 30, 1993, Signet Trust Company had
$2.6 billion in total trust assets. Signet Asset Management has investment
authority over $1.6 billion of the $2.6 billion. The Adviser has managed
The Medalist Funds since their inception in 1990. The Adviser manages three
equity common trust funds with $47.5 million in assets and three fixed
income common trust funds with $204.7 million in assets.
E. Christian Goetz has managed The U.S. Government Securities Fund since
August, 1991. Mr. Goetz is a Chartered Financial Analyst, and is currently
Vice President of Signet Trust Company and Director of Fixed Income
Investments for Signet Asset Management, where he has been a fixed income
portfolio manager since 1990. Prior to joining Signet Asset Management, Mr.
Goetz had been a foreign and domestic bond portfolio manager with Central
Fidelity Bank, Richmond, Virginia, since 1988.
Garry M. Allen has managed The Stock Fund since July 1994. Mr. Allen is a
Chartered Financial Analyst, and has since March 1994 been Senior Vice
President of Signet Trust Company and Chief Investment Officer for Signet
Asset Management. Prior to joining Signet Asset Management,
Mr. Allen had been Managing Director of U.S. Equities (November 1990 to
March 1994) and Director, International Asset Management (June 1985 to
November 1990) of Virginia Retirement System.
Elizabeth D. Swartz has managed The Maryland Municipal Bond Fund, and The
Virginia Municipal Bond Fund, since February 1992. Ms. Swartz is currently
Investment Officer of Signet Trust Company and Fixed Income Portfolio
Manager for Signet Asset Management. Prior to joining Signet Asset
Management in 1991, Ms. Swartz had been a fixed income portfolio manager
with Sovran Bank, Richmond, Virginia, since 1987.
DISTRIBUTION OF INVESTMENT SHARES OF THE FUNDS
Federated Securities Corp. is the principal distributor for Shares of the Funds.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. According to the provisions of a distribution plan adopted
pursuant to Investment Company Act Rule 12b-1, the distributor may select
brokers and dealers to provide distribution and administrative services as to
Shares of the Funds. The distributor may also select administrators (including
financial institutions, fiduciaries, custodians for public funds and investment
advisers) to provide administrative services. Administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various personnel including
clerical, supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding Shares; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as each Fund reasonably requests for its Shares.
Brokers, dealers, and administrators will receive fees based upon Shares owned
by their clients or customers. The schedules of such fees and the basis upon
which such fees will be paid will be determined from time to time by the Board
of Trustees, provided that for any period the total amount of fees representing
an expense to the Trust shall not exceed an annual rate of .25 of 1% of the
average net asset value of Shares of The U.S. Government Securities Fund, The
Stock Fund, The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund, and .35 of 1% of the average net asset value of Shares of The Treasury
Money Market Fund and The Money Market Fund held in the accounts during the
period for which the brokers, dealers, and administrators provide services. Any
fees paid by the distributor with respect to Shares of a Fund pursuant to the
distribution plan will be reimbursed by the Trust from the assets of the Shares
of that Fund.
The distributor, in its sole discretion, may uniformly offer to pay all brokers
or dealers selling Shares of a Fund additional amounts predicated upon the
amount of shares of that Fund or certain other Funds of The Medalist Funds sold
by the broker or dealer. Such payments, if made, will be in addition to amounts
paid under the distribution plan and will not be an expense of a Fund.
ADMINISTRATIVE ARRANGEMENTS. The distributor may pay financial institutions a
fee based upon the average net asset value of Shares of their customers invested
in the Trust for providing administrative services. This fee, if paid, will be
reimbursed by the Adviser and not the Trust.
ADMINISTRATION OF THE FUNDS
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Funds with certain administrative personnel
and services necessary to operate each Fund and the separate classes. Such
services include shareholder servicing and certain legal and accounting
services. Federated Administrative Services provides these at an annual rate as
specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE TRUST
----------------------------------- -----------------------------------
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund; however, this requirement was waived by the administrator for the year
ended September 30, 1993. Federated Administrative Services may voluntarily
waive a portion of its fee.
CUSTODIAN. Signet Trust Company, Richmond, Virginia, is custodian for the
securities and cash of the Funds. Under the Custodian Agreement, Signet Trust
Company holds the Funds' portfolio securities in safekeeping and keeps all
necessary records and documents relating to its duties.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the Shares of the Funds and
dividend disbursing agent for the Funds.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P. Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Funds are Deloitte &
Touche, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUNDS AND INVESTMENT SHARES
Each Fund pays all of its own expenses and its allocable share of the Trust's
expenses.
The Trust's expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust; Trustees fees; auditors' fees; the cost of
meetings of Trustees; legal fees of the Trust; association membership dues and
such nonrecurring and extraordinary items as may arise.
Each Fund's expenses for which holders of Shares may pay their allocable portion
include, but are not limited to: registering each Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such nonrecurring and extraordinary items as may
arise.
In addition, the Board of Trustees reserves the right to allocate certain other
expenses to holders of Shares as it deems appropriate ("Class Expenses"). In any
case, Class Expenses would be limited to: distribution fees; transfer agent fees
as identified by the transfer agent as attributable to holders of Shares;
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and
registration fees paid to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
legal fees relating solely to Shares; and Trustees' fees incurred as a result of
issues relating solely to Shares.
BROKERAGE TRANSACTIONS. With respect to The U.S. Government Securities Fund and
The Stock Fund, 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
utilize 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, the Adviser may give
consideration to those firms which have sold or are selling shares of the Trust.
The Adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Board of Trustees.
NET ASSET VALUE
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With respect to The Treasury Money Market Fund and The Money Market Fund, each
Fund attempts to stabilize the net asset value of its Shares at $1.00 by valuing
its portfolio securities using the amortized cost method. The net asset value
for Shares is determined by adding the interest of the Shares in the value of
all securities and other assets of the Fund, subtracting the interest of the
Shares in the liabilities of the Fund and those attributable to Shares and
dividing the remainder by the total number of Shares outstanding. Of course, The
Treasury Money Market Fund and The Money Market Fund cannot guarantee that their
net asset value will always remain at $1.00 per Share.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund net asset
value per Share fluctuates and is determined by adding the interest of the
Shares in the market value of all securities and other assets of the Fund,
subtracting the interest of the Shares in the liabilities of the Fund and those
attributable to Shares, and dividing the remainder by the total number of Shares
outstanding. The net asset value for Trust Shares may exceed that of Shares due
to the variance in daily net income realized by each class. Such variance will
reflect only accrued net income to which the shareholders of a particular class
are entitled.
INVESTING IN INVESTMENT SHARES
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SHARE PURCHASES
Shares of the Funds are sold on days on which the New York Stock Exchange is
open for business except on Lee-Jackson-King Day, Columbus Day and Veterans'
Day. Shares of the Funds may be purchased through Signet Financial Services,
Inc. In connection with the sale of Shares of the Funds, the distributor may
from time to time offer certain items of nominal value to any shareholder or
investor. The Funds reserve the right to reject any purchase request.
With respect to The Treasury Money Market Fund and The Money Market Fund, an
investor may write or call Signet Financial Services, Inc. to place an order to
purchase Shares of the Funds. (Call toll-free 1-800-723-9512). Purchase orders
must be received by Signet Financial Services, Inc. before 4:00 p.m. (Eastern
time). Payment for Shares of the Funds may be made by check or by wire. Orders
are considered received after payment by check is converted into federal funds
and received by Signet Financial Services, Inc. Payment must be received by
Signet Financial Services, Inc. on the next business day after placing the
order. For orders received by 11:00 a.m. (Eastern time), shareholders will begin
earning dividends on that day provided payment by wire is received by Signet
Financial Services, Inc. by 2:00 p.m. (Eastern time) on that day.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, an investor
may write or call Signet Financial Services, Inc. to place an order to purchase
Shares of the Fund. (Call toll-free 1-800-723-9512). Purchase orders must be
received by Signet Financial Services, Inc. before 4:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's public offering price. Payment
for Shares of the Funds may be made by check or by wire. Payment must be
received by Signet Financial Services, Inc. within five days of placing the
order.
BY CHECK. Purchases of Shares by check must be made payable to Signet Financial
Services, Inc. and sent to Signet Financial Services, Inc., P.O. Box 26301,
Richmond, VA 23260.
BY WIRE. With respect to The Treasury Money Market Fund and The Money Market
Fund, payment by wire must be received by Signet Financial Services, Inc. before
2:00 p.m. (Eastern time) by the next business day after placing the order. With
respect to The U.S. Government Securities Fund, The Stock Fund, The Virginia
Municipal Bond Fund and The Maryland Municipal Bond Fund, payment by wire must
be received by Signet Financial Services, Inc. by the fifth business day after
placing the order. Shares of the Funds cannot be purchased by Federal Reserve
Wire on Columbus Day, Veterans' Day or Lee-Jackson-King Day.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, holders of Shares may add to their investment
on a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by Signet Financial Services, Inc., plus the applicable sales charge. A
Shareholder may apply for participation in this program through Signet Financial
Services, Inc.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,000. Subsequent investments must
be in amounts of at least $100. No minimum investment is required for officers,
directors and employees (and their spouses and immediate family members) of
Signet Banking Corporation or its subsidiaries.
WHAT SHARES COST
Shares of the Funds are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Funds.
On Monday through Friday, The U.S. Government Securities Fund, The Stock Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund calculate
net asset value at 4:00 p.m. (Eastern time), while The Treasury Money Market
Fund and The Money Market Fund calculate net asset value at 1:00 p.m. (Eastern
time), and 4:00 p.m. (Eastern time), except on: (i) 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; (ii) days during which no shares of a
Fund are tendered for redemption and no orders to purchase shares are received;
or (iii) the following holidays: New Year's Day, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued unless
requested by contacting Signet Financial Services, Inc. in writing.
With respect to The Treasury Money Market Fund and The Money Market Fund,
monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month. With respect to The U.S.
Government Securities Fund, The Stock Fund, The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund, detailed confirmations of each purchase or
redemption are sent to each shareholder. In addition, monthly confirmations are
sent to report dividends paid during that month.
DIVIDENDS
With respect to The U.S. Government Securities Fund, The Virginia Municipal Bond
Fund, The Maryland Municipal Bond Fund, The Treasury Money Market Fund and The
Money Market Fund, dividends are declared daily and paid monthly.
With respect to The Treasury Money Market Fund and The Money Market Fund, Shares
purchased by wire before 2:00 p.m. (Eastern time) begin earning dividends that
day. Shares purchased by check begin earning dividends on the day after the
check is converted by Signet Trust Company into federal funds.
With respect to The Stock Fund, dividends are declared and paid quarterly.
Unless cash payments are requested by shareholders in writing to a Fund,
dividends are automatically reinvested in additional Shares of the Fund on
payment dates at the ex-dividend date net asset value without a sales charge.
CAPITAL GAINS
With respect to The Treasury Money Market Fund and The Money Market Fund,
capital gains, if any, 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.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, capital gains
realized by a Fund, if any, will be distributed at least once every 12 months.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All holders of Investment Shares are shareholders of the Trust. Holders of
Investment Shares have easy access to Investment Shares of the other funds
comprising the Trust ("participating funds") through an exchange program.
Investment Shares may be exchanged for Investment Shares of participating funds
at net asset value without paying a redemption fee or sales charge upon such
exchange.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the participating fund into which an
exchange is to be made.
Upon receipt by Signet Financial Services, Inc. of proper instructions and all
necessary supporting documents, Shares submitted for exchange will be redeemed
at the next-determined net asset value and invested in Investment Shares of the
other participating fund. If the exchanging shareholder does not have an account
in the participating fund whose Shares are being acquired, a new account will be
established with the same registration and reinvestment options for dividends
and capital gains as the account from which Shares are exchanged, unless
otherwise specified by the shareholder. In the case where the new account
registration is not identical to that of the existing account, a signature
guarantee is required. (See "Redeeming Shares By Mail".) Exercise of this
privilege is treated as a sale for federal income tax purposes and, depending on
the circumstances, a short-or long-term capital gain or loss may be realized.
The Fund reserves the right to modify or terminate the exchange privilege at any
time. Shareholders will be notified prior to any modification or termination of
this privilege. Shareholders may obtain further information on the exchange
privilege by calling Signet Financial Services, Inc.
BY TELEPHONE. Shareholders may provide instructions for exchanges between
participating funds by calling Signet Financial Services, Inc. toll-free at
1-800-723-9512. It is recommended that investors request this privilege at the
time of their initial application. Information on this service can be obtained
through Signet Financial Services, Inc. Shares may be exchanged by telephone
only between fund accounts having identical shareholder registrations. Exchange
instructions given by telephone may be electronically recorded. If reasonable
procedures are not followed by a Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Signet Financial Services, Inc. and deposited to the shareholder's
mutual fund account before being exchanged.
Telephone exchange instructions must be received by Signet Financial Services,
Inc. before 3:00 p.m. (Eastern time) for Shares to be exchanged the same day.
The telephone exchange privilege may be modified or terminated at any time.
Shareholders will be notified of such modification or termination. Shareholders
of a Fund may have difficulty in making exchanges by telephone through banks,
brokers, and other financial institutions during times of drastic economic or
market changes. If a shareholder cannot contact his bank, broker, or financial
institution by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail to Signet Financial Services, Inc.
REDEEMING INVESTMENT SHARES
- --------------------------------------------------------------------------------
Each Fund redeems Shares at their net asset value next determined after Signet
Financial Services, Inc. receives the redemption request. Redemptions will be
made on days on which a Fund computes its net asset value. Telephone or written
requests for redemption must be received in proper form by Signet Financial
Services, Inc.
BY TELEPHONE. A shareholder may redeem Shares of a Fund by calling Signet
Financial Services, Inc. to request the redemption. (Call toll free
1-800-444-7123). Shares will be redeemed at the net asset value next determined
after a Fund receives the redemption request from Signet Financial Services,
Inc.
With respect to The Treasury Money Market Fund and The Money Market Fund,
redemption requests received before 11:00 a.m. (Eastern time) will be wired the
same day, but will not be entitled to that day's dividend. A redemption request
must be received by Signet Financial Services, Inc. before 4:00 p.m. (Eastern
time). Redemption requests through registered broker/dealers must be received by
Signet Financial Services, Inc. before 3:00 p.m. (Eastern time). Signet
Financial Services, Inc. is responsible for promptly submitting redemption
requests and providing proper written redemption instructions to a Fund. Other
registered broker/dealers may charge customary fees and commissions for this
service.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, a redemption
request must be received by Signet Financial Services, Inc. before 4:00 p.m.
(Eastern time) in order for Shares to be redeemed at that day's net asset value.
Redemption requests through registered broker/dealers must be received by Signet
Financial Services, Inc. before 3:00 p.m. (Eastern time) in order for Shares to
be redeemed at that day's net asset value. Signet Financial Services, Inc. is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to a Fund. Other registered broker/dealers may
charge customary fees and commissions for this service.
If, at any time, a Fund should determine it necessary to terminate or modify
this method of redemption, shareholders would be promptly notified.
An authorization form permitting a Fund to accept telephone redemption requests
must first be completed. It is recommended that investors request this privilege
at the time of their initial application. If not completed at the time of
initial application, authorization forms and information on this service can be
obtained through Signet Financial Services, Inc. Telephone redemption
instructions may be recorded. If reasonable procedures are not followed by a
Fund, it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered.
BY MAIL. Shareholders may redeem Shares of a Fund by sending a written request
to Signet Financial Services, Inc. The written request should include the
shareholder's name, the Fund name, the class of shares, the account number, and
the Share or dollar amount requested. If share certificates have been issued,
they must be properly endorsed and should be sent by registered or certified
mail with the written request to Signet Financial Services, Inc. P.O. Box 26301,
Richmond, VA 23260.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with a Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by BIF,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the SAIF, which is administered by the FDIC; 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.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
REDEMPTION FEE--THE U.S. GOVERNMENT SECURITIES FUND, THE STOCK FUND,
THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND
Shareholders redeeming Shares from accounts in the Funds listed above within
five years of the purchase date of those Shares will be charged a redemption fee
by the Fund's distributor. The fee will
be based upon the lesser of the original purchase price or the net asset value
of the Shares redeemed, as follows:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE REDEMPTION FEE
---------------------------------------- ---------------
<S> <C>
Under $100,000 2.0%
$100,000-$249,999 1.5%
$250,000-$399,999 1.0%
$400,000-$499,999 0.5%
$500,000 or more None
</TABLE>
Separate purchases will not be aggregated for purposes of determining the
applicable redemption fee. In instances in which Fund Shares have been acquired
in exchange for Investment Shares in other Medalist Funds, (i) the purchase
price is the price of the Shares when originally purchased and (ii) the five
year period will begin on the date of the original purchase. The redemption fee
will not be imposed on Shares acquired (i) through the reinvestment of dividends
or distribution of capital gains, (ii) prior to October 1, 1992, or (iii) in
exchange for Shares acquired prior to October 1, 1992. In computing the
redemption fee, if any, redemptions are deemed to have occurred in the following
order: 1) Shares acquired through the reinvestment of dividends and long-term
capital gains, 2) Shares purchased prior to October 1, 1992 (including Shares
acquired in exchange for Shares purchased prior to October 1, 1992), 3) Shares
purchased more than five years before the date of redemption, and 4) Shares
purchased after October 1, 1992 and redeemed within five years of the date of
purchase, determined on a first-in, first-out basis.
The redemption fee will not be imposed on redemption of Shares (i) following the
death or disability (as defined in the Internal Revenue Code) of a shareholder;
(ii) to the extent that the redemption represents a minimum required
distribution from an IRA or other retirement plan to a shareholder who has
attained the age of 70 1/2; (iii) owned by the Trust Division of Signet Trust
Company or other affiliates of Signet Banking Corporation representing funds
which are held in a fiduciary, agency, custodial, or similar capacity, or owned
by directors and employees of the Fund, Signet Banking Corporation or Federated
Securities Corp. or their affiliates, or any bank or investment dealer who has a
sales agreement with Federated Securities Corp. with regard to the Fund, and
their spouses and children under 21; or (iv) if the proceeds from the redemption
are used to purchase a Signet Select variable annuity within 10 days of the
redemption.
Redemption fees are not charged when Fund Shares are exchanged for shares of any
other portfolio of The Medalist Funds or when redemptions are made by the Fund
to liquidate accounts with low balances.
REDEMPTION FEE--THE TREASURY MONEY MARKET FUND AND THE MONEY MARKET FUND
A redemption fee will be imposed only in certain instances in which the Shares
of The Treasury Money Market Fund or The Money Market Fund being redeemed were
acquired in exchange for Shares of those other Medalist Funds which charge a
redemption fee ("Redemption Fee Shares"). If Shares of The Treasury Money Market
Fund or The Money Market Fund were acquired in exchange for Redemption Fee
Shares, redemption of the Shares of The Treasury Money Market Fund and The Money
Market Fund, within five years of the purchase of the Redemption Fee Shares,
will have the same consequences as described under "Redemption Fee--The U.S.
Government Securities Fund, The Stock Fund, The Virginia Municipal Bond Fund,
and The Maryland Municipal Bond Fund."
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When Shares of a Fund are purchased by check, or through the Automated Clearing
House ("ACH"), the proceeds from the redemption of those Shares are not
available, and the Shares may not be exchanged, until Signet Financial Services,
Inc. is reasonably certain that the purchase check has cleared, which could take
up to ten calendar days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Shares are
redeemed to provide for periodic
withdrawal payments in an amount directed by the shareholder. Depending upon the
amount of the withdrawal payments, the amount of dividends paid and capital
gains distributions with respect to Shares, and the fluctuation of the net asset
value of Shares redeemed under this program, redemptions may reduce, and
eventually deplete, the shareholder's investment in Shares of a Fund. For this
reason, payments under this program should not be considered as yield or income
on the shareholder's investment in Shares of a Fund. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000. A shareholder may apply for participation in this program through
Signet Financial Services, Inc.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, a Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,000 due to shareholder redemptions. This requirement does not apply, however,
if the balance falls below $1,000 because of changes in a Fund's net asset
value. Before Shares are redeemed to close an account, the shareholder is
notified in writing and allowed 30 days to purchase additional Shares to meet
the minimum requirement.
REDEMPTION IN KIND
The Trust is obligated to redeem Shares solely in cash up to $250,000 or 1% of
any class' net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as net asset value is determined. The portfolio
instruments will be selected in a manner that the Trustees deem 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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only shareholders of that Fund or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the operation of the Trust or a Fund and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
As of November 9, 1993, Stephens Inc., Little Rock, Arkansas, acting as
shareholder for the benefit of individual investors, was the owner of record of
4,749,681 shares (41.66%) of The U.S. Government Securities Fund--Investment
Shares; 3,229,374 shares (49.59%) of The Virginia Municipal Bond
Fund--Investment Shares; 1,542,904 shares (49.41%) of The Maryland Municipal
Bond Fund--Investment Shares; 20,745,412 shares (98.43%) of The Treasury Money
Market Fund--Investment Shares; and 9,040,547 shares (84.04%) of The Money
Market Fund--Investment Shares, and therefore, may, for certain purposes, be
deemed to control the Funds and be able to affect the outcome of certain matters
presented for a vote of shareholders.
As of November 9, 1993, Signet Trust Company, Richmond, Virginia, acting in
various capacities for numerous accounts, was the owner of record of 10,986,813
shares (99.99%) of The U.S. Government Securities Fund--Trust Shares; 5,202,317
shares (99.99%) of The Stock Fund--Trust Shares; 3,771,697 shares (99.99%) of
The Virginia Municipal Bond Fund--Trust Shares; 1,058,305 shares (99.99%) of The
Maryland Municipal Bond Fund--Trust Shares; 143,210,919 shares (99.99%) of The
Treasury Money
Market Fund--Trust Shares; and 138,542,690 shares (99.99%) of The Money Market
Fund--Trust Shares, and therefore, may, for certain purposes, be deemed to
control the Funds and be able to affect the outcome of certain matters presented
for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign.
In the unlikely event a shareholder is held personally liable for obligations of
the Trust, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust cannot meet its obligations to indemnify shareholders and pay
judgments against them from its assets.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, or distributing securities. However, such banking
laws and regulations do not prohibit such a holding company affiliate or banks
generally from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of such a customer. Signet Trust Company is subject to such
banking laws and regulations.
Signet Trust Company believes, based on the advice of its counsel, that Signet
Asset Management may perform the services for any Fund contemplated by its
advisory agreement with the Trust without violation of the Glass-Steagall Act or
other applicable banking 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 such or future statutes and regulations, could
prevent Signet Asset Management from continuing to perform all or a part of the
above services for its customers and/or a Fund. If it were prohibited from
engaging in these customer-related activities, the Trustees would consider
alternative advisers and means of continuing available investment services. In
such event, changes in the operation of a Fund may occur, including possible
termination of any automatic or other Fund share investment and redemption
services then being provided by Signet Asset Management. It is not expected that
existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Signet Asset Management is found)
as a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Funds anticipate that they will pay no federal income tax because each Fund
expects to meet requirements of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies.
Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by a Fund
will not be combined for tax purposes with those realized by any of the other
Funds.
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Treasury Money Market Fund and The Money Market Fund, unless otherwise exempt,
shareholders are required to pay federal income tax on any dividends and other
distributions received. This applies whether dividends and distributions are
received in cash or as additional shares.
Shareholders of The U.S. Government Securities Fund, The Stock Fund, The
Treasury Money Market Fund and The Money Market Fund are urged to consult their
own tax advisers regarding the status of their accounts under state and local
tax laws.
THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL
BOND FUND FEDERAL INCOME TAX
With respect to The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund, shareholders are not required to pay the federal regular income tax on any
dividends received from a Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on some municipal bonds may be included in
calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, 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. A Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, while neither
Fund has a present intention of purchasing any private activity bonds, should
either Fund purchase any such bonds, a portion of that Fund's dividends may be
treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of either Fund
which represent interest on municipal bonds may be 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 a Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of either 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.
VIRGINIA TAXES. Income to the Fund that is exempt from Virginia state income
taxes and income taxes imposed by Virginia municipalities will retain its exempt
status when distributed to Virginia shareholders.
Shares of the Fund will not be subject to Virginia state or local personal
property taxes.
MARYLAND TAXES. Holders of the Fund who are individuals, corporations, estates
or trusts and who are subject to Maryland state and local income tax will not be
subject to tax in Maryland on Fund dividends to the extent that such dividends
qualify as exempt-interest dividends of a regulated investment company under
Section 852(b)(5) of the Internal Revenue Code of 1986, as amended (the "Code"),
and which are attributable to (i) interest on tax-exempt obligations of the
State of Maryland or its political subdivisions or authorities, (ii) interest on
obligations of the United States or an authority, commission, instrumentality,
possession or territory of the United States, or (iii) gain
realized by the Fund from the sale or exchange of bonds issued by Maryland, a
political subdivision of Maryland, or the United States government (excluding
obligations issued by the District of Columbia, a territory or possession of the
United States, or a department, agency, instrumentality, or political
subdivision of the District, territory or possession).
To the extent that distributions of the Fund are attributable to sources other
than those described above, such as (i) interest on obligations issued by states
other than Maryland or (ii) income from repurchase contracts, such distributions
will not be exempt from Maryland state and local income taxes. In addition, gain
realized by a shareholder upon a redemption or exchange of Fund shares will be
subject to Maryland taxation.
Maryland presently includes in taxable net income items of tax preferences as
defined in the Code. Interest paid on certain private activity bonds constitutes
a tax preference. Accordingly, subject to a threshold amount, 50% of any
distributions of the Fund attributable to such private activity bonds will not
be exempt from Maryland state and local income taxes.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the Fund to purchase or carry shares of the The Maryland Municipal Bond Fund
will not be deductible for Maryland state and local income tax purposes to the
extent such interest is allocable to exempt-interest dividends.
Shares of the Fund will not be subject to the Maryland personal property tax.
OTHER STATE AND LOCAL TAXES. With respect to The Virginia Municipal Bond Fund
and The Maryland Municipal Bond Fund, distributions representing net interest
received on tax-exempt municipal securities are not necessarily free from income
taxes of any other state or local taxing authority. State laws differ on this
issue and shareholders are urged to consult their own tax advisers.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, The U.S. Government Securities Fund and The Stock Fund may
advertise total return and yield. The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund may advertise total return, yield and
tax-equivalent yield. The Treasury Money Market Fund and The Money Market Fund
may advertise yield and effective yield.
Total return represents the change, over a specified period of time, in the
value of an investment in a Fund after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares of The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund is calculated
by dividing the net investment income per Share (as defined by the Securities
and Exchange Commission) earned by Shares over a thirty-day period by the
maximum offering price per share of Shares of a Fund on the last day of the
period. This number is then annualized using semi-annual compounding. The yield
does not necessarily reflect income actually earned by Shares and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
The yield of Shares of The Treasury Money Market Fund and The Money Market Fund
represent the annualized rate of income earned on an investment in Shares over a
seven-day period. It is the annualized dividends earned during the period on the
investment, shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but, when annualized, the income earned on an
investment in Shares is assumed to be reinvested daily. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
The tax equivalent yield of the Shares for The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that the Shares would have had to earn to
equal its actual yield, assuming a specific tax rate. The tax-equivalent yield
does not necessarily reflect income actually earned by Shares and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
With respect to The U.S. Government Securities Fund and The Stock Fund, total
return and yield will be calculated separately for Investment Shares and Trust
Shares. Because Investment Shares may be
subject to a redemption fee and are subject to a 12b-1 fee, the total return and
yield for Trust Shares for the same period will exceed that of Investment
Shares.
With respect to The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund, total return, yield and tax-equivalent yield will be calculated separately
for Investment Shares and Trust Shares. Because Investment Shares may be subject
to a redemption fee and are subject to a 12b-1 fee, the total return and yield
for Trust Shares for the same period will exceed that of Investment Shares.
With respect to The Treasury Money Market Fund and The Money Market Fund, yield
and effective yield will be calculated separately for Investment Shares and
Trust Shares. Because Investment Shares are subject to 12b-1 fees the yield and
effective yield for Trust Shares, for the same period, will exceed that of
Investment Shares.
From time to time, the Funds may advertise their performances using certain
reporting services and compare their performances to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Trust Shares, the other class of shares offered by the Funds, are sold to
trusts, fiduciaries and institutions at net asset value at a minimum initial
investment of $10,000. Trust Shares are not sold pursuant to a Rule 12b-1 Plan.
The amount of dividends payable to Trust Shares will exceed those payable to
Investment Shares by the difference between class expenses and distribution
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of each of the Funds.
[THIS PAGE INTENTIONALLY LEFT BLANK]
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The U.S. Government Securities Fund Federated Investors Tower
The Stock Fund Pittsburgh, Pennsylvania 15222-3779
The Treasury Money Market Fund
The Money Market Fund
The Virginia Municipal Bond Fund
The Maryland Municipal Bond Fund
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Signet Asset Management 7 North Eighth Street
Richmond, Virginia 23219
- ------------------------------------------------------------------------------------------------
Custodian
Signet Trust Company 7 North Eighth Street
Richmond, Virginia 23219
- ------------------------------------------------------------------------------------------------
Transfer Agent, and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 2500 One PPG Place
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
</TABLE>
SIGNET
ASSET MANAGEMENT
A Division of Signet Trust Company
Investment Adviser
FEDERATED SECURITIES CORP. IS THE DISTRIBUTOR OF THE FUNDS.
3042108A-R (8/94)
