1933 Act File No. 33-36451
1940 Act File No. 811-6158
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 11 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 14 X
THE MEDALIST FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on January 26, 1995 pursuant to paragraph (b)
_ 60 days after filing pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previouslyfiled post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on November 15, 1994; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of THE MEDALIST FUNDS,
which is comprised of eight portfolios: (1) The U.S. Government
Securities Fund;(2) The Maryland Municipal Bond Fund; (3) The Money
Market Fund; (4) The Treasury Money Market Fund; (5) The Stock Fund;
(6) The Virginia Municipal Bond Fund; all of which are offered in two
separate classes of shares known as Investment Shares and Trust Shares;
(7) The Tax-Free Money Market Fund; and (8) The Strategic Stock Fund;
neither of which currently offer separate classes of shares, relates to
all portfolios with the exception of The Strategic Stock Fund, and is
comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-7) Cover Page.
Item 2. Synopsis (1-7) Summary of Fund Expenses.
Item 3. Condensed Financial
Information (1-7) Financial Highlights
Item 4. General Description of
Registrant (1-7) General Information;
Investment Objective; Investment
Policies; Investment Limitations.
Item 5. Management of the Fund (1-7) The Medalist Funds
Information; (1-7) Management of
the Trust; (1-7) Distribution of
Shares; (1-6, Investment Shares
only) (1-7) Distribution Plan; (1-7)
Administration of the Funds; (1-7)
Expenses of the Funds (and Shares.)
Item 6. Capital Stock and Other
Securities (1-7) Dividends; Capital Gains;
Shareholder Information;
Voting Rights; Massachusetts
Partnership Law; Tax Information;
Federal Income Tax.
Item 7. Purchase of Securities Being
Offered (1-7) Net Asset Value; (1-7)
Investing in Shares; (1-7) Share
Purchases; (1-7) Minimum Investment
Required; (1-7) What Shares Cost; (1-
7) Certificates and Confirmations;
(1-6, Investment Shares only)
Exchange Privilege.
Item 8. Redemption or Repurchase (1-7) Redeeming Shares; (1-7) By
Telephone; (1-7) By Mail; (1-7)
Contingent Deferred Sales Charge
(Investment Shares Only); (1-7)
Systematic Withdrawal Program
(Investment Shares only).
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-7) Cover Page.
Item 11. Table of Contents (1-7) Table of Contents.
Item 12. General Information and
History (1-7) General Information About the
Trust.
Item 13. Investment Objectives and
Policies (1-7) Investment Objective and
Policies.
Item 14. Management of the Fund (1-7) The Medalist Funds Management.
Item 15. Control Persons and Principal
Holders of Securities Not Applicable.
Item 16. Investment Advisory and Other
Services (1-7) Investment Advisory Services;
Administrative Services; Custodian.
Item 17. Brokerage Allocation (1-7) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered (1-7) Purchasing Shares; (1-7)
Determining Net Asset Value; (1-7)
Redeeming Shares; (1-7) Exchange
Privilege (Investment Shares only).
Item 20. Tax Status (1-7) Tax Status.
Item 21. Underwriters (1-7) Distribution Plan (Investment
Shares only).
Item 22. Calculation of Performance
Data (1-7) Performance Comparisons.
Item 23. Financial Statements (1-7) The Financial Statements for
the fiscal year ended September 30,
1994 are incorporated into the
Statement of Additional Information
herein by reference from the Funds'
Annual Report dated September 30,
1994.
THE MEDALIST FUNDS
(FORMERLY THE SIGNET SELECT
FUNDS)
TRUST SHARES
PROSPECTUS
JANUARY 31, 1995
- 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 TAX-FREE 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 seven separate investment portfolios set forth
below (collectively, the "Funds," individually, a "Fund"), each having a
distinct investment objective and policies. With the exception of The Tax-Free
Money Market Fund, which offers a single class of Shares, the Funds are offered
in two separate classes of shares known as Trust Shares and 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 Tax-Free Money Market Fund
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND
ARE NOT ENDORSED OR GUARANTEED BY, SIGNET TRUST COMPANY OR SIGNET BANK OR ANY OF
THEIR AFFILIATES. SUCH SHARES 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, THE MONEY MARKET FUND, AND THE TAX-FREE 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 those Funds offering classes
and to shares of The Tax-Free Money Market Fund 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
Trust Shares of the Funds offering classes and to shares of the Tax-Free Money
Market Fund, dated January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
Special Considerations 1
SUMMARY OF FUND EXPENSES--TRUST SHARES
AND TAX-FREE MONEY MARKET SHARES 2
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 3
- ------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND 10
- ------------------------------------------------------
The U.S. Government Securities Fund 10
Acceptable Investments 10
CMOs 10
ARMS 11
The Stock Fund 11
Acceptable Investments 11
Common Stocks 11
Other Corporate Securities 11
Commercial Paper 11
Bank Instruments 11
American Depositary Receipts ("ADRs") 11
U.S. Government Securities 11
Put and Call Options 12
Financial Futures and Options on Futures 12
Risks 12
Portfolio Turnover 12
Investment Considerations 13
The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund 13
Acceptable Investments 13
Characteristics 13
The Treasury Money Market Fund 14
Acceptable Investments 14
The Money Market Fund 14
Acceptable Investments 14
Bank Instruments 14
Short-Term Credit Facilities 14
Asset-Backed Securities 14
Ratings 14
The Tax-Free Money Market Fund 15
Acceptable Investments 15
Participation Interests 15
Ratings 15
Investment Limitations 15
PORTFOLIO INVESTMENTS AND STRATEGIES 15
- ------------------------------------------------------
Regulatory Compliance 15
Borrowing Money 16
Selling Short 16
Restricted and Illiquid Securities 16
When-Issued and Delayed Delivery Transactions 16
Investing in Securities of Other
Investment Companies 16
Diversification 17
Non-Diversification 17
Investing in New Issuers 17
Repurchase Agreements 17
Lending of Portfolio Securities 17
Acquiring Securities 18
Investment Risks 18
Variable Rate Demand Notes 18
Credit Enhancement 18
Demand Features 18
Participation Interests 19
Variable Rate Municipal Securities 19
Municipal Leases 19
Temporary Investments 19
Municipal Securities 19
Investment Risks 20
Futures Contracts and Options to Buy or
Sell Such Contracts 20
THE MEDALIST FUNDS INFORMATION 20
- ------------------------------------------------------
Management of the Trust 20
Board of Trustees 20
Investment Adviser 21
Advisory Fees 21
Adviser's Background 21
Distribution of Shares of the Funds 22
Distribution Plan 22
Administrative Arrangements 22
Glass-Steagall Act 22
Administration of the Funds 22
Administrative Services 22
Custodian 23
Transfer Agent and Dividend Disbursing Agent 23
Independent Auditors 23
Expenses of the Funds and Trust Shares 23
Brokerage Transactions 23
NET ASSET VALUE 23
- ------------------------------------------------------
INVESTING IN SHARES 24
- ------------------------------------------------------
Share Purchases 24
By Check 24
By Wire 24
Minimum Investment Required 24
What Shares Cost 24
Certificates and Confirmations 25
Dividends 25
Capital Gains 25
REDEEMING SHARES 25
- ------------------------------------------------------
By Telephone 25
By Mail 26
SHAREHOLDER INFORMATION 26
- ------------------------------------------------------
Voting Rights 26
Massachusetts Partnership Law 27
EFFECT OF BANKING LAWS 27
- ------------------------------------------------------
TAX INFORMATION 28
- ------------------------------------------------------
Federal Income Tax 28
Virginia Taxes 28
Maryland Taxes 28
Other State and Local Taxes 29
PERFORMANCE INFORMATION 29
- ------------------------------------------------------
OTHER CLASSES OF SHARES 30
- ------------------------------------------------------
ADDRESSES 31
- ------------------------------------------------------
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 a single class of shares
for The Tax-Free Money Market Fund, and two classes of shares, Trust Shares and
Investment Shares, for each of the other Funds in the Trust.
As of the date of this prospectus, the Trust is comprised of the following seven
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;
- The Money Market Fund--seeks to provide current income consistent with
stability of principal by investing in money market instruments; and
- The Tax-Free Money Market Fund--seeks to provide current income exempt
from federal income tax consistent with stability of principal, by
investing in municipal securities.
This prospectus relates only to the Trust Shares ("Trust Shares") of those Funds
offering classes and to the single class of shares ("Tax-Free Money Market
Shares") of The Tax-Free Money Market Fund (Trust Shares and Tax-Free Money
Market Shares are sometimes collectively referred to as "Shares"). For
information on how to purchase Shares please refer to "Investing in Shares." A
minimum initial investment of $1,000 is required for shares of The Tax-Free
Money Market Fund, and a minimum investment of $10,000 is required for Trust
Shares of the other Funds in the Trust. Shares are sold and redeemed at net
asset value. Information on redeeming Shares may be found under "Redeeming
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 AND
TAX-FREE MONEY MARKET SHARES
- --------------------------------------------------------------------------------
The following Fee Table and Example summarize the various costs and expenses
that a shareholder of Trust Shares and Tax-Free Money Market Shares will bear,
either directly or indirectly.
<TABLE>
<CAPTION>
THE THE THE THE
TAX-FREE THE TREASURY MARYLAND VIRGINIA THE U.S.
MONEY MONEY MONEY MUNICIPAL MUNICIPAL THE GOVERNMENT
MARKET MARKET MARKET BOND BOND STOCK SECURITIES
FUND FUND FUND FUND FUND FUND FUND
-------- ------ -------- --------- --------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses.................... None None None None None None None
</TABLE>
ANNUAL TRUST SHARES AND TAX-FREE MONEY MARKET SHARES OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL TRUST SHARES
TRUST SHARES AND TAX-FREE
AND TAX-FREE MONEY MARKET
MONEY MARKET SHARES OPERATING
NET SHARES EXPENSES NET OF
MANAGEMENT 12B-1 OTHER ANY WAIVERS OR
FEES(1) FEES(2) EXPENSES(3)(4) REIMBURSEMENTS(5)
---------- ------------ -------------- -------------------
<S> <C> <C> <C> <C>
The Money Market Fund................................. 0.25% None 0.30% 0.55%
The Treasury Money Market Fund........................ 0.32% None 0.27% 0.59%
The Tax-Free Money Market Fund........................ 0.04% 0.00% 0.32% 0.36%
The Maryland Municipal Bond Fund...................... 0.24% None 0.68% 0.92%
The Virginia Municipal Bond Fund...................... 0.48% None 0.42% 0.90%
The Stock Fund........................................ 0.52% None 0.43% 0.95%
The U.S. Government Securities Fund................... 0.43% None 0.31% 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 Tax-Free 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%, 0.50%, 0.75%,
0.75%, 0.75% and 0.75%, respectively.
(2) As of the date of this prospectus, The Tax-Free Money Market Fund is not
paying or accruing 12b-1 fees. The Tax-Free Money Market Fund will not
accrue or pay 12b-1 fees until a separate class of shares has been created
for certain institutional investors. The Tax-Free Money Market Fund can pay
up to 0.35% as a 12b-1 fee to the distributor. See "Management of the
Trust--Distribution Plans."
(3) Includes administration fees. See "Management of the Trust--Administration
of the Funds."
(4) Total other expenses for the Tax-Free Money Market Fund would have been
0.56% absent the voluntary reimbursement of other operating expenses by the
Adviser. The Adviser can terminate this reimbursement at any time at its
sole discretion.
(5) 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%, 0.77%, 1.43%, 1.17%, 1.18% and 1.06%, respectively,
and the total Operating Expenses for The Tax-Free Money Market Fund would
have been 1.06%, absent the waivers and reimbursements described above in
notes 1, 2, and 4.
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 contingent deferred sales charges for Trust Shares or Tax-Free Money
Market 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 $ 33 $ 74
The Tax-Free Money Market Fund............................................. $ 4 $ 12 $ 20 $ 46
The Maryland Municipal Bond Fund........................................... $ 9 $ 29 $ 51 $ 113
The Virginia Municipal Bond Fund........................................... $ 9 $ 29 $ 50 $ 111
The Stock Fund............................................................. $10 $ 30 $ 53 $ 117
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 and Tax-Free
Money Market 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 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 FUNDS' FISCAL YEAR ENDING SEPTEMBER 30, 1995.
The information set forth in the foregoing table and Example relates only to
Trust Shares of those Funds offering separate classes, and Tax-Free Money Market
Shares. Investment Shares of those Funds offering separate classes are subject
to certain of the same expenses as Trust Shares with the addition of a maximum
contingent deferred sales charge of 2.00%, and a 12b-1 fee of up to 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 of up to 0.35 of 1% of the Investment Shares'
average daily net assets of The Money Market Fund, The Treasury Money Market
Fund, and The Tax-Free 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 LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.90 $10.95 $10.54 $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.63 0.67 0.75 0.78
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.94) 0.03 0.50 0.54
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total from investment operations (0.31) 0.70 1.25 1.32
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.63) (0.67)(d) (0.75) (0.78)
- ----------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions -- (0.08) (0.09) --
- ----------------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on investment
transactions (0.13)(c) -- -- --
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total distributions (0.76) (0.75) (0.84) (0.78)
- ---------------------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 9.83 $10.90 $10.95 $10.54
- ---------------------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** (3.12%) 6.94% 12.42% 14.00%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.74% 0.63% 0.52% 0.64%(a)
- ----------------------------------------------------------------------
Net investment income 6.19% 6.17% 7.01% 8.03%(a)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.32% 0.43% 0.65% 0.93%(a)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $107,103 $112,334 $95,610 $27,565
- ----------------------------------------------------------------------
Portfolio turnover rate 227% 154% 201% 101%
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.90 $10.95 $10.54 $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.61 0.66 0.75 0.78
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.94) 0.03 0.50 0.54
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total from investment operations (0.33) 0.69 1.25 1.32
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.61) (0.66)(d) (0.75) (0.78)
- ----------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions -- (0.08) (0.09) --
- ----------------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on investment
transactions (0.13)(c) -- -- --
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total distributions (0.74) (0.74) (0.84) (0.78)
- ---------------------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 9.83 $10.90 $10.95 $10.54
- ---------------------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** (3.36%) 6.82% 12.42% 14.00%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.99% 0.77% 0.52% 0.64%(a)
- ----------------------------------------------------------------------
Net investment income 5.94% 5.91% 7.01% 8.03%(a)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.32% 0.43% 0.65% 0.93%(a)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $112,439 $119,187 $40,274 $10
- ----------------------------------------------------------------------
Portfolio turnover rate 227% 154% 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, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(d) Amount includes distributions in excess of net investment income of $0.007
per share.
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, 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 LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.39 $12.02 $11.86 $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.20 0.28 0.26 0.32
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.40) 0.51 0.46 1.85
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total from investment operations (0.20) 0.79 0.72 2.17
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.19) (0.26) (0.25) (0.31)
- ----------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (0.20) (0.16) (0.31) --
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total distributions (0.39) (0.42) (0.56) (0.31)
- ---------------------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.80 $12.39 $12.02 $11.86
- ---------------------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** (1.50%) 6.42% 6.31% 22.68%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.95% 0.66% 0.95% 0.80%(a)
- ----------------------------------------------------------------------
Net investment income 1.68% 2.09% 2.25% 3.05%(a)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.23% 0.55% 0.34% 0.38%(a)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $70,374 $65,841 $49,581 $37,032
- ----------------------------------------------------------------------
Portfolio turnover rate 205% 67% 38% 84%
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.39 $12.02 $11.86 $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.17 0.24 0.26 0.32
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.39) 0.54 0.46 1.85
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total from investment operations (0.22) 0.78 0.72 2.17
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.17) (0.25) (0.25) (0.31)
- ----------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (0.20) (0.16) (0.31) --
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total distributions (0.37) (0.41) (0.56) (0.31)
- ---------------------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $11.80 $12.39 $12.02 $11.86
- ---------------------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** (1.72%) 6.31% 6.31% 22.68%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.20% 0.87% 0.95% 0.80%(a)
- ----------------------------------------------------------------------
Net investment income 1.40% 1.81% 2.25% 3.05%(a)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.23% 0.55% 0.34% 0.38%(a)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $26,739 $18,691 $2,290 $488
- ----------------------------------------------------------------------
Portfolio turnover rate 205% 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, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, which can be obtained free of charge.
THE VIRGINIA MUNICIPAL BOND FUND
(FORMERLY VIRGINIA MUNICIPAL BOND FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- ------------------------------------------------------------------------ ------ ------ ------ -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.26 $10.46 $10.18 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.48 0.53 0.54 0.57
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------ ----- ----- ----- -----
Total from investment operations (0.44) 1.42 0.83 0.75
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.48)(e) (0.53) (0.54) (0.57)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (0.06) (0.09) (0.01) --
- ------------------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on investment
transactions (0.02)(c) -- -- --
- ------------------------------------------------------------------------ ----- ----- ----- -----
Total distributions (0.56) (0.62) (0.55) (0.57)
- ------------------------------------------------------------------------ ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.26 $11.26 $10.46 $10.18
- ------------------------------------------------------------------------ ----- ----- ----- -----
TOTAL RETURN** (4.01%) 13.62% 8.51% 7.64%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.90% 0.75% 0.83% 0.47%(a)
- ------------------------------------------------------------------------
Net investment income 4.47% 4.85% 5.14% 6.08%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.27% 0.50% 0.86% 1.70%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,165 $41,204 $20,852 $8,546
- ------------------------------------------------------------------------
Portfolio turnover rate 29% 17% 51% 27%
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- ------------------------------------------------------------------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.26 $10.46 $10.18 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.45 0.51 0.54 0.57
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------ ----- ----- ----- -----
Total from investment operations (0.47) 1.40 0.83 0.75
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.45)(d) (0.51) (0.54) (0.57)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (0.06) (0.09) (0.01) --
- ------------------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on investment
transactions (0.02)(c) -- -- --
- ------------------------------------------------------------------------ ----- ----- ----- -----
Total distributions (0.53) (0.60) (0.55) (0.57)
- ------------------------------------------------------------------------ ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.26 $11.26 $10.46 $10.18
- ------------------------------------------------------------------------ ----- ----- ----- -----
TOTAL RETURN** (4.25%) 13.49% 8.51% 7.64%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 1.15% 0.90% 0.83% 0.47%(a)
- ------------------------------------------------------------------------
Net investment income 4.22% 4.68% 5.14% 6.08%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.27% 0.50% 0.86% 1.70%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $74,706 $63,492 $20,883 $6,031
- ------------------------------------------------------------------------
Portfolio turnover rate 29% 17% 51% 27%
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment), to September 30, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment ratios shown above.
(c) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(d) Amount includes distributions to shareholders in excess of net investment
income of $0.0001 per share.
(e) Amount includes distributions to shareholders in excess of net investment
income of $0.0002 per share.
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, which can be obtained free of charge.
THE MARYLAND MUNICIPAL BOND FUND
(FORMERLY MARYLAND MUNICIPAL BOND FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.24 $10.39 $10.10 $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.48 0.50 0.54 0.53
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.97) 0.85 0.29 0.10
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total from investment operations (0.49) 1.35 0.83 0.63
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.48) (0.50) (0.54) (0.53)
- ----------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (0.10) -- -- --
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total distributions (0.58) (0.50) (0.54) (0.53)
- ---------------------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.17 $11.24 $10.39 $10.10
- ---------------------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** (4.50%) 13.37% 8.31% 6.64%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.92% 0.86% 0.59% 0.60%(a)
- ----------------------------------------------------------------------
Net investment income 4.46% 4.64% 5.11% 5.66%(a)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.51% 0.77% 1.91% 1.05%(a)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $11,301 $12,014 $6,004 $556
- ----------------------------------------------------------------------
Portfolio turnover rate 27% 23% 34% 35%
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.24 $10.39 $10.10 $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.45 0.49 0.54 0.53
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.97) 0.85 0.29 0.10
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total from investment operations (0.52) 1.34 0.83 0.63
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.45) (0.49) (0.54) (0.53)
- ----------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (0.10) -- -- --
- ---------------------------------------------------------------------- ----- ----- ----- -----
Total distributions (0.55) (0.49) (0.54) (0.53)
- ---------------------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $10.17 $11.24 $10.39 $10.10
- ---------------------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** (4.74%) 13.24% 8.31% 6.64%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.17% 1.00% 0.59% 0.60%(a)
- ----------------------------------------------------------------------
Net investment income 4.22% 4.50% 5.11% 5.66%(a)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.51% 0.77% 1.91% 1.05%(a)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,580 $33,907 $4,053 $2,940
- ----------------------------------------------------------------------
Portfolio turnover rate 27% 23% 34% 35%
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, which can be obtained free of charge.
THE TREASURY MONEY MARKET FUND
(FORMERLY TREASURY MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income 0.03 0.03 0.04 0.06
- ----------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.03) (0.04) (0.06)
- ---------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** 3.16% 2.64% 3.61% 5.90%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 0.59% 0.58% 0.70% 0.51%(a)
- ----------------------------------------------------------
Net investment income 3.30% 2.60% 3.49% 5.65%(a)
- ----------------------------------------------------------
Expense waiver/reimbursement (b) 0.18% 0.20% 0.11% 0.27%(a)
- ----------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $304,285 $152,921 $163,451 $129,959
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income 0.03 0.02 0.04 0.06
- ----------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.02) (0.04) (0.06)
- ---------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** 2.90% 2.52% 3.61% 5.90%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 0.84% 0.70% 0.70% 0.51%(a)
- ----------------------------------------------------------
Net investment income 2.86% 2.47% 3.49% 5.65%(a)
- ----------------------------------------------------------
Expense waiver/reimbursement (b) 0.18% 0.20% 0.11% 0.27%(a)
- ----------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $21,883 $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, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
THE MONEY MARKET FUND
(FORMERLY MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income 0.03 0.03 0.04 0.06
- ----------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.03) (0.04) (0.06)
- ---------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** 3.35% 2.89% 3.79% 5.92%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 0.55% 0.50% 0.64% 0.51%(a)
- ----------------------------------------------------------
Net investment income 3.25% 2.83% 3.64% 5.99%(a)
- ----------------------------------------------------------
Expense waiver/reimbursement (b) 0.25% 0.30% 0.29% 0.36%(a)
- ----------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $132,445 $134,397 $136,616 $57,432
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- ---------------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income 0.03 0.03 0.04 0.06
- ----------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.03) (0.04) (0.06)
- ---------------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** 3.10% 2.77% 3.79% 5.92%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 0.80% 0.64% 0.64% 0.51%(a)
- ----------------------------------------------------------
Net investment income 3.07% 2.68% 3.64% 5.99%(a)
- ----------------------------------------------------------
Expense waiver/reimbursement (b) 0.25% 0.30% 0.29% 0.36%(a)
- ----------------------------------------------------------
SUPPLEMENT DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $15,236 $9,905 $5,803 $1
- ----------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
THE TAX-FREE MONEY MARKET FUND
(FORMERLY TAX-FREE MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 30,
1994*
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.01
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
- ---------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------- ---------
TOTAL RETURN** 0.45%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.36%(a)
- ----------------------------------------------------------------------
Net investment income 2.65%(a)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.70%(a)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $21,967
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 27, 1994 (date of initial public
investment) to September 30, 1994.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
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
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation; Federal National Mortgage
Association; Government National Mortgage Association; and Student Loan
Marketing Association.
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 Exchanges 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.
The Fund will only invest in convertible securities rated BBB or higher by
Standard & Poor's Ratings Group ("S&P") or Baa or higher by Moody's Investors
Service, Inc. ("Moody's"). Bonds rated BBB by S&P or Baa by Moody's 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.
COMMERCIAL PAPER. The Fund may invest in commercial paper rated A-1 by S&P, or
Prime-1 by 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"), and Eurodollar Time Deposits
("ETDs").
AMERICAN DEPOSITARY 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 Fund's adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater transaction expenses which
must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a high rate of portfolio turnover
may result in the realization of larger amounts of capital gains which, when
distributed to the Fund's shareholders, are taxable to them. (Further
information is contained in the Fund's Statement of Additional Information
within the sections "Brokerage Transactions" and "Tax Status"). Nevertheless,
transactions for the Fund's portfolio will be based only upon investment
considerations and will not be limited by any other considerations when the
Fund's investment adviser deems it appropriate to make changes in the Fund's
portfolio.
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 AND THE MARYLAND MUNICIPAL BOND FUND
The investment objective of The Virginia Municipal Bond Fund and The Maryland
Municipal Bond 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 and the State of Maryland, respectively. (Federal regular income tax
does not include the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.)
ACCEPTABLE INVESTMENTS. Each Fund pursues its investment objective by investing
in a professionally managed portfolio of securities at least 65% of which is
comprised of Virginia municipal bonds or Maryland municipal bonds, as the case
may be. Each 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 or Maryland state income taxes, respectively, 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 or Maryland state income taxes,
respectively.
The municipal securities in which each Fund invests are debt obligations,
including industrial development bonds, issued on behalf of the Commonwealth of
Virginia or the State of Maryland, as the case may be, or the political
subdivisions or agencies of each respective state. In addition, each 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 relevant Fund
and/or the investment adviser to the relevant Fund, exempt from federal regular
income tax and the personal income tax imposed by the Commonwealth of Virginia
or the State of Maryland, as the case may be.
CHARACTERISTICS. The debt securities in which each Fund invests will only
be rated investment grade or of comparable quality at the time of purchase.
The municipal securities which each 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 Funds' 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 a Fund has purchased it, that 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.
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 nationally recognized statistical rating organizations
("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.
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."
THE TAX-FREE MONEY MARKET FUND
The investment objective of The Tax-Free Money Market Fund is current income
exempt from federal income tax consistent with stability of principal and
liquidity.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
in a portfolio of municipal securities (as defined below) maturing in 13 months
or less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income will be
exempt from federal income tax (including alternative minimum tax). The average
maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less.
The Fund invests primarily in debt obligations issued by or on behalf of states,
territories, and possessions of the United States, including the District of
Columbia, and any political subdivision or financing authority of any of these,
the income from which is, in the opinion of qualified legal counsel, exempt from
federal income tax ("municipal securities"). Examples of municipal securities
include, but are not limited to:
- tax and revenue anticipation notes issued to finance working capital
needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes that are intended to be refinanced through a
later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases;
- construction loan notes insured by the Federal Housing Administration and
financed by the Federal or Government National Mortgage Associations; and
- participation, trust, and partnership interests in any of the foregoing
obligations.
PARTICIPATION INTERESTS. The Fund may purchase interests in municipal
securities from financial institutions such as commercial and investment
banks, savings and loan associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying municipal securities.
RATINGS. The municipal securities in which the Fund invests must be rated in one
of the two highest short-term rating categories by one or more NRSRO or be of
comparable quality to securities having such ratings. The Fund will follow
applicable regulations in determining whether a security rated by more than one
NRSRO can be treated as being in one of the two highest short-term rating
categories; currently, such securities must be rated by two NRSROs in one of
their two highest rating categories. See "Regulatory Compliance."
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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REGULATORY COMPLIANCE
The Treasury Money Market Fund, The Money Market Fund, and The Tax-Free Money
Market Fund may follow non-fundamental operational policies that are more
restrictive than their fundamental investment limitations, as set forth in this
prospectus and their 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 Funds will comply with the various requirements of Rule 2a-7, which
regulates money market mutual funds. The
Treasury Money Market Fund, The Money Market Fund, and The Tax-Free Money Market
Fund will also determine the effective maturity of their respective investments,
as well as their ability to consider a security as having received the requisite
short-term ratings by NRSROs, according to Rule 2a-7. The Funds may change these
operational policies to reflect changes in the laws and regulations without the
approval of their shareholders.
BORROWING MONEY
Except for The Tax-Free Money Market Fund 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. The Tax-Free Money Market Fund may borrow up to one-third of
the value of its total assets, including the amount borrowed. The Tax-Free Money
Market Fund will not purchase any securities while borrowings in excess of 5% of
the value of its total assets are outstanding. These policies 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, The Virginia Municipal Bond
Fund and The Maryland Municipal Bond Fund will not invest more than 15% of their
net assets in illiquid securities. The Treasury Money Market Fund, The Money
Market Fund, and The Tax-Free Money Market Fund will not invest more than 10% of
their net assets in illiquid securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which a Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause a Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices. Accordingly, a Fund may pay more or less than the
market value of the securities on the settlement date.
Each Fund may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, a Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. A Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds, except for The Tax-Free Money Market Fund, 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. It should be
noted that investment companies incur certain
expenses, and therefore, any investment by a Fund in shares of another
investment company would be subject to certain duplicate expenses, particularly
transfer agent and custodian fees. The adviser will waive its investment
advisory fee on assets invested in securities of open-end investment companies.
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. This policy cannot be
changed without the approval of holders of a majority of a Fund's Shares.
NON-DIVERSIFICATION
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, The Treasury
Money Market Fund, and The Tax-Free Money Market 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.
INVESTING IN NEW ISSUERS
The U.S. Government Securities Fund, The Stock Fund, The Money Market Fund, and
The Tax-Free 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.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
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 a Fund.
VARIABLE RATE DEMAND NOTES
The Money Market Fund and The Tax-Free Money Market Fund may invest in variable
rate demand notes. Variable rate demand notes are long-term corporate debt
instruments that have variable or floating interest rates and provide the Funds
with the right to tender the security for repurchase at its stated principal
amount plus accrued interest. Such securities typically bear interest at a rate
that is intended to cause the securities to trade at par. The interest rate may
float or be adjusted at regular intervals (ranging from daily to annually), and
is normally based on a published interest rate or interest rate index. Most
variable rate demand notes allow a Fund to demand the repurchase of the security
on not more than seven days' prior notice. Other notes only permit the Funds to
tender the security at the time of each interest rate adjustment or at other
fixed intervals. See "Demand Features." The Funds treat variable rate demand
notes as maturing on the later of the date of the next interest adjustment or
the date on which a Fund may next tender the security for repurchase.
CREDIT ENHANCEMENT
Certain of The Money Market Fund's and The Tax-Free Money Market Fund's
acceptable investments may have been credit enhanced by a guaranty, letter of
credit or insurance. A 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, a 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 a 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 Money Market Fund and The Tax-Free Money Market 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 a 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. A Fund uses these arrangements to provide itself
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.
PARTICIPATION INTERESTS
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market 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, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market 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. 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.
Lease obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments, the entity cannot be compelled
to make such payments. In the event of failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute.
TEMPORARY INVESTMENTS
From time to time, during periods of other than normal market conditions, The
Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The Tax-Free
Money Market 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).
Except for The Tax-Free Money Market Fund, 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. Temporary
investments held by The Tax-Free Money Market Fund must be rated in one of the
two highest short-term rating categories by one or more NRSRO.
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.
MUNICIPAL SECURITIES
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund invest principally in municipal securities. Municipal
securities are generally issued to finance public works, such as airports,
bridges, highways, housing, hospitals, mass transportation projects, schools,
streets, and water and sewer works. They are also issued to repay outstanding
obligations, to raise funds for general operating expenses and to make loans to
other public institutions and facilities.
Municipal securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
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 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, with respect to The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund, 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 The Virginia
Municipal Bond Fund, The Maryland Municipal Bond Fund, and The Tax-Free Money
Market Fund to achieve their investment objectives also depends on the
continuing ability of the issuers of municipal securities and participation
interests, or the guarantors of either, to meet their obligations for the
payment of interest and principal when due. With respect to The Virginia
Municipal Bond Fund and The Maryland Municipal Bond Fund, 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. In
addition, from time to time, the supply of municipal securities acceptable for
purchase by The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund,
and The Tax-Free Money Market Fund, could become limited.
The Tax-Free Money Market Fund may invest in municipal securities which are
repayable out of revenue streams generated from economically related projects or
facilities and/or whose issuers are located in the same state. Sizable
investments in these municipal securities could involve an increased risk to the
Fund should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of municipal securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislators, or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the ability of states
or municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any issuer to pay,
when due, the principal of and interest on its municipal securities may be
materially affected.
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.
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, The Money Market Fund, and The
Tax-Free 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 December 31, 1994, Signet Trust Company had
$9.9 billion in total trust assets. Signet Asset Management has investment
authority over $2.8 billion of the $9.9 billion. The Adviser has managed
The Medalist Funds since their inception in 1990. The Adviser manages three
equity common trust funds with $39 million in assets and three fixed income
common trust funds with $221 million in assets. As part of their regular
banking operations, Signet Bank and Trust may make loans to public
companies. Thus, it may be possible, from time to time, for the Funds to
hold or acquire the securities of issuers which are also lending clients of
Signet Bank and Trust. The lending relationship will not be a factor in the
selection of securities.
Effective March 1, 1995, subject to approval of the Trustees, Virtus
Capital Management, Inc., a wholly-owned subsidiary of Signet Banking
Corporation, will, by virtue of a reorganization within the Signet holding
company system, succeed to the business of Signet Asset Management, and
thus will become Adviser to the Funds. Since those persons currently
responsible for management of the Funds' assets will have similar
responsibilities to the Funds as employees of Virtus Capital Management,
Inc., the reorganization will have no effect on the operations of the Fund.
E. Christian Goetz has managed The U.S. Government Securities Fund since
August, 1991, and The Maryland Municipal Bond Fund and The Virginia
Municipal Bond Fund since November 1994. 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
The Virginia Retirement System.
DISTRIBUTION OF 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. Under a distribution plan adopted in accordance with
Investment Company Act Rule 12b-1 on behalf of The Tax-Free Money Market Fund
(the "Plan"), the distributor may select financial institutions such as
fiduciaries, custodians for public funds, investment advisers and brokers/
dealers to provide distribution and/or administrative services as agents for
their clients or customers. 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 The Tax-Free Money Market Fund; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as The Tax-Free Money Market Fund reasonably requests for
its shares.
The distributor will pay financial institutions a fee based upon shares subject
to the Plan and 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 Trustees, provided that for any period the total amount of these
fees shall not exceed an annual rate of .35 of 1% of the average net asset value
of Tax-Free Money Market Shares subject to the Plan held during the period by
clients or customers of financial institutions. Any fees paid by the distributor
under the Plan will be reimbursed from the assets of The Tax-Free Money Market
Fund. The Plan will not be activated unless and until a second class of shares
of The Tax-Free Money Market Fund, which will not have a Rule 12b-1 Plan, is
created.
The distributor, in its sole discretion, may uniformly offer to pay all brokers
or dealers selling shares of The Tax-Free Money Market Fund additional amounts
predicated upon the amount of shares of The Tax-Free Money Market 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 The Tax-Free Money Market 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.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository institution
(such as a commercial bank or a savings and loan association) from being an
underwriter or distributor of most securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax current
restrictions on depository institutions, the Board of Trustees will consider
appropriate changes in the administrative services.
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.
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; however, this requirement was waived by the administrator for the year
ended September 30, 1994. 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.
INDEPENDENT AUDITORS. The independent auditors for the Funds are Deloitte &
Touche LLP, 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. 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
- --------------------------------------------------------------------------------
With respect to The Treasury Money Market Fund, The Money Market Fund, and The
Tax-Free 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, these Funds 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 SHARES
- --------------------------------------------------------------------------------
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, The Money Market Fund, and The
Tax-Free 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, The Money Market Fund,
and The Tax-Free Money Market Fund, payment by wire must be received by Signet
Trust Company before 2:00 p.m. (Eastern time) 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 for those Funds offering
Trust Shares, and $1,000 for The Tax-Free Money Market Fund.
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 at the time of
purchase.
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, The Money Market Fund, and The Tax-Free 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, The Money Market Fund, and The
Tax-Free 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, The
Money Market Fund, and The Tax-Free Money Market Fund, dividends are declared
daily and paid monthly.
With respect to The Treasury Money Market Fund, The Money Market Fund, and The
Tax-Free 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, The Money Market Fund, and The
Tax-Free 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 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, The Money Market Fund, and The
Tax-Free 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
Exchanges;
- 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.
SHAREHOLDER INFORMATION
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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 January 11, 1995,
Bova & Co, Richmond, Virginia, owned approximately 10,523,663 Trust Shares of
The U.S. Government Securities Fund (100%); approximately 5,612,531 Trust Shares
of The Stock Fund (96%); approximately 3,278,593 Trust Shares of The Virginia
Municipal Bond Fund (100%); approximately 960,850 Trust
Shares of The Maryland Municipal Bond Fund (100%); approximately 417,604,382
Trust Shares of The Treasury Money Market Fund (100%); approximately 116,586,184
Trust Shares of The Money Market Fund (100%); and approximately 17,601,826
shares of The Tax-Free Money Market Fund (64.6%), 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.
Shareholders of The Virginia Municipal Bond Fund, The Maryland Municipal Bond
Fund and The Tax-Free Money Market Fund are not required to pay the federal
regular income tax on any dividends received from the Fund that represent net
interest on tax-exempt municipal bonds. However, under the Tax Reform Act of
1986, dividends representing net interest earned on certain "private activity"
bonds issued after August 17, 1986, may be included in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations. The Tax-Free Money Market Fund may purchase all types of municipal
bonds, including private activity bonds.
The alternative minimum tax 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.
Dividends of the Funds 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.
VIRGINIA TAXES. Under existing Virginia laws, distributions made by the Fund
will not be subject to Virginia income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code of 1986, as amended, and represent (i) interest from obligations issued by
or on behalf of the Commonwealth of Virginia or any political subdivision
thereof; or (ii) interest from obligations issued by a territory or possession
of the United States or any political subdivision thereof which federal law
exempts from state income taxes. Conversely, to the extent that distributions
made by the Fund are attributable to other types of obligations, such
distributions will be subject to Virginia income taxes.
MARYLAND TAXES. Under existing Maryland laws, distributions made by the Fund
will not be subject to Maryland state or local income taxes to the extent that
such distributions qualify as exempt-interest dividends under the Internal
Revenue Code, and represent (i) interest on tax-exempt obligations 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). Conversely, to the extent that distributions made by the Fund are
derived from other types of obligations, such distributions will be subject to
Maryland income taxes.
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. The Tax-Free Money Market Fund may
advertise its yield, effective yield, and tax-equivalent 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, The Money Market Fund,
and The Tax-Free 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, The
Maryland Municipal Bond Fund, and The Tax-Free Money Market 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 contingent deferred sales charge 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 performance using certain
financial publications and/or compare their performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Investment Shares, the other class of shares offered by those Funds offering
separate classes, 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%
contingent deferred sales charge. 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
The Tax-Free Money Market 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
- ------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 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-I (1/95)
THE MEDALIST FUNDS
(FORMERLY THE SIGNET SELECT
FUNDS)
INVESTMENT SHARES
PROSPECTUS
JANUARY 31, 1995
- 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 TAX-FREE MONEY MARKET FUND
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 seven separate investment portfolios set forth
below (collectively, the "Funds," individually, a "Fund"), each having a
distinct investment objective and policies. With the exception of the Tax-Free
Money Market Fund, which offers a single class of shares, the Funds are offered
in two separate classes of shares known as Investment Shares and 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 Tax-Free Money Market Fund
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND
ARE NOT ENDORSED OR GUARANTEED BY, SIGNET TRUST COMPANY OR SIGNET BANK OR ANY OF
THEIR AFFILIATES. SUCH SHARES 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, THE MONEY MARKET FUND, AND THE TAX-FREE 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 those Funds offering
classes and to shares of The Tax-Free Money Market Fund 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
Investment Shares of the Funds offering classes and to shares of The Tax-Free
Money Market Fund, dated January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
Special Considerations 1
SUMMARY OF FUND EXPENSES--INVESTMENT SHARES
AND TAX-FREE MONEY MARKET SHARES 2
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 3
- ------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND 10
- ------------------------------------------------------
The U.S. Government Securities Fund 10
Acceptable Investments 10
CMOs 10
ARMS 11
The Stock Fund 11
Acceptable Investments 11
Common Stocks 11
Other Corporate Securities 11
Commercial Paper 11
Bank Instruments 11
American Depositary Receipts ("ADRs") 11
U.S. Government Securities 11
Put and Call Options 12
Financial Futures and Options on Futures 12
Risks 12
Portfolio Turnover 12
Investment Considerations 13
The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund 13
Acceptable Investments 13
Characteristics 13
The Treasury Money Market Fund 14
Acceptable Investments 14
The Money Market Fund 14
Acceptable Investments 14
Bank Instruments 14
Short-Term Credit Facilities 14
Asset-Backed Securities 14
Ratings 14
The Tax-Free Money Market Fund 15
Acceptable Investments 15
Participation Interests 15
Ratings 15
Investment Limitations 15
PORTFOLIO INVESTMENTS AND STRATEGIES 15
- ------------------------------------------------------
Regulatory Compliance 15
Borrowing Money 16
Selling Short 16
Restricted and Illiquid Securities 16
When-Issued and Delayed Delivery Transactions 16
Investing in Securities of Other
Investment Companies 16
Diversification 17
Non-Diversification 17
Investing in New Issuers 17
Repurchase Agreements 17
Lending of Portfolio Securities 17
Acquiring Securities 18
Investment Risks 18
Variable Rate Demand Notes 18
Credit Enhancement 18
Demand Features 18
Participation Interests 19
Variable Rate Municipal Securities 19
Municipal Leases 19
Temporary Investments 19
Municipal Securities 19
Investment Risks 20
Futures Contracts and Options to Buy or
Sell Such Contracts 20
THE MEDALIST FUNDS INFORMATION 21
- ------------------------------------------------------
Management of the Trust 21
Board of Trustees 21
Investment Adviser 21
Advisory Fees 21
Adviser's Background 21
Distribution of Shares of the Funds 22
Distribution Plan 22
Administrative Arrangements 22
Glass-Steagall Act 22
Administration of the Funds 23
Administrative Services 23
Custodian 23
Transfer Agent and Dividend Disbursing Agent 23
Independent Auditors 23
Expenses of the Funds and Investment Shares 23
Brokerage Transactions 23
NET ASSET VALUE 24
- ------------------------------------------------------
INVESTING IN SHARES 24
- ------------------------------------------------------
Share Purchases 24
By Check 24
By Wire 24
Systematic Investment Program 25
Minimum Investment Required 25
What Shares Cost 25
Certificates and Confirmations 25
Dividends 25
Capital Gains 25
EXCHANGE PRIVILEGE 26
- ------------------------------------------------------
By Telephone 26
REDEEMING SHARES 26
- ------------------------------------------------------
By Telephone 26
By Mail 27
Contingent Deferred Sales Charge 28
Systematic Withdrawal Program 29
Accounts with Low Balances 29
SHAREHOLDER INFORMATION 29
- ------------------------------------------------------
Voting Rights 29
Massachusetts Partnership Law 29
EFFECT OF BANKING LAWS 30
- ------------------------------------------------------
TAX INFORMATION 30
- ------------------------------------------------------
Federal Income Tax 30
Virginia Taxes 31
Maryland Taxes 31
Other State and Local Taxes 31
PERFORMANCE INFORMATION 31
- ------------------------------------------------------
OTHER CLASSES OF SHARES 32
- ------------------------------------------------------
ADDRESSES 33
- ------------------------------------------------------
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 a single class of shares
for The Tax-Free Money Market Fund, and two classes of shares, Investment Shares
and Trust Shares, for each of the other Funds in the Trust.
As of the date of this prospectus, the Trust is comprised of the following seven
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;
- 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;
- The Money Market Fund--seeks to provide current income consistent with
stability of principal by investing in money market instruments; and
- The Tax-Free Money Market Fund--seeks to provide current income exempt
from federal income tax consistent with stability of principal, by
investing in municipal securities.
This prospectus relates only to the Investment Shares ("Investment Shares") of
those Funds offering classes and to the single class of shares ("The Tax-Free
Money Market Shares") of The Tax-Free Money Market Fund (Investment Shares and
The Tax-Free Money Market Shares are sometimes collectively referred to as
"Shares"). For information on how to purchase Shares please refer to "Investing
in Shares." A minimum initial investment of $1,000 is required for each Fund. A
contingent deferred sales charge 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
AND TAX-FREE MONEY MARKET SHARES
- --------------------------------------------------------------------------------
The following Fee Table and Example summarize the various costs and expenses
that a shareholder of Investment Shares and Tax-Free Money Market Shares will
bear, either directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
THE THE THE THE
TAX-FREE THE TREASURY MARYLAND VIRGINIA THE U.S.
MONEY MONEY MONEY MUNICIPAL MUNICIPAL THE GOVERNMENT
MARKET MARKET MARKET BOND BOND STOCK SECURITIES
FUND FUND FUND FUND FUND FUND FUND
--------- ------- --------- ---------- ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Contingent Deferred Sales Charge (as a
percentage of amount redeemed, if
applicable)(1)............................. None None None 2.00% 2.00% 2.00% 2.00%
</TABLE>
ANNUAL INVESTMENT SHARES AND TAX-FREE MONEY MARKET SHARES OPERATING EXPENSES (AS
A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
SHARES AND TAX-FREE
MONEY MARKET SHARES
NET OPERATING EXPENSES
MANAGEMENT 12B-1 OTHER NET OF ANY WAIVERS OR
FEES(2) FEES(3) EXPENSES(4)(5) REIMBURSEMENTS(6)
----------- -------- --------------- ---------------------
<S> <C> <C> <C> <C>
The Money Market Fund................................... 0.25% 0.25% 0.30% 0.80%
The Treasury Money Market Fund.......................... 0.32% 0.25% 0.27% 0.84%
The Tax-Free Money Market Fund.......................... 0.04% 0.00% 0.32% 0.36%
The Maryland Municipal Bond Fund........................ 0.24% 0.25% 0.68% 1.17%
The Virginia Municipal Bond Fund........................ 0.48% 0.25% 0.42% 1.15%
The Stock Fund.......................................... 0.52% 0.25% 0.43% 1.20%
The U.S. Government Securities Fund..................... 0.43% 0.25% 0.31% 0.99%
</TABLE>
(1) A contingent deferred sales charge of 2% will be imposed on The Money Market
Fund, The Treasury Money Market Fund, and The Tax-Free 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
contingent deferred sales charge. The contingent deferred sales charge 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 Tax-Free 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%, 0.50%, 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 0.25 of 1% (except The Money Market Fund and The Treasury
Money Market Fund which have total payments of up to 0.35 of 1%) of the
average daily net assets attributable to Investment Shares are permitted
under the Distribution Plans. As of the date of this prospectus, The
Tax-Free Money Market Fund is not paying or accruing 12b-1 fees. The
Tax-Free Money Market Fund will not accrue or pay 12b-1 fees until a
separate class of shares has been created for certain institutional
investors. The Tax-Free Money Market Fund can pay up to 0.35% as a 12b-1 fee
to the distributor. See "Management of the Trust--Distribution Plans."
(4) Includes administration fees. See "Management of the Trust--Administration
of the Funds."
(5) Total other expenses for The Tax-Free Money Fund, would have been 0.56%
absent the voluntary reimbursement of other operating expenses by the
Adviser. The Adviser can terminate this reimbursement at any time at its
sole discretion.
(6) 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%, 1.02%, 1.68%, 1.42%, 1.43% and 1.31%,
respectively, and the total Operating Expenses for The Tax-Free Money Market
Fund would have been 1.06%, absent the waivers and reimbursements described
above in notes 2, 3, and 5.
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................. $ 9 $ 9 $ 27 $27 $ 47 $47 $104
The Tax-Free Money Market Fund................. $ 4 $ 4 $ 12 $12 $ 20 $20 $ 46
The Maryland Municipal Bond Fund............... $33 $ 12 $ 60 $37 $ 89 $64 $142
The Virginia Municipal Bond Fund............... $32 $ 12 $ 59 $37 $ 87 $63 $140
The Stock Fund................................. $33 $ 12 $ 60 $38 $ 90 $66 $145
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 and
Tax-Free Money Market 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 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 FUNDS' FISCAL YEAR ENDING SEPTEMBER 30, 1995.
The information set forth in the foregoing table and Example relates only to
Investment Shares of those Funds offering separate classes, and The Tax-Free
Money Market Shares. Trust Shares of those Funds offering separate classes are
subject to certain of the same expenses as Investment Shares, except they bear
no contingent deferred sales charge 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 LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.90 $10.95 $10.54 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.61 0.66 0.75 0.78
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.94) 0.03 0.50 0.54
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total from investment operations (0.33) 0.69 1.25 1.32
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.61) (0.66)(d) (0.75) (0.78)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions -- (0.08) (0.09) --
- ------------------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on investment
transactions (0.13)(c) -- -- --
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total distributions (0.74) (0.74) (0.84) (0.78)
- ------------------------------------------------------------------------ ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $ 9.83 $10.90 $10.95 $10.54
- ------------------------------------------------------------------------ ---- ---- ---- ----
TOTAL RETURN** (3.36%) 6.82% 12.42% 14.00%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.99% 0.77% 0.52% 0.64%(a)
- ------------------------------------------------------------------------
Net investment income 5.94% 5.91% 7.01% 8.03%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.32% 0.43% 0.65% 0.93%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $112,439 $119,187 $40,274 $10
- ------------------------------------------------------------------------
Portfolio turnover rate 227% 154% 201% 101%
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.90 $10.95 $10.54 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.63 0.67 0.75 0.78
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.94) 0.03 0.50 0.54
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total from investment operations (0.31) 0.70 1.25 1.32
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.63) (0.67)(d) (0.75) (0.78)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions -- (0.08) (0.09) --
- ------------------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on investment
transactions (0.13)(c) -- -- --
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total distributions (0.76) (0.75) (0.84) (0.78)
- ------------------------------------------------------------------------ ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $ 9.83 $10.90 $10.95 $10.54
- ------------------------------------------------------------------------ ---- ---- ---- ----
TOTAL RETURN** (3.12%) 6.94% 12.42% 14.00%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.74% 0.63% 0.52% 0.64%(a)
- ------------------------------------------------------------------------
Net investment income 6.19% 6.17% 7.01% 8.03%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.32% 0.43% 0.65% 0.93%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $107,103 $112,334 $95,610 $27,565
- ------------------------------------------------------------------------
Portfolio turnover rate 227% 154% 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, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(d) Amount includes distributions in excess of net investment income of $0.007
per share.
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, 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 LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.39 $12.02 $11.86 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.17 0.24 0.26 0.32
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.39) 0.54 0.46 1.85
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total from investment operations (0.22) 0.78 0.72 2.17
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.17) (0.25) (0.25) (0.31)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.20) (0.16) (0.31) --
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total distributions (0.37) (0.41) (0.56) (0.31)
- ------------------------------------------------------------------------ ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $11.80 $12.39 $12.02 $11.86
- ------------------------------------------------------------------------ ---- ---- ---- ----
TOTAL RETURN** (1.72%) 6.31% 6.31% 22.68%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 1.20% 0.87% 0.95% 0.80%(a)
- ------------------------------------------------------------------------
Net investment income 1.40% 1.81% 2.25% 3.05%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.23% 0.55% 0.34% 0.38%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $26,739 $18,691 $2,290 $488
- ------------------------------------------------------------------------
Portfolio turnover rate 205% 67% 38% 84%
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.39 $12.02 $11.86 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.20 0.28 0.26 0.32
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.40) 0.51 0.46 1.85
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total from investment operations (0.20) 0.79 0.72 2.17
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.19) (0.26) (0.25) (0.31)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.20) (0.16) (0.31) --
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total distributions (0.39) (0.42) (0.56) (0.31)
- ------------------------------------------------------------------------ ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $11.80 $12.39 $12.02 $11.86
- ------------------------------------------------------------------------ ---- ---- ---- ----
TOTAL RETURN** (1.50%) 6.42% 6.31% 22.68%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.95% 0.66% 0.95% 0.80%(a)
- ------------------------------------------------------------------------
Net investment income 1.68% 2.09% 2.25% 3.05%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.23% 0.55% 0.34% 0.38%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $70,374 $65,841 $49,581 $37,032
- ------------------------------------------------------------------------
Portfolio turnover rate 205% 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, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, which can be obtained free of charge.
THE VIRGINIA MUNICIPAL BOND FUND
(FORMERLY VIRGINIA MUNICIPAL BOND FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.26 $10.46 $10.18 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.45 0.51 0.54 0.57
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total from investment operations (0.47) 1.40 0.83 0.75
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.45)(d) (0.51) (0.54) (0.57)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.06) (0.09) (0.01) --
- ------------------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on investment
transactions (0.02)(c) -- -- --
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total distributions (0.53) (0.60) (0.55) (0.57)
- ------------------------------------------------------------------------ ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $10.26 $11.26 $10.46 $10.18
- ------------------------------------------------------------------------ ---- ---- ---- ----
TOTAL RETURN** (4.25%) 13.49% 8.51% 7.64%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 1.15% 0.90% 0.83% 0.47%(a)
- ------------------------------------------------------------------------
Net investment income 4.22% 4.68% 5.14% 6.08%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.27% 0.50% 0.86% 1.70%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $74,706 $63,492 $20,883 $6,031
- ------------------------------------------------------------------------
Portfolio turnover rate 29% 17% 51% 27%
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.26 $10.46 $10.18 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.48 0.53 0.54 0.57
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total from investment operations (0.44) 1.42 0.83 0.75
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.48)(e) (0.53) (0.54) (0.57)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.06) (0.09) (0.01) --
- ------------------------------------------------------------------------
Distributions to shareholders in excess of net realized gain on investment
transactions (0.02)(c) -- -- --
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total distributions (0.56) (0.62) (0.55) (0.57)
- ------------------------------------------------------------------------ ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $10.26 $11.26 $10.46 $10.18
- ------------------------------------------------------------------------ ---- ---- ---- ----
TOTAL RETURN** (4.01%) 13.62% 8.51% 7.64%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.90% 0.75% 0.83% 0.47%(a)
- ------------------------------------------------------------------------
Net investment income 4.47% 4.85% 5.14% 6.08%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.27% 0.50% 0.86% 1.70%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,165 $41,204 $20,852 $8,546
- ------------------------------------------------------------------------
Portfolio turnover rate 29% 17% 51% 27%
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment), to September 30, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment ratios shown above.
(c) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(d) Amount includes distributions to shareholders in excess of net investment
income of $0.0001 per share.
(e) Amount includes distributions to shareholders in excess of net investment
income of $0.0002 per share.
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, which can be obtained free of charge.
THE MARYLAND MUNICIPAL BOND FUND
(FORMERLY MARYLAND MUNICIPAL BOND FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.24 $10.39 $10.10 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.45 0.49 0.54 0.53
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.97) 0.85 0.29 0.10
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total from investment operations (0.52) 1.34 0.83 0.63
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.45) (0.49) (0.54) (0.53)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.10) -- -- --
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total distributions (0.55) (0.49) (0.54) (0.53)
- ------------------------------------------------------------------------ ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $10.17 $11.24 $10.39 $10.10
- ------------------------------------------------------------------------ ---- ---- ---- ----
TOTAL RETURN** (4.74%) 13.24% 8.31% 6.64%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 1.17% 1.00% 0.59% 0.60%(a)
- ------------------------------------------------------------------------
Net investment income 4.22% 4.50% 5.11% 5.66%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.51% 0.77% 1.91% 1.05%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,580 $33,907 $4,053 $2,940
- ------------------------------------------------------------------------
Portfolio turnover rate 27% 23% 34% 35%
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- --------------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.24 $10.39 $10.10 $10.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.48 0.50 0.54 0.53
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.97) 0.85 0.29 0.10
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total from investment operations (0.49) 1.35 0.83 0.63
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.48) (0.50) (0.54) (0.53)
- ------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.10) -- -- --
- ------------------------------------------------------------------------ ---- ---- ---- ----
Total distributions (0.58) (0.50) (0.54) (0.53)
- ------------------------------------------------------------------------ ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $10.17 $11.24 $10.39 $10.10
- ------------------------------------------------------------------------ ---- ---- ---- ----
TOTAL RETURN** (4.50%) 13.37% 8.31% 6.64%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.92% 0.86% 0.59% 0.60%(a)
- ------------------------------------------------------------------------
Net investment income 4.46% 4.64% 5.11% 5.66%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.51% 0.77% 1.91% 1.05%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $11,301 $12,014 $6,004 $556
- ------------------------------------------------------------------------
Portfolio turnover rate 27% 23% 34% 35%
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1994, which can be obtained free of charge.
THE TREASURY MONEY MARKET FUND
(FORMERLY TREASURY MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- ----------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------
Net investment income 0.03 0.02 0.04 0.06
- -----------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Dividends to shareholders from net investment
income (0.03) (0.02) (0.04) (0.06)
- ----------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** 2.90% 2.52% 3.61% 5.90%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.84% 0.70% 0.70% 0.51%(a)
- -----------------------------------------------------
Net investment income 2.86% 2.47% 3.49% 5.65%(a)
- -----------------------------------------------------
Expense waiver/reimbursement (b) 0.18% 0.20% 0.11% 0.27%(a)
- -----------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets, end of period (000 omitted) $21,883 $20,382 $12,960 $548
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- ----------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------
Net investment income 0.03 0.03 0.04 0.06
- -----------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Dividends to shareholders from net investment
income (0.03) (0.03) (0.04) (0.06)
- ----------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** 3.16% 2.64% 3.61% 5.90%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.59% 0.58% 0.70% 0.51%(a)
- -----------------------------------------------------
Net investment income 3.30% 2.60% 3.49% 5.65%(a)
- -----------------------------------------------------
Expense waiver/reimbursement (b) 0.18% 0.20% 0.11% 0.27%(a)
- -----------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets, end of period (000 omitted) $304,285 $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, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
THE MONEY MARKET FUND
(FORMERLY MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
INVESTMENT SHARES 1994 1993 1992 1991*
- ----------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------
Net investment income 0.03 0.03 0.04 0.06
- -----------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Dividends to shareholders from net investment
income (0.03) (0.03) (0.04) (0.06)
- ----------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** 3.10% 2.77% 3.79% 5.92%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.80% 0.64% 0.64% 0.51%(a)
- -----------------------------------------------------
Net investment income 3.07% 2.68% 3.64% 5.99%(a)
- -----------------------------------------------------
Expense waiver/reimbursement (b) 0.25% 0.30% 0.29% 0.36%(a)
- -----------------------------------------------------
SUPPLEMENT DATA
- -----------------------------------------------------
Net assets, end of period (000 omitted) $15,236 $9,905 $5,803 $1
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
TRUST SHARES 1994 1993 1992 1991*
- ----------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------
Net investment income 0.03 0.03 0.04 0.06
- -----------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Dividends to shareholders from net investment
income (0.03) (0.03) (0.04) (0.06)
- ----------------------------------------------------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------- ----- ----- ----- -----
TOTAL RETURN** 3.35% 2.89% 3.79% 5.92%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.55% 0.50% 0.64% 0.51%(a)
- -----------------------------------------------------
Net investment income 3.25% 2.83% 3.64% 5.99%(a)
- -----------------------------------------------------
Expense waiver/reimbursement (b) 0.25% 0.30% 0.29% 0.36%(a)
- -----------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets, end of period (000 omitted) $132,445 $134,397 $136,616 $57,432
- -----------------------------------------------------
</TABLE>
* Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
THE TAX-FREE MONEY MARKET FUND
(FORMERLY TAX-FREE MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 11, 1994, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1994. This table should be read in conjunction with the Fund's
Financial Statements and Notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 30,
1994*
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.01
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
- ---------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------- ---------
TOTAL RETURN** 0.45%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.36%(a)
- ----------------------------------------------------------------------
Net investment income 2.65%(a)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.70%(a)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $21,967
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 27, 1994 (date of initial public
investment) to September 30, 1994.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
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
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation; Federal National Mortgage
Association; Government
National Mortgage Association; and Student Loan Marketing Association.
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 Exchanges 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.
The Fund will only invest in convertible securities rated BBB or higher by
Standard & Poor's Ratings Group ("S&P") or Baa or higher by Moody's Investor's
Service, Inc. ("Moody's"). Bonds rated BBB by S&P or Baa by Moody's 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.
COMMERCIAL PAPER. The Fund may invest in commercial paper rated A-1 by S&P, or
Prime-1 by 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"), and Eurodollar Time Deposits
("ETDs").
AMERICAN DEPOSITARY 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 Fund's adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater transaction expenses which
must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a high rate of portfolio turnover
may result in the realization of larger amounts of capital gains which, when
distributed to the Fund's shareholders, are taxable to them. (Further
information is contained in the Fund's Statement of Additional Information
within the sections "Brokerage Transactions" and "Tax Status"). Nevertheless,
transactions for the Fund's portfolio will be based only upon investment
considerations and will not be limited by any other considerations when the
Fund's investment adviser deems it appropriate to make changes in the Fund's
portfolio.
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 AND THE MARYLAND MUNICIPAL BOND FUND
The investment objective of The Virginia Municipal Bond Fund and The Maryland
Municipal Bond 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 and the State of Maryland, respectively. (Federal regular income tax
does not include the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.)
ACCEPTABLE INVESTMENTS. Each Fund pursues its investment objective by investing
in a professionally managed portfolio of securities at least 65% of which is
comprised of Virginia municipal bonds or Maryland municipal bonds, as the case
may be. Each 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 or Maryland state income taxes, respectively, 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 or Maryland state income taxes,
respectively.
The municipal securities in which each Fund invests are debt obligations,
including industrial development bonds, issued on behalf of the Commonwealth of
Virginia or the State of Maryland, as the case may be, or the political
subdivisions or agencies of each respective state. In addition, each 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 relevant Fund
and/or the investment adviser to the relevant Fund, exempt from federal regular
income tax and the personal income tax imposed by the Commonwealth of Virginia
or the State of Maryland, as the case may be.
CHARACTERISTICS. The debt securities in which each Fund invests will only
be rated investment grade or of comparable quality at the time of purchase.
The municipal securities which each 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 Funds' 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 a Fund has purchased it, that 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.
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 nationally recognized statistical rating organization
("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.
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."
THE TAX-FREE MONEY MARKET FUND
The investment objective of The Tax-Free Money Market Fund is current income
exempt from federal income tax consistent with stability of principal and
liquidity.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
in a portfolio of municipal securities (as defined below) maturing in 13 months
or less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income will be
exempt from federal income tax (including alternative minimum tax). The average
maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less.
The Fund invests primarily in debt obligations issued by or on behalf of states,
territories, and possessions of the United States, including the District of
Columbia, and any political subdivision or financing authority of any of these,
the income from which is, in the opinion of qualified legal counsel, exempt from
federal income tax ("municipal securities"). Examples of municipal securities
include, but are not limited to:
- tax and revenue anticipation notes issued to finance working capital
needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes that are intended to be refinanced through a
later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases;
- construction loan notes insured by the Federal Housing Administration and
financed by the Federal or Government National Mortgage Associations; and
- participation, trust, and partnership interests in any of the foregoing
obligations.
PARTICIPATION INTERESTS. The Fund may purchase interests in municipal
securities from financial institutions such as commercial and investment
banks, savings and loan associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying municipal securities.
RATINGS. The municipal securities in which the Fund invests must be rated in one
of the two highest short-term rating categories by one or more NRSRO or be of
comparable quality to securities having such ratings. The Fund will follow
applicable regulations in determining whether a security rated by more than one
NRSRO can be treated as being in one of the two highest short-term rating
categories; currently, such securities must be rated by two NRSROs in one of
their two highest rating categories. See "Regulatory Compliance."
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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REGULATORY COMPLIANCE
The Treasury Money Market Fund, The Money Market Fund and The Tax-Free Money
Market Fund may follow non-fundamental operational policies that are more
restrictive than their fundamental investment limitations, as set forth in this
prospectus and their 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 Funds will comply with the various requirements of Rule 2a-7, which
regulates money market mutual funds. The
Treasury Money Market Fund, The Money Market Fund, and The Tax-Free Money Market
Fund will also determine the effective maturity of their respective investments,
as well as their ability to consider a security as having received the requisite
short-term ratings by NRSROs, according to Rule 2a-7. The Funds may change these
operational policies to reflect changes in the laws and regulations without the
approval of their shareholders.
BORROWING MONEY
Except for The Tax-Free Money Market Fund 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. The Tax-Free Money Market Fund may borrow up to one-third of
the value of its total assets, including the amount borrowed. The Tax-Free Money
Market Fund will not purchase any securities while borrowings in excess of 5% of
the value of its total assets are outstanding. These policies 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, The Virginia Municipal Bond
Fund, and The Maryland Municipal Bond Fund will not invest more than 15 % of
their net assets in illiquid securities. The Treasury Money Market Fund, The
Money Market Fund, and The Tax-Free Money Market Fund will not invest more than
10% of their net assets in illiquid securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which a Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause a Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices. Accordingly, a Fund may pay more or less than the
market value of the securities on the settlement date.
The Trust may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Trust may enter in transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Trust may realize short-term profits or losses upon the sale of such
commitments.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds, except for The Tax-Free Money Market Fund, 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. It should be
noted that investment companies incur certain
expenses, and therefore, any investment by a Fund in shares of another
investment company would be subject to certain duplicate expenses, particularly
transfer agent and custodian fees. The adviser will waive its investment
advisory fee on assets invested in securities of open-end investment companies.
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. This policy cannot be
changed without the approval of holders of a majority of a Fund's Shares.
NON-DIVERSIFICATION
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, The Treasury
Money Market Fund, and The Tax-Free Money Market 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.
INVESTING IN NEW ISSUERS
The U.S. Government Securities Fund, The Stock Fund, The Money Market Fund, and
The Tax-Free 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.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
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 a Fund.
VARIABLE RATE DEMAND NOTES
The Money Market Fund and The Tax-Free Money Market Fund may invest in variable
rate demand notes. Variable rate demand notes are long-term corporate debt
instruments that have variable or floating interest rates and provide the Funds
with the right to tender the security for repurchase at its stated principal
amount plus accrued interest. Such securities typically bear interest at a rate
that is intended to cause the securities to trade at par. The interest rate may
float or be adjusted at regular intervals (ranging from daily to annually), and
is normally based on a published interest rate or interest rate index. Most
variable rate demand notes allow a Fund to demand the repurchase of the security
on not more than seven days' prior notice. Other notes only permit the Funds to
tender the security at the time of each interest rate adjustment or at other
fixed intervals. See "Demand Features." The Funds treat variable rate demand
notes as maturing on the later of the date of the next interest adjustment or
the date on which a Fund may next tender the security for repurchase.
CREDIT ENHANCEMENT
Certain of The Money Market Fund's and The Tax-Free Money Market Fund's
acceptable investments may have been credit enhanced by a guaranty, letter of
credit or insurance. A 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, a 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 a 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 Money Market Fund and The Tax-Free Money Market 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 a 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. A Fund uses these arrangements to provide itself
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.
PARTICIPATION INTERESTS
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market 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, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market 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. 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.
Lease obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments, the entity cannot be compelled
to make such payments. In the event of failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute.
TEMPORARY INVESTMENTS
From time to time, during periods of other than normal market conditions, The
Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The Tax-Free
Money Market 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).
Except for The Tax-Free Money Market Fund, 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. Temporary
investments held by The Tax-Free Money Market Fund must be rated in one of the
two highest short-term rating categories by one or more NRSRO.
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.
MUNICIPAL SECURITIES
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund invest principally in municipal securities. Municipal
securities are generally issued to finance public works, such as airports,
bridges, highways, housing, hospitals, mass transportation projects, schools,
streets, and water and sewer works. They are also issued to repay outstanding
obligations, to raise funds for general operating expenses and to make loans to
other public institutions and facilities.
Municipal securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
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 off 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 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, with respect to The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund, 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 The Virginia
Municipal Bond Fund, The Maryland Municipal Bond Fund, and The Tax-Free
Money-Market Fund to achieve their investment objectives also depends on the
continuing ability of the issuers of municipal securities and participation
interests, or the guarantors of either, to meet their obligations for the
payment of interest and principal when due. With respect to The Virginia
Municipal Bond Fund and The Maryland Municipal Bond Fund, 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. In
addition, from time to time, the supply of municipal securities acceptable for
purchase by The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund,
and The Tax-Free Money Market Fund, could become limited.
The Tax-Free Money Market Fund may invest in municipal securities which are
repayable out of revenue streams generated from economically related projects or
facilities and/or whose issuers are located in the same state. Sizable
investments in these municipal securities could involve an increased risk to the
Fund should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of municipal securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislators, or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the ability of states
or municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any issuer to pay,
when due, the principal of and interest on its municipal securities may be
materially affected.
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.
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, The Money Market Fund, and The
Tax-Free 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 December 31, 1994, Signet Trust Company had
$9.9 billion in total trust assets. Signet Asset Management has investment
authority over $2.8 billion of the $9.9 billion. The Adviser has managed
The Medalist Funds since their inception in 1990. The Adviser manages three
equity common trust funds with $39 million in assets and three fixed income
common trust funds with $221 million in assets. As part of their regular
banking operations, Signet Bank and Trust may make loans to public
companies. Thus, it may be possible, from time to time, for the Funds to
hold or acquire the securities of issuers which are also lending clients of
Signet Bank and Trust. The lending relationship will not be a factor in the
selection of securities.
Effective March 1, 1995, subject to approval of the Trustees, Virtus
Capital Management, Inc., a wholly-owned subsidiary of Signet Banking
Corporation, will, by virtue of a reorganization within the Signet holding
company system, succeed to the business of Signet Asset Management, and
thus will become Adviser to the Funds. Since those persons currently
responsible for management of the Funds' assets will have similar
responsibilities to the Funds as employees of Virtus Capital Management,
Inc., the reorganization will have no effect on the operations of the Fund.
E. Christian Goetz has managed The U.S. Government Securities Fund since
August, 1991, and The Maryland Municipal Bond Fund and The Virginia
Municipal Bond Fund since November 1994. 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
The Virginia Retirement System.
DISTRIBUTION OF 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, The Money Market Fund, and The Tax-Free 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 will, periodically, uniformly offer to pay cash or promotional
incentives in the form of trips to sales seminars at luxury resorts, tickets or
other items to all dealers selling shares of the Funds. Such payments will be
predicated upon the amount of shares of the Funds that are sold by the 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.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository institution
(such as a commercial bank or a savings and loan association) from being an
underwriter or distributor of most securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax current
restrictions on depository institutions, the Board of Trustees will consider
appropriate changes in the administrative services.
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.
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
----------------------------------- -----------------------------------
<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; however, this requirement was waived by the administrator for the year
ended September 30, 1994. 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.
INDEPENDENT AUDITORS. The independent auditors for the Funds are Deloitte &
Touche LLP, 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. 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, The Money Market Fund, and The
Tax-Free 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, these Funds 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 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, The Money Market Fund, and The
Tax-Free 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, The Money Market Fund,
and The Tax-Free 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 at the time of
purchase.
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, The Money Market Fund, and The Tax-Free 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, The Money Market Fund, and The
Tax-Free 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, The
Money Market Fund, and The Tax-Free Money Market Fund, dividends are declared
daily and paid monthly.
With respect to The Treasury Money Market Fund, The Money Market Fund, and The
Tax-Free 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, The Money Market Fund, and The
Tax-Free 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
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Holders of Shares have easy access to Shares of the other funds comprising the
Trust through an exchange program, and exchanges may be made 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 SHARES
- --------------------------------------------------------------------------------
Each Fund redeems Shares at their net asset value, less any applicable
contingent deferred sales charge, 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, The Money Market Fund, and The
Tax-Free 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
Exchanges;
- 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.
CONTINGENT DEFERRED SALES CHARGE--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 contingent
deferred sales charge by the Fund's distributor. The charge will be based upon
the lesser of the original purchase price or the net asset value of the Shares
redeemed, as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
AMOUNT OF PURCHASE SALES CHARGE
------------------------------------ --------------------
<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 contingent deferred sales charge. 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
contingent deferred sales charge 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 contingent deferred sales charge, 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 contingent deferred sales charge 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;
(iv) 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; owned by non-trust customers
("customers") of fee-based planners, investment advisers or banking institutions
(collectively, "Institutions") where such Institutions have an agreement with,
and such customers have a brokerage account with, Signet Financial Services,
Inc.; (vi) purchased through the Imprint Program sponsored by Signet Financial
Services, Inc.; or (vii) if the proceeds from the redemption are used to
purchase a Strive variable annuity within 10 days of the redemption.
The contingent deferred sales charge is 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.
CONTINGENT DEFERRED SALES CHARGE--THE TREASURY MONEY MARKET FUND,
THE MONEY MARKET FUND AND THE TAX-FREE MONEY MARKET FUND
A contingent deferred sales charge will be imposed only in certain instances in
which the Shares of The Treasury Money Market Fund, The Money Market Fund, or
The Tax-Free Money Market Fund being redeemed were acquired in exchange for
Shares of those other Medalist Funds which charge a contingent deferred sales
charge ("CDSC Shares"). If Shares of The Treasury Money Market Fund, The Money
Market Fund, or The Tax-Free Money Market Fund were acquired in exchange for
CDSC Shares, redemption of the Shares of The Treasury Money Market Fund, The
Money Market Fund, or
The Tax-Free Money Market Fund within five years of the purchase of the CDSC
Shares, will have the same consequences as described under "Contingent Deferred
Sales Charge--The U.S. Government Securities Fund, The Stock Fund, The Virginia
Municipal Bond Fund, and The Maryland Municipal Bond Fund."
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 at net asset value, less any applicable contingent deferred sales
charge, 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.
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 January 11, 1995,
Stephens Inc., Little Rock, Arkansas, owned approximately 2,784,480 Investment
Shares of The U.S. Government Securities Fund (26%); approximately 2,035,032
Investment Shares of The Virginia Municipal Bond Fund (30%); approximately
22,352,342 Investment Shares of The Treasury Money Market Fund (67%);
approximately 9,248,672 Investment Shares of The Money Market Fund (32%); and
Bova & Co, Richmond, Virginia, owned approximately 17,601,826 shares of The
Tax-Free Money Market Fund (65%), and therefore, may, for certain purposes, be
deemed to control the respective Fund 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.
Shareholders of The Virginia Municipal Bond Fund, The Maryland Municipal Bond
Fund and The Tax-Free Money Market Fund are not required to pay the federal
regular income tax on any dividends received from the Fund that represent net
interest on tax-exempt municipal bonds. However, under the Tax reform Act of
1986, dividends representing net interest earned on certain "private activity"
bonds issued after August 17, 1986, may be included in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations. The Virginia Municipal Bond Fund, The
Maryland Municipal Bond Fund and The Tax-Free Money Market Fund may purchase all
types of municipal bonds, including private activity bonds.
The alternative minimum tax 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.
Dividends of the Funds 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.
VIRGINIA TAXES. Under existing Virginia laws, distributions made by the Fund
will not be subject to Virginia income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code of 1986, as amended, and represent (i) interest from obligations issued by
or on behalf of the Commonwealth of Virginia or any political subdivision
thereof; or (ii) interest from obligations issued by a territory or possession
of the United States or any political subdivision thereof which federal law
exempts from state income taxes. Conversely, to the extent that distributions
made by the Fund are attributable to other types of obligations, such
distributions will be subject to Virginia income taxes.
MARYLAND TAXES. Under existing Maryland laws, distributions made by the Fund
will not be subject to Maryland state or local income taxes to the extent that
such distributions qualify as exempt-interest dividends under the Internal
Revenue Code, and represent (i) interest on tax-exempt obligations 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). Conversely, to the extent that distributions made by the Fund are
derived from other types of obligations, such distributions will be subject to
Maryland income taxes.
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. The Tax-Free Money Market Fund may
advertise its yield, effective yield, and tax-equivalent 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, The Money Market Fund,
and The Tax-Free 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, The
Maryland Municipal Bond Fund, and The Tax-Free Money Market 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 contingent deferred sales charge 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 performance using certain
financial publications and/or compare their performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Trust Shares, the other class of shares offered by those Funds offering separate
classes, 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
The Tax-Free Money Market 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
- ------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 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 (1/95)
The Medalist Funds
(formerly the Signet Select Funds)
Trust Shares
consists of seven portfolios:
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; and
The Tax-Free Money Market Fund
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read
with the Combined Prospectus for the Trust Shares ("Trust Shares")
of The Medalist Funds (the "Trust") and The Tax-Free Money Market
Fund, dated January 31, 1995. This Statement is not a Prospectus
itself. To receive a copy of the prospectus, write to or call the
Trust.
</R)
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
FEDERATED INVESTORS
Distributor
A subsidiary of
Federated Investors
STATEMENT DATED JANUARY 31, 1995
General Information About the Trust 1
Investment Objective and Policies
of the Funds 1
The U.S. Government Securities
Fund 1
Types of Investments 1
U.S. Government Obligations 1
Collateralized Mortgage
Obligations (CMOs) 2
The Stock Fund 2
Convertible Securities 2
Warrants 2
Futures And Options
Transactions 2
Financial Futures Contracts 2
Put Options on Financial
Futures Contracts 3
Call Options on Financial
Futures Contracts 3
"Margin" in Futures
Transactions 3
Purchasing Put Options on
Portfolio Securities 4
Writing Covered Call Options
On Portfolio Securities 4
Over-the-Counter Options 4
U.S. Government Obligations 4
Commercial Paper 4
Bank Instruments 4
The Virginia Municipal Bond Fund
and The Maryland Municipal Bond
Fund 5
Acceptable Investments 5
Characteristics 5
Types of Acceptable Investments 5
The Treasury Money Market Fund 5
Types of Investments 5
The Money Market Fund 6
Types of Investments 6
Bank Instruments 6
U.S. Government Obligations 6
The Tax-Free Money Market Fund 6
Portfolio Investments and
Strategies 6
Repurchase Agreements 6
Reverse Repurchase Agreements 6
When-Issued and Delayed
Delivery Transactions 6
Lending of Portfolio Securities 7
Restricted and Illiquid
Securities 7
Participation Interests 7
Variable Rate Municipal
Securities 8
Municipal Leases 8
Temporary Investments 8
Adjustable Rate Mortgage Securities 8
Issuing Senior Securities and
Borrowing Money 9
Selling Short and Buying on
Margin 9
Pledging Assets 9
Lending Cash or Securities 9
Investing in Restricted
Securities 10
Investing in Commodities 10
Investing in Real Estate 10
Diversification of Investments 10
Concentration of Investments 10
Underwriting 10
Investing in Illiquid
Securities 11
Investing in Securities of
Other Investment Companies 11
Investing in New Issuers 11
Investing in Issuers Whose
Securities are Owned by
Officers and Trustees of the
Trust 11
Investing in Minerals 11
Arbitrage Transactions 11
Purchasing Securities to
Exercise Control 11
Investing in Warrants 12
Investing in Put Options 12
Writing Covered Call Options 12
Selling Short 12
Dealing in Puts and Calls 12
The Medalist Funds Management 13
Officers and Trustees 13
The Funds 16
Fund Ownership 17
Officers and Trustees
Compensation 17
Trustee Liability 18
Investment Advisory Services 18
Adviser to the Trust 18
Advisory Fees 18
State Expense Limitations 18
Administrative Services 18
Custodian 19
Brokerage Transactions 19
Purchasing Shares 19
Distribution Plan 19
Conversion to Federal Funds 20
Administrative Arrangements 20
Determining Market Value of
Securities 20
Use of the Amortized Cost
Method 21
Monitoring Procedures 21
Investment Restrictions 21
Valuing Municipal Securities 22
Use of Amortized Cost 22
Redeeming Shares 22
Redemption in Kind 22
Tax Status 22
The Funds' Tax Status 22
Shareholders' Tax Status 23
Capital Gains 23
Total Return 23
Yield 23
Effective Yield 24
Tax-Equivalent Yield 24
Tax-Equivalency Tables 24
Performance Comparisons 26
The U.S. Government Securities
Fund 27
The Stock Fund 27
The Virginia Municipal Bond
Fund and The Maryland
Municipal Bond Fund 28
The Treasury Money Market Fund 28
The Money Market Fund 28
The Tax-Free Money Market Fund 28
Financial Statements 29
Appendix 30
Standard and Poor's Ratings
Group Municipal Bond Rating
Definitions 30
Moody's Investors Service, Inc.
Municipal Bond Rating
Definitions 30
Fitch Investors Service, Inc.,
Long-Term Debt Ratings 30
Standard & Poor's Corporation,
Municipal Note Ratings 31
Moody's Investors Service,
Short-Term Loan Ratings 31
General Information About the Trust
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated June 20, 1990. As of the date of this Statement,
the Trust consists of seven separate portfolios of securities
(collectively, the "Funds", individually, a "Fund") which are as follows:
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, and The Tax-Free Money Market Fund. On
October 1, 1992, the name of the Trust was changed from "The SBK Select
Series" to "Signet Select Funds." On August 15, 1994, the name of the Trust
was changed from "Signet Select Funds" to "The Medalist Funds."
With the exception of The Tax-Free Money Market Fund, which offers a single
class of shares, the Funds are offered in two classes, Investment Shares
and Trust Shares. This Combined Statement of Additional Information relates
only to the Trust Shares of those Funds offering classes and to shares of
The Tax-Free Money Market Fund.
Investment Objective and Policies of the Funds
The prospectus discusses the objective of each Fund and the policies it
employs to achieve those objectives. The following discussion supplements
the description of the Funds' investment policies in the Combined
prospectus.
The Funds' respective investment objectives cannot be changed without
approval of shareholders. The investment policies described below may be
changed by the Trustees without shareholder approval. 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 prospectus section "Portfolio Investments and Strategies."
The U.S. Government Securities Fund
Types of Investments
The Fund invests primarily in securities which are guaranteed as to payment
of principal and interest by the U.S. government or its instrumentalities.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may
invest generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations
issued or guaranteed by U.S. government agencies or
instrumentalities. These securities are backed by: the full faith
and credit of the U.S. Treasury; the issuer's right to borrow from
the U.S. Treasury; the discretionary authority of the U.S.
government to purchase certain obligations of agencies or
instrumentalities; or the credit of the agency or instrumentality
issuing the obligations.
Examples of agencies and instrumentalities which may not always
receive financial support from the U.S. government are: the Farm
Credit System; Federal Home Loan Banks; Farmers Home
Administration; and Federal National Mortgage Association.
Collateralized Mortgage Obligations (CMOs)
Privately issued CMOs generally represent an ownership interest in
federal agency mortgage pass-through securities such as those
issued by the Government National Mortgage Association. The terms
and characteristics of the mortgage instruments may vary among
pass-through mortgage loan pools.
The market for such CMOs has expanded considerably since its
inception. The size of the primary issuance market and the active
participation in the secondary market by securities dealers and
other investors make government-related pools highly liquid.
The Stock Fund
The Fund invests primarily in the securities of high quality companies,
including common stocks, preferred stocks, corporate bonds, notes, warrants
and convertible securities.
Convertible Securities
Convertible securities are fixed income securities which may be
exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures,
units consisting of "usable" bonds and warrants or a combination
of the features of several of these securities. The investment
characteristics of each convertible security vary widely, which
allows convertible securities to be employed for different
investment objectives.
The Fund will exchange or convert the convertible securities held
in its portfolio into shares of the underlying common stock in
instances in which, in the investment adviser's opinion, the
investment characteristics of the underlying common shares will
assist the Fund in achieving its investment objectives. Otherwise,
the Fund may hold or trade convertible securities. In selecting
convertible securities for the Fund, the Fund's adviser evaluates
the investment characteristics of the convertible security as a
fixed income instrument, and the investment potential of the
underlying equity security for capital appreciation. In evaluating
these matters with respect to a particular convertible security,
the Fund's adviser considers numerous factors, including the
economic and political outlook, the value of the security relative
to other investment alternatives, trends in the determinants of
the issuer's profits, and the issuer's management capability and
practices.
Warrants
Warrants are basically options to purchase common stock at a
specific price (usually at a premium above the market value of the
optioned common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than a year to
twenty years or may be perpetual. However, most warrants have
expiration dates after which they are worthless. In addition, if
the market price of the common stock does not exceed the warrant's
exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no
dividends, and have no rights with respect to the assets of the
corporation issuing them. The percentage increase or decrease in
the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the
optioned common stock.
Futures And Options Transactions
As a means of reducing fluctuations in the net asset value of
shares of the Fund, the Fund may attempt to hedge all or a portion
of its portfolio by buying and selling financial futures
contracts, buying put options on portfolio securities and listed
put options on futures contracts, and writing call options on
futures contracts. The Fund may also write covered call options on
portfolio securities to attempt to increase its current income.
The Fund will maintain its positions in securities, option rights,
and segregated cash subject to puts and calls until the options
are exercised, closed, or have expired. An option position on
financial futures contracts may be closed out only on an exchange
which provides a secondary market from options of the same series.
Financial Futures Contracts
A futures contract is a firm commitment by two parties: the
seller, who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the buyer,
who agrees to take delivery of the security ("going long") at a
certain time in the future. Financial futures contracts call for
the delivery of shares of common stocks represented in a
particular index.
Put Options on Financial Futures Contracts
The Fund may purchase listed put options on financial futures
contracts.Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date
at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide
on or before a future date whether to assume a short position at
the specified price.
Generally, if the hedged portfolio securities decrease in value
during the term of an option, the related futures contracts will
also decrease in value and the option will increase in value. In
such an event, the Fund will normally close out its option by
selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option
will be large enough to offset both the premium paid by the Fund
for the original option plus the decrease in value of the hedged
securities.
Alternatively, the Fund may exercise its put option to close out
the position. To do so, it would simultaneously enter into a
futures contract of the type underlying the option (for a price
less than the strike price of the option) and exercise the option.
The Fund would then deliver the futures contract in return for
payment of the strike price. If the Fund neither closes out nor
exercises an option, the option will expire on the date provided
in the option contract, and only the premium paid for the contract
will be lost.
Call Options on Financial Futures Contracts
In addition to purchasing put options on futures, the Fund may
write listed call options on futures contracts to hedge its
portfolio. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of assuming a short
futures position (selling a futures contract) at the fixed strike
price at any time during the life of the option if the option is
exercised. As stock prices fall, causing the prices of futures to
go down, the Fund's obligation under a call option on a future (to
sell a futures contract) costs less to fulfill, causing the value
of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below
the strike price, the buyer of the option has no reason to
exercise the call, so that the Fund keeps the premium received for
the option. This premium can substantially offset the drop in
value of the Fund's fixed income or indexed portfolio which is
occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise
of it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the
second option will be less than the premium received by the Fund
for the initial option. The net premium income of the Fund will
then substantially offset the decrease in value of the hedged
securities.
The Fund will not maintain open positions in futures contracts it
has sold or call options it has written on futures contracts if,
in the aggregate, the value of the open positions (marked to
market) exceeds the current market value of its securities
portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is
exceeded at any time, the Fund will take prompt action to close
out a sufficient number of open contracts to bring its open
futures and options positions within this limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay
or receive money upon the purchase or sale of a futures contract.
Rather, the Fund is required to deposit an amount of "initial
margin" in cash or U.S. Treasury bills with its custodian (or the
broker, if legally permitted). The nature of initial margin in
futures transactions is different from that of margin in
securities transactions in that futures contract initial margin
does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance
bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the
official settlement price of the exchange on which it is traded.
Each day the Fund pays or receives cash, called "variation
margin," equal to the daily change in value of the futures
contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is
instead settlement between the Fund and the broker of the amount
one would owe the other if the futures contract expired. In
computing its daily net asset value, the Fund will mark to market
its open futures positions.
The Fund is also required to deposit and maintain margin when it
writes call options on futures contracts.
Purchasing Put Options on Portfolio Securities
The Fund may purchase put options on portfolio securities to
protect against price movements in particular securities in its
portfolio. A put option gives the Fund, in return for a premium,
the right to sell the underlying security to the writer (seller)
at a specified price during the term of the option.
Writing Covered Call Options On Portfolio Securities
The Fund may also write covered call options to generate income.
As writer of a call option, the Fund has the obligation upon
exercise of the option during the option period to deliver the
underlying security upon payment of the exercise price. The Fund
may only sell call options either on securities held in its
portfolio or on securities which it has the right to obtain
without payment of further consideration (or has segregated cash
in the amount of any additional consideration).
Over-the-Counter Options
The Fund may purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or
writers of the options for those options on portfolio securities
held by the Fund and not traded on an exchange.
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.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may
invest are those set forth under "The U.S. Government Securities
Fund--U.S. Government Obligations."
Commercial Paper
The Fund may invest in commercial paper rated at least A-1 by Standard &
Poor's Ratings Group ("S&P"), Prime-1 by Moody's Investors Service, Inc.
("Moody's"), or F-1 by Fitch Investors Service ("Fitch") and money market
instruments (including commercial paper) which are unrated but of
comparable quality, including Canadian Commercial Paper ("CCPs") and
Europaper. In the case where commercial paper, CCPs or Europaper have
received different ratings from different rating services, such commercial
paper, CCPs or Europaper is an acceptable investment so long as at least
one rating is one of the preceding high quality ratings and provided the
investment adviser has determined that such investment presents minimal
credit risks.
Bank Instruments
The Fund may invest in the instruments of banks and savings and loans whose
deposits are 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, such as certificates of deposit, demand and time deposits, savings
shares, and bankers' acceptances. These instruments are not necessarily
guaranteed by those organizations.
In addition to domestic bank obligations such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, the
Fund may invest in:
o Eurodollar Certificates of Deposit ("ECDs") issued by foreign
branches of U.S. or foreign banks;
o Eurodollar Time Deposits ("ETDs"), which are U.S. dollar-
denominated deposits in foreign branches of U.S. or foreign
banks;
o Canadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the United
States; and
o Yankee Certificates of Deposit ("Yankee CDs"), which are U.S.
dollar-denominated certificates of deposit issued by U.S.
branches of foreign banks and held in the United States.
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
Acceptable Investments
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
pursue their investment objectives by investing in professionally managed
portfolios of securities at least 65% of which are comprised of Virginia
(in the case of The Virginia Municipal Bond Fund) or Maryland (in the case
of The Maryland Municipal Bond Fund) municipal securities. The Funds will
invest their assets so that, under normal circumstances, at least 80% of
their annual interest income is exempt from federal regular and Virginia
(in the case of The Virginia Municipal Bond Fund) or Maryland (in the case
of The Maryland Municipal Bond Fund) state income taxes or that at least
80% of their total assets are invested in obligations, the interest income
from which is exempt from federal regular and Virginia (in the case of The
Virginia Municipal Bond Fund) or Maryland (in the case of The Maryland
Municipal Bond Fund) state income taxes.
Characteristics
The municipal securities in which the Funds invest have the
characteristics set forth in the prospectus. An unrated municipal
security will be determined by a Fund's adviser to meet the
quality standards established by the Fund's Board of Trustees if
it is of comparable quality to the rated municipal securities
which the Fund purchases. The Trustees consider the
creditworthiness of the issuer of a municipal security, the issuer
of a participation interest if the Fund has the right to demand
payment from the issuer of the interest or the guarantor of
payment by either of those issuers.
If Moody's or S&P's ratings change because of changes in those
organizations or in their rating systems, a Fund will try to use
comparable ratings as standards in accordance with the investment
policies described in the Fund's prospectus.
Types of Acceptable Investments
Examples of Virginia and Maryland municipal securities are:
o municipal notes and tax-exempt commercial paper;
o serial bonds sold with a series of maturity dates;
o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes at a later
date;
o bond anticipation notes sold in anticipation of the issuance of
longer-term bonds in the future;
o revenue anticipation notes sold in expectation of receipt of
federal income available under the Federal Revenue Sharing
Program;
o prerefunded municipal bonds refundable at a later date (payment of
principal and interest on prerefunded bonds is assured through
the first call date by the deposit in escrow of U.S. government
securities); or
o general obligation bonds secured by a municipality's pledge of
taxation.
The Treasury Money Market Fund
Types of Investments
The Fund invests only in short-term U.S. Treasury obligations. Short-term
U.S. Treasury obligations as used herein refers to evidences of
indebtedness issued by the United States, or issued by an agency or
instrumentality thereof, and fully guaranteed as to principal and interest
by the United States, maturing 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 Fund may also retain Fund assets in cash.
The Money Market Fund
Types of Investments
The Fund invests primarily in money market instruments maturing in 397 days
or less and which include, but are not limited to, commercial paper and
demand master notes, domestic and foreign bank instruments, U.S. government
obligations, and corporate debt obligations.
Bank Instruments
The types of bank instruments in which the Fund invests are those
set forth under "The Stock Fund-Bank Instruments."
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may
invest are those set forth under "The U.S. Government Securities
Fund-U.S. Government Obligations."
The Tax-Free Money Market Fund
The Fund invests in a portfolio of municipal securities maturing in 13
months or less. As a matter of investment policy, which cannot be changed
without shareholder approval, at least 80% of the Fund's annual interest
income will be exempt from federal income tax (including alternative
minimum tax). The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Portfolio Investments and Strategies
Repurchase Agreements
The Funds or their custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market
daily. In the event that a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Funds believe that under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in
favor of a Fund and allow retention or disposition of such securities. The
Funds will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the adviser to be creditworthy pursuant to guidelines established by the
Trustees.
Reverse Repurchase Agreements
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement a Fund transfers possession of a portfolio instrument to another
person, such as a financial institution, broker, or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable a
Fund to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that a Fund will be able to avoid
selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of a
Fund sufficient to make payment for the securities to be purchased are
segregated on a Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Funds may engage in these transactions to an extent that would cause
the segregation of an amount up to 20% of the total value of their assets.
The Funds do not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of their respective assets.
Lending of Portfolio Securities
The collateral received when The U.S. Government Securities Fund, The Stock
Fund and The Money Market Fund lend portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the particular Fund. During
the time portfolio securities are on loan, the borrower pays a Fund any
dividends or interest paid on such securities. Loans are subject to
termination at the option of a Fund or the borrower. A Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker. The U.S.
Government Securities Fund and The Stock Fund do not have the right to vote
securities on loan, but would terminate the loan and regain the right to
vote if that were considered important with respect to the investment.
Restricted and Illiquid Securities
The Funds may invest in restricted securities. Restricted securities are
any securities in which a Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restriction on
resale under federal securities law. However, The U.S. Government
Securities Fund, The Stock Fund, The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund will limit investments in illiquid securities,
including certain restricted securities determined by the Trustees not to
be liquid, and repurchase agreements providing for settlement in more than
seven days after notice, to 15% of its net assets. In the case of The
Virginia Municpal Bond Fund and The Maryland Municipal Bond Fund, illiquid
securities will include 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, The Money Market Fund, and The Tax-Free
Money Market Fund will limit investments in illiquid securities, including
certain securities determined by the Trustees not to be liquid, and
repurchase agreements providing for settlement in more than seven days
after notice, and in the case of The Money Market Fund, specifically
including non-negotiable fixed income time deposits with maturities over
seven days, to 10% of their net assets.
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
the Fund, 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 like the Fund through
or with the assistance of the issuer or investment dealers who make a
market in Section 4(2) commercial paper, thus providing liquidity. The
Funds believe that Section 4(2) commercial paper and possibly certain other
restricted securities which meet the criteria for liquidity established by
the Board of Trustees are quite liquid. The Funds intend, therefore, to
treat the restricted securities which meet the criteria for liquidity
established by the Trustees, including Section 4(2) commercial paper, as
determined by a Fund's investment adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition,
because Section 4(2) commercial paper is liquid, the Funds intend to not
subject such paper to the limitation applicable to restricted securities.
Participation Interests
The financial institutions from which The Virginia Municipal Bond Fund, The
Maryland Municipal Bond Fund, and The Tax-Free Money Market Fund purchase
participation interests frequently provide or secure from other financial
institutions irrevocable letters of credit or guarantees and give a Fund
the right to demand payment on specified notice (normally within thirty
days for The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund and seven days for The Tax-Free Money Market Fund) from the issuer of
the letter of credit or guarantee. These financial institutions may charge
certain fees in connection with their repurchase commitments, including a
fee equal to the excess of the interest paid on the municipal securities
over the negotiated yield at which the participation interests were
purchased by a Fund. By purchasing participation interests, a Fund is
buying a security meeting the maturity and quality requirements of a Fund
and is also receiving the tax-free benefits of the underlying securities.
In the acquisition of participation interests, a Fund's investment adviser
will consider the following quality factors:
o the quality of the underlying municipal security (of which a Fund
takes possession);
o the quality of the issuer of the participation interest; and
o a guarantee or letter of credit from a high-quality financial
institution supporting the participation interest.
Variable Rate Municipal Securities
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund invest in variable municipal securities.
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for
fixed income obligations.
Many municipal securities with variable interest rates purchased by the The
Tax-Free Money Market Fund are subject to repayment of principal (usually
within seven days) on the The Tax-Free Money Market Fund's demand. For
purposes of determining the Fund's average maturity, the maturities of
these variable rate demand municipal securities (including participation
interests) are the longer of the periods remaining until the next
readjustment of their interest rates or the periods remaining until their
principal amounts can be recovered buy exercising the right to demand
payment. The terms of these variable rate demand instruments require
payment of principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests or a guarantor of
either issuer.
Municipal Leases
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund may purchase municipal securities in the form of
participation interests which represent undivided proportional interests in
lease payments by a governmental or nonprofit entity. The lease payments
and other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations
may be subject to periodic appropriation. If the entity does not
appropriate funds for future lease payments, the entity cannot be compelled
to make such payments. Furthermore, a lease may provide that the
certificate trustee cannot accelerate lease obligations upon default. The
trustee would only be able to enforce lease payments as they became due. In
the event of a default or failure of appropriation, it is unlikely that the
trustee would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the adviser,
under the authority delegated by the Board of Trustees, will base its
determination on the following factors: (a) whether the lease can be
terminated by the lessee; (b) the potential recovery, if any, from a sale
of the leased property upon termination of the lease; (c) the lessee's
general credit strength (e.g., its debts, administrative, economic and
financial characteristics, and prospects); (d) the likelihood that the
lessee will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to its operations (e.g.,
the potential for an "event of nonappropriation"); and (e) any credit
enhancement of legal recourse provided upon an event of nonappropriation or
other termination of the lease.
Temporary Investments
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund and The
Tax-Free Money Market Fund may also invest in temporary investments during
times of unusual market conditions for defensive purposes and to maintain
liquidity.
From time to time, such as when suitable securities are not available to
the respective Fund, a Fund may invest a portion of its assets in cash. Any
portion of a Fund's assets maintained in cash will reduce the amount of
assets in securities held in the respective Fund, and could thereby reduce
a Fund's yield.
</R.
Adjustable Rate Mortgage Securities
The U.S. Government Securities Fund invests in adjustable rate mortgage
securities ("ARMS"). Not unlike other U.S. government securities, the
market value of ARMS will generally vary inversely with changes in market
interest rates. Thus, the market value of ARMS generally declines when
interest rates rise and generally rises when interest rates decline.
While ARMS generally entail less risk of a decline during periods of
rapidly rising rates, ARMS may also have less potential for capital
appreciation than other similar investments (e.g. investments with
comparable maturities) because as interest rates decline, the likelihood
increases that mortgages will be prepaid. Furthermore, if ARMS are
purchased at a premium, mortgage foreclosures and unscheduled principal
payment may result in some loss of a holder's principal investment to the
extent of the premium paid. Conversely, if ARMS are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
Portfolio Turnover
The Funds will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in an
attempt to achieve a Fund's investment objective. The Stock Fund may
experience greater portfolio turnover than would be expected with a
portfolio of higher-rated securities. A high portfolio turnover will
result in increased transaction costs to the Fund. For the fiscal years
ended September 30, 1994, 1993, and 1992, the portfolio turnover rates
were 227%, 154%, and 201%, respectively, for The U.S. Government
Securities Fund; 205%, 67%, and 38%, respectively, for The Stock Fund;
29%, 17%, and 51%, respectively, for The Virginia Municipal Bond Fund;
and 27%, 23%, and 34%, respectively, for The Maryland Municipal Bond
Fund.
Investment Limitations
Issuing Senior Securities and Borrowing Money
The Funds will not issue senior securities except that a Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its net assets, including
the amount borrowed. The Funds will not borrow money or engage in
reverse repurchase agreements for investment leverage, but rather
as a temporary, extraordinary, or emergency measure or to
facilitate management of the portfolio by enabling a Fund to meet
redemption requests when the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous. A Fund will not
purchase any securities while any borrowings in excess of 5% of
its total assets are outstanding. With respect to The U.S.
Government Securities Fund, The Stock Fund, The Virginia Municipal
Bond Fund, The Maryland Municipal Bond Fund, The Treasury Money
Market Fund, and The Money Market Fund, during the period any
reverse repurchase agreements are outstanding, the Funds will
restrict the purchase of portfolio securities to money market
instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to
assure completion of the reverse repurchase agreements.
Selling Short and Buying on Margin
The Funds will not purchase any securities on margin but they may
obtain such short-term credits as may be necessary for clearance
of transactions. With respect to The U.S. Government Securities
Fund and The Stock Fund, the deposit or payment by the Fund of
initial or variation margin in connection with financial futures
contracts or related options transactions is not considered the
purchase of a security on margin. The Virginia Municipal Bond
Fund, The Maryland Municipal Bond Fund, The Treasury Money Market
Fund, The Money Market Fund, and The Tax-Free Money Market Fund
may not sell any securities short.
Pledging Assets
The Funds will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In these cases the Funds,
except The Tax-Free Money Market Fund, may pledge assets having a
market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets of a Fund at the time
of the pledge. Margin deposits for the purchase and sale of
financial futures contracts and related options are not deemed to
be a pledge.
Lending Cash or Securities
The U.S. Government Securities Fund, The Stock Fund, The Treasury
Money Market Fund and The Money Market Fund, will not lend any of
their assets, except portfolio securities up to one-third of the
value of their total assets. This shall not prevent a Fund from
purchasing or holding bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by a
Fund's investment objective, policies, and limitations or the
Trust's Declaration of Trust.
The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund will not lend any of their assets, except that they may
acquire publicly or nonpublicly issued municipal securities or
temporary investments or enter into repurchase agreements as
permitted by a Fund's investment objective, policies, limitations
and Declaration of Trust.
</R.
The Tax-Free Money Market Fund will not lend any of its assets
except that it may purchase or hold portfolio securities permitted
by its investment objective, policies and limitations, or
Declaration of Trust.
Investing in Restricted Securities
Except for The Tax-Free Money Market Fund, the Funds will not
invest more than 10% of their net assets in securities subject to
restrictions on resale under the Securities Act of 1933 (except
certain restricted securities which meet the criteria for
liquidity as established by the Board of Trustees. With respect to
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 and
certain other restricted securities which meet the criteria for
liquidity as established by the Board of Trustees).
The Tax-Free Money Market Fund will not invest more than 10% of
its total assets in securities subject to restrictions on resale
under federal securities law, except for restricted securities
determined to be liquid under criteria established by the
Trustees.
Investing in Commodities
The Funds will not purchase or sell commodities, commodity
contracts or commodity futures contracts except for financial
futures contracts in the case of The Stock Fund.
Investing in Real Estate
The Funds will not purchase or sell real estate, although The U.S.
Government Securities Fund and The Stock Fund may invest in
securities secured by real estate or interests in real estate or
issued by companies, including real estate investment trusts,
which invest in real estate or interests therein. The Virginia
Municipal Bond Fund, The Maryland Municipal Bond Fund, The Money
Market Fund, and The Tax-Free Money Market Fund may invest in
securities of issuers whose business involves the purchase or sale
of real estate or in securities which are secured by real estate
or interests in real estate.
Diversification of Investments
With respect to 75% of the value of its total assets, The U.S.
Government Securities Fund, The Stock Fund and The Money Market
Fund will not purchase securities issued by any one issuer (other
than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by such
securities), if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer. The
U.S. Government Fund and The Stock Fund will not acquire more than
10% of the outstanding voting securities of any one issuer.
Concentration of Investments
The U.S. Government Securities Fund, The Stock Fund and The Money
Market Fund will not invest 25% or more of the value of their
total assets in any one industry. With respect to The Money Market
Fund, investing in bank instruments (such as time and demand
deposits and certificates of deposit), U.S. government
obligations, or instruments secured by these money market
instruments, such as repurchase agreements for U.S. government
obligations, shall not be considered investments in any one
industry.
The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry or in industrial development bonds or
other securities, the interest on which is paid from revenues of
similar types of projects. However, these Funds may invest as
temporary investments more than 25% of the value of its assets in
cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, or instruments
secured by these money market instruments, such as repurchase
agreements.
The Tax-Free Money Market Fund will not invest 25% or more of the
value of its total assets in any one industry, except that it may
invest more than 25% of its total assets in securities issued or
guaranteed by the U.S. government, its agencies or
instrumentalities and industrial development bonds as long as they
are not from the same facility or similar types of facilities. The
Tax-Free Money Market Fund does not intend to purchase securities
that would increase the percentage of its assets invested in the
securities of governmental subdivisions located in any one state,
territory, or U.S. possession to 25% or more.
Underwriting
The Funds will not underwrite any issue of securities, except as a
Fund may be deemed to be an underwriter under the Securities Act
of 1933 in connection with the sale of securities in accordance
with its investment objective, policies, and limitations.
The above limitations cannot be changed with respect to a Fund without
approval of a majority of that Fund's Shares. The following limitations may
be changed by the Trustees without shareholder approval. Shareholders will
be notified before any material change in these limitations becomes
effective.
Investing in Illiquid Securities
The U.S. Government Securities Fund, The Stock Fund, 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, and certain
restricted securities determined by the Trustees not to be liquid;
and, in the case of The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund, specifically including 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, The Money Market Fund, and The Tax-
Free Money Market Fund will not invest more than 10% of the value
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; and, in the case of The Money Market Fund, specifically
including non-negotiable fixed income time deposits with
maturities over seven days.
Investing in Securities of Other Investment Companies
The Funds will limit their respective investment in other
investment companies to no more than 3% of the total outstanding
voting stock of any investment company, invest no 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 U.S.
Government Securities Fund, The Stock Fund, The Treasury Money
Market Fund and The Money Market Fund will purchase securities of
closed-end investment companies only in open market transactions
involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a
merger, consolidation, reorganization, or acquisition of assets.
With respect to The Treasury Money Market Fund and The Money
Market Fund, the Funds will limit their investments and the
securities of other investment companies to those of The Money
Market Funds having investment objectives and policies similar to
their own. The Virginia Municipal Bond Fund and The Maryland
Municipal Bond Fund will invest in other investment companies
primarily for the purposes 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.
Investing in New Issuers
The U.S. Government Securities Fund, The Stock Fund, The Money
Market Fund, and The Tax-Free Money Market Fund will not invest
more than 5% of the value of their total assets in securities of
issuers which 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 the value of its total assets in
industrial development bonds where the payment of principal and
interest is the responsibility of companies (or in the alternative
guarantors, where applicable) which have records of less than
three years of continuous operations, including the operation of
any predecessor.
Investing in Issuers Whose Securities are Owned by Officers and Trustees
of the Trust
A Fund will not purchase or retain the securities of any issuer if
the officers and Trustees of the Trust or its investment adviser
owning individually more than 1/2 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
Investing in Minerals
A Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may
purchase the securities of issuers which invest in or sponsor such
programs.
Arbitrage Transactions
A Fund will not enter into transactions for the purpose of
engaging in arbitrage.
Purchasing Securities to Exercise Control
A Fund will not purchase securities of a company for the purpose
of exercising control or management.
Investing in Warrants
The Funds will not invest in warrants, except that The Stock Fund
may invest not more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities.
To comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on the New York or American
Stock Exchanges to 2% of its net assets. (If state restrictions
change, this latter restriction may be revised without notice to
shareholders.) For purposes of this investment restriction,
warrants will be valued at the lower of cost or market, except
that warrants acquired by the Fund in units with or attached to
securities may be deemed to be without value.
Investing in Put Options
Neither The U.S. Government Securities Fund nor The Stock Fund
will purchase put options on securities unless the securities are
held in a Fund's portfolio and not more than 5% of the value of
either Fund's total assets would be invested in premiums on open
and put option positions.
Writing Covered Call Options
Neither The U.S. Government Securities Fund nor The Stock Fund
will write call options on securities unless the securities are
held in their portfolio or unless either Fund is entitled to them
in deliverable form without further payment or after segregating
cash in the amount of any further payment.
Selling Short
Neither The U.S. Government Securities Fund nor The Stock Fund
will sell securities short unless (1) it owns, or has a right to
acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other assets equal to the lesser of
the market value of the securities sold short or the amount
required to acquire such securities. The segregated amount will
not exceed 10% of either Fund's net assets. While in a short
position, the Fund will retain the securities, rights, or
segregated assets.
Dealing in Puts and Calls
The Virginia Municipal Bond Fund, The Maryland Municipal Bond
Fund, and The Tax-Free Money Market Fund will not invest in puts,
calls, straddles, spreads, or any combination of them except that
The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund may purchase put options on municipal securities in an amount
up to 5% of its total assets or may purchase municipal securities
accompanied by agreements of sellers to repurchase them at a
Fund's option.
Except with respect to the Funds' policy of borrowing money, if a
percentage limitation is adhered to at the time of investment, a
later increase or decrease in percentage resulting from any change
in value or net assets will not result in a violation of such
restriction.
The U.S. Government Securities Fund and The Stock Fund have no
present intent to borrow money, pledge securities or invest in
restricted or illiquid securities in excess of 5% of the value of
their respective net assets in the coming fiscal year. These Funds
(1) will limit the aggregate value of the assets underlying
covered call options or put options written by a Fund to not more
than 25% of its net assets, (2) will limit the premiums paid for
options purchased by a Fund to 20% of its net assets, and (3) will
limit the margin deposits on futures contracts entered into by a
Fund to 5% of its net assets. (If state requirements change, these
restrictions may be revised without shareholder notification.)
The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund have no present intent to issue senior securities or borrow
money, pledge securities, invest in restricted or illiquid
securities or engage in when-issued and delayed delivery
transactions in excess of 5% of the value of its net assets during
the fiscal period.
The Treasury Money Market Fund and The Money Market Fund do not
expect to issue senior securities or borrow money, pledge
securities, engage in whenissued and delayed delivery transactions
or reverse repurchase agreements, for The Money Market Fund only,
in excess of 5% of the value of their net assets during the coming
fiscal year.
The Tax-Free Money Market Fund does not intend to borrow money or
pledge securities in excess of 5% of the value of its net assets
during the coming fiscal year.
To comply with registration requirements in a certain state, The
Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund,
The Money Market Fund, and The Tax-Free Money Market Fund will not
invest in real estate limited partnerships.
The Medalist Funds Management
Officers and Trustees
Officers and Trustees are listed with their addresses, principal
occupations, and present positions, including any affiliation with Signet
Asset Management, Signet Trust Company, Federated Investors, Federated
Securities Corp., Federated Services Company, and Federated Administrative
Services or the Funds (as defined below).
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Centre
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.
___________________________________________________________________________
_________________________________
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer & Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.; Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer of
the Funds.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director, Trustee, or Managing General Partner of the Funds; formerly,
President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer & Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Craig P. Churman
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President of the Trust
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and Director,
Federated Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Vice President of the
Funds; Director, Trustee, or Managing General Partner of some of the
Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee
of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" of the Trust as
defined in the Investment Company Act of 1940, as amended.
@ Member of the Trust Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund;
First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds,
Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. -
1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; The Medalist Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; New York Municipal Cash Trust; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark
Funds; Trust for Financial Institutions; Trust For Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; and World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the outstanding shares of each
Fund.
Officers and Trustees Compensation
NAME, AGGREGATE TOTAL COMPENSATION
POSITION WITH COMPENSATION FROM PAID TO TRUSTEES FROM
TRUST TRUST+ TRUST AND FUND COMPLEX
John F. Donahue,
Chairman and Trustee $ -0- $ -0- for the Trust and
69 investment companies
Thomas G. Bigley,
Trustee $498 $24,991 for the Trust and
50 investment companies
John T. Conroy, Jr.,
Trustee $2,001.50 $136,100 for the Trust and
65 investment companies
William J. Copeland,
Trustee $2,001.50 $136,100 for the Trust and
65 investment companies
James E. Dowd,
Trustee $2,001.50 $136,100 for the Trust and
65 investment companies
Lawrence D. Ellis, M.D.,
Trustee $1,816 $123,600 for the Trust and
65 investment companies
Edward L. Flaherty, Jr.,
Trustee $2,001.50 $136,100 for the Trust and
65 investment companies
Edward C. Gonzales,
President and Trustee $ -0- $ -0- for the Trust and
18 investment companies
Peter E. Madden,
Trustee $1,517.50 $104,880 for the Trust and
65 investment companies
Gregor F. Meyer,
Trustee $1,816 $123,600 for the Trust and
65 investment companies
Wesley W. Posvar,
Trustee $1,816 $123,600 for the Trust and
65 investment companies
Marjorie P. Smuts,
Trustee $1,816 $123,600 for the Trust and
65 investment companies
+The aggregate compensation is provided for the Trust which is comprised
of eight portfolios.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they are
not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Adviser to the Trust
The Trust's investment adviser is Signet Asset Management which is a
division of Signet Trust Company, a wholly-owned subsidiary of Signet
Banking Corporation. Because of the internal controls maintained by Signet
Bank to restrict the flow of non-public information, Fund investments are
typically made without any knowledge of Signet Bank's or its affiliates'
lending relationships with an issuer.
The adviser shall not be liable to the Trust, a Fund, or any shareholder of
any of the Funds for any losses that may be sustained in the purchase,
holding, or sale of any security or for anything done or omitted by it,
except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon it by its
contract with the Trust.
Advisory Fees
For its advisory services, Signet Asset Management receives an annual
investment advisory fee as described in the prospectus. During the fiscal
years ended September 30, 1994, 1993, and 1992 , the adviser earned fees
from: The U.S. Government Securities Fund, of $1,734,083, $1,375,434, and
$662,158, of which $734,744, $784,857, and $571,943 were voluntarily
waived; The Stock Fund $703,937, $512,930, and $348,390, of which $214,366,
$372,554, and $157,500 were voluntarily waived; The Virginia Municipal Bond
Fund $861,187, $519,326, and $203,123, of which $314,920, $345,108, and
$203,123 were voluntarily waived; The Maryland Municipal Bond Fund
$355,431, $233,787, and $91,829, of which $241,790, $231,723, and $91,829
were voluntarily waived; The Treasury Money Market Fund $1,388,302,
$922,509, and $809,409, of which $508,090, $369,003, and $176,525 were
voluntarily waived; and The Money Market Fund $709,679, $729,525, and
$387,183 of which $354,839, $431,083, and $222,685 were voluntarily waived.
For the period from July 27, 1994 to September 30, 1994 the adviser earned
$21,033 from The Tax-Free Money Market Fund, of which $19,388 was
voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If a Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1 1/2%
per year of the remaining average net assets, the adviser will
reimburse the Fund for its expenses over the limitation. If a Fund's
monthly projected operating expenses exceed this limitation, the
investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the adviser will be limited,
in any single fiscal year, by the amount of the investment advisory
fee. This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Administrative Services
Federated Administrative Services, which is a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds for
the fees set forth in the prospectus. For the fiscal years ended September
30, 1994, 1993, and 1992, the Funds incurred costs for administrative
services as follows: The U.S. Government Securities Fund incurred $269,932,
$233,156, and $122,622; The Stock Fund incurred $109,075, $86,960, and
$65,066; The Virginia Municipal Bond Fund incurred $133,956, $87,752 and
$50,000; The Maryland Municipal Bond Fund incurred $55,254, $49,614, and
$50,000; The Treasury Money Market Fund incurred $319,857, $235,278, and
$226,433; The Money Market Fund incurred $165,549, $186,110, and $107,640;
of which $0, $0, and $0 were voluntarily waived for The U.S. Government
Securities Fund; $0, $0, and $0 were voluntarily waived for The Stock Fund;
$0, $0, and $33,416 were voluntarily waived for The Virginia Municipal Bond
Fund; $0, $0, and $50,000 were voluntarily waived for The Maryland
Municipal Bond Fund; $0, $0, and $0 were voluntarily waived for The
Treasury Money Market Fund; and $0, $0, and $0 were voluntarily waived for
The Money Market Fund. For the period from July 27, 1994, to September 30,
1994, The Tax-Free Money Market Fund paid $8,904 for administrative
services, of which $0 was voluntarily waived.
Custodian
Signet Trust Company 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. The custodian receives a fee at an annual
rate of .05 of 1% on the first $10 million of average net assets of each of
the six respective portfolios and .025 of 1% on average net assets in
excess of $10 million. There is a $20 fee imposed on each transaction. The
custodian fee received during any fiscal year shall be at least $1,000 per
Fund.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the Board
of Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Funds or to the
adviser and may include:
advice as to the advisability of investing in securities;
security analysis and reports;
economic studies;
industry studies;
receipt of quotations for portfolio evaluations; and
similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers may be used by the adviser in
advising the Funds and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses.
For the fiscal year ended September 30, 1994, The Stock Fund paid $552,066
in commissions on brokerage transactions.
Purchasing Shares
Shares of the Funds are sold at their net asset value without a sales
charge on days the New York Stock Exchange is open for business. The
procedure for purchasing Shares of the Funds is explained in the prospectus
under "Investing in Shares."
Distribution Plan
The Trust has adopted a Plan for Shares of the Funds pursuant to Rule 12b-1
which was promulgated by the Securities and Exchange Commission pursuant to
the Investment Company Act of 1940. The Plan provides that the Funds'
distributor, Federated Securities Corp., shall act as the distributor of
Shares, and it permits the payment of fees to brokers and dealers for
distribution and administrative services and to administrators for
administrative services. The Plan is designed to (i) stimulate brokers and
dealers to provide distribution and administrative support services to the
Funds and their holders of Shares and (ii) stimulate administrators to
render administrative support services to the Funds and their holders of
Shares. These services are to be provided by a representative who has
knowledge of the holder of Shares' particular circumstances and goals, and
include, but are not limited to: 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 the Funds; assisting
clients in changing dividend options, account designations, and addresses;
and providing such other services as the Trust reasonably requests.
Other benefits which the Funds hope to achieve through the Plan include,
but are not limited to the following: (1) an efficient and effective
administrative system; (2) a more efficient use of assets of holders of
Shares by having them rapidly invested in the Funds with a minimum of delay
and administrative detail; and (3) an efficient and reliable records system
for holders of Shares and prompt responses to shareholder requests and
inquiries concerning their accounts.
By adopting the Plan, the Board of Trustees expects that the Funds will be
able to achieve a more predictable flow of cash for investment purposes and
to meet redemptions. This will facilitate more efficient portfolio
management and assist the Funds in seeking to achieve their respective
investment objectives. By identifying potential investors in Shares whose
needs are served by a particular Fund's objective, and properly servicing
these accounts, the Funds may be able to curb sharp fluctuations in rates
of redemptions and sales.
For the fiscal years ended September 30, 1994, 1993, and 1992, the Funds
paid fees to brokers and administrators (financial institutions) pursuant
to the Plan as follows: The U.S. Government Securities Fund , of $299,048,
$111,353, and $0; The Stock Fund $59,836, $14,672, and $0; The Virginia
Municipal Bond Fund, of $190,877, $55,569, and $0; The Maryland Municipal
Bond Fund, of $89,447, $31,414, and $0; The Treasury Money Market Fund, of
$52,221, $20,462, and $0; The Money Market Fund, of $26,424, $11,499, and
$0. For the period from July 27, 1994 to September 30, 1994 the Tax-Free
Money Market Fund paid no fees pursuant to the Plan.
Conversion to Federal Funds
It is the policy of The Treasury Money Market Fund, The Money Market Fund,
and The Tax-Free Money Market Fund to be as fully invested as possible so
that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds.
Federated Services Company acts as the shareholder's agent in depositing
checks and converting them to federal funds.
Administrative Arrangements
For the fiscal years ended September 30, 1994, 1993 and 1992, the
distributor paid no administrative fees to brokers and administrators
(financial institutions).
Determining Net Asset Value
Net asset values of The U.S. Government Securities Fund, The Stock Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
generally change each day. The Treasury Money Market Fund, The Money Market
Fund, and The Tax-Free Money Market Fund attempt to stabilize the value of
their Shares at $1.00. The days on which the net asset value is calculated
by these Funds are described in the prospectus.
Determining Market Value of Securities
The market value of The U.S. Government Securities Fund's portfolio
securities are determined as follows:
according to the mean between the over-the-counter bid and asked
prices provided by an independent pricing service, if available,
or at fair value as determined in good faith by the Fund's Board
of Trustees; or
for short-term obligations with remaining maturities of 60 days or
less at the time of purchase at amortized cost unless the Board of
Trustees determines that particular circumstances of the security
indicate otherwise.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
The market value of The Stock Fund's portfolio securities is determined as
follows:
for equity securities, according to the last sale price on a
national securities exchange, if available;
in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked
prices;
o for unlisted equity securities, the latest bid prices;
o for bonds and other fixed income securities, as determined by an
independent pricing service;
o for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service or for
short-term obligations with remaining maturities of 60 days or
less at the time of purchase at amortized cost; or
o for all other securities, at fair value as determined in good
faith by the Board of Trustees.
The U.S. Government Securities Fund and The Stock Fund will value futures
contracts, options, and put options on futures and at their market values
established by the exchanges at the close of option trading on such
exchanges unless the Board of Trustees determine in good faith that another
method of valuing option positions is necessary to appraise their fair
value. Over-the-counter put options will be valued at the mean between the
bid and the asked prices.
Use of the Amortized Cost Method
With respect to The Treasury Money Market Fund, The Money Market Fund, and
The Tax-Free Money Market Fund, the Trustees have decided that the best
method for determining the value of portfolio instruments is amortized
cost. Under this method, portfolio instruments are valued at the
acquisition cost as adjusted for amortization of premium or accumulation of
discount rather than at current market value.
A Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed
for purposes of distribution and redemption, at $1.00 per Share, taking
into account current market conditions and a Fund's investment objective.
Under the Rule, a Fund is permitted to purchase instruments which are
subject to demand features or standby commitments. As defined by the Rule,
a demand feature entitles a Fund to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days'
notice or (2) at specified intervals not exceeding one year on no more than
30 days' notice. A standby commitment entitles a Fund to achieve same day
settlement and to receive an exercise price equal to the amortized cost of
the underlying instrument plus accrued interest at the time of exercise.
The Funds acquire instruments subject to demand features and standby
commitments to enhance the instrument's liquidity. The Funds treat demand
features and standby commitments as a part of the underlying instruments,
because the Funds do not acquire them for speculative purposes and cannot
transfer them separately from the underlying instruments. Therefore,
although the Rule defines demand features and standby commitments as
"puts", the Fund does not consider them to be separate investments for
purposes of its investment policies.
Monitoring Procedures
The Trustees' procedures include monitoring the relationship between
the amortized cost value per share and the net asset value per share
based upon available indications of market value. The Trustees will
decide what, if any, steps should be taken if there is a difference of
more than .5 of 1% between the two. The Trustees will take any steps
they consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
Investment Restrictions
The Rule requires that a Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
have received the requisite rating from one or more nationally
recognized statistical rating organizations. If the instruments are not
rated, the Trustees must determine that they are of comparable quality.
The Rule also requires a Fund to maintain a dollar-weighted average
portfolio maturity (not more than 90 days) appropriate to the objective
of maintaining a stable net asset value of $1.00 per Share. In
addition, no instrument with a remaining maturity of more than 397 days
can be purchased by a Fund.
Should the disposition of a portfolio security result in a dollar-
weighted average portfolio maturity of more than 90 days, a Fund will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
A Fund may attempt to increase yield by trading portfolio securities to
take advantage of short-term market variations. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset
value is affected by any unrealized appreciation or depreciation of the
portfolio.
In periods of declining interest rates, the indicated daily yield on
Shares, computed by dividing the annualized daily income on a Fund's
portfolio by the net asset value computed as above, may tend to be higher
than a similar computation made by using a method of valuation based upon
market prices and estimates.
In periods of rising interest rates, the indicated daily yield on Shares
computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
Valuing Municipal Securities
With respect to The Virginia Municipal Bond Fund, The Maryland Municipal
Bond Fund, and The Tax-Free Money Market Fund, the Board of Trustees uses
an independent pricing service to value municipal securities. The
independent pricing service takes into consideration: yield; stability;
risk; quality; coupon rate; maturity; type of issue; trading
characteristics; special circumstances of a security or trading market; and
any other factors or market data it considers relevant in determining
valuations for normal institutional size trading units of debt securities
and does not rely exclusively on quoted prices.
Use of Amortized Cost
With respect to The Virginia Municipal Bond Fund and The Maryland Municipal
Bond Fund, the Board of Trustees has decided that the fair value of debt
securities purchased by a Fund with remaining maturities of 60 days or less
at the time of purchase shall be their amortized cost value, unless the
particular circumstances of the security indicate otherwise. Under this
method, portfolio instruments and assets are valued at the acquisition cost
as adjusted for amortization of premium or accumulation of discount rather
than at current market value. The Executive Committee continually assesses
this method of valuation and recommends changes where necessary to assure
that the Fund's portfolio instruments are valued at their fair value as
determined in good faith by the Trustees.
Redeeming Shares
Each Fund redeems Shares at the next computed net asset value after a Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Trust Shares."
Redemption in Kind
Although the Trust intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from a Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Board of Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which a Fund is obligated to redeem Shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of any
class' net asset value during any 90-day period. Although a Fund reserves
the right to redeem Shares in kind, it will activate this right only after
providing 60 days' notice to shareholders.
Tax Status
The Funds' Tax Status
The Funds will pay no federal income tax because they expect to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
Shareholders' Tax Status
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Treasury Money Market Fund and The Money Market Fund, shareholders are
subject to federal income tax on dividends received as cash or additional
shares. No portion of any income dividend paid by a Fund is eligible for
the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary
income.
With respect to The Virginia Municipal Bond Fund, The Maryland Municipal
Bond Fund, and The Tax-Free Money Market Fund, no portion of any income
dividend paid by a Fund is eligible for the dividends received deduction
available to corporations.
Capital Gains
Capital gains experienced by The Treasury Money Market Fund and The
Money Market Fund could result in an increase in dividends. Capital
losses could result in a decrease in dividends. If, for some
extraordinary reason, these Funds realize net long-term capital gains,
such net long-term capital gains will be distributed at least once
every 12 months.
With respect to The U.S. Government Securities Fund and The Stock Fund,
long-term capital gains distributed to shareholders will be treated as long-
term capital gains regardless of how long shareholders have held Shares.
With respect to The Maryland Municipal Bond Fund, The Virginia Municipal
Bond Fund, and The Tax-Free Money Market Fund, capital gains or losses may
be realized by a Fund on the sale of portfolio securities and as a result
of discounts from par value on securities held to maturity. Sales would
generally be made because of:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or
o an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the Shares.
Total Return
The average annual total return for The U.S. Government Securities Fund,
The Stock Fund, Virginia Municipal Bond Fund, and The Maryland Municipal
Bond Fund, for the fiscal year ended September 30, 1994 and for the period
from October 12, 1990 (effective date of each Fund's registration
statement) to September 30, 1994 was (3.12%) and 7.43%; (1.50%) and 8.23%;
(4.01%) and 6.34%; (4.50% ) and 5.87% for Trust Shares and (5.32%) and
6.77%; (3.71%) and 7.66%; (6.21%) and 5.71%; (6.60%) and 5.24% for
Investment Shares.
The average annual total return for Shares of each Fund is the average
compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of shares
owned at the end of the period by the net asset value per share at the end
of the period. The number of shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000, adjusted over the period by any additional shares, assuming the
monthly/quarterly reinvestment of all dividends and distributions.
Yield
The yield for the seven-day period ended September 30, 1994 for the The
Treasury Money Market Fund and The Money Market Fund were for 4.10% and
4.34% for Trust Shares and 3.85% and 4.09% for Investment Shares,
respectively. The yield for the seven-day period ended September 30, 1994
for the The Tax-Free Money Market Fund was 2.98%.
The U.S. Government Securities Fund, The Stock Fund, The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund's yield for the thirty-day
period ended September 30, 1994 were 5.31%, 0.78%, 4.73% and 5.08% for
Trust Shares and 5.06% , 0.53%, 4.47% and 4.82% for Investment Shares.
The Treasury Money Market Fund, The Money Market Fund, and The Tax-Free
Money Market Fund calculate yield daily, based upon the seven days ending
on the day of the calculation, called the "base period." This yield is
computed by:
o determining the net change in the value of a hypothetical account
with a balance of one share at the beginning of the base period,
with the net change excluding capital changes but including the
value of any additional Shares purchased with dividends earned
from the original one share and all dividends declared on the
original and any purchased Shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base
period return; and
o multiplying the base period return by 365/7.
The yield for Shares of The U.S. Government Securities Fund, The Stock
Fund, The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
is determined by dividing the net investment income per share (as defined
by the Securities and Exchange Commission) earned by the class of shares
over a thirty-day period by the maximum offering price per share of the
class of shares on the last day of the period. The yield of the Investment
Shares of the Fund is determined each day by dividing the net investment
income per share (as defined by the Securities and Exchange Commission)
earned by the class of shares over a thirty-day period by the maximum
offering price per share of the class of shares on the last day of the
period. This value is then annualized using semiannual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a 12-month period and is reinvested
every six months. The yield does not necessarily reflect income actually
earned by the Fund because of certain adjustments required by the
Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
With respect to The U.S. Government Securities Fund and The Stock Fund, the
yield will be calculated separately for Investment Shares and Trust Shares.
Because Investment Shares are subject to a 12b-1 fee, the net yield for
Trust Shares for the same period will exceed that of Investment Shares.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
Fund, the performance will be reduced for those shareholders paying those
fees.
Effective Yield
The effective yield for the seven-day period ended September 30, 1994 for
the The Treasury Money Market Fund and The Money Market Fund was 4.18% and
4.44% for Trust Shares and 3.92% and 4.18% for Investment Shares,
respectively. The effective yield for the period ended September 30, 1994
for The Tax-Free Money Market Fund was 3.03%.
The effective yield of The Treasury Money Market Fund, The Money Market
Fund, and The Tax-Free Money Market Fund is computed by compounding the
unannualized base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
Tax-Equivalent Yield
The tax-equivalent yield for both classes of shares for The Virginia
Municipal Bond Fund, The Maryland Municipal Bond Fund, and The Tax-Free
Money Market Fund is calculated similarly to the yield, but is adjusted to
reflect the taxable yield that either class would have had to earn to equal
its actual yield, assuming a 28% tax rate and also assuming that income
earned by the Fund is 100% tax-exempt.
The tax-equivalent yield for the Trust Shares for the thirty-day period
ended September 30, 1994, was 7.14% for The Virginia Municipal Bond Fund
and 7.88% for The Maryland Municipal Bond Fund. The tax-equivalent yield
for the Investment Shares was 6.75% for The Virginia Municipal Bond Fund
and 7.47% for The Maryland Municipal Bond Fund for the same period. The tax-
equivalent yield for The Tax-Free Money Market Fund for the same period was
4.14%%.
Tax-Equivalency Tables
Both classes of shares may also use a tax-equivalency table in
advertising and sales literature. The interest earned by the municipal
bonds in the Fund's portfolio generally remains free from federal
regular income tax, and is often free from state and local taxes as
well. As the tables below indicate, a "tax-free" investment is an
attractive choice for investors, particularly in times of narrow
spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
COMMONWEALTH OF VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
20.75% 33.75% 36.75% 41.75% 45.35%
JOINT $1- $39,001 $94,251 $143,601 OVER
RETURN: 39,000 94,250 143,600 256,500 $256,500
SINGLE $1 $23,351 $56,551 $117,951 OVER
RETURN: 23,350 56,550 117.,950 256,500 $256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
3.50% 4.42% 5.28% 5.53% 6.01% 6.40%
4.00% 5.05% 6.04% 6.32% 6.87% 7.32%
4.50% 5.68% 6.79% 7.11% 7.73% 8.23%
5.00% 6.31% 7.55% 7.91% 8.58% 9.15%
5.50% 6.94% 8.30% 8.70% 9.44% 10.06%
6.00% 7.57% 9.06% 9.49% 10.30% 10.98%
6.50% 8.20% 9.81% 10.28% 11.16% 11.89%
7.00% 8.83% 10.57% 11.07% 12.02% 12.81%
7.50% 9.46% 11.32% 11.86% 12.88% 13.72%
8.00% 10.09% 12.08% 12.65% 13.73% 14.64%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH
BRACKET WAS USED IN CALCULATING THE TAXABLE
YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE
TAXABLE INVESTMENTS WERE NOT USED TO INCREASE
FEDERAL DEDUCTIONS.
The charts above are for illustrative purposes only. They are not an
indicator of past or future performance of either class of shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF MARYLAND
INCLUDING LOCAL INCOME TAX
COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
22.50% 32.50% 38.50% 40.00% 45.00% 48.60%
JOINT $1- $39,001 $94,251 $100,001 $143,601 OVER
RETURN: 39,000 94,250 100,000 143,600 $256,500$256,500
SINGLE $1- $23,351 $56,551 $100,000 $117,951 OVER
RETURN: 23,350 56,550 100,000 117,950 256,500 $256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
2.00% 2.58% 3.10% 3.25% 3.33% 3.64% 3.89%
2.50% 3.23% 3.88% 4.07% 4.17% 4.55% 4.86%
3.00% 3.87% 4.65% 4.88% 5.00% 5.45% 5.84%
3.50% 4.52% 5.43% 5.69% 5.83% 6.36% 6.81%
4.00% 5.16% 6.20% 6.50% 6.67% 7.27% 7.78%
4.50% 5.81% 6.98% 7.32% 7.50% 8.18% 8.75%
5.00% 6.45% 7.75% 8.13% 8.33% 9.09% 9.73%
5.50% 7.10% 8.53% 8.94% 9.17% 10.00% 10.70%
6.00% 7.74% 9.30% 9.76% 10.00% 10.91% 11.67%
6.50% 8.39% 10.08% 10.57% 10.83% 11.82% 12.65%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH
BRACKET WAS USED IN CALCULATING THE TAXABLE
YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE
TAXABLE INVESTMENT WERE NOT USED TO INCREASE
FEDERAL DEDUCTIONS. THE LOCAL INCOME TAX RATE
IS ASSUMED TO BE 50% OF THE STATE RATE FOR ALL
COUNTIES EXCLUDING ALLEGHENY, BALTIMORE,
MONTGOMERY, PRINCE GEORGE'S, TALBOT, AND
WORCHESTER.
The charts above are for illustrative purposes only. They are not an
indicator of past or future performance of either class of shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
Performance Comparisons
Each Fund's performance of both classes of shares depends upon such
variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments, in the case
of The Treasury Money Market Fund and The Money Market Fund, or
changes in interest rates and market value of portfolio securities
in the case of U.S. Government Income Fund, The Stock Fund, The
Virginia Municipal Bond Fund and Maryland Municipal Bond Fund;
o changes in each Fund's or each class of Shares' expenses;
o the relative amount of The Treasury Money Market Fund's and The
Money Market Fund's cash flow; and
o various other factors.
In the case of The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, either
class of shares' performance fluctuates on a daily basis largely because
net earnings and offering price per Share fluctuate daily. Both net
earnings and offering price per Share are factors in the computation of
yield and total return.
From time to time, each Fund may advertise its performance compared to
similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
The U.S. Government Securities Fund:
o MERRILL LYNCH COMPOSITE 1-5 YEAR TREASURY INDEX is comprised of
approximately 66 issues of U.S. Treasury securities maturing
between 1 and 4.99 years, with coupon rates of 4.25% or more.
These total return figures are calculated for one, three, six, and
twelve month periods and year-to-date and include the value of the
bond plus income and any price appreciation or depreciation.
o SALOMON BROTHERS 3-5 YEARS GOVERNMENT INDEX quotes total returns
for U.S. Treasury issues (excluding flower bonds) which have
maturities of three to five years. These total returns are year-to-
date figures which are calculated each month following January 1.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes income into account
any change in net asset value over a specific period of time. From
time to time, the Trust will quote its Lipper ranking in the U.S.
Government funds category in advertising and sales literature.
o MERRILL LYNCH 3-5 YEAR TREASURY INDEX is comprised of
approximately 24 issues of intermediate-term U.S. government and
U.S. Treasury securities with maturities between 3 and 4.99 years
and coupon rates above 4.25%. Index returns are calculated as
total returns for periods of one, three, six and twelve months as
well as year-to-date.
o MERRILL LYNCH 3-YEAR TREASURY YIELD CURVE INDEX is an unmanaged
index comprised of the most recently issued 3-year U.S. Treasury
notes. Index returns are calculated as total returns for periods
of one, three, six, and twelve months as well as year-to-date.
o LEHMAN BROTHERS GOVERNMENT INTERMEDIATE INDEX is an unmanaged
index comprised of all publicly issued, non-convertible domestic
debt of the U.S. government, or any agency thereof, or any quasi-
federal corporation and of corporate debt guaranteed by the U.S.
government. Only notes and bonds with a minimum outstanding
principal of $1 million and maturities of 1-10 years.
o 3 YEAR TREASURY NOTES Source: Wall Street Journal, Bloomberg
Financial Markets, and Telerate.. MORNINGSTAR, INC., an
independent rating service, is the publisher of the bi-weekly
Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-
adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
The Stock Fund:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the
"growth and income funds" category in advertising and sales
literature.
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of
selected blue-chip industrial corporations as well as public
utility and transportation companies. The DJIA indicates daily
changes in the average price of stocks in any of its categories.
It also reports total sales for each group of industries. Because
it represents the top corporations of America, the DJIA index is a
leading economic indicator for the stock market as a whole.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and
financial and publicutility companies, compares total returns of
funds whose portfolios areinvested primarily in common stocks. In
addition, the Standard & Poor's index assumes reinvestment of all
dividends paid by stocks listed on the index. Taxes due on any of
these distributions are not included, nor are brokerage or other
fees calculated in the Standard & Poor's figures.
o MORNINGSTAR, INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns.The maximum rating is five stars, and
ratings are effective for two weeks.
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the
"general municipal bond funds" category in advertising and sales
literature.
o MORNINGSTAR, INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns.The maximum rating is five stars, and
ratings are effective for two weeks.
The Treasury Money Market Fund:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "short-term U.S. government
funds" category in advertising and sales literature.
o SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S.
Treasury, maturing in 30 days.
The Money Market Fund:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "money market instruments
fund" category in advertising and sales literature.
o BANK RATE MONITOR NATIONAL INDEX, Miami, Florida, is a financial
reporting service which publishes weekly average rates of 50
leading bank and thrift institution money market deposit accounts.
The rates published in the index are an average of the personal
account rates offered on the Wednesday prior to the date of
publication by ten of the largest banks and thrifts in each of the
five largest Standard Metropolitan Statistical Areas. Account
minimums range upward from $2,500 in each institution and
compounding methods vary. If more than one rate is offered, the
lowest rate is used. Rates are subject to change at any time
specified by the institution. Investors may use such indices or
reporting services in addition to either class of shares'
prospectus to obtain a more complete view of the Share's
performance before investing. Of course, when comparing
performance of either class of shares to any index, factors such
as portfolio composition and prevailing market conditions should
be considered in assessing the significance of such comparisons.
The Tax-Free Money Market Fund
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "Tax-Free Money Market Funds"
category in advertising and sales literature.
o IBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of
hundreds of money market funds on a weekly basis, and through its
Money Market Insight publication, reports monthly and 12-month-to-
date investment results for the same money funds.
o MONEY, A MONTHLY MAGAZINE, regularly ranks money market funds in
various categories based on the latest available seven-day
compound effective yield. From time to time, the Fund will quote
its Money ranking in advertising and sales literature.
o SALOMON BROTHERS SIX-MONTH PRIME MUNI NOTES is an index of
selected municipal notes, maturing in six months, whose yields are
chosen as representative of this market. Calculations are made
weekly and monthly.
o SALOMON BROTHERS ONE-MONTH TAX-EXEMPT COMMERCIAL PAPER is an index
of selected tax-exempt commercial paper issues, maturing in one
month, whose yields are chosen as representative of this
particular market. It is a weekly quote of the most representative
yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days. Calculations are made weekly and monthly.
Ehrlich-Bober & Co., Inc. also tracks this Salomon Brothers Index.
Advertisements and other sales literature for both classes of shares may
quote total returns which are calculated on non-standardized base periods.
These total returns also represent the historic change in the value of an
investment in either class of shares based on monthly reinvestment of
dividends over a specified period of time.
Financial Statements
The financial statements for the fiscal period ended September 30, 1994,
are incorporated herein by reference from the Funds' Annual Report dated
September 30, 1994. A copy of the Annual Report for a Fund may be
obtained without charge by contacting Signet Trust Company at the
address located on the back cover of the combined prospectus of by
calling 804-771-7470.
Appendix
Standard and Poor's Ratings Group Municipal Bond Rating Definitions
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Moody's Investors Service, Inc. Municipal Bond Rating Definitions
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group,
they comprise what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment some time in the
future. Baa--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba--Bonds which are Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Fitch Investors Service, Inc., Long-Term Debt Ratings
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated F-
1+.
NR--NR indicates that Fitch does not the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in AAA category.
Standard & Poor's Corporation, Municipal Note Ratings
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Short-Term Loan Ratings
MIG1/VMIG1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
2102608B-R (1/95)
The Medalist Funds
(formerly the Signet Select Funds)
Investment Shares
consists of seven portfolios:
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; and
The Tax-Free Money Market Fund
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read
with the Combined Prospectus for the Investment Shares
("Investment Shares") of The Medalist Funds (the "Trust") and The
Tax-Free Money Market Fund, dated January 31, 1995. This Statement
is not a prospectus itself. To receive a copy of the prospectus,
write to or call the Trust.
Federated Investors Tower
Pittsburgh, PA 15222-3779
FEDERATED INVESTORS
Distributor
A subsidiary of
Federated Investors
STATEMENT DATED JANUARY 31, 1995
General Information About the Trust 1
Investment Objective and Policies
of the Funds 1
The U.S. Government Securities
Fund 1
Types of Investments 1
U.S. Government Obligations 1
Collateralized Mortgage
Obligations (CMOs) 1
The Stock Fund 2
Convertible Securities 2
Warrants 2
Futures And Options
Transactions 2
Financial Futures Contracts 2
Put Options on Financial
Futures Contracts 2
Call Options on Financial
Futures Contracts 3
"Margin" in Futures
Transactions 3
Purchasing Put Options on
Portfolio Securities 3
Writing Covered Call Options
On Portfolio Securities 3
Over-the-Counter Options 4
U.S. Government Obligations 4
Commercial Paper 4
Bank Instruments 4
The Virginia Municipal Bond Fund
and The Maryland Municipal Bond
Fund 4
Acceptable Investments 4
Characteristics 5
Types of Acceptable Investments 5
The Treasury Money Market Fund 5
Types of Investments 5
The Money Market Fund 5
Types of Investments 5
Bank Instruments 5
U.S. Government Obligations 5
The Tax-Free Money Market Fund 6
Portfolio Investments and
Strategies 6
Repurchase Agreements 6
Reverse Repurchase Agreements 6
When-Issued and Delayed
Delivery Transactions 6
Lending of Portfolio Securities 6
Restricted and Illiquid
Securities 6
Participation Interests 7
Variable Rate Municipal
Securities 7
Municipal Leases 8
Temporary Investments 8
Adjustable Rate Mortgage
Securities 8
Portfolio Turnover 8
Investment Limitations 8
Issuing Senior Securities and
Borrowing Money 8
Selling Short and Buying on
Margin 9
Pledging Assets 9
Lending Cash or Securities 9
Investing in Restricted
Securities 9
Investing in Commodities 9
Investing in Real Estate 10
Diversification of Investments 10
Concentration of Investments 10
Underwriting 10
Investing in Illiquid
Securities 10
Investing in Securities of
Other Investment Companies 11
Investing in New Issuers 11
Investing in Issuers Whose
Securities are Owned by
Officers and Trustees of the
Trust 11
Investing in Minerals 11
Arbitrage Transactions 11
Purchasing Securities to
Exercise Control 11
Investing in Warrants 11
Investing in Put Options 11
Writing Covered Call Options 12
Selling Short 12
Dealing in Puts and Calls 12
The Medalist Funds Management 12
Officers and Trustees 12
The Funds 16
Fund Ownership 16
Officers and Trustees
Compensation 16
Trustee Liability 17
Investment Advisory Services 17
Adviser to the Trust 17
Advisory Fees 18
State Expense Limitations 18
Administrative Services 18
Custodian 18
Brokerage Transactions 19
Purchasing Shares 19
Distribution Plan 19
Conversion to Federal Funds 20
Administrative Arrangements 20
Determining Market Value of
Securities 20
Use of the Amortized Cost
Method 21
Monitoring Procedures 21
Investment Restrictions 21
Valuing Municipal Securities 21
Use of Amortized Cost 22
Redeeming Shares 22
Redemption in Kind 22
Tax Status 22
The Funds' Tax Status 22
Shareholders' Tax Status 22
Capital Gains 23
Total Return 23
Yield 23
Effective Yield 24
Tax-Equivalent Yield 24
Tax-Equivalency Tables 24
Performance Comparisons 27
The U.S. Government Securities
Fund 27
The Stock Fund 28
The Virginia Municipal Bond
Fund and The Maryland
Municipal Bond Fund 28
The Treasury Money Market Fund 28
The Money Market Fund 28
The Tax-Free Money Market Fund 29
Financial Statements 29
Appendix 30
Standard and Poor's Ratings
Group Municipal Bond Rating
Definitions 30
Moody's Investors Service, Inc.
Municipal Bond Rating
Definitions 30
Fitch Investors Service, Inc.,
Long-Term Debt Ratings 30
Standard & Poor's Corporation,
Municipal Note Ratings 31
Moody's Investors Service,
Short-Term Loan Ratings 31
General Information About the Trust
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated June 20, 1990. As of the date of this Statement,
the Trust consists of seven separate portfolios of securities
(collectively, the "Funds", individually, a "Fund") which are as follows:
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, and The Tax-Free Money Market Fund. On
October 1, 1992, the name of the Trust was changed from "The SBK Select
Series" to "Signet Select Funds." On August 15, 1994, the name of the Trust
was changed from "Signet Select Funds" to "The Medalist Funds."
With the exception of The Tax-Free Money Market Fund, which offers a single
class of shares, the Funds are offered in two classes, Investment Shares
and Trust Shares. This Combined Statement of Additional Information relates
only to the Investment Shares of those Funds offering classes and to shares
of The Tax-Free Money Market Fund.
Investment Objective and Policies of the Funds
The prospectus discusses the objective of each Fund and the policies it
employs to achieve those objectives. The following discussion supplements
the description of the Funds' investment policies in the Combined
prospectus.
The Funds' respective investment objectives cannot be changed without
approval of shareholders. The investment policies described below may be
changed by the Trustees without shareholder approval. 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 prospectus section "Portfolio Investments and Strategies."
The U.S. Government Securities Fund
Types of Investments
The Fund invests primarily in securities which are guaranteed as to payment
of principal and interest by the U.S. government or its instrumentalities.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may
invest generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations
issued or guaranteed by U.S. government agencies or
instrumentalities. These securities are backed by: the full faith
and credit of the U.S. Treasury; the issuer's right to borrow from
the U.S. Treasury; the discretionary authority of the U.S.
government to purchase certain obligations of agencies or
instrumentalities; or the credit of the agency or instrumentality
issuing the obligations.
Examples of agencies and instrumentalities which may not always
receive financial support from the U.S. government are: the Farm
Credit System; Federal Home Loan Banks; Farmers Home
Administration; and Federal National Mortgage Association.
Collateralized Mortgage Obligations (CMOs)
Privately issued CMOs generally represent an ownership interest in
federal agency mortgage pass-through securities such as those
issued by the Government National Mortgage Association. The terms
and characteristics of the mortgage instruments may vary among
pass-through mortgage loan pools.
The market for such CMOs has expanded considerably since its
inception. The size of the primary issuance market and the active
participation in the secondary market by securities dealers and
other investors make government-related pools highly liquid.
The Stock Fund
The Fund invests primarily in the securities of high quality companies,
including common stocks, preferred stocks, corporate bonds, notes, warrants
and convertible securities.
Convertible Securities
Convertible securities are fixed income securities which may be
exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures,
units consisting of "usable" bonds and warrants or a combination
of the features of several of these securities. The investment
characteristics of each convertible security vary widely, which
allows convertible securities to be employed for different
investment objectives.
The Fund will exchange or convert the convertible securities held
in its portfolio into shares of the underlying common stock in
instances in which, in the investment adviser's opinion, the
investment characteristics of the underlying common shares will
assist the Fund in achieving its investment objectives. Otherwise,
the Fund may hold or trade convertible securities. In selecting
convertible securities for the Fund, the Fund's adviser evaluates
the investment characteristics of the convertible security as a
fixed income instrument, and the investment potential of the
underlying equity security for capital appreciation. In evaluating
these matters with respect to a particular convertible security,
the Fund's adviser considers numerous factors, including the
economic and political outlook, the value of the security relative
to other investment alternatives, trends in the determinants of
the issuer's profits, and the issuer's management capability and
practices.
Warrants
Warrants are basically options to purchase common stock at a
specific price (usually at a premium above the market value of the
optioned common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than a year to
twenty years or may be perpetual. However, most warrants have
expiration dates after which they are worthless. In addition, if
the market price of the common stock does not exceed the warrant's
exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no
dividends, and have no rights with respect to the assets of the
corporation issuing them. The percentage increase or decrease in
the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the
optioned common stock.
Futures And Options Transactions
As a means of reducing fluctuations in the net asset value of
shares of the Fund, the Fund may attempt to hedge all or a portion
of its portfolio by buying and selling financial futures
contracts, buying put options on portfolio securities and listed
put options on futures contracts, and writing call options on
futures contracts. The Fund may also write covered call options on
portfolio securities to attempt to increase its current income.
The Fund will maintain its positions in securities, option rights,
and segregated cash subject to puts and calls until the options
are exercised, closed, or have expired. An option position on
financial futures contracts may be closed out only on an exchange
which provides a secondary market from options of the same series.
Financial Futures Contracts
A futures contract is a firm commitment by two parties: the
seller, who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the buyer,
who agrees to take delivery of the security ("going long") at a
certain time in the future. Financial futures contracts call for
the delivery of shares of common stocks represented in a
particular index.
Put Options on Financial Futures Contracts
The Fund may purchase listed put options on financial futures
contracts.Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date
at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide
on or before a future date whether to assume a short position at
the specified price.
Generally, if the hedged portfolio securities decrease in value
during the term of an option, the related futures contracts will
also decrease in value and the option will increase in value. In
such an event, the Fund will normally close out its option by
selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option
will be large enough to offset both the premium paid by the Fund
for the original option plus the decrease in value of the hedged
securities.
Alternatively, the Fund may exercise its put option to close out
the position. To do so, it would simultaneously enter into a
futures contract of the type underlying the option (for a price
less than the strike price of the option) and exercise the option.
The Fund would then deliver the futures contract in return for
payment of the strike price. If the Fund neither closes out nor
exercises an option, the option will expire on the date provided
in the option contract, and only the premium paid for the contract
will be lost.
Call Options on Financial Futures Contracts
In addition to purchasing put options on futures, the Fund may
write listed call options on futures contracts to hedge its
portfolio. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of assuming a short
futures position (selling a futures contract) at the fixed strike
price at any time during the life of the option if the option is
exercised. As stock prices fall, causing the prices of futures to
go down, the Fund's obligation under a call option on a future (to
sell a futures contract) costs less to fulfill, causing the value
of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below
the strike price, the buyer of the option has no reason to
exercise the call, so that the Fund keeps the premium received for
the option. This premium can substantially offset the drop in
value of the Fund's fixed income or indexed portfolio which is
occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise
of it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the
second option will be less than the premium received by the Fund
for the initial option. The net premium income of the Fund will
then substantially offset the decrease in value of the hedged
securities.
The Fund will not maintain open positions in futures contracts it
has sold or call options it has written on futures contracts if,
in the aggregate, the value of the open positions (marked to
market) exceeds the current market value of its securities
portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is
exceeded at any time, the Fund will take prompt action to close
out a sufficient number of open contracts to bring its open
futures and options positions within this limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay
or receive money upon the purchase or sale of a futures contract.
Rather, the Fund is required to deposit an amount of "initial
margin" in cash or U.S. Treasury bills with its custodian (or the
broker, if legally permitted). The nature of initial margin in
futures transactions is different from that of margin in
securities transactions in that futures contract initial margin
does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance
bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the
official settlement price of the exchange on which it is traded.
Each day the Fund pays or receives cash, called "variation
margin," equal to the daily change in value of the futures
contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is
instead settlement between the Fund and the broker of the amount
one would owe the other if the futures contract expired. In
computing its daily net asset value, the Fund will mark to market
its open futures positions.
The Fund is also required to deposit and maintain margin when it
writes call options on futures contracts.
Purchasing Put Options on Portfolio Securities
The Fund may purchase put options on portfolio securities to
protect against price movements in particular securities in its
portfolio. A put option gives the Fund, in return for a premium,
the right to sell the underlying security to the writer (seller)
at a specified price during the term of the option.
Writing Covered Call Options On Portfolio Securities
The Fund may also write covered call options to generate income.
As writer of a call option, the Fund has the obligation upon
exercise of the option during the option period to deliver the
underlying security upon payment of the exercise price. The Fund
may only sell call options either on securities held in its
portfolio or on securities which it has the right to obtain
without payment of further consideration (or has segregated cash
in the amount of any additional consideration).
Over-the-Counter Options
The Fund may purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or
writers of the options for those options on portfolio securities
held by the Fund and not traded on an exchange.
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.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may
invest are those set forth under "The U.S. Government Securities
Fund--U.S. Government Obligations."
Commercial Paper
The Fund may invest in commercial paper rated at least A-1 by Standard &
Poor's Ratings Group ("S&P"), Prime-1 by Moody's Investors Service, Inc.
("Moody's"), or F-1 by Fitch Investors Service ("Fitch") and money market
instruments (including commercial paper) which are unrated but of
comparable quality, including Canadian Commercial Paper ("CCPs") and
Europaper. In the case where commercial paper, CCPs or Europaper have
received different ratings from different rating services, such commercial
paper, CCPs or Europaper is an acceptable investment so long as at least
one rating is one of the preceding high quality ratings and provided the
investment adviser has determined that such investment presents minimal
credit risks.
Bank Instruments
The Fund may invest in the instruments of banks and savings and loans whose
deposits are 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, such as certificates of deposit, demand and time deposits, savings
shares, and bankers' acceptances. These instruments are not necessarily
guaranteed by those organizations.
In addition to domestic bank obligations such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, the
Fund may invest in:
o Eurodollar Certificates of Deposit ("ECDs") issued by foreign
branches of U.S. or foreign banks;
o Eurodollar Time Deposits ("ETDs"), which are U.S. dollar-
denominated deposits in foreign branches of U.S. or foreign
banks;
o Canadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the United
States; and
o Yankee Certificates of Deposit ("Yankee CDs"), which are U.S.
dollar-denominated certificates of deposit issued by U.S.
branches of foreign banks and held in the United States.
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
Acceptable Investments
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
pursue their investment objectives by investing in professionally managed
portfolios of securities at least 65% of which are comprised of Virginia
(in the case of The Virginia Municipal Bond Fund) or Maryland (in the case
of The Maryland Municipal Bond Fund) municipal securities. The Funds will
invest their assets so that, under normal circumstances, at least 80% of
their annual interest income is exempt from federal regular and Virginia
(in the case of The Virginia Municipal Bond Fund) or Maryland (in the case
of The Maryland Municipal Bond Fund) state income taxes or that at least
80% of their total assets are invested in obligations, the interest income
from which is exempt from federal regular and Virginia (in the case of The
Virginia Municipal Bond Fund) or Maryland (in the case of The Maryland
Municipal Bond Fund) state income taxes.
Characteristics
The municipal securities in which the Funds invest have the
characteristics set forth in the prospectus. An unrated municipal
security will be determined by a Fund's adviser to meet the
quality standards established by the Fund's Board of Trustees if
it is of comparable quality to the rated municipal securities
which the Fund purchases. The Trustees consider the
creditworthiness of the issuer of a municipal security, the issuer
of a participation interest if the Fund has the right to demand
payment from the issuer of the interest or the guarantor of
payment by either of those issuers.
If Moody's or S&P's ratings change because of changes in those
organizations or in their rating systems, a Fund will try to use
comparable ratings as standards in accordance with the investment
policies described in the Fund's prospectus.
Types of Acceptable Investments
Examples of Virginia and Maryland municipal securities are:
o municipal notes and tax-exempt commercial paper;
o serial bonds sold with a series of maturity dates;
o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes at a later
date;
o bond anticipation notes sold in anticipation of the issuance of
longer-term bonds in the future;
o revenue anticipation notes sold in expectation of receipt of
federal income available under the Federal Revenue Sharing
Program;
o prerefunded municipal bonds refundable at a later date (payment of
principal and interest on prerefunded bonds is assured through
the first call date by the deposit in escrow of U.S. government
securities); or
o general obligation bonds secured by a municipality's pledge of
taxation.
The Treasury Money Market Fund
Types of Investments
The Fund invests only in short-term U.S. Treasury obligations. Short-term
U.S. Treasury obligations as used herein refers to evidences of
indebtedness issued by the United States, or issued by an agency or
instrumentality thereof, and fully guaranteed as to principal and interest
by the United States, maturing 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 Fund may also retain Fund assets in cash.
The Money Market Fund
Types of Investments
The Fund invests primarily in money market instruments maturing in 397 days
or less and which include, but are not limited to, commercial paper and
demand master notes, domestic and foreign bank instruments, U.S. government
obligations, and corporate debt obligations.
Bank Instruments
The types of bank instruments in which the Fund invests are those
set forth under "The Stock Fund-Bank Instruments."
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may
invest are those set forth under "The U.S. Government Securities
Fund-U.S. Government Obligations."
The Tax-Free Money Market Fund
The Fund invests in a portfolio of municipal securities maturing in 13
months or less. As a matter of investment policy, which cannot be changed
without shareholder approval, at least 80% of the Fund's annual interest
income will be exempt from federal income tax (including alternative
minimum tax). The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Portfolio Investments and Strategies
Repurchase Agreements
The Funds or their custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market
daily. In the event that a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Funds believe that under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in
favor of a Fund and allow retention or disposition of such securities. The
Funds will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the adviser to be creditworthy pursuant to guidelines established by the
Trustees.
Reverse Repurchase Agreements
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement a Fund transfers possession of a portfolio instrument to another
person, such as a financial institution, broker, or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable a
Fund to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that a Fund will be able to avoid
selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of a
Fund sufficient to make payment for the securities to be purchased are
segregated on a Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Funds may engage in these transactions to an extent that would cause
the segregation of an amount up to 20% of the total value of their assets.
The Funds do not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of their respective assets.
Lending of Portfolio Securities
The collateral received when The U.S. Government Securities Fund, The Stock
Fund and The Money Market Fund lend portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the particular Fund. During
the time portfolio securities are on loan, the borrower pays a Fund any
dividends or interest paid on such securities. Loans are subject to
termination at the option of a Fund or the borrower. A Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker. The U.S.
Government Securities Fund and The Stock Fund do not have the right to vote
securities on loan, but would terminate the loan and regain the right to
vote if that were considered important with respect to the investment.
Restricted and Illiquid Securities
The Funds may invest in restricted securities. Restricted securities are
any securities in which a Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restriction on
resale under federal securities law. However, The U.S. Government
Securities Fund, The Stock Fund, The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund will limit investments in illiquid securities,
including certain restricted securities determined by the Trustees not to
be liquid, and repurchase agreements providing for settlement in more than
seven days after notice, to 15% of its net assets. In the case of The
Virginia Municpal Bond Fund and The Maryland Municipal Bond Fund, illiquid
securities will include 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, The Money Market Fund, and The Tax-Free
Money Market Fund will limit investments in illiquid securities, including
certain securities determined by the Trustees not to be liquid, and
repurchase agreements providing for settlement in more than seven days
after notice, and in the case of The Money Market Fund, specifically
including non-negotiable fixed income time deposits with maturities over
seven days, to 10% of their net assets.
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
the Fund, 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 like the Fund through
or with the assistance of the issuer or investment dealers who make a
market in Section 4(2) commercial paper, thus providing liquidity. The
Funds believe that Section 4(2) commercial paper and possibly certain other
restricted securities which meet the criteria for liquidity established by
the Board of Trustees are quite liquid. The Funds intend, therefore, to
treat the restricted securities which meet the criteria for liquidity
established by the Trustees, including Section 4(2) commercial paper, as
determined by a Fund's investment adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition,
because Section 4(2) commercial paper is liquid, the Funds intend to not
subject such paper to the limitation applicable to restricted securities.
Participation Interests
The financial institutions from which The Virginia Municipal Bond Fund, The
Maryland Municipal Bond Fund, and The Tax-Free Money Market Fund purchase
participation interests frequently provide or secure from other financial
institutions irrevocable letters of credit or guarantees and give a Fund
the right to demand payment on specified notice (normally within thirty
days for The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund and seven days for The Tax-Free Money Market Fund) from the issuer of
the letter of credit or guarantee. These financial institutions may charge
certain fees in connection with their repurchase commitments, including a
fee equal to the excess of the interest paid on the municipal securities
over the negotiated yield at which the participation interests were
purchased by a Fund. By purchasing participation interests, a Fund is
buying a security meeting the maturity and quality requirements of a Fund
and is also receiving the tax-free benefits of the underlying securities.
In the acquisition of participation interests, a Fund's investment adviser
will consider the following quality factors:
o the quality of the underlying municipal security (of which a Fund
takes possession);
o the quality of the issuer of the participation interest; and
o a guarantee or letter of credit from a high-quality financial
institution supporting the participation interest.
Variable Rate Municipal Securities
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund invest in variable municipal securities.
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for
fixed income obligations.
Many municipal securities with variable interest rates purchased by the The
Tax-Free Money Market Fund are subject to repayment of principal (usually
within seven days) on the The Tax-Free Money Market Fund's demand. For
purposes of determining the Fund's average maturity, the maturities of
these variable rate demand municipal securities (including participation
interests) are the longer of the periods remaining until the next
readjustment of their interest rates or the periods remaining until their
principal amounts can be recovered buy exercising the right to demand
payment. The terms of these variable rate demand instruments require
payment of principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests or a guarantor of
either issuer.
Municipal Leases
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund may purchase municipal securities in the form of
participation interests which represent undivided proportional interests in
lease payments by a governmental or nonprofit entity. The lease payments
and other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations
may be subject to periodic appropriation. If the entity does not
appropriate funds for future lease payments, the entity cannot be compelled
to make such payments. Furthermore, a lease may provide that the
certificate trustee cannot accelerate lease obligations upon default. The
trustee would only be able to enforce lease payments as they became due. In
the event of a default or failure of appropriation, it is unlikely that the
trustee would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the adviser,
under the authority delegated by the Board of Trustees, will base its
determination on the following factors: (a) whether the lease can be
terminated by the lessee; (b) the potential recovery, if any, from a sale
of the leased property upon termination of the lease; (c) the lessee's
general credit strength (e.g., its debts, administrative, economic and
financial characteristics, and prospects); (d) the likelihood that the
lessee will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to its operations (e.g.,
the potential for an "event of nonappropriation"); and (e) any credit
enhancement of legal recourse provided upon an event of nonappropriation or
other termination of the lease.
Temporary Investments
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund and The
Tax-Free Money Market Fund may also invest in temporary investments during
times of unusual market conditions for defensive purposes and to maintain
liquidity.
From time to time, such as when suitable securities are not available to
the respective Fund, a Fund may invest a portion of its assets in cash. Any
portion of a Fund's assets maintained in cash will reduce the amount of
assets in securities held in the respective Fund, and could thereby reduce
a Fund's yield.
Adjustable Rate Mortgage Securities
The U.S. Government Securities Fund invests in adjustable rate mortgage
securities ("ARMS"). Not unlike other U.S. government securities, the
market value of ARMS will generally vary inversely with changes in market
interest rates. Thus, the market value of ARMS generally declines when
interest rates rise and generally rises when interest rates decline.
While ARMS generally entail less risk of a decline during periods of
rapidly rising rates, ARMS may also have less potential for capital
appreciation than other similar investments (e.g. investments with
comparable maturities) because as interest rates decline, the likelihood
increases that mortgages will be prepaid. Furthermore, if ARMS are
purchased at a premium, mortgage foreclosures and unscheduled principal
payment may result in some loss of a holder's principal investment to the
extent of the premium paid. Conversely, if ARMS are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
Portfolio Turnover
The Funds will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in an
attempt to achieve a Fund's investment objective. The Stock Fund may
experience greater portfolio turnover than would be expected with a
portfolio of higher-rated securities. A high portfolio turnover will
result in increased transaction costs to the Fund. For the fiscal years
ended September 30, 1994, 1993, and 1992, the portfolio turnover rates
were 227%, 154%, and 201%, respectively, for The U.S. Government
Securities Fund; 205%, 67%, and 38%, respectively, for The Stock Fund;
29%, 17%, and 51%, respectively, for The Virginia Municipal Bond Fund;
and 27%, 23%, and 34%, respectively, for The Maryland Municipal Bond
Fund.
Investment Limitations
Issuing Senior Securities and Borrowing Money
The Funds will not issue senior securities except that a Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its net assets, including
the amount borrowed. The Funds will not borrow money or engage in
reverse repurchase agreements for investment leverage, but rather
as a temporary, extraordinary, or emergency measure or to
facilitate management of the portfolio by enabling a Fund to meet
redemption requests when the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous. A Fund will not
purchase any securities while any borrowings in excess of 5% of
its total assets are outstanding. With respect to The U.S.
Government Securities Fund, The Stock Fund, The Virginia Municipal
Bond Fund, The Maryland Municipal Bond Fund, The Treasury Money
Market Fund, and The Money Market Fund, during the period any
reverse repurchase agreements are outstanding, the Funds will
restrict the purchase of portfolio securities to money market
instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to
assure completion of the reverse repurchase agreements.
Selling Short and Buying on Margin
The Funds will not purchase any securities on margin but they may
obtain such short-term credits as may be necessary for clearance
of transactions. With respect to The U.S. Government Securities
Fund and The Stock Fund, the deposit or payment by the Fund of
initial or variation margin in connection with financial futures
contracts or related options transactions is not considered the
purchase of a security on margin. The Virginia Municipal Bond
Fund, The Maryland Municipal Bond Fund, The Treasury Money Market
Fund, The Money Market Fund, and The Tax-Free Money Market Fund
may not sell any securities short.
Pledging Assets
The Funds will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In these cases the Funds,
except The Tax-Free Money Market Fund, may pledge assets having a
market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets of a Fund at the time
of the pledge. Margin deposits for the purchase and sale of
financial futures contracts and related options are not deemed to
be a pledge.
Lending Cash or Securities
The U.S. Government Securities Fund, The Stock Fund, The Treasury
Money Market Fund and The Money Market Fund, will not lend any of
their assets, except portfolio securities up to one-third of the
value of their total assets. This shall not prevent a Fund from
purchasing or holding bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by a
Fund's investment objective, policies, and limitations or the
Trust's Declaration of Trust.
The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund will not lend any of their assets, except that they may
acquire publicly or nonpublicly issued municipal securities or
temporary investments or enter into repurchase agreements as
permitted by a Fund's investment objective, policies, limitations
and Declaration of Trust.
The Tax-Free Money Market Fund will not lend any of its assets
except that it may purchase or hold portfolio securities permitted
by its investment objective, policies and limitations, or
Declaration of Trust.
Investing in Restricted Securities
Except for The Tax-Free Money Market Fund, the Funds will not
invest more than 10% of their net assets in securities subject to
restrictions on resale under the Securities Act of 1933 (except
certain restricted securities which meet the criteria for
liquidity as established by the Board of Trustees. With respect to
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 and
certain other restricted securities which meet the criteria for
liquidity as established by the Board of Trustees).
The Tax-Free Money Market Fund will not invest more than 10% of
its total assets in securities subject to restrictions on resale
under federal securities law, except for restricted securities
determined to be liquid under criteria established by the
Trustees.
Investing in Commodities
The Funds will not purchase or sell commodities, commodity
contracts or commodity futures contracts except for financial
futures contracts in the case of The Stock Fund.
Investing in Real Estate
The Funds will not purchase or sell real estate, although The U.S.
Government Securities Fund and The Stock Fund may invest in
securities secured by real estate or interests in real estate or
issued by companies, including real estate investment trusts,
which invest in real estate or interests therein. The Virginia
Municipal Bond Fund, The Maryland Municipal Bond Fund, The Money
Market Fund, and The Tax-Free Money Market Fund may invest in
securities of issuers whose business involves the purchase or sale
of real estate or in securities which are secured by real estate
or interests in real estate.
Diversification of Investments
With respect to 75% of the value of its total assets, The U.S.
Government Securities Fund, The Stock Fund and The Money Market
Fund will not purchase securities issued by any one issuer (other
than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by such
securities), if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer. The
U.S. Government Fund and The Stock Fund will not acquire more than
10% of the outstanding voting securities of any one issuer.
Concentration of Investments
The U.S. Government Securities Fund, The Stock Fund and The Money
Market Fund will not invest 25% or more of the value of their
total assets in any one industry. With respect to The Money Market
Fund, investing in bank instruments (such as time and demand
deposits and certificates of deposit), U.S. government
obligations, or instruments secured by these money market
instruments, such as repurchase agreements for U.S. government
obligations, shall not be considered investments in any one
industry.
The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry or in industrial development bonds or
other securities, the interest on which is paid from revenues of
similar types of projects. However, these Funds may invest as
temporary investments more than 25% of the value of its assets in
cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, or instruments
secured by these money market instruments, such as repurchase
agreements.
The Tax-Free Money Market Fund will not invest 25% or more of the
value of its total assets in any one industry, except that it may
invest more than 25% of its total assets in securities issued or
guaranteed by the U.S. government, its agencies or
instrumentalities and industrial development bonds as long as they
are not from the same facility or similar types of facilities. The
Tax-Free Money Market Fund does not intend to purchase securities
that would increase the percentage of its assets invested in the
securities of governmental subdivisions located in any one state,
territory, or U.S. possession to 25% or more.
Underwriting
The Funds will not underwrite any issue of securities, except as a
Fund may be deemed to be an underwriter under the Securities Act
of 1933 in connection with the sale of securities in accordance
with its investment objective, policies, and limitations.
The above limitations cannot be changed with respect to a Fund without
approval of a majority of that Fund's Shares. The following limitations may
be changed by the Trustees without shareholder approval. Shareholders will
be notified before any material change in these limitations becomes
effective.
Investing in Illiquid Securities
The U.S. Government Securities Fund, The Stock Fund, 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, and certain
restricted securities determined by the Trustees not to be liquid;
and, in the case of The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund, specifically including 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, The Money Market Fund, and The Tax-
Free Money Market Fund will not invest more than 10% of the value
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; and, in the case of The Money Market Fund, specifically
including non-negotiable fixed income time deposits with
maturities over seven days.
Investing in Securities of Other Investment Companies
The Funds will limit their respective investment in other
investment companies to no more than 3% of the total outstanding
voting stock of any investment company, invest no 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 U.S.
Government Securities Fund, The Stock Fund, The Treasury Money
Market Fund and The Money Market Fund will purchase securities of
closed-end investment companies only in open market transactions
involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a
merger, consolidation, reorganization, or acquisition of assets.
With respect to The Treasury Money Market Fund and The Money
Market Fund, the Funds will limit their investments and the
securities of other investment companies to those of The Money
Market Funds having investment objectives and policies similar to
their own. The Virginia Municipal Bond Fund and The Maryland
Municipal Bond Fund will invest in other investment companies
primarily for the purposes 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.
Investing in New Issuers
The U.S. Government Securities Fund, The Stock Fund, The Money
Market Fund, and The Tax-Free Money Market Fund will not invest
more than 5% of the value of their total assets in securities of
issuers which 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 the value of its total assets in
industrial development bonds where the payment of principal and
interest is the responsibility of companies (or in the alternative
guarantors, where applicable) which have records of less than
three years of continuous operations, including the operation of
any predecessor.
Investing in Issuers Whose Securities are Owned by Officers and Trustees
of the Trust
A Fund will not purchase or retain the securities of any issuer if
the officers and Trustees of the Trust or its investment adviser
owning individually more than 1/2 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
Investing in Minerals
A Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may
purchase the securities of issuers which invest in or sponsor such
programs.
Arbitrage Transactions
A Fund will not enter into transactions for the purpose of
engaging in arbitrage.
Purchasing Securities to Exercise Control
A Fund will not purchase securities of a company for the purpose
of exercising control or management.
Investing in Warrants
The Funds will not invest in warrants, except that The Stock Fund
may invest not more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities.
To comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on the New York or American
Stock Exchanges to 2% of its net assets. (If state restrictions
change, this latter restriction may be revised without notice to
shareholders.) For purposes of this investment restriction,
warrants will be valued at the lower of cost or market, except
that warrants acquired by the Fund in units with or attached to
securities may be deemed to be without value.
Investing in Put Options
Neither The U.S. Government Securities Fund nor The Stock Fund
will purchase put options on securities unless the securities are
held in a Fund's portfolio and not more than 5% of the value of
either Fund's total assets would be invested in premiums on open
and put option positions.
Writing Covered Call Options
Neither The U.S. Government Securities Fund nor The Stock Fund
will write call options on securities unless the securities are
held in their portfolio or unless either Fund is entitled to them
in deliverable form without further payment or after segregating
cash in the amount of any further payment.
Selling Short
Neither The U.S. Government Securities Fund nor The Stock Fund
will sell securities short unless (1) it owns, or has a right to
acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other assets equal to the lesser of
the market value of the securities sold short or the amount
required to acquire such securities. The segregated amount will
not exceed 10% of either Fund's net assets. While in a short
position, the Fund will retain the securities, rights, or
segregated assets.
Dealing in Puts and Calls
The Virginia Municipal Bond Fund, The Maryland Municipal Bond
Fund, and The Tax-Free Money Market Fund will not invest in puts,
calls, straddles, spreads, or any combination of them except that
The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund may purchase put options on municipal securities in an amount
up to 5% of its total assets or may purchase municipal securities
accompanied by agreements of sellers to repurchase them at a
Fund's option.
Except with respect to the Funds' policy of borrowing money, if a
percentage limitation is adhered to at the time of investment, a
later increase or decrease in percentage resulting from any change
in value or net assets will not result in a violation of such
restriction.
The U.S. Government Securities Fund and The Stock Fund have no
present intent to borrow money, pledge securities or invest in
restricted or illiquid securities in excess of 5% of the value of
their respective net assets in the coming fiscal year. These Funds
(1) will limit the aggregate value of the assets underlying
covered call options or put options written by a Fund to not more
than 25% of its net assets, (2) will limit the premiums paid for
options purchased by a Fund to 20% of its net assets, and (3) will
limit the margin deposits on futures contracts entered into by a
Fund to 5% of its net assets. (If state requirements change, these
restrictions may be revised without shareholder notification.)
The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund have no present intent to issue senior securities or borrow
money, pledge securities, invest in restricted or illiquid
securities or engage in when-issued and delayed delivery
transactions in excess of 5% of the value of its net assets during
the fiscal period.
The Treasury Money Market Fund and The Money Market Fund do not
expect to issue senior securities or borrow money, pledge
securities, engage in whenissued and delayed delivery transactions
or reverse repurchase agreements, for The Money Market Fund only,
in excess of 5% of the value of their net assets during the coming
fiscal year.
The Tax-Free Money Market Fund does not intend to borrow money or
pledge securities in excess of 5% of the value of its net assets
during the coming fiscal year.
To comply with registration requirements in a certain state, The
Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund,
The Money Market Fund, and The Tax-Free Money Market Fund will not
invest in real estate limited partnerships.
The Medalist Funds Management
Officers and Trustees
Officers and Trustees are listed with their addresses, principal
occupations, and present positions, including any affiliation with Signet
Asset Management, Signet Trust Company, Federated Investors, Federated
Securities Corp., Federated Services Company, and Federated Administrative
Services or the Funds (as defined below).
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Centre
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer & Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.; Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer of
the Funds.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer & Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Craig P. Churman
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President of the Trust
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and Director,
Federated Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Vice President of the
Funds; Director, Trustee, or Managing General Partner of some of the
Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee
of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" of the Trust as
defined in the Investment Company Act of 1940, as amended.
@ Member of the Trust Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund;
First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds,
Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. -
1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; The Medalist Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; New York Municipal Cash Trust; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark
Funds; Trust for Financial Institutions; Trust For Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; and World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the outstanding shares of each
Fund.
As of January 11, 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Funds: Stephens Inc., Little Rock,
Arkansas, owned approximately 434,383 Investment Shares of The Stock Fund
(18.6%); approximately 727,728 Investment Shares of The Maryland Municipal
Bond Fund (23.3%); and approximately 6,058,078 shares of The Tax-Free Money
Market Fund (22.2%).
Officers and Trustees Compensation
NAME , AGGREGATE TOTAL COMPENSATION
POSITION WITH COMPENSATION FROM PAID TO TRUSTEES FROM
TRUST TRUST+ TRUST AND FUND COMPLEX
John F. Donahue,
Chairman and Trustee $ -0- $ -0- for the Trust and
69 investment companies
Thomas G. Bigley,
Trustee $498 $24,991 for the Trust and
50 investment companies
John T. Conroy, Jr.,
Trustee $2,001.50 $136,100 for the Trust and
65 investment companies
William J. Copeland,
Trustee $2,001.50 $136,100 for the Trust and
65 investment companies
James E. Dowd,
Trustee $2,001.50 $136,100 for the Trust and
65 investment companies
Lawrence D. Ellis, M.D.,
Trustee $1,816 $123,600 for the Trust and
65 investment companies
Edward L. Flaherty, Jr.,
Trustee $2,001.50 $136,100 for the Trust and
65 investment companies
Edward C. Gonzales,
President and Trustee $ -0- $ -0- for the Trust and
18 investment companies
Peter E. Madden,
Trustee $1,517.50 $104,880 for the Trust and
65 investment companies
Gregor F. Meyer,
Trustee $1,816 $123,600 for the Trust and
65 investment companies
Wesley W. Posvar,
Trustee $1,816 $123,600 for the Trust and
65 investment companies
Marjorie P. Smuts,
Trustee $1,816 $123,600 for the Trust and
65 investment companies
+The aggregate compensation is provided for the Trust which is comprised
of eight portfolios.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they are
not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Adviser to the Trust
The Trust's investment adviser is Signet Asset Management which is a
division of Signet Trust Company, a wholly-owned subsidiary of Signet
Banking Corporation. Because of the internal controls maintained by Signet
Bank to restrict the flow of non-public information, Fund investments are
typically made without any knowlidge of Signet Bank's or its affiliates'
lending relationships with an issuer.
The adviser shall not be liable to the Trust, a Fund, or any shareholder of
any of the Funds for any losses that may be sustained in the purchase,
holding, or sale of any security or for anything done or omitted by it,
except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon it by its
contract with the Trust.
Advisory Fees
For its advisory services, Signet Asset Management receives an annual
investment advisory fee as described in the prospectus. During the fiscal
years ended September 30, 1994, 1993, and 1992 , the adviser earned fees
from: The U.S. Government Securities Fund, of $1,734,083, $1,375,434, and
$662,158, of which $734,744, $784,857, and $571,943 were voluntarily
waived; The Stock Fund $703,937, $512,930, and $348,390, of which $214,366,
$372,554, and $157,500 were voluntarily waived; The Virginia Municipal Bond
Fund $861,187, $519,326, and $203,123, of which $314,920, $345,108, and
$203,123 were voluntarily waived; The Maryland Municipal Bond Fund
$355,431, $233,787, and $91,829, of which $241,790, $231,723, and $91,829
were voluntarily waived; The Treasury Money Market Fund $1,388,302,
$922,509, and $809,409, of which $508,090, $369,003, and $176,525 were
voluntarily waived; and The Money Market Fund $709,679, $729,525, and
$387,183 of which $354,839, $431,083, and $222,685 were voluntarily waived.
For the period from July 27, 1994 to September 30, 1994 the adviser earned
$21,033 from The Tax-Free Money Market Fund, of which $19,388 was
voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose
shares are registered for sale in those states. If a Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2 1/2% per year of the first $30
million of average net assets, 2% per year of the next $70 million
of average net assets, and 1 1/2% per year of the remaining
average net assets, the adviser will reimburse the Fund for its
expenses over the limitation. If a Fund's monthly projected
operating expenses exceed this limitation, the investment advisory
fee paid will be reduced by the amount of the excess, subject to
an annual adjustment. If the expense limitation is exceeded, the
amount to be reimbursed by the adviser will be limited, in any
single fiscal year, by the amount of the investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Administrative Services
Federated Administrative Services, which is a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds for
the fees set forth in the prospectus. For the fiscal years ended September
30, 1994, 1993, and 1992, the Funds incurred costs for administrative
services as follows: The U.S. Government Securities Fund incurred $269,932,
$233,156, and $122,622; The Stock Fund incurred $109,075, $86,960, and
$65,066; The Virginia Municipal Bond Fund incurred $133,956, $87,752 and
$50,000; The Maryland Municipal Bond Fund incurred $55,254, $49,614, and
$50,000; The Treasury Money Market Fund incurred $319,857, $235,278, and
$226,433; and The Money Market Fund incurred $165,549, $186,110, and
$107,640; of which $0, $0, and $0 were voluntarily waived for The U.S.
Government Securities Fund; $0, $0, and $0 were voluntarily waived for The
Stock Fund; $0, $0, and $33,416 were voluntarily waived for The Virginia
Municipal Bond Fund; $0, $0, and $50,000 were voluntarily waived for The
Maryland Municipal Bond Fund; $0, $0, and $0 were voluntarily waived for
The Treasury Money Market Fund; and $0, $0, and $0 were voluntarily waived
for The Money Market Fund. For the period from July 27, 1994, to September
30, 1994, The Tax-Free Money Market Fund paid $8,904 for administrative
services, of which $0 was voluntarily waived.
Custodian
Signet Trust Company 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. The custodian receives a fee at an annual
rate of .05 of 1% on the first $10 million of average net assets of each of
the six respective portfolios and .025 of 1% on average net assets in
excess of $10 million. There is a $20 fee imposed on each transaction. The
custodian fee received during any fiscal year shall be at least $1,000 per
Fund.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the Board
of Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Funds or to the
adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers may be used by the adviser in
advising the Funds and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses.
For the fiscal year ended September 30, 1994, The Stock Fund paid $552,066
in commissions on brokerage transactions.
Purchasing Shares
Shares of the Funds are sold at their net asset value without a sales
charge on days the New York Stock Exchange is open for business. The
procedure for purchasing Shares of the Funds is explained in the prospectus
under "Investing in Shares."
Distribution Plan
The Trust has adopted a Plan for Shares of the Funds pursuant to Rule 12b-1
which was promulgated by the Securities and Exchange Commission pursuant to
the Investment Company Act of 1940. The Plan provides that the Funds'
distributor, Federated Securities Corp., shall act as the distributor of
Shares, and it permits the payment of fees to brokers and dealers for
distribution and administrative services and to administrators for
administrative services. The Plan is designed to (i) stimulate brokers and
dealers to provide distribution and administrative support services to the
Funds and their holders of Shares and (ii) stimulate administrators to
render administrative support services to the Funds and their holders of
Shares. These services are to be provided by a representative who has
knowledge of the holder of Shares' particular circumstances and goals, and
include, but are not limited to: 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 the Funds; assisting
clients in changing dividend options, account designations, and addresses;
and providing such other services as the Trust reasonably requests.
Other benefits which the Funds hope to achieve through the Plan include,
but are not limited to the following: (1) an efficient and effective
administrative system; (2) a more efficient use of assets of holders of
Shares by having them rapidly invested in the Funds with a minimum of delay
and administrative detail; and (3) an efficient and reliable records system
for holders of Shares and prompt responses to shareholder requests and
inquiries concerning their accounts.
By adopting the Plan, the Board of Trustees expects that the Funds will be
able to achieve a more predictable flow of cash for investment purposes and
to meet redemptions. This will facilitate more efficient portfolio
management and assist the Funds in seeking to achieve their respective
investment objectives. By identifying potential investors in Shares whose
needs are served by a particular Fund's objective, and properly servicing
these accounts, the Funds may be able to curb sharp fluctuations in rates
of redemptions and sales.
For the fiscal years ended September 30, 1994, 1993, and 1992, the Funds
paid fees to brokers and administrators (financial institutions) pursuant
to the Plan as follows: The U.S. Government Securities Fund , of $299,048,
$111,353, and $0; The Stock Fund $59,836, $14,672, and $0; The Virginia
Municipal Bond Fund, of $190,877, $55,569, and $0; The Maryland Municipal
Bond Fund, of $89,447, $31,414, and $0; The Treasury Money Market Fund, of
$52,221, $20,462, and $0; The Money Market Fund, of $26,424, $11,499, and
$0. For the period from July 27, 1994 to September 30, 1994 the Tax-Free
Money Market Fund paid no fees pursuant to the Plan.
Conversion to Federal Funds
It is the policy of The Treasury Money Market Fund, The Money Market Fund,
and The Tax-Free Money Market Fund to be as fully invested as possible so
that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds.
Federated Services Company acts as the shareholder's agent in depositing
checks and converting them to federal funds.
Administrative Arrangements
For the fiscal years ended September 30, 1994, 1993 and 1992, the
distributor paid no administrative fees to brokers and administrators
(financial institutions).
Determining Net Asset Value
Net asset values of The U.S. Government Securities Fund, The Stock Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
generally change each day. The Treasury Money Market Fund, The Money Market
Fund, and The Tax-Free Money Market Fund attempt to stabilize the value of
their Shares at $1.00. The days on which the net asset value is calculated
by these Funds are described in the prospectus.
Determining Market Value of Securities
The market value of The U.S. Government Securities Fund's portfolio
securities is determined as follows:
o according to the mean between the over-the-counter bid and asked
prices provided by an independent pricing service, if available,
or at fair value as determined in good faith by the Fund's Board
of Trustees; or
o for short-term obligations with remaining maturities of 60 days or
less at the time of purchase at amortized cost unless the Board of
Trustees determines that particular circumstances of the security
indicate otherwise.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
The market value of The Stock Fund's portfolio securities is determined as
follows:
o for equity securities, according to the last sale price on a
national securities exchange, if available;
o in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked
prices;
o for unlisted equity securities, the latest bid prices;
o for bonds and other fixed income securities, as determined by an
independent pricing service;
o for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service or for
short-term obligations with remaining maturities of 60 days or
less at the time of purchase at amortized cost; or
o for all other securities, at fair value as determined in good
faith by the Board of Trustees.
The U.S. Government Securities Fund and The Stock Fund will value futures
contracts, options, and put options on futures and at their market values
established by the exchanges at the close of option trading on such
exchanges unless the Board of Trustees determine in good faith that another
method of valuing option positions is necessary to appraise their fair
value. Over-the-counter put options will be valued at the mean between the
bid and the asked prices.
Use of the Amortized Cost Method
With respect to The Treasury Money Market Fund, The Money Market Fund, and
The Tax-Free Money Market Fund, the Trustees have decided that the best
method for determining the value of portfolio instruments is amortized
cost. Under this method, portfolio instruments are valued at the
acquisition cost as adjusted for amortization of premium or accumulation of
discount rather than at current market value.
A Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed
for purposes of distribution and redemption, at $1.00 per Share, taking
into account current market conditions and a Fund's investment objective.
Under the Rule, a Fund is permitted to purchase instruments which are
subject to demand features or standby commitments. As defined by the Rule,
a demand feature entitles a Fund to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days'
notice or (2) at specified intervals not exceeding one year on no more than
30 days' notice. A standby commitment entitles a Fund to achieve same day
settlement and to receive an exercise price equal to the amortized cost of
the underlying instrument plus accrued interest at the time of exercise.
The Funds acquire instruments subject to demand features and standby
commitments to enhance the instrument's liquidity. The Funds treat demand
features and standby commitments as a part of the underlying instruments,
because the Funds do not acquire them for speculative purposes and cannot
transfer them separately from the underlying instruments. Therefore,
although the Rule defines demand features and standby commitments as
"puts", the Fund does not consider them to be separate investments for
purposes of its investment policies.
Monitoring Procedures
The Trustees' procedures include monitoring the relationship
between the amortized cost value per share and the net asset value
per share based upon available indications of market value. The
Trustees will decide what, if any, steps should be taken if there
is a difference of more than .5 of 1% between the two. The
Trustees will take any steps they consider appropriate (such as
redemption in kind or shortening the average portfolio maturity)
to minimize any material dilution or other unfair results arising
from differences between the two methods of determining net asset
value.
Investment Restrictions
The Rule requires that a Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks
and have received the requisite rating from one or more nationally
recognized statistical rating organizations. If the instruments
are not rated, the Trustees must determine that they are of
comparable quality. The Rule also requires a Fund to maintain a
dollar-weighted average portfolio maturity (not more than 90 days)
appropriate to the objective of maintaining a stable net asset
value of $1.00 per Share. In addition, no instrument with a
remaining maturity of more than 397 days can be purchased by a
Fund.
Should the disposition of a portfolio security result in a dollar-
weighted average portfolio maturity of more than 90 days, a Fund
will invest its available cash to reduce the average maturity to
90 days or less as soon as possible.
A Fund may attempt to increase yield by trading portfolio securities to
take advantage of short-term market variations. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset
value is affected by any unrealized appreciation or depreciation of the
portfolio.
In periods of declining interest rates, the indicated daily yield on
Shares, computed by dividing the annualized daily income on a Fund's
portfolio by the net asset value computed as above, may tend to be higher
than a similar computation made by using a method of valuation based upon
market prices and estimates.
In periods of rising interest rates, the indicated daily yield on Shares
computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
Valuing Municipal Securities
With respect to The Virginia Municipal Bond Fund, The Maryland Municipal
Bond Fund, and The Tax-Free Money Market Fund, the Board of Trustees uses
an independent pricing service to value municipal securities. The
independent pricing service takes into consideration: yield; stability;
risk; quality; coupon rate; maturity; type of issue; trading
characteristics; special circumstances of a security or trading market; and
any other factors or market data it considers relevant in determining
valuations for normal institutional size trading units of debt securities
and does not rely exclusively on quoted prices.
Use of Amortized Cost
With respect to The Virginia Municipal Bond Fund and The Maryland Municipal
Bond Fund, the Board of Trustees has decided that the fair value of debt
securities purchased by a Fund with remaining maturities of 60 days or less
at the time of purchase shall be their amortized cost value, unless the
particular circumstances of the security indicate otherwise. Under this
method, portfolio instruments and assets are valued at the acquisition cost
as adjusted for amortization of premium or accumulation of discount rather
than at current market value. The Executive Committee continually assesses
this method of valuation and recommends changes where necessary to assure
that the Fund's portfolio instruments are valued at their fair value as
determined in good faith by the Trustees.
Redeeming Shares
Each Fund redeems Shares at the next computed net asset value after a Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Investment Shares."
Redemption in Kind
Although the Trust intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from a Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Board of Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which a Fund is obligated to redeem Shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of any
class' net asset value during any 90-day period. Although a Fund reserves
the right to redeem Shares in kind, it will activate this right only after
providing 60 days' notice to shareholders.
Tax Status
The Funds' Tax Status
The Funds will pay no federal income tax because they expect to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
Shareholders' Tax Status
With respect to The U.S. Government Securities Fund, The Stock Fund, The
Treasury Money Market Fund and The Money Market Fund, shareholders are
subject to federal income tax on dividends received as cash or additional
shares. No portion of any income dividend paid by a Fund is eligible for
the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary
income.
With respect to The Virginia Municipal Bond Fund, The Maryland Municipal
Bond Fund, and The Tax-Free Money Market Fund, no portion of any income
dividend paid by a Fund is eligible for the dividends received deduction
available to corporations.
Capital Gains
Capital gains experienced by The Treasury Money Market Fund and
The Money Market Fund could result in an increase in dividends.
Capital losses could result in a decrease in dividends. If, for
some extraordinary reason, these Funds realize net long-term
capital gains, such net long-term capital gains will be
distributed at least once every 12 months.
With respect to The U.S. Government Securities Fund and The Stock Fund,
long-term capital gains distributed to shareholders will be treated as long-
term capital gains regardless of how long shareholders have held Shares.
With respect to The Maryland Municipal Bond Fund, The Virginia Municipal
Bond Fund, and The Tax-Free Money Market Fund, capital gains or losses may
be realized by a Fund on the sale of portfolio securities and as a result
of discounts from par value on securities held to maturity. Sales would
generally be made because of:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or
o an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the Shares.
Total Return
The average annual total return for The U.S. Government Securities Fund,
The Stock Fund, The Virginia Municipal Bond Fund, and The Maryland
Municipal Bond Fund, for the fiscal year ended September 30, 1994 and for
the period from October 12, 1990 (effective date of each Fund's
registration statement) to September 30, 1994 was (5.32%) and 6.77%;
(3.71%) and 7.66%; (6.21%) and 5.71%; (6.60%) and 5.24% for Investment
Shares and (3.12%) and 7.43%; (1.50%) and 8.23%; (4.01%) and 6.34%; (4.50%)
and 5.87% for Trust Shares.
The average annual total return for Shares of each Fund is the average
compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of shares
owned at the end of the period by the net asset value per share at the end
of the period. The number of shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000, adjusted over the period by any additional shares, assuming the
monthly/quarterly reinvestment of all dividends and distributions.
Yield
The yield for the seven-day period ended September 30, 1994 for the The
Treasury Money Market Fund and The Money Market Fund were 3.85% and 4.09%,
for Investment Shares and 4.10% and 4.34%, for Trust Shares, respectively.
The yield for the seven-day period ended September 30, 1994 for the The Tax-
Free Money Market Fund was 2.98%.
The U.S. Government Securities Fund, The Stock Fund, The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund's yield for the thirty-day
period ended September 30, 1994 were 5.06%, 0.53%, 4.47% and 4.82% for
Investment Shares and 5.31%, 0.78%, 4.73% and 5.08% for Trust Shares.
The Treasury Money Market Fund, The Money Market Fund, and The Tax-Free
Money Market Fund calculate yield daily, based upon the seven days ending
on the day of the calculation, called the "base period." This yield is
computed by:
o determining the net change in the value of a hypothetical account
with a balance of one share at the beginning of the base period,
with the net change excluding capital changes but including the
value of any additional Shares purchased with dividends earned
from the original one share and all dividends declared on the
original and any purchased Shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base
period return; and
o multiplying the base period return by 365/7.
The yield for Shares of The U.S. Government Securities Fund, The Stock
Fund, The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
is determined by dividing the net investment income per share (as defined
by the Securities and Exchange Commission) earned by the class of shares
over a thirty-day period by the maximum offering price per share of the
class of shares on the last day of the period. The yield of the Investment
Shares of the Fund is determined each day by dividing the net investment
income per share (as defined by the Securities and Exchange Commission)
earned by the class of shares over a thirty-day period by the maximum
offering price per share of the class of shares on the last day of the
period. This value is then annualized using semiannual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a 12-month period and is reinvested
every six months. The yield does not necessarily reflect income actually
earned by the Fund because of certain adjustments required by the
Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
With respect to The U.S. Government Securities Fund and The Stock Fund, the
yield will be calculated separately for Investment Shares and Trust Shares.
Because Investment Shares are subject to a 12b-1 fee, the net yield for
Trust Shares for the same period will exceed that of Investment Shares.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
Fund, the performance will be reduced for those shareholders paying those
fees.
Effective Yield
The effective yield for the seven-day period ended September 30, 1994 for
the The Treasury Money Market Fund and The Money Market Fund was 3.92% and
4.18% for Investment Shares and 4.18% and 4.44% for Trust Shares,
respectively. The effective yield for the period ended September 30, 1994
for The Tax-Free Money Market Fund was 3.03%.
The effective yield of The Treasury Money Market Fund, The Money Market
Fund, and The Tax-Free Money Market Fund is computed by compounding the
unannualized base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
Tax-Equivalent Yield
The tax-equivalent yield for both classes of shares for The Virginia
Municipal Bond Fund and The Maryland Municipal Bond Fund, and for The Tax-
Free Money Market Fund is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that either class would have had to
earn to equal its actual yield, assuming a 28% tax rate and also assuming
that income earned by the Fund is 100% tax-exempt.
The tax-equivalent yield for the Investment Shares for the thirty-day
period ended September 30, 1994, was 6.75% for The Virginia Municipal Bond
Fund and 7.47% for The Maryland Municipal Bond Fund. The tax-equivalent
yield for the Trust Shares was 7.14% for The Virginia Municipal Bond Fund
and 7.88% for The Maryland Municipal Bond Fund for the same period. The tax-
equivalent yield for The Tax-Free Money Market Fund for the same period was
4.14%.
Tax-Equivalency Tables
Both classes of shares may also use a tax-equivalency table in
advertising and sales literature. The interest earned by the
municipal bonds in the Fund's portfolio generally remains free
from federal regular income tax, and is often free from state and
local taxes as well. As the tables below indicate, a "tax-free"
investment is an attractive choice for investors, particularly in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
COMMONWEALTH OF VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
20.75% 33.75% 36.75% 41.75% 45.35%
JOINT $1- $39,001 $94,251 $143,601 OVER
RETURN: 39,000 94,250 143,600 256,500 $256,500
SINGLE $1 $23,351 $56,551 $117,951 OVER
RETURN: 23,350 56,550 117.,950 256,500 $256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
3.50% 4.42% 5.28% 5.53% 6.01% 6.40%
4.00% 5.05% 6.04% 6.32% 6.87% 7.32%
4.50% 5.68% 6.79% 7.11% 7.73% 8.23%
5.00% 6.31% 7.55% 7.91% 8.58% 9.15%
5.50% 6.94% 8.30% 8.70% 9.44% 10.06%
6.00% 7.57% 9.06% 9.49% 10.30% 10.98%
6.50% 8.20% 9.81% 10.28% 11.16% 11.89%
7.00% 8.83% 10.57% 11.07% 12.02% 12.81%
7.50% 9.46% 11.32% 11.86% 12.88% 13.72%
8.00% 10.09% 12.08% 12.65% 13.73% 14.64%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH
BRACKET WAS USED IN CALCULATING THE TAXABLE
YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE
TAXABLE INVESTMENTS WERE NOT USED TO INCREASE
FEDERAL DEDUCTIONS.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF MARYLAND
INCLUDING LOCAL INCOME TAX
COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
22.50% 32.50% 38.50% 40.00% 45.00% 48.60%
JOINT $1- $39,001 $94,251 $100,001 $143,601 OVER
RETURN: 39,000 94,250 100,000 143,600 $256,500$256,500
SINGLE $1- $23,351 $56,551 $100,000 $117,951 OVER
RETURN: 23,350 56,550 100,000 117,950 256,500 $256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
2.00% 2.58% 3.10% 3.25% 3.33% 3.64% 3.89%
2.50% 3.23% 3.88% 4.07% 4.17% 4.55% 4.86%
3.00% 3.87% 4.65% 4.88% 5.00% 5.45% 5.84%
3.50% 4.52% 5.43% 5.69% 5.83% 6.36% 6.81%
4.00% 5.16% 6.20% 6.50% 6.67% 7.27% 7.78%
4.50% 5.81% 6.98% 7.32% 7.50% 8.18% 8.75%
5.00% 6.45% 7.75% 8.13% 8.33% 9.09% 9.73%
5.50% 7.10% 8.53% 8.94% 9.17% 10.00% 10.70%
6.00% 7.74% 9.30% 9.76% 10.00% 10.91% 11.67%
6.50% 8.39% 10.08% 10.57% 10.83% 11.82% 12.65%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH
BRACKET WAS USED IN CALCULATING THE TAXABLE
YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE
TAXABLE INVESTMENT WERE NOT USED TO INCREASE
FEDERAL DEDUCTIONS. THE LOCAL INCOME TAX RATE
IS ASSUMED TO BE 50% OF THE STATE RATE FOR ALL
COUNTIES EXCLUDING ALLEGHENY, BALTIMORE,
MONTGOMERY, PRINCE GEORGE'S, TALBOT, AND
WORCHESTER.
The charts above are for illustrative purposes
only. They are not an indicator of past or
future performance of either class of shares.
Some portion of the Fund's income may be
subject to the federal alternative minimum tax
and state and local taxes.
Performance Comparisons
Each Fund's performance of both classes of shares depends upon such
variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments, in the case
of The Treasury Money Market Fund and The Money Market Fund, or
changes in interest rates and market value of portfolio securities
in the case of U.S. Government Income Fund, The Stock Fund, The
Virginia Municipal Bond Fund and Maryland Municipal Bond Fund;
o changes in each Fund's or each class of Shares' expenses;
o the relative amount of The Treasury Money Market Fund's and The
Money Market Fund's cash flow; and
o various other factors.
In the case of The U.S. Government Securities Fund, The Stock Fund, The
Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, either
class of shares' performance fluctuates on a daily basis largely because
net earnings and offering price per Share fluctuate daily. Both net
earnings and offering price per Share are factors in the computation of
yield and total return.
From time to time, each Fund may advertise its performance compared to
similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
The U.S. Government Securities Fund:
o MERRILL LYNCH COMPOSITE 1-5 YEAR TREASURY INDEX is comprised of
approximately 66 issues of U.S. Treasury securities maturing
between 1 and 4.99 years, with coupon rates of 4.25% or more.
These total return figures are calculated for one, three, six, and
twelve month periods and year-to-date and include the value of the
bond plus income and any price appreciation or depreciation.
o SALOMON BROTHERS 3-5 YEARS GOVERNMENT INDEX quotes total returns
for U.S. Treasury issues (excluding flower bonds) which have
maturities of three to five years. These total returns are year-to-
date figures which are calculated each month following January 1.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes income into account
any change in net asset value over a specific period of time. From
time to time, the Trust will quote its Lipper ranking in the U.S.
Government funds category in advertising and sales literature.
o MERRILL LYNCH 3-5 YEAR TREASURY INDEX is comprised of
approximately 24 issues of intermediate-term U.S. government and
U.S. Treasury securities with maturities between 3 and 4.99 years
and coupon rates above 4.25%. Index returns are calculated as
total returns for periods of one, three, six and twelve months as
well as year-to-date.
o MERRILL LYNCH 3-YEAR TREASURY YIELD CURVE INDEX is an unmanaged
index comprised of the most recently issued 3-year U.S. Treasury
notes. Index returns are calculated as total returns for periods
of one, three, six, and twelve months as well as year-to-date.
o LEHMAN BROTHERS GOVERNMENT INTERMEDIATE INDEX is an unmanaged
index comprised of all publicly issued, non-convertible domestic
debt of the U.S. government, or any agency thereof, or any quasi-
federal corporation and of corporate debt guaranteed by the U.S.
government. Only notes and bonds with a minimum outstanding
principal of $1 million and maturities of 1-10 years.
o 3 YEAR TREASURY NOTES Source: Wall Street Journal, Bloomberg
Financial Markets, and Telerate.. MORNINGSTAR, INC., an
independent rating service, is the publisher of the bi-weekly
Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-
adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
The Stock Fund:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the
"growth and income funds" category in advertising and sales
literature.
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of
selected blue-chip industrial corporations as well as public
utility and transportation companies. The DJIA indicates daily
changes in the average price of stocks in any of its categories.
It also reports total sales for each group of industries. Because
it represents the top corporations of America, the DJIA index is a
leading economic indicator for the stock market as a whole.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and
financial and publicutility companies, compares total returns of
funds whose portfolios areinvested primarily in common stocks. In
addition, the Standard & Poor's index assumes reinvestment of all
dividends paid by stocks listed on the index. Taxes due on any of
these distributions are not included, nor are brokerage or other
fees calculated in the Standard & Poor's figures.
o MORNINGSTAR, INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns.The maximum rating is five stars, and
ratings are effective for two weeks.
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the
"general municipal bond funds" category in advertising and sales
literature.
o MORNINGSTAR, INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns.The maximum rating is five stars, and
ratings are effective for two weeks.
The Treasury Money Market Fund:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "short-term U.S. government
funds" category in advertising and sales literature.
o SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S.
Treasury, maturing in 30 days.
The Money Market Fund:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "money market instruments
fund" category in advertising and sales literature.
o BANK RATE MONITOR NATIONAL INDEX, Miami, Florida, is a financial
reporting service which publishes weekly average rates of 50
leading bank and thrift institution money market deposit accounts.
The rates published in the index are an average of the personal
account rates offered on the Wednesday prior to the date of
publication by ten of the largest banks and thrifts in each of the
five largest Standard Metropolitan Statistical Areas. Account
minimums range upward from $2,500 in each institution and
compounding methods vary. If more than one rate is offered, the
lowest rate is used. Rates are subject to change at any time
specified by the institution. Investors may use such indices or
reporting services in addition to either class of shares'
prospectus to obtain a more complete view of the Share's
performance before investing. Of course, when comparing
performance of either class of shares to any index, factors such
as portfolio composition and prevailing market conditions should
be considered in assessing the significance of such comparisons.
The Tax-Free Money Market Fund:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "Tax-Free Money Market Funds"
category in advertising and sales literature.
o IBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of
hundreds of money market funds on a weekly basis, and through its
Money Market Insight publication, reports monthly and 12-month-to-
date investment results for the same money funds.
o MONEY, A MONTHLY MAGAZINE, regularly ranks money market funds in
various categories based on the latest available seven-day
compound effective yield. From time to time, the Fund will quote
its Money ranking in advertising and sales literature.
o SALOMON BROTHERS SIX-MONTH PRIME MUNI NOTES is an index of
selected municipal notes, maturing in six months, whose yields are
chosen as representative of this market. Calculations are made
weekly and monthly.
o SALOMON BROTHERS ONE-MONTH TAX-EXEMPT COMMERCIAL PAPER is an index
of selected tax-exempt commercial paper issues, maturing in one
month, whose yields are chosen as representative of this
particular market. It is a weekly quote of the most representative
yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days. Calculations are made weekly and monthly.
Ehrlich-Bober & Co., Inc. also tracks this Salomon Brothers Index.
Advertisements and other sales literature for both classes of shares may
quote total returns which are calculated on non-standardized base periods.
These total returns also represent the historic change in the value of an
investment in either class of shares based on monthly reinvestment of
dividends over a specified period of time.
Financial Statements
The financial statements for the fiscal period ended September 30, 1994,
are incorporated herein by reference from the Funds' Annual Reports
dated September 30, 1994. A copy of the Annual Report for a Fund may be
obtained without charge by contacting Signet Trust Company at the
address located on the back cover of the combined prospectus or by
calling 804-771-7470.
Appendix
Standard and Poor's Ratings Group Municipal Bond Rating Definitions
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Moody's Investors Service, Inc. Municipal Bond Rating Definitions
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment some time in the
future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba--Bonds which are Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Fitch Investors Service, Inc., Long-Term Debt Ratings
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated F-
1+.
NR--NR indicates that Fitch does not the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in AAA category.
Standard & Poor's Corporation, Municipal Note Ratings
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Short-Term Loan Ratings
MIG1/VMIG1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
2102608B-R (1/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (1-7) The Financial Statements for the
fiscal year ended September 30,
1994, are incorporated into the
Statement of Additional Information
by reference from the Funds' Annual
Report dated September 30, 1994.
(b) Exhibits:
(1) (i) Conformed Copy of Declaration of Trust of
the Registrant;(10)
(ii) Copy of Amendment No. 1, dated September 20,
1990, to the Declaration of Trust;(2)
(iii) Copy of Amendment No. 2, dated November 14,
1991, to the Declaration of Trust;(5)
(iv) Conformed copy of Amendment No. 3, dated
October 1, 1992, to the Declaration of Trust;
(7)
(v) Conformed copy of Amendment No. 4, dated
October 1, 1992, to the Declaration of
Trust;(10)
(vi) Conformed copy of Amendment No. 5, dated
May 27, 1994, to the Declaration of Trust;(10)
(vii) Conformed copy of Amendment No. 6, dated
July 28,, 1994, to the Declaration of Trust;(10)
(viii) Conformed Copy of Amendment No. 7 dated December
25, 1993 to the Declaration of Trust;(10)
(iv) Conformed Copy of Amendment No. 8 dated December
1, 1994, to the Declaration of Trust;(10)
(2) Copy of By-Laws of the Registrant;(1)
(3) Not applicable;
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed August 24, 1990. (File No. 33-
36451 and 811-6158).
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 3 and Amendment No. 3 to its Registration Statement on
Form N-1A filed October 9, 1990. (File Nos. 33-36451 and 811-6158).
(5) Response is incorporated by reference to the Registrant's Post-Effective
Amendment No. 3 and Amendment No. 6 to its Registration Statement on
Form N-1A filed on December 2, 1991. (File Nos. 33-36451 and 811-6158).
(7) Response is incorporated by reference to the Registrant's Post-
Effective Amendment No. 5 and Amendment No. 8 to its Registration
Statement on Form N-1A filed November 24, 1993. (File Nos. 33-36451 and
811-6158)
(10) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 10 and Amendment No. 13 to its Registration
Statement on Form N-1A filed December 21, 1994. (File Nos. 33-36451 and
811-6158)
(4) (i) Copy of Specimen Certificate for Shares of
Beneficial Interest of The Treasury Money Market
Fund, The Money Market Fund, The Value Equity Fund,
The Maryland Municipal Bond Fund, The Virginia
Municipal Bond Fund, The Stock Fund, and The U.S
Government Securities Fund (Investment and Trust
Shares(7);
(ii) Copy of Specimen Certificate for Shares of
Beneficial Interest of The Tax-Free Money Market
Fund(8);
(iii) Copy of Specimen Certificate for Shares of
Beneficial Interest of The Strategic Stock Fund;
(to be filed by Amendment)
(5) (i) Conformed copy of Investment Advisory Contract
of the Registrant and Exhibits A-G thereto;(10)
(ii) Form of Exhibit H to the present Investment
Advisory Contract of the Registrant to add The
Strategic Stock Fund to the existing Investment
Advisory Contract; (+)
(6) (i) Conformed copy of Distributor's Contract of the
Registrant and Exhibits A-D thereto;(10)
(ii) Form of Exhibit E to the Distributor's Contract
of the Registrant; (+)
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the
Registrant;(9)
+ All exhibits have been filed electronically.
(7) Response is incorporated by reference to the Registrant's Post-
Effective Amendment No. 5 and Amendment No. 8 to its Registration
Statement on Form N-1A filed November 24, 1993. (File Nos. 33-36451 and
811-6158)
(8) Response in incorporated by reference to Registrant's Post-
Effective Amendment No. 6 and Amendment No. 9 to its Registration
Statement on Form N-1A filed April 21, 1994. (File Nos. 33-36451 and
811-6158)
(9) Response in incorporated by reference to Registrant's Post-
Effective Amendment No. 7 and Amendment No. 10 to its Registration
Statement on Form N-1A filed June 20, 1994. (File Nos. 33-36451 and 811-
6158)
(10) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 10 and Amendment No. 13 to its Registration
Statement on Form N-1A filed December 21, 1994. (File Nos. 33-36451 and
811-6158)
(9) Conformed copy of Transfer Agency and Service
Agreement (Fund Accounting and Shareholder
Recordkeeping) of the Registrant;(9)
(10) Copy of Opinion and Consent of Counsel as to
legality of shares being registered;(2)
(11) Conformed copy of Consent of Independent Auditors;+
(12) Not applicable;
(13) Copy of Initial Capital Understanding;(2)
(14) Not applicable;
(15) Conformed Copy of the Distribution Plan of the
Registrant and Amendment No. 1 and Exhibit A
thereto, and Amendment No. 2 thereto; (10)
(ii) Copy of Rule 12b-1 Agreement of the Registrant
and Amendment Nos. 1 and 2 thereto;(10)
(iii) Conformed Copy of Administrative Services
Agreement of the Registrant ;(10)
(iv) Conformed Copy of previous Administrative
Services Agreement of the Registrant;(10)
(16) Copy of Schedule for Computation of Fund
Performance Data;(3)
(17) Copy of Financial Data Schedules;+
(18) Power of Attorney;(6)
+ All exhibits have been filed electronically.
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 3 and Amendment No. 3 to its Registration Statement on
Form N-1A filed October 9, 1990. (File Nos. 33-36451 and 811-6158).
(3) Response is incorporated by reference to
Registrant's Post-Effective Amendment No. 1 and Amendment No. 4 to its
Registration Statement on Form N-1A filed on May 9, 1991. (File Nos. 33-
36451 and 811-6158).
(6) Response is incorporated by reference to the
Registrant's Post-Effective Amendment No. 4 and Amendment No. 7 to its
Registration Statement on Form N-1A filed December 1, 1992. (File Nos.
33-36451 and 811-6158).
(9) Response in incorporated by reference to Registrant's Post-
Effective Amendment No. 7 and Amendment No. 10 to its Registration
Statement on Form N-1A filed June 20, 1994. (File Nos. 33-36451 and 811-
6158)
(10) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 10 and Amendment No. 13 to its Registration
Statement on Form N-1A filed December 21, 1994. (File Nos. 33-36451 and
811-6158)
Item 25. Persons Controlled by or Under Common Control with Registrant:
No persons are controlled by the Registrant.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of January 11, 1995
Shares of beneficial interest The U.S. Government Securities
Fund - Trust Shares 5
The U.S. Government Securities
Fund - Investment Shares 4417
The Maryland Municipal Bond
Fund - Trust Shares 5
The Maryland Municipal Bond
Fund Investment Shares 1,151
The Money Market Fund
Trust Shares 5
The Money Market Fund
Investment Shares 623
The Treasury Money
Market Fund - Trust Shares 5
The Treasury Money Market
Fund - Investment Shares 320
The Stock Fund - Trust Shares 7
The Stock Fund
Investment Shares 3,000
The Virginia Municipal Bond
Fund - Trust Shares 5
The Virginia Municipal Bond
Fund - Investment Shares 1,893
The Tax-Free Money Market
Fund 95
Item 27. Indemnification: (1.)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of Signet Asset
Management, the investment adviser, see the section entitled "The
Medalist Funds Information - Management of The Medalist Funds" in
Part A.
The Officers of the investment adviser are:
Other Substantial
Positions with Business, Profession,
Name the Adviser Vocation or Employment
Leslie P. Hunter President
Gary M. Allen Senior Vice President Managing Director
of the Virginia
Retirement System
(11/90-3/94)
Steve Kramer Senior Vice President
Raymond E. Williams, Jr. Senior Vice President
Joe Rose Vice President
Bob Perrin Vice President
Betty Speegle Vice President
Joe L. Stork Vice President
Jerry Weaks Vice President
DIRECTORS
Name
Gary M. Allen
Gordon Holt
Leslie P. Hunter
T. Gaylon Layfield, III
Christopher Oddleifson
Sanford Teu, III
John F. Vogel
Raymond W. Williams, Jr.
(1) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 and Amendment No. 4 to its Registration Statement on
Form N-1A filed on May 9, 1991. (File Nos. 33-36451 and 811-6158).
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: Alexander Hamilton
Funds; American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Cash Management Trust;
Automated Government Money Trust; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; California Municipal
Cash Trust; Cash Trust Series, Inc.; Cash Trust Series II; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government
Bond Fund; First Priority Funds; First Union Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fountain Square Funds; Fund for
U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Independence One
Mutual Funds; Insight Institutional Series, Inc.; Insurance
Management Series; Intermediate Municipal Trust;
International Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust; The
Monitor Funds; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; Portage Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; SouthTrust Vulcan
Funds; Star Funds; The Starburst Funds; The Starburst Funds
II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Tower Mutual
Funds; Trademark Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations;
Vision Fiduciary Funds, Inc.; Vision Group of Funds, Inc.;
and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty
Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President,
Federated Investors Tower President, and Treasurer, Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities and Trustee
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President,
Federated Investors Tower Federated Securities Corp. __
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President,
Federated Investors Tower Federated Securities Corp. --
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of the
following locations:
The Medalist Funds Federated Investors Tower
Pittsburgh, PA
Federated Services Company
(Transfer Agent, Dividend
Disbursing Agent and Federated Investors Tower
PortfolioRecordkeeper) Pittsburgh, PA
Federated Administrative Federated Investors Tower
Services(Administrator) Pittsburgh, PA
Signet Asset Management 7 North Eighth Street
(Adviser) Richmond, VA
Signet Trust Company 7 North Eighth Street
(Custodian) Richmond, VA
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and
without charge.
Registrant hereby undertakes to file a post-effective amendment on
behalf of The Tax-Free Money Market Fund, using financial
statements which need not be certified, within four to six months
of the effective date of Post Effective Amendment No. 6.
Registrant hereby undertakes to file a post-effective amendment on
behalf of The Strategic Stock Fund, using financial statements
which need not be certified, within four to six months of the
effective date of Post-Effective Amendment No. 10.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE MEDALIST FUNDS,
certifies that it meets all the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the securities Act
of 1933 and has duly caused this Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized,
all in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
25th day of January 1995.
THE MEDALIST FUNDS
BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
January 25, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ C. Grant Anderson
C. Grant Anderson Attorney In Fact January 25, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President and Treasurer
(Principal Financial and
Accounting Officer)
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg S-K
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of
The Medalist Funds:
We consent to the incorporation by reference in Post-Effective Amendment
No. 13 to Registration Statement 33-36451 of The Medalist Funds
(comprising the following portfolios: The Money Market Fund, The
Treasury Money Market Fund, The Tax-Free Money Market Fund, The Maryland
Municipal Bond Fund, The Virginia Municipal Bond Fund, The Stock Fund,
The U.S. Government Securities Fund) of our report dated November 11,
1994, appearing in the Annual Reports to Shareholders for the Medalist
Funds for the year ended September 30, 1994, and to the references to us
under the heading "Financial Highlights" in the prospectuses, which is a
part of such Registration Statement.
By: DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 23, 1995
EXHIBIT H
to the
Investment Advisory Contract
The Strategic Stock Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to .75 of 1% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .75 of 1% of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this December 1, 1994.
Attest: Signet Asset Management
By:
Secretary Executive Vice President
Attest: THE MEDALIST FUNDS
By:
Assistant Secretary Vice President
Form N-1A Exhibit No. 6(ii)
Regulation S-K Exhibit No. 10(iv)
Exhibit E
to Distributor's Contract
THE MEDALIST FUNDS
The Strategic Stock Fund
The following provisions are hereby incorporated and made part of
the Distributor's Contract dated the 12th day of October, 1990, between
The Medalist Funds and Federated Securities Corp. with respect to the
Classes of the Funds set forth above:
1. The Trust hereby appoints FSC to select a group of brokers
("Brokers") to sell shares of the above-listed series and Classes
("Shares"), at the current offering price thereof as described and set
forth in the prospectuses of the Trust, and to render administrative
support services to the Trust and its shareholders. In addition, the
Trust hereby appoints FSC to select a group of Administrators
("Administrators") to render administrative support services to the
Trust and its shareholders.
2. Administrative support services may include, but are not
limited to, the following eleven functions: (1) account openings: the
Broker or Administrator communicates account openings via computer
terminals located on the Broker or Administrator's premises; 2) account
closings: the Broker or Administrator communicates account closings via
computer terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker or Administrator's own
personal computer or through the use of a toll-free telephone number; 4)
enter redemption transactions: Broker or Administrator enters
redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide
accounting support for all transactions. Broker or Administrator also
wires funds and receives funds for Trust share purchases and
redemptions, confirms and reconciles all transactions, reviews the
activity in the Trust's accounts, and provides training and supervision
of its personnel; 6) interest posting: Broker or Administrator posts
and reinvests dividends to the Trust's accounts; 7) prospectus and
shareholder reports: Broker or Administrator maintains and distributes
current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the
Broker or Administrator continuously provides names of potential
customers; 10) design services: the Broker or Administrator
continuously designs material to send to customers and develops methods
of making such materials accessible to customers; and 11) consultation
services: the Broker or Administrator continuously provides information
about the product needs of customers.
3. FSC will enter into separate written agreements with various
firms to provide the services set forth in Paragraph 1 herein. During
the term of this Agreement, the Trust will reimburse FSC for payments
made by FSC to obtain services pursuant to this Agreement, a monthly fee
computed at the annual rate of up to .25% of the average aggregate net
asset value of the Investment Shares held during the month. For the
month in which this Agreement becomes effective or terminates, there
shall be an appropriate proration of any fee payable on the basis of the
number of days that the Agreement is in effect during the month. The
fees paid hereunder shall be in an amount equal to the aggregate amount
of periodic fees paid by FSC to Brokers and Administrators pursuant to
Paragraph 4 herein.
4. FSC, in its sole discretion, may pay Brokers and
Administrators a periodic fee in respect of Shares owned from time to
time by their clients or customers. The schedules of such fees and the
basis upon which such fees will be paid shall be determined from time to
time by the Trust's Board of Trustees.
5. FSC will prepare reports to the Board of Trustees of the Trust
on a quarterly basis showing amounts paid to the various firms and the
purpose for such payments.
6. In the event any amendment to this Agreement materially
increases the fees set forth in Paragraph 3, such amendment must be
approved by a vote of a majority of the outstanding voting securities of
the appropriate Fund or Class.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated October 12, 1990 between The Medalist Funds
and Federated Securities Corp., The Medalist Funds executes and delivers
this Exhibit on behalf of the Funds and Classes first set forth in this
Exhibit.
Witness the due execution hereof this 1st day of December, 1994.
ATTEST: SIGNET SELECT FUNDS
By:
Secretary President
(SEAL)
ATTEST:
FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
(SEAL)
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<NET-CHANGE-FROM-OPS> (2,276,918)
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<SHARES-COMMON-STOCK> 3,398,913
<SHARES-COMMON-PRIOR> 3,017,939
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<DISTRIBUTIONS-OF-GAINS> 329,347
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<NAME> THE MONEY MARKET FUND TRUST SHARES
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<PERIOD-END> SEP-30-1994
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<SHARES-COMMON-PRIOR> 134,397,424
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 132,445,041
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,407,210
<OTHER-INCOME> 0
<EXPENSES-NET> 807,118
<NET-INVESTMENT-INCOME> 4,600,092
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,600,092
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,275,163
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 276,276,617
<NUMBER-OF-SHARES-REDEEMED> 278,229,002
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 3,378,172
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 709,679
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,161,957
<AVERAGE-NET-ASSETS> 141,935,846
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> THE MONEY MARKET FUND INVESTMENT SHARES
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 146,798,566
<INVESTMENTS-AT-VALUE> 146,798,566
<RECEIVABLES> 1,744,751
<ASSETS-OTHER> 9,189
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 148,552,506
<PAYABLE-FOR-SECURITIES> 419,789
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 452,145
<TOTAL-LIABILITIES> 871,934
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,680,572
<SHARES-COMMON-STOCK> 15,235,531
<SHARES-COMMON-PRIOR> 9,904,976
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 15,235,531
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,407,210
<OTHER-INCOME> 0
<EXPENSES-NET> 807,118
<NET-INVESTMENT-INCOME> 4,600,092
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,600,092
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 324,929
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,429,884
<NUMBER-OF-SHARES-REDEEMED> 20,417,859
<SHARES-REINVESTED> 318,530
<NET-CHANGE-IN-ASSETS> 3,378,172
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 709,679
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,161,957
<AVERAGE-NET-ASSETS> 141,935,846
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> THE STOCK FUND TRUST SHARES
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 96,189,162
<INVESTMENTS-AT-VALUE> 97,200,334
<RECEIVABLES> 311,761
<ASSETS-OTHER>20,415
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 97,532,510
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 419,517
<TOTAL-LIABILITIES> 419,517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,775,042
<SHARES-COMMON-STOCK> 5,961,603
<SHARES-COMMON-PRIOR> 5,315,955
<ACCUMULATED-NII-CURRENT> 145,067
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,181,712
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,011,172
<NET-ASSETS> 70,373,732
<DIVIDEND-INCOME> 2,199,603
<INTEREST-INCOME> 257,160
<OTHER-INCOME> 0
<EXPENSES-NET> 948,650
<NET-INVESTMENT-INCOME> 1,508,113
<REALIZED-GAINS-CURRENT> 2,244,847
<APPREC-INCREASE-CURRENT> (4,568,297)
<NET-CHANGE-FROM-OPS> (815,337)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,098,902
<DISTRIBUTIONS-OF-GAINS> 1,031,282
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,077,354
<NUMBER-OF-SHARES-REDEEMED> 3,511,622
<SHARES-REINVESTED> 79,916
<NET-CHANGE-IN-ASSETS> 12,581,258
<ACCUMULATED-NII-PRIOR> 71,243
<ACCUMULATED-GAINS-PRIOR> 1,325,437
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 703,937
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,163,016
<AVERAGE-NET-ASSETS> 94,059,597
<PER-SHARE-NAV-BEGIN> 12.390
<PER-SHARE-NII> .200
<PER-SHARE-GAIN-APPREC> (.400)
<PER-SHARE-DIVIDEND> .190
<PER-SHARE-DISTRIBUTIONS> .200
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 11.800
<EXPENSE-RATIO> 95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> THE STOCK FUND INVESTMENT SHARES
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 96,189,162
<INVESTMENTS-AT-VALUE> 97,200,334
<RECEIVABLES> 311,761
<ASSETS-OTHER>20,415
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 97,532,510
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 419,517
<TOTAL-LIABILITIES> 419,517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,775,042
<SHARES-COMMON-STOCK> 2,265,177
<SHARES-COMMON-PRIOR> 1,509,120
<ACCUMULATED-NII-CURRENT> 145,067
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,181,712
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,011,172
<NET-ASSETS> 26,739,261
<DIVIDEND-INCOME> 2,199,603
<INTEREST-INCOME> 257,160
<OTHER-INCOME> 0
<EXPENSES-NET> 948,650
<NET-INVESTMENT-INCOME> 1,508,113
<REALIZED-GAINS-CURRENT> 2,244,847
<APPREC-INCREASE-CURRENT> (4,568,297)
<NET-CHANGE-FROM-OPS> (815,337)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 335,387
<DISTRIBUTIONS-OF-GAINS> 352,939
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 991,369
<NUMBER-OF-SHARES-REDEEMED> 291,272
<SHARES-REINVESTED> 55,960
<NET-CHANGE-IN-ASSETS> 12,581,258
<ACCUMULATED-NII-PRIOR> 71,243
<ACCUMULATED-GAINS-PRIOR> 1,325,437
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 703,937
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,163,016
<AVERAGE-NET-ASSETS> 94,059,597
<PER-SHARE-NAV-BEGIN> 12.390
<PER-SHARE-NII> .170
<PER-SHARE-GAIN-APPREC> (.390)
<PER-SHARE-DIVIDEND> .170
<PER-SHARE-DISTRIBUTIONS> .200
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 11.800
<EXPENSE-RATIO> 120
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> THE TAX-FREE MONEY MARKET FUND
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 23,489,051
<INVESTMENTS-AT-VALUE> 23,489,051
<RECEIVABLES> 201,034
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,690,085
<PAYABLE-FOR-SECURITIES> 1,670,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,445
<TOTAL-LIABILITIES> 1,723,445
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,966,640
<SHARES-COMMON-STOCK> 21,966,640
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 21,966,640
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 126,835
<OTHER-INCOME> 0
<EXPENSES-NET> 15,297
<NET-INVESTMENT-INCOME> 111,538
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 111,538
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 111,538
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,866,117
<NUMBER-OF-SHARES-REDEEMED> 10,916,585
<SHARES-REINVESTED> 17,108
<NET-CHANGE-IN-ASSETS> 21,966,640
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,033
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 44,709
<AVERAGE-NET-ASSETS> 23,621,734
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .010
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> .010
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> THE TREASURY MONEY MARKET FUND TRUST SHARES
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 324,801,639
<INVESTMENTS-AT-VALUE> 324,801,639
<RECEIVABLES> 2,745,409
<ASSETS-OTHER> 13,397
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 327,560,445
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,392,961
<TOTAL-LIABILITIES> 1,392,961
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 326,167,484
<SHARES-COMMON-STOCK> 304,284,576
<SHARES-COMMON-PRIOR> 152,920,569
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 304,284,576
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,755,740
<OTHER-INCOME> 0
<EXPENSES-NET> 1,677,886
<NET-INVESTMENT-INCOME> 9,077,854
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,077,854
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,479,888
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,045,478,085
<NUMBER-OF-SHARES-REDEEMED> 894,114,112
<SHARES-REINVESTED> 34
<NET-CHANGE-IN-ASSETS> 152,864,828
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,388,302
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,185,976
<AVERAGE-NET-ASSETS> 277,660,461
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> THE TREASURY MONEY MARKET FUND INVMNT SHARES
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 324,801,639
<INVESTMENTS-AT-VALUE> 324,801,639
<RECEIVABLES> 2,745,409
<ASSETS-OTHER> 13,397
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 327,560,445
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,392,961
<TOTAL-LIABILITIES> 1,392,961
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 326,167,484
<SHARES-COMMON-STOCK> 21,882,908
<SHARES-COMMON-PRIOR> 20,382,087
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 21,882,908
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,755,740
<OTHER-INCOME> 0
<EXPENSES-NET> 1,677,886
<NET-INVESTMENT-INCOME> 9,077,854
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,077,854
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 597,966
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,345,275
<NUMBER-OF-SHARES-REDEEMED> 24,442,899
<SHARES-REINVESTED> 598,444
<NET-CHANGE-IN-ASSETS> 152,864,828
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,388,302
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,185,976
<AVERAGE-NET-ASSETS> 277,660,461
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> U.S. GOVT SECURITIES FUND TRUST SHARES
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 225,898,019
<INVESTMENTS-AT-VALUE> 216,831,635
<RECEIVABLES> 3,892,194
<ASSETS-OTHER> 6,640
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 220,730,469
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,188,255
<TOTAL-LIABILITIES> 1,188,255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 238,332,359
<SHARES-COMMON-STOCK> 10,891,884
<SHARES-COMMON-PRIOR> 10,303,166
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,723,761)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,066,384)
<NET-ASSETS> 107,103,288
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,014,630
<OTHER-INCOME> 0
<EXPENSES-NET> 2,001,932
<NET-INVESTMENT-INCOME> 14,012,698
<REALIZED-GAINS-CURRENT> (7,736,461)
<APPREC-INCREASE-CURRENT> (13,610,731)
<NET-CHANGE-FROM-OPS> (7,334,494)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,839,985
<DISTRIBUTIONS-OF-GAINS> 1,411,493
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,770,940
<NUMBER-OF-SHARES-REDEEMED> 3,182,224
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (11,978,464)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 769,729
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,734,083
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,736,676
<AVERAGE-NET-ASSETS> 111,350,857
<PER-SHARE-NAV-BEGIN> 10.900
<PER-SHARE-NII> .640
<PER-SHARE-GAIN-APPREC> (.950)
<PER-SHARE-DIVIDEND> .630
<PER-SHARE-DISTRIBUTIONS> .130
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 9.830
<EXPENSE-RATIO> 74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> U.S. GOVT SECURITIES FUND INVESTMENT SHARES
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 225,898,019
<INVESTMENTS-AT-VALUE> 216,831,635
<RECEIVABLES> 3,892,194
<ASSETS-OTHER> 6,640
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 220,730,469
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,188,255
<TOTAL-LIABILITIES> 1,188,255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 238,332,359
<SHARES-COMMON-STOCK> 11,434,415
<SHARES-COMMON-PRIOR> 10,931,662
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,723,761)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,066,384)
<NET-ASSETS> 112,438,926
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,014,630
<OTHER-INCOME> 0
<EXPENSES-NET> 2,001,932
<NET-INVESTMENT-INCOME> 14,012,698
<REALIZED-GAINS-CURRENT> (7,736,461)
<APPREC-INCREASE-CURRENT> (13,610,731)
<NET-CHANGE-FROM-OPS> (7,334,494)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,032,638
<DISTRIBUTIONS-OF-GAINS> 1,485,610
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,757,863
<NUMBER-OF-SHARES-REDEEMED> 2,914,655
<SHARES-REINVESTED> 659,546
<NET-CHANGE-IN-ASSETS> (11,978,464)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 769,729
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,734,083
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,736,676
<AVERAGE-NET-ASSETS> 119,230,867
<PER-SHARE-NAV-BEGIN> 10.900
<PER-SHARE-NII> .610
<PER-SHARE-GAIN-APPREC> (.940)
<PER-SHARE-DIVIDEND> .610
<PER-SHARE-DISTRIBUTIONS> .130
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 9.830
<EXPENSE-RATIO> 99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> THE VIRGINIA MUNICIPAL BOND FUND TRUST SHARES
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 111,455,946
<INVESTMENTS-AT-VALUE> 107,518,553
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<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
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<NUMBER> 13
<NAME> THE VIRGINIA MUNICIPAL BOND FUND INVMNT SHARES
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