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. 13 ........... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 16 .......................... X
THE VIRTUS 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 November 30, 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:
X 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, 1995; 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 VIRTUS 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 of the
portfolios, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-8) Cover Page.
Item 2. Synopsis.................(1-8) Summary of Fund Expenses.
Item 3. Condensed Financial
Information.............(1-8) Financial Highlights
Item 4. General Description of
Registrant..............(1-8) General Information; Investment
Objective; Investment Policies;
Investment Limitations.
Item 5. Management of the Fund...(1-8) The Virtus Funds Information; (1-
8) Management of the Trust; (1-8)
Distribution of Shares; (1-6, Investment
Shares only) (1-8) Distribution Plan;
(1-8) Administration of the Funds; (1-8)
Expenses of the Funds (and Shares.)
Item 6. Capital Stock and Other
Securities..............(1-8) Dividends; Capital Gains;
Shareholder Information; Voting Rights;
Massachusetts Partnership Law; Tax
Information; Federal Income Tax.
Item 7. Purchase of Securities Being
Offered.................(1-8) Net Asset Value; (1-8) Investing
in Shares; (1-8) Share Purchases; (1-8)
Minimum Investment Required; (1-8) What
Shares Cost; (1-8) Certificates and
Confirmations; (1-6, Investment Shares
only) Exchange Privilege.
Item 8. Redemption or Repurchase.(1-8) Redeeming Shares; (1-8) By
Telephone; (1-8) By Mail; (1-8)
Contingent Deferred Sales Charge
(Investment Shares Only); (1-8)
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...............(1-8) Cover Page.
Item 11. Table of Contents........(1-7) Table of Contents.
Item 12. General Information and
History.................(1-8) General Information About the
Trust.
Item 13. Investment Objectives and
Policies................(1-8) Investment Objective and Policies.
Item 14. Management of the Fund...(1-8) The Virtus Funds Management.
Item 15. Control Persons and Principal
Holders of Securities...Not Applicable.
Item 16. Investment Advisory and Other
Services................(1-8) Investment Advisory Services;
Administrative Services; Custodian.
Item 17. Brokerage Allocation.....(1-8) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities..............Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered.................(1-8) Purchasing Shares; (1-8)
Determining Net Asset Value; (1-8)
Redeeming Shares; (1-8) Exchange
Privilege (Investment Shares only).
Item 20. Tax Status...............(1-8) Tax Status.
Item 21. Underwriters.............(1-8) Distribution Plan (Investment
Shares only).
Item 22. Calculation of Performance
Data....................(1-8) Performance Comparisons.
Item 23. Financial Statements.....(1-8) The Financial Statements for the
fiscal year ended September 30, 1995 are
incorporated into the Statement of
Additional Information herein by
reference from the Funds' Annual Report
dated September 30, 1995.
INVESTMENT SHARES
COMBINED PROSPECTUS
November 30, 1995
The U.S. Government Securities Fund
The Stock Fund
The Strategic 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
Funds Managed by
[LOGO]
The Investment Adviser to The Virtus Funds is Virtus Capital Management, Inc.,
a subsidiary of Signet Banking Corporation. The Virtus Funds are administered
by subsidiaries of Federated Investors, independent of Signet.
Investment products offered through Signet Financial Services, Inc. are not
deposits, obligations of, or guaranteed by Signet Bank, and are not insured by
FDIC or any Federal agency. In addition, they involve risk, including possible
loss of principal invested. Member NASD.
Virtus Capital Management, Inc. is the investment adviser for The Virtus Funds.
Federated Securities Corp. is the distributor of the Funds.
Federated Securities Corp., Distributor, is independent of Signet Bank.
THE VIRTUS FUNDS
INVESTMENT SHARES
PROSPECTUS
The Virtus Funds (the "Trust"), an open-end management investment company (a
mutual fund), is comprised of the eight 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 and The Strategic Stock Fund, which offer 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
. The Stock Fund
. The Strategic 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 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 STRATEGIC 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 The Strategic Stock
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 for shares of The Tax-Free
Money Market Fund and The Strategic Stock Fund, dated November 30, 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 November 30, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
Special Considerations 1
SUMMARY OF FUND EXPENSES 2
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- ------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF EACH
FUND 12
- ------------------------------------------------------
The U.S. Government Securities Fund 12
The Stock Fund 13
The Strategic Stock Fund 14
The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund 15
The Treasury Money Market Fund 15
The Money Market Fund 15
The Tax-Free Money Market Fund 16
Investment Limitations 17
PORTFOLIO INVESTMENTS AND STRATEGIES 17
- ------------------------------------------------------
Regulatory Compliance 17
Borrowing Money 17
Selling Short 18
Restricted and Illiquid Securities 18
When-Issued and Delayed Delivery
Transactions 18
Investing in Securities of Other
Investment Companies 18
Diversification 18
Non-Diversification 18
Investing in New Issuers 19
Repurchase Agreements 19
Lending of Portfolio Securities 19
Acquiring Securities 19
Investment Risks 19
Variable Rate Demand Notes 20
Credit Enhancement 20
Demand Features 20
Participation Interests 21
Variable Rate Municipal Securities 21
Municipal Leases 21
Temporary Investments 21
Municipal Securities 22
Futures Contracts and Options to Buy or
Sell Such Contracts 23
THE VIRTUS FUNDS INFORMATION 24
- ------------------------------------------------------
Management of the Trust 24
Distribution of Shares of the Funds 25
Administration of the Funds 25
Expenses of the Funds and Investment
Shares 26
NET ASSET VALUE 26
- ------------------------------------------------------
INVESTING IN SHARES 27
- ------------------------------------------------------
Share Purchases 27
Systematic Investment Program 27
Minimum Investment Required 28
What Shares Cost 28
Certificates and Confirmations 28
Dividends 28
Capital Gains 28
EXCHANGE PRIVILEGE 29
- ------------------------------------------------------
REDEEMING SHARES 29
- ------------------------------------------------------
Contingent Deferred Sales Charge--
The U.S. Government Securities
Fund, The Stock Fund, The Strategic
Stock Fund, The Virginia Municipal
Bond Fund and The Maryland
Municipal Bond Fund 31
Contingent Deferred Sales Charge--
The Treasury Money Market Fund,
The Money Market Fund and The
Tax-Free Money Market Fund 31
Systematic Withdrawal Program 32
Check-Writing Privilege 32
Accounts with Low Balances 32
SHAREHOLDER INFORMATION 32
- ------------------------------------------------------
Voting Rights 32
Massachusetts Partnership Law 33
EFFECT OF BANKING LAWS 33
- ------------------------------------------------------
TAX INFORMATION 33
- ------------------------------------------------------
Federal Income Tax 33
PERFORMANCE INFORMATION 35
- ------------------------------------------------------
OTHER CLASSES OF SHARES 35
- ------------------------------------------------------
ADDRESSES 36
- ------------------------------------------------------
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 Board of Trustees (the "Board" or "Trustees") have
established a single class of shares for The Tax-Free Money Market Fund and The
Strategic Stock 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 eight
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 Strategic Stock Fund--seeks to provide growth of capital 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 ("Tax-Free Money
Market Shares" and "Strategic Stock Shares") of The Tax-Free Money Market Fund
and The Strategic Stock Fund (Investment Shares, Tax-Free Money Market Shares
and Strategic Stock 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 Strategic 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 Virtus Capital Management, Inc.
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,
STRATEGIC STOCK 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, Strategic Stock 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
MONEY MONEY MONEY MUNICIPAL MUNICIPAL THE
MARKET MARKET MARKET BOND BOND STOCK
FUND FUND FUND FUND FUND FUND
<S> <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%
<CAPTION>
THE U.S. THE
GOVERNMENT STRATEGIC
SECURITIES STOCK
FUND FUND
<S> <C> <C>
Contingent Deferred Sales Charge
(as a percentage of amount
redeemed, if applicable) (1)...... 2.00% 2.00%
</TABLE>
ANNUAL INVESTMENT SHARES, STRATEGIC STOCK SHARES AND TAX-FREE MONEY MARKET
SHARES OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
SHARES, STRATEGIC STOCK
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................................. 0.35% 0.00% 0.46% 0.81%
The Treasury Money Market Fund........................ 0.40% 0.25% 0.20% 0.85%
The Tax-Free Money Market Fund........................ 0.00% 0.00% 0.39% 0.39%
The Maryland Municipal Bond Fund...................... 0.32% 0.25% 0.67% 1.24%
The Virginia Municipal Bond Fund...................... 0.55% 0.25% 0.37% 1.17%
The Stock Fund........................................ 0.54% 0.25% 0.42% 1.21%
The U.S. Government Securities Fund................... 0.50% 0.25% 0.26% 1.01%
The Strategic Stock Fund.............................. 0.00% 0.00% 0.44% 0.44%
</TABLE>
(1) A contingent deferred sales charge of 2.00% will be imposed on The Tax-Free
Money Market Fund, The Money Market Fund and The Treasury Money Market Fund
only in limited circumstances in which Shares being redeemed are acquired in
exchange for Investment Shares in those Virtus 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, The U.S. Government Securities Fund, and The Strategic Stock Fund is
0.50%, 0.50%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75%, and 1.00%, 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. The Money Market Fund has voluntarily waived
the 12b-1 fees. As of the date of this prospectus, The Strategic Stock Fund
and The Tax-Free Money Market Fund are not paying or accruing 12b-1 fees.
The Strategic Stock Fund and 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 Strategic Stock Fund and The Tax-Free
Money Market Fund can pay up to 0.25% and 0.35% respectively, 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 Market Fund, would have been
0.45% 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, The U.S. Government Securities
Fund and The Strategic Stock Fund would have been 1.01%, 0.95%, 1.43%,
1.39%, 1.42%, 1.29%, and 1.47%, respectively, and the total Operating
Expenses for The Tax-Free Money Market Fund would have been 0.95%, absent
the waivers 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
<S> <C> <C> <C> <C> <C>
The Money Market Fund................................ $ 8 $ 8 $ 26 $ 26 $ 45
The Treasury Money Market Fund....................... $ 9 $ 9 $ 27 $ 27 $ 47
The Tax-Free Money Market Fund....................... $ 4 $ 4 $ 13 $ 13 $ 22
The Maryland Municipal Bond Fund..................... $ 33 $ 13 $ 62 $ 39 $ 68
The Virginia Municipal Bond Fund..................... $ 33 $ 12 $ 60 $ 37 $ 64
The Stock Fund....................................... $ 33 $ 12 $ 61 $ 38 $ 67
The U.S. Government Securities Fund.................. $ 31 $ 10 $ 55 $ 32 $ 56
The Strategic Stock Fund............................. $ 25 $ 5 $ 37 $ 14 $ 25
<CAPTION>
10 YEARS
<S> <C>
The Money Market Fund................................ $ 100
The Treasury Money Market Fund....................... $ 104
The Tax-Free Money Market Fund....................... $ 49
The Maryland Municipal Bond Fund..................... $ 150
The Virginia Municipal Bond Fund..................... $ 142
The Stock Fund....................................... $ 147
The U.S. Government Securities Fund.................. $ 124
The Strategic Stock Fund............................. $ 55
</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,
Strategic Stock 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 Virtus 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, 1996.
The information set forth in the foregoing table and Example relates only to
Investment Shares of those Funds offering separate classes, The Tax-Free Money
Market Shares and The Strategic Stock Fund 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
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 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.83 $ 10.90 $ 10.95 $ 10.54 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.64 0.61 0.66 0.75 0.78
Net realized and unrealized gain (loss) on investments 0.30 (0.94) 0.03 0.50 0.54
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.94 (0.33) 0.69 1.25 1.32
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.64) (0.61) (0.66)(e) (0.75) (0.78)
Distributions from net realized gains on investment
transactions -- -- (0.08) (0.09) --
Distributions in excess of net realized gain on investment
transactions (e) -- (0.13) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.64) (0.74) (0.74) (0.84) (0.78)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.13 $ 9.83 $ 10.90 $ 10.95 $ 10.54
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 9.84% (3.36)% 6.82% 12.42% 14.00%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.01% 0.99% 0.77% 0.52% 0.64%(c)
Net investment income 6.41% 5.94% 5.91% 7.01% 8.03%(c)
Expense waiver/reimbursement (d) 0.28% 0.32% 0.43% 0.65% 0.93%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $114,803 $112,439 $119,187 $40,274 $10
Portfolio turnover 82% 227% 154% 201% 101 %
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.83 $ 10.90 $ 10.95 $ 10.54 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.66 0.63 0.67 0.75 0.78
Net realized and unrealized gain (loss) on investments 0.30 (0.94) 0.03 0.50 0.54
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.96 (0.31) 0.70 1.25 1.32
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.66) (0.63) (0.67)(e) (0.75) (0.78)
Distributions from net realized gains on investment
transactions -- -- (0.08) (0.09) --
Distributions in excess of net realized gain on investment
transactions (e) -- (0.13) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.66) (0.76) (0.75) (0.84) (0.78)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.13 $ 9.83 $ 10.90 $ 10.95 $ 10.54
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 10.11% (3.12)% 6.94% 12.42% 14.00%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.76% 0.74% 0.63% 0.52% 0.64%(c)
Net investment income 6.66% 6.19% 6.17% 7.01% 8.03%(c)
Expense waiver/reimbursement (d) 0.28% 0.32% 0.43% 0.65% 0.93%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $101,410 $107,103 $112,334 $95,610 $27,565
Portfolio turnover 82% 227% 154% 201% 101 %
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal tax
purposes.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE STOCK 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 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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 1995(E) 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 12.39 $ 12.02 $ 11.86 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.17 0.24 0.26 0.32
Net realized and unrealized gain (loss) on investments 2.20 (0.39) 0.54 0.46 1.85
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.29 (0.22) 0.78 0.72 2.17
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.09) (0.17) (0.25) (0.25) (0.31)
Distributions from net realized gains on investment
transactions (0.30) (0.20) (0.16) (0.31) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.39) (0.37) (0.41) (0.56) (0.31)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.70 $ 11.80 $ 12.39 $ 12.02 $ 11.86
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 20.02% (1.72%) 6.31% 6.31% 22.68%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.21% 1.20% 0.87% 0.95% 0.80%(c)
Net investment income 0.67% 1.40% 1.81% 2.25% 3.05%(c)
Expense waiver/reimbursement (d) 0.21% 0.23% 0.55% 0.34% 0.38%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $44,509 $26,739 $18,691 $ 2,290 $ 488
Portfolio turnover 208 % 205% 67% 38% 84 %
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995(E) 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 12.39 $ 12.02 $ 11.86 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.12 0.20 0.28 0.26 0.32
Net realized and unrealized gain (loss) on investments 2.20 (0.40) 0.51 0.46 1.85
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.32 (0.20) 0.79 0.72 2.17
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.12) (0.19) (0.26) (0.25) (0.31)
Distributions from net realized gains on investment
transactions (0.30) (0.20) (0.16) (0.31) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.42) (0.39) (0.42) (0.56) (0.31)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.70 $ 11.80 $ 12.39 $ 12.02 $ 11.86
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 20.33% (1.50%) 6.42% 6.31% 22.68%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.96% 0.95% 0.66% 0.95% 0.80%(c)
Net investment income 0.92% 1.68% 2.09% 2.25% 3.05%(c)
Expense waiver/reimbursement (d) 0.21% 0.23% 0.55% 0.34% 0.38%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $45,344 $70,374 $65,841 $49,581 $37,032
Portfolio turnover 208 % 205% 67% 38% 84 %
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Per share information presented is based on the monthly number of shares
outstanding due to large fluctuations in the number of shares outstanding
during the period.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE STRATEGIC STOCK FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
1995(A)
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03
Net realized and unrealized gain (loss) on investments 2.03
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.06
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.03)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.03
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 20.59%
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.44%(c)
Net investment income 0.46%(c)
Expense waiver/reimbursement (d) 1.03%(c)
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $78,388
Portfolio turnover 92 %
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from March 7, 1995 (date of initial
public investment) to September 30, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE VIRGINIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 11.26 $ 10.46 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.45 0.45 0.51 0.54 0.57
Net realized and unrealized gain (loss) on investments 0.55 (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.00 (0.47) 1.40 0.83 0.75
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.45) (0.45)(e) (0.51) (0.54) (0.57)
Distributions from net realized gain on investment
transactions -- (0.06) (0.09) (0.01) --
Distributions in excess of net realized gain on investments
(g) -- (0.02) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.45) (0.53) (0.60) (0.55) (0.57)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.81 $ 10.26 $ 11.26 $ 10.46 $ 10.18
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 10.00% (4.25%) 13.49% 8.51% 7.64%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.17% 1.15% 0.90% 0.83% 0.47%(c)
Net investment income 4.32% 4.22% 4.68% 5.14% 6.08%(c)
Expense waiver/reimbursement (d) 0.22% 0.27% 0.50% 0.86% 1.70%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $70,572 $74,706 $63,492 $20,883 $ 6,031
Portfolio turnover 26% 29% 17% 51% 27 %
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 11.26 $ 10.46 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.48 0.48 0.53 0.54 0.57
Net realized and unrealized gain (loss) on investments 0.55 (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.03 (0.44) 1.42 0.83 0.75
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.48) (0.48)(f) (0.53) (0.54) (0.57)
Distributions from net realized gain on investment
transactions -- (0.06) (0.09) (0.01) --
Distributions in excess of net realized gain on investments
(g) -- (0.02) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.48) (0.56) (0.62) (0.55) (0.57)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.81 $ 10.26 $ 11.26 $ 10.46 $ 10.18
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 10.27% (4.01%) 13.62% 8.51% 7.64%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.92% 0.90% 0.75% 0.83% 0.47%(c)
Net investment income 4.57% 4.47% 4.85% 5.14% 6.08%(c)
Expense waiver/reimbursement (c) 0.22% 0.27% 0.50% 0.86% 1.70%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $33,670 $34,165 $41,204 $20,852 $ 8,546
Portfolio turnover 26% 29% 17% 51% 27 %
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Amount includes distributions to shareholders in excess of net investment
income of $0.0001 per share.
(f) Amount includes distributions to shareholders in excess of net investment
income of $0.0002 per share.
(g) 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.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE MARYLAND MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
<S> <C> <C> <C> <C> <C>
INVESTMENT SHARES 1995 1994 1993 1992 1991(A)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.17 $ 11.24 $ 10.39 $ 10.10 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.40 0.45 0.49 0.54 0.53
Net realized and unrealized gain (loss) on investments 0.54 (0.97) 0.85 0.29 0.10
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.94 (0.52) 1.34 0.83 0.63
- -----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.40) (0.45) (0.49) (0.54) (0.53)
Total distributions from net realized gain on investment
transactions (0.02) (0.10) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (0.42) (0.55) (0.49) (0.54) (0.53)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.69 $ 10.17 $ 11.24 $ 10.39 $ 10.10
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 9.81% (4.74%) 13.24% 8.31% 6.64%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.24% 1.17% 1.00% 0.59% 0.60%(c)
Net investment income 4.24% 4.22% 4.50% 5.11% 5.66%(c)
Expense waiver/reimbursement (d) 0.44% 0.51% 0.77% 1.91% 1.05%(c)
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $32,172 $34,580 $33,907 $ 4,053 $ 2,940
Portfolio turnover 21% 27% 23% 34% 35%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.17 $ 11.24 $ 10.39 $ 10.10 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.42 0.48 0.50 0.54 0.53
Net realized and unrealized gain (loss) on investments 0.54 (0.97) 0.85 0.29 0.10
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.96 (0.49) 1.35 0.83 0.63
- -----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.42) (0.48) (0.50) (0.54) (0.53)
Total distributions from net realized gain on investment
transactions (0.02) (0.10) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (0.44) (0.58) (0.50) (0.54) (0.53)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.69 $ 10.17 $ 11.24 $ 10.39 $ 10.10
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 10.09% (4.50%) 13.37% 8.31% 6.64%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.99% 0.92% 0.86% 0.59% 0.60%(c)
Net investment income 4.49% 4.46% 4.64% 5.11% 5.66%(c)
Expense waiver/reimbursement (d) 0.44% 0.51% 0.77% 1.91% 1.05%(c)
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 9,447 $11,301 $12,014 $ 6,004 $ 556
Portfolio turnover 21% 27% 23% 34% 35%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
<S> <C> <C> <C> <C> <C>
INVESTMENT SHARES 1995 1994 1993 1992 1991(A)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03 0.02 0.04 0.06
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.02) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.98% 2.90% 2.52% 3.61% 5.90%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85% 0.84% 0.70% 0.70% 0.51%(c)
Net investment income 4.92% 2.86% 2.47% 3.49% 5.65%(c)
Expense waiver/reimbursement (d) 0.10% 0.18% 0.20% 0.11% 0.27%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $39,363 $21,883 $20,382 $12,960 $ 548
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03 0.03 0.04 0.06
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.03) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.24% 3.16% 2.64% 3.61% 5.90%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.60% 0.59% 0.58% 0.70% 0.51%(c)
Net investment income 5.17% 3.30% 2.60% 3.49% 5.65%(c)
Expense waiver/reimbursement (d) 0.10% 0.18% 0.20% 0.11% 0.27%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $208,656 $304,285 $152,921 $163,451 $129,959
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE 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 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
<S> <C> <C> <C> <C> <C>
INVESTMENT SHARES 1995 1994 1993 1992 1991(A)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03 0.03 0.04 0.06
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.03) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.11% 3.10% 2.77% 3.79% 5.92%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.64% 0.64% 0.51%(c)
Net investment income 5.04% 3.07% 2.68% 3.64% 5.99%(c)
Expense waiver/reimbursement (d) 0.21% 0.25% 0.30% 0.29% 0.36%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $41,813 $15,236 $9,905 $5,803 $ 1
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03 0.03 0.04 0.06
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.03) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.36% 3.35% 2.89% 3.79% 5.92%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.57% 0.55% 0.50% 0.64% 0.51%(c)
Net investment income 5.27% 3.25% 2.83% 3.64% 5.99%(c)
Expense waiver/reimbursement (d) 0.19% 0.25% 0.30% 0.29% 0.36%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $173,761 $132,445 $134,397 $136,616 $57,432
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE 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 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
<S> <C> <C>
1995 1994(A)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.01)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 3.53% 0.45%
- --------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.39% 0.36%(c)
Net investment income 3.55% 2.65%(c)
Expense waiver/reimbursement (d) 0.56% 0.70%(c)
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $81,977 $21,967
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from July 27, 1994 (date of initial
public investment) to September 30, 1994.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND
- --------------------------------------------------------------------------------
The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.
Unless indicated otherwise, the investment policies of a Fund may be changed by
the Trustees without approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
Additional information about investment limitations, strategies that one or more
Funds may employ, and certain investment policies mentioned below, appear in the
"Portfolio Investments and Strategies" section of this Prospectus and in the
Combined Statement of Additional Information.
THE U.S. GOVERNMENT SECURITIES FUND
The investment objective of The U.S. Government Securities Fund is to provide
current income.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in securities which are primary or direct obligations of the U.S.
government or its instrumentalities or which are guaranteed by the U.S.
government, its agencies, or instrumentalities. The Fund may also invest in
certain collateralized mortgage obligations ("CMOs") and adjustable rate
mortgage securities ("ARMS"), both of which represent or are supported by direct
or indirect obligations of the U.S. government or its instrumentalities. The
Fund will invest, under normal circumstances, at least 65% of the value of its
total assets in U.S. government securities (including such CMOs and ARMS).
The U.S. government securities in which the Fund invests include:
. direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and
. 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 Corporate bonds, notes, and convertible debt securities in which the Fund
may invest must be rated, at the time of purchase, BBB or higher by Standard &
Poor's Ratings Group ("S&P") or Fitch Investor Services ("Fitch") or Baa or
higher by Moody's Investor's Service, Inc. ("Moody's"), or, if unrated, of
comparable quality as determined by the Fund's adviser. (If a securities rating
is reduced below the required minimum after the Fund has purchased it, the Fund
is not required to sell the security, but may consider doing so. Bonds rated BBB
by S&P or Fitch 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 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.
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 adviser does not anticipate that the Fund's annual
turnover rate will exceed 200% under normal market conditions. A higher rate of
portfolio turnover may lead to increased costs and may also result in higher
taxes paid by the Fund's shareholders.
THE STRATEGIC STOCK FUND
The investment objective of The Strategic Stock Fund is to provide growth of
capital.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
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primarily in common stocks of large, medium and small capitalization companies
which are either listed on the New York or American Stock Exchange or trade in
the over-the-counter markets. The securities in which the Fund invests include,
but are not limited to, the following securities. Unless indicated otherwise,
investment policies may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material changes in these policies
becomes effective.
COMMON STOCKS. The Fund will invest in stock that the Fund's investment
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adviser's proprietary investment methodology has identified as having superior
appreciation potential. Factors such as product position, market share,
potential earnings growth, or asset values will be considered by the investment
adviser. Under normal market conditions, at least 65% of the Fund's portfolio
will be invested in common stocks.
The Fund is managed to take advantage of trends in the stock market that favor
different styles of stock selection (value or growth), and different sizes of
companies (large, medium and small capitalization). The value style seeks stocks
that, in the opinion of the adviser, are undervalued and are or will be worth
more than their current price. The growth style seeks stocks with high earnings
growth rates which, in the opinion of the adviser, will lead to appreciation in
stock price.
OTHER CORPORATE SECURITIES. The Fund may invest in preferred stocks, corporate
bonds, notes, warrants, rights, and convertible securities of these companies of
the kind described under "The Stock Fund."
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 and money market instruments (including
commercial paper) which are unrated but of comparable quality, including 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 BIF. These instruments may include ECPs, Yankee
CDs and ETDs.
AMERICAN DEPOSITARY RECEIPTS ("ADRS"). The Fund may invest in ADRs.
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.
The Fund's ability to establish and close out futures and options positions
depends on this secondary market.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The adviser does not anticipate that the Fund's annual
portfolio turnover rate will exceed 200% under normal market conditions. A high
portfolio turnover rate may lead to increased costs and may also result in
higher taxes paid by the Fund's shareholders.
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, The Stock Fund and The
Strategic 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, The Money Market Fund and The
Strategic Stock 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 Strategic 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 Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the 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 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, The Money Market Fund and The Strategic Stock 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 Strategic 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, The Stock Fund and The Strategic 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
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.
The Stock Fund and The Strategic Stock Fund, as with other mutual funds that
invest primarily in equity securities, are 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 Funds invest in small capitalization stocks, there are some
additional risk factors associated with investments in the Funds. 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.
Further, in addition to exhibiting greater volatility, the stocks of small
companies may, to some degree, fluctuate independently of the stocks of large
companies. That is, the stocks of small companies may decline in price as the
price of large company stocks rises or vice versa. Therefore, investors should
expect that the Funds, to the extent that it is invested in small capitalization
stocks, will be more volatile than, and may fluctuate independently of, broad
stock market indices such as the Standard & Poor's 500 Index.
In addition, with respect to fixed income securities, investors should be aware
that prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.
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.
PUT AND CALL OPTIONS. The Stock Fund and The Strategic Stock Fund may purchase
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put options on its portfolio securities. These options will be used as a hedge
to attempt to protect securities which the Funds hold against decreases in
value. These Funds may also write covered call options on all or any portion of
their portfolios to generate income for the Funds. The Funds will write call
options on securities either held in their portfolios or which they have the
right to obtain without payment of further consideration or for which they have
segregated cash or U.S. government securities in the amount of any additional
consideration.
The Stock Fund and The Strategic Stock 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 Funds purchase and write
options only with investment dealers and other financial institutions (such as
commercial banks or savings and loan associations) deemed creditworthy by the
Funds' 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 Stock Fund and The Strategic
Stock Fund may purchase and sell financial futures contracts to hedge all or a
portion of their portfolios 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 Stock Fund and The Strategic Stock 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 a 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, a Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.
A 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 a Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged.
RISKS. When a 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. A Fund's ability to establish and close out futures and
options positions depends on this secondary market.
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.
DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has traditionally
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been applied to certain contracts (including futures, forward, option and swap
contracts) that "derive" their value from changes in the value of an underlying
security, currency, commodity or index. Certain types of securities that
incorporate the performance characteristics of these contracts are also referred
to as "derivatives." The term has also been applied to securities "derived" from
the cash flows from underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Funds will only
use derivative contracts for the purposes disclosed in the applicable prospectus
sections above. To the
extent that a Fund invests in securities that could be characterized as
derivatives, it will only do so in a manner consistent with its investment
objectives, policies and limitations.
THE VIRTUS 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 Virtus
Capital Management, Inc., 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; The Maryland Municipal
Bond Fund--.75%; and The Strategic Stock Fund--1.00%. The fee paid by The
U.S. Government Securities Fund, The Stock Fund, The Strategic 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. Virtus Capital Management, Inc., a Maryland
corporation formed in 1995 to succeed to the business of Signet Asset
Management (adviser to the Funds since 1990), is 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. Virtus Capital Management, Inc., which is a registered
investment adviser, manages, in addition to the Funds, three equity common
trust funds with $44 million in assets and three fixed income common trust
funds with $218 million in assets. As part of their regular banking
operations, Signet Bank may make loans to public companies. Virtus Capital
Management, Inc. also advises The Blanchard Group of Funds. 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. The
lending relationship will not be a factor in the selection of securities.
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 Virtus Capital Management, Inc.,
where he has been a fixed income portfolio manager since 1990. Prior to
joining Virtus Capital Management, Inc., 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, and The
Strategic Stock Fund since its inception. Mr. Allen is a Chartered
Financial Analyst and Chief Investment Officer for Virtus Capital
Management, Inc. Prior to joining Virtus Capital Management, Inc., 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 Strategic 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. With
respect to The Strategic Stock Fund, the Plan will not be activated unless and
until a second class of shares of the Fund, which will not have a Rule 12b-1
Plan, is created.
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
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 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. With respect to The Strategic Stock Fund, the fee shall be at least
$75,000. 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,
Boston, Massachusetts, 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
Strategic 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
Strategic 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 three 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 Strategic 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.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday, for
The U.S. Government Securities Fund, The Stock Fund, The Strategic Stock Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, 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.
The net asset value is determined at 1:00 p.m. Eastern time, and 4:00 p.m.
Eastern time and as of the close of trading (normally 4:00 p.m., Eastern time)
on the New York Stock Exchange, Monday through Friday, for The Treasury Money
Market Fund, The Money Market Fund, and The Tax-Free Money Market Fund, except
on 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 Strategic 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 and The Strategic 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
Strategic 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
- --------------------------------------------------------------------------------
Holders of Shares have easy access to Shares of the other funds comprising the
Trust and to shares of any Fund (a "Blanchard Fund") of The Blanchard Group of
Funds 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 exchange into a Virtus Fund must exchange shares having a net
asset value of at least $1,000, and shareholders who exchange into a Blanchard
Fund must exchange shares having a net asset value at least equal to the minimum
investment requirement of the applicable Blanchard Fund. 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, or in shares of the applicable Blanchard Fund, as the
case may be. 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
Strategic 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 any amount to be sent to an address
other than that on record with a Fund, or a redemption payable other than to the
shareholder of record must have signatures on written redemption requests
guaranteed by:
. a trust company or commercial bank whose deposits are insured by BIF,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings and loan association whose deposits are insured
by the SAIF, which is administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and their transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Funds and their transfer agent reserve the
right to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
CONTINGENT DEFERRED SALES CHARGE--THE U.S. GOVERNMENT SECURITIES FUND, THE STOCK
FUND, THE STRATEGIC 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 Virtus 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.; (vii) if the proceeds from the redemption are used to purchase a
Strive variable annuity within 10 days of the redemption; (viii) purchased by a
person who, at the time of purchase owns shares of a Blanchard Fund; (ix)
purchased in exchange for shares of a Blanchard Fund (unless such Blanchard Fund
shares were themselves acquired in exchange for shares of a Virtus Fund which
imposed a contingent deferred sales charge); or (x) purchased in exchange for
shares of a Virtus Fund which shares originally represented an interest in the
Vista Federal Money Market Fund.
The contingent deferred sales charge is not charged when Fund Shares are
exchanged for shares of any other portfolio of The Virtus 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, THE TAX-FREE MONEY MARKET FUND AND BLANCHARD FUNDS
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, The
Tax-Free Money Market Fund or a Blanchard Fund being redeemed were acquired in
exchange for Shares of those Virtus Funds which charge a contingent deferred
sales charge ("CDSC Shares"). If Shares of The Treasury Money Market Fund, The
Money Market Fund, The Tax-Free Money Market Fund or a Blanchard Fund were
acquired in exchange for CDSC Shares, redemption of the Shares of The Treasury
Money Market Fund, The Money Market Fund, The Tax-Free Money Market Fund or a
Blanchard 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.
CHECK-WRITING PRIVILEGE
If you are a shareholder of The Treasury Money Market Fund, The Money Market
Fund, or The Tax-Free Money Market Fund (other than IRA shareholders), you may
elect a service which allows you to write an unlimited number of checks in any
amount of $250 or more which will clear through the Transfer Agent. If the
amount of your check is less than $250 or exceeds the value of the shares in
your account, your check will be returned and a $10 fee deducted from your
account. You may not use the Check-Writing Privilege to close out your account
as you will not be able to ascertain the exact account balance of your account
on the date your check clears. To close out your account completely, you should
use the telephone or mail redemption procedures previously described. Stop
orders may be placed on checks for a fee of $10. For further information on this
service, please call 1-800-723-9512.
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 November 6, 1995, Stephens Inc., Little Rock, Arkansas, owned approximately
1,403,741 Investment Shares of The Stock Fund (43%); 3,797,838 Investment Shares
of The U.S. Government Securities Fund (33%); approximately 1,992,227 Investment
Shares of The Virginia Municipal Bond Fund (31%); approximately 21,630,662
Investment Shares of The Treasury Money Market Fund (53%); approximately
16,000,411 Investment Shares of The Money Market Fund (35%); and Bova & Co,
Richmond, Virginia, owned approximately 5,519,877 shares of The Strategic Stock
Fund (91%); 66,885,852 shares of The Tax-Free Money Market Fund (68%), 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 Virtus
Capital Management, Inc. 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 Virtus Capital Management, Inc. 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 Virtus Capital
Management, Inc. It is not expected that existing shareholders would suffer any
adverse financial consequences (if another adviser with equivalent abilities to
Virtus Capital Management, Inc. 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
Strategic 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 Strategic 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 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, The Stock Fund and The
Strategic 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
Strategic 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.
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.
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.
From time to time, advertisements for the Funds may refer to ratings, rankings,
and other information in 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.
To obtain more information and a prospectus for Trust Shares, investors may call
1-800-723-9512.
ADDRESSES
- --------------------------------------------------------------------------------
The U.S. Government Securities Fund Federated Investors Tower
The Stock Fund Pittsburgh, Pennsylvania 15222-3779
The Strategic Stock Fund
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
Virtus Capital Management, Inc. 707 East Main Street
Suite 1300
Richmond, Virginia 23219
- --------------------------------------------------------------------------------
Custodian
Signet Trust Company 7 North Eighth Street
Richmond, Virginia 23219
- --------------------------------------------------------------------------------
Transfer Agent, and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- --------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- --------------------------------------------------------------------------------
THE VIRTUS FUNDS
INVESTMENT SHARES
COMBINED PROSPECTUS
November 30, 1995
VIRTUS CAPITAL MANAGEMENT, INC.
A Subsidiary of Signet Banking Corporation
Investment Adviser
Federated Securities Corp. is the distributor of the Funds.
Cusip 927913202 Cusip 927913848
----
Cusip 927913400 Cusip 927913871
----
Cusip 927913509 Cusip 927913889
----
Cusip 927913707 Cusip 927913806
----
3042108A-R (11/95)
TRUST SHARES
COMBINED PROSPECTUS
November 30, 1995
. The U.S. Government Securities Fund
. The Stock Fund
. The Strategic 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
Funds Managed by
[LOGO]
The Investment Adviser to The Virtus Funds is Virtus Capital Management, Inc.,
a subsidiary of Signet Banking Corporation. The Virtus Funds are administered
by subsidiaries of Federated Investors, independent of Signet.
Investment products offered through Signet Financial Services, Inc. are not
deposits, obligations of, or guaranteed by Signet Bank, and are not insured by
FDIC or any Federal agency. In addition, they involve risk, including possible
loss of principal invested. Member NASD.
Virtus Capital Management, Inc. is the investment adviser for The Virtus Funds.
Federated Securities Corp. is the distributor of the Funds.
Federated Securities Corp., Distributor, is independent of Signet Bank.
THE VIRTUS FUNDS
TRUST SHARES
PROSPECTUS
The Virtus Funds (the "Trust"), an open-end management investment company (a
mutual fund), is comprised of the eight 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 and The Strategic Stock Fund, which offer 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
The Stock Fund
The Strategic 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 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 STRATEGIC 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 The Strategic Stock 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 for shares of The Tax-Free Money
Market Fund and The Strategic Stock Fund, dated November 30, 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 November 30, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
Special Considerations 1
SUMMARY OF FUND EXPENSES 2
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- ------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF EACH
FUND 12
- ------------------------------------------------------
The U.S. Government Securities Fund 12
The Stock Fund 13
The Strategic Stock Fund 14
The Virginia Municipal Bond Fund and
The Maryland Municipal Bond Fund 15
The Treasury Money Market Fund 15
The Money Market Fund 15
The Tax-Free Money Market Fund 16
Investment Limitations 17
PORTFOLIO INVESTMENTS AND STRATEGIES 17
- ------------------------------------------------------
Regulatory Compliance 17
Borrowing Money 17
Selling Short 18
Restricted and Illiquid Securities 18
When-Issued and Delayed Delivery
Transactions 18
Investing in Securities of Other
Investment Companies 18
Diversification 18
Non-Diversification 18
Investing in New Issuers 19
Repurchase Agreements 19
Lending of Portfolio Securities 19
Acquiring Securities 19
Investment Risks 19
Variable Rate Demand Notes 20
Credit Enhancement 20
Demand Features 20
Participation Interests 21
Variable Rate Municipal Securities 21
Municipal Leases 21
Temporary Investments 21
Municipal Securities 22
Futures Contracts and Options to Buy
or Sell Such Contracts 23
THE VIRTUS FUNDS INFORMATION 24
- ------------------------------------------------------
Management of the Trust 24
Distribution of Shares of the Funds 25
Administration of the Funds 25
Expenses of the Funds and
Trust Shares 26
NET ASSET VALUE 26
- ------------------------------------------------------
INVESTING IN SHARES 27
- ------------------------------------------------------
Share Purchases 27
Minimum Investment Required 27
What Shares Cost 27
Certificates and Confirmations 28
Dividends 28
Capital Gains 28
REDEEMING SHARES 28
- ------------------------------------------------------
SHAREHOLDER INFORMATION 30
- ------------------------------------------------------
Voting Rights 30
Massachusetts Partnership Law 30
EFFECT OF BANKING LAWS 30
- ------------------------------------------------------
TAX INFORMATION 31
- ------------------------------------------------------
Federal Income Tax 31
PERFORMANCE INFORMATION 32
- ------------------------------------------------------
OTHER CLASSES OF SHARES 33
- ------------------------------------------------------
ADDRESSES 34
- ------------------------------------------------------
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 Board of Trustees (the "Board" or "Trustees") have
established a single class of shares for The Tax-Free Money Market Fund and The
Strategic Stock 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 eight
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 Strategic Stock Fund--seeks to provide growth of capital 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 Trust Shares ("Trust Shares") of those Funds
offering classes and to the single class of shares ("Tax-Free Money Market
Shares" and "Strategic Stock Shares") of The Tax-Free Money Market Fund and The
Strategic Stock Fund (Trust Shares, Tax-Free Money Market Shares and Strategic
Stock 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 The Strategic Stock 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 Virtus Capital
Management, Inc.
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, STRATEGIC
STOCK 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, Strategic Stock 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
MONEY MONEY MONEY MUNICIPAL MUNICIPAL THE
MARKET MARKET MARKET BOND BOND STOCK
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
Contingent Deferred Sales Charge
(as a percentage of amount
redeemed, if applicable).......... None None None None None None
<CAPTION>
THE U.S.
GOVERNMENT THE STRATEGIC
SECURITIES STOCK
FUND FUND
<S> <C> <C>
Contingent Deferred Sales Charge
(as a percentage of amount
redeemed, if applicable).......... None 2.00%
</TABLE>
ANNUAL TRUST SHARES, STRATEGIC STOCK SHARES, AND TAX-FREE MONEY MARKET SHARES
OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TRUST SHARES, TOTAL TRUST SHARES,
STRATEGIC STOCK STRATEGIC STOCK SHARES
SHARES AND AND TAX-FREE MONEY MARKET
NET TAX-FREE MONEY SHARE OPERATING EXPENSES
MANAGEMENT MARKET SHARES OTHER NET OF ANY WAIVERS
FEES (1) 12B-1 FEES (2) EXPENSES (3)(4) OR REIMBURSEMENTS (5)
<S> <C> <C> <C> <C>
The Money Market Fund..................... 0.35% None 0.22% 0.57%
The Treasury Money Market Fund............ 0.40% None 0.20% 0.60%
The Tax-Free Money Market Fund............ 0.00% 0.00% 0.39% 0.39%
The Maryland Municipal Bond Fund.......... 0.32% None 0.67% 0.99%
The Virginia Municipal Bond Fund.......... 0.55% None 0.37% 0.92%
The Stock Fund............................ 0.54% None 0.42% 0.96%
The U.S. Government Securities Fund....... 0.50% None 0.26% 0.76%
The Strategic Stock Fund.................. 0.00% 0.00% 0.44% 0.44%
</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, The U.S. Government Securities Fund, and The Strategic Stock Fund is
0.50%, 0.50%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75%, and 1.00%, respectively.
(2) As of the date of this prospectus, The Strategic Stock Fund and The Tax-Free
Money Market Fund are not paying or accruing 12b-1 fees. The Strategic Stock
Fund and 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 Strategic Stock Fund and The Tax-Free Money Market Fund can
pay up to 0.25% and 0.35% respectively, 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
0.45% 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, The U.S. Government Securities Fund,
and The Strategic Stock Fund would have been 0.76%, 0.70%, 1.43%, 1.14%,
1.17%, 1.04%, and 1.47%, respectively, and the total Operating Expenses for
The Tax-Free Money Market Fund would have been 0.95%, absent the waivers
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 $ 32 $ 71
The Treasury Money Market Fund.............................................. $ 6 $ 19 $ 33 $ 75
The Tax-Free Money Market Fund.............................................. $ 4 $ 13 $ 22 $ 49
The Maryland Municipal Bond Fund............................................ $ 10 $ 32 $ 55 $ 121
The Virginia Municipal Bond Fund............................................ $ 9 $ 29 $ 51 $ 113
The Stock Fund.............................................................. $ 10 $ 31 $ 53 $ 118
The U.S. Government Securities Fund......................................... $ 8 $ 24 $ 42 $ 94
The Strategic Stock Fund.................................................... $ 5 $ 14 $ 25 $ 55
</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, Strategic
Stock 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 Virtus 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, 1996.
The information set forth in the foregoing table and Example relates only to
Trust Shares of those Funds offering separate classes, The Tax-Free Money Market
Shares, and The Strategic Stock Fund 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, and
The Treasury Money Market Fund. See "Other Classes of Shares."
THE U.S. GOVERNMENT SECURITIES 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 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
<S> <C> <C> <C> <C> <C>
INVESTMENT SHARES 1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.83 $ 10.90 $ 10.95 $ 10.54 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.64 0.61 0.66 0.75 0.78
Net realized and unrealized gain (loss) on investments 0.30 (0.94) 0.03 0.50 0.54
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.94 (0.33) 0.69 1.25 1.32
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.64) (0.61) (0.66)(e) (0.75) (0.78)
Distributions from net realized gains on investment
transactions -- -- (0.08) (0.09) --
Distributions in excess of net realized gain on investment
transactions (e) -- (0.13) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.64) (0.74) (0.74) (0.84) (0.78)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.13 $ 9.83 $ 10.90 $ 10.95 $ 10.54
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 9.84% (3.36)% 6.82% 12.42% 14.00%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.01% 0.99% 0.77% 0.52% 0.64%(c)
Net investment income 6.41% 5.94% 5.91% 7.01% 8.03%(c)
Expense waiver/reimbursement (d) 0.28% 0.32% 0.43% 0.65% 0.93%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $114,803 $112,439 $119,187 $40,274 $10
Portfolio turnover 82% 227% 154% 201% 101 %
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.83 $ 10.90 $ 10.95 $ 10.54 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.66 0.63 0.67 0.75 0.78
Net realized and unrealized gain (loss) on investments 0.30 (0.94) 0.03 0.50 0.54
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.96 (0.31) 0.70 1.25 1.32
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.66) (0.63) (0.67)(e) (0.75) (0.78)
Distributions from net realized gains on investment
transactions -- -- (0.08) (0.09) --
Distributions in excess of net realized gain on investment
transactions (e) -- (0.13) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.66) (0.76) (0.75) (0.84) (0.78)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.13 $ 9.83 $ 10.90 $ 10.95 $ 10.54
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 10.11% (3.12)% 6.94% 12.42% 14.00%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.76% 0.74% 0.63% 0.52% 0.64%(c)
Net investment income 6.66% 6.19% 6.17% 7.01% 8.03%(c)
Expense waiver/reimbursement (d) 0.28% 0.32% 0.43% 0.65% 0.93%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $101,410 $107,103 $112,334 $95,610 $27,565
Portfolio turnover 82% 227% 154% 201% 101 %
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal tax
purposes.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE STRATEGIC STOCK FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
1995(A)
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03
Net realized and unrealized gain (loss) on investments 2.03
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.06
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.03)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.03
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 20.59%
- --------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.44%(c)
Net investment income 0.46%(c)
Expense waiver/reimbursement (d) 1.03%(c)
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $78,388
Portfolio turnover 92 %
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from March 7, 1995 (date of initial
public investment) to September 30, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE STOCK 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 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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 1995(E) 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 12.39 $ 12.02 $ 11.86 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.17 0.24 0.26 0.32
Net realized and unrealized gain (loss) on investments 2.20 (0.39) 0.54 0.46 1.85
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.29 (0.22) 0.78 0.72 2.17
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.09) (0.17) (0.25) (0.25) (0.31)
Distributions from net realized gains on investment
transactions (0.30) (0.20) (0.16) (0.31) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.39) (0.37) (0.41) (0.56) (0.31)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.70 $ 11.80 $ 12.39 $ 12.02 $ 11.86
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 20.02% (1.72%) 6.31% 6.31% 22.68%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.21% 1.20% 0.87% 0.95% 0.80%(c)
Net investment income 0.67% 1.40% 1.81% 2.25% 3.05%(c)
Expense waiver/reimbursement (d) 0.21% 0.23% 0.55% 0.34% 0.38%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $44,509 $26,739 $18,691 $ 2,290 $ 488
Portfolio turnover 208 % 205% 67% 38% 84 %
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995(E) 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 12.39 $ 12.02 $ 11.86 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.12 0.20 0.28 0.26 0.32
Net realized and unrealized gain (loss) on investments 2.20 (0.40) 0.51 0.46 1.85
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.32 (0.20) 0.79 0.72 2.17
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.12) (0.19) (0.26) (0.25) (0.31)
Distributions from net realized gains on investment
transactions (0.30) (0.20) (0.16) (0.31) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.42) (0.39) (0.42) (0.56) (0.31)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.70 $ 11.80 $ 12.39 $ 12.02 $ 11.86
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 20.33% (1.50%) 6.42% 6.31% 22.68%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.96% 0.95% 0.66% 0.95% 0.80%(c)
Net investment income 0.92% 1.68% 2.09% 2.25% 3.05%(c)
Expense waiver/reimbursement (d) 0.21% 0.23% 0.55% 0.34% 0.38%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $45,344 $70,374 $65,841 $49,581 $37,032
Portfolio turnover 208 % 205% 67% 38% 84 %
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Per share information presented is based on the monthly number of shares
outstanding due to large fluctuations in the number of shares outstanding
during the period.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE VIRGINIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 11.26 $ 10.46 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.45 0.45 0.51 0.54 0.57
Net realized and unrealized gain (loss) on investments 0.55 (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.00 (0.47) 1.40 0.83 0.75
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.45) (0.45)(e) (0.51) (0.54) (0.57)
Distributions from net realized gain on investment
transactions -- (0.06) (0.09) (0.01) --
Distributions in excess of net realized gain on investments
(g) -- (0.02) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.45) (0.53) (0.60) (0.55) (0.57)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.81 $ 10.26 $ 11.26 $ 10.46 $ 10.18
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 10.00% (4.25%) 13.49% 8.51% 7.64%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.17% 1.15% 0.90% 0.83% 0.47%(c)
Net investment income 4.32% 4.22% 4.68% 5.14% 6.08%(c)
Expense waiver/reimbursement (d) 0.22% 0.27% 0.50% 0.86% 1.70%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $70,572 $74,706 $63,492 $20,883 $ 6,031
Portfolio turnover 26% 29% 17% 51% 27 %
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 11.26 $ 10.46 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.48 0.48 0.53 0.54 0.57
Net realized and unrealized gain (loss) on investments 0.55 (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.03 (0.44) 1.42 0.83 0.75
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.48) (0.48)(f) (0.53) (0.54) (0.57)
Distributions from net realized gain on investment
transactions -- (0.06) (0.09) (0.01) --
Distributions in excess of net realized gain on investments
(g) -- (0.02) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.48) (0.56) (0.62) (0.55) (0.57)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.81 $ 10.26 $ 11.26 $ 10.46 $ 10.18
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 10.27% (4.01%) 13.62% 8.51% 7.64%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.92% 0.90% 0.75% 0.83% 0.47%(c)
Net investment income 4.57% 4.47% 4.85% 5.14% 6.08%(c)
Expense waiver/reimbursement (d) 0.22% 0.27% 0.50% 0.86% 1.70%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $33,670 $34,165 $41,204 $20,852 $ 8,546
Portfolio turnover 26% 29% 17% 51% 27 %
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
-
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Amount includes distributions to shareholders in excess of net investment
income of $0.0001 per share.
(f) Amount includes distributions to shareholders in excess of net investment
income of $0.0002 per share.
(g) 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.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE MARYLAND MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
<S> <C> <C> <C> <C> <C>
INVESTMENT SHARES 1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.17 $ 11.24 $ 10.39 $ 10.10 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.40 0.45 0.49 0.54 0.53
Net realized and unrealized gain (loss) on investments 0.54 (0.97) 0.85 0.29 0.10
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.94 (0.52) 1.34 0.83 0.63
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.40) (0.45) (0.49) (0.54) (0.53)
Distributions from net realized gain on investment
transactions (0.02) (0.10) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.42) (0.55) (0.49) (0.54) (0.53)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.69 $ 10.17 $ 11.24 $ 10.39 $ 10.10
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 9.81% (4.74%) 13.24% 8.31% 6.64%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.24% 1.17% 1.00% 0.59% 0.60%(c)
Net investment income 4.24% 4.22% 4.50% 5.11% 5.66%(c)
Expense waiver/reimbursement (d) 0.44% 0.51% 0.77% 1.91% 1.05%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $32,172 $34,580 $33,907 $ 4,053 $ 2,940
Portfolio turnover 21% 27% 23% 34% 35 %
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.17 $ 11.24 $ 10.39 $ 10.10 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.42 0.48 0.50 0.54 0.53
Net realized and unrealized gain (loss) on investments 0.54 (0.97) 0.85 0.29 0.10
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.96 (0.49) 1.35 0.83 0.63
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.42) (0.48) (0.50) (0.54) (0.53)
Total Distributions from net realized gain on investment
transactions (0.02) (0.10) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (0.44) (0.58) (0.50) (0.54) (0.53)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.69 $ 10.17 $ 11.24 $ 10.39 $ 10.10
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 10.09% (4.50%) 13.37% 8.31% 6.64%
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.99% 0.92% 0.86% 0.59% 0.60%(c)
Net investment income 4.49% 4.46% 4.64% 5.11% 5.66%(c)
Expense waiver/reimbursement (d) 0.44% 0.51% 0.77% 1.91% 1.05%(c)
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 9,447 $11,301 $12,014 $ 6,004 $ 556
Portfolio turnover 21% 27% 23% 34% 35 %
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated September 30, 1995, which can be obtained free of charge.
THE TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03 0.02 0.04 0.06
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.02) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.98% 2.90% 2.52% 3.61% 5.90%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85% 0.84% 0.70% 0.70% 0.51%(c)
Net investment income 4.92% 2.86% 2.47% 3.49% 5.65%(c)
Expense waiver/reimbursement (d) 0.10% 0.18% 0.20% 0.11% 0.27%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $39,363 $21,883 $20,382 $12,960 $ 548
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03 0.03 0.04 0.06
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.03) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.24% 3.16% 2.64% 3.61% 5.90%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.60% 0.59% 0.58% 0.70% 0.51%(c)
Net investment income 5.17% 3.30% 2.60% 3.49% 5.65%(c)
Expense waiver/reimbursement (d) 0.10% 0.18% 0.20% 0.11% 0.27%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $208,656 $304,285 $152,921 $163,451 $129,959
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE 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 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03 0.03 0.04 0.06
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.03) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.11% 3.10% 2.77% 3.79% 5.92%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.64% 0.64% 0.51%(c)
Net investment income 5.04% 3.07% 2.68% 3.64% 5.99%(c)
Expense waiver/reimbursement (d) 0.21% 0.25% 0.30% 0.29% 0.36%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $41,813 $15,236 $9,905 $5,803 $ 1
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
TRUST SHARES 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03 0.03 0.04 0.06
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.03) (0.03) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.36% 3.35% 2.89% 3.79% 5.92%
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.57% 0.55% 0.50% 0.64% 0.51%(c)
Net investment income 5.27% 3.25% 2.83% 3.64% 5.99%(c)
Expense waiver/reimbursement (d) 0.19% 0.25% 0.30% 0.29% 0.36%(c)
- -------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $173,761 $132,445 $134,397 $136,616 $57,432
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE 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 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
1995 1994(A)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.01)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 3.53% 0.45%
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.39% 0.36%(c)
Net investment income 3.55% 2.65%(c)
Expense waiver/reimbursement (d) 0.56% 0.70%(c)
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $81,977 $21,967
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from July 27, 1994 (date of initial
public investment) to September 30, 1994.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND
- --------------------------------------------------------------------------------
The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.
Unless indicated otherwise, the investment policies of a Fund may be changed by
the Trustees without approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
Additional information about investment limitations, strategies that one or more
Funds may employ, and certain investment policies mentioned below, appear in the
"Portfolio Investments and Strategies" section of this Prospectus and in the
Combined Statement of Additional Information.
THE U.S. GOVERNMENT SECURITIES FUND
The investment objective of The U.S. Government Securities Fund is to provide
current income.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in securities which are primary or direct obligations of the U.S.
government or its instrumentalities or which are guaranteed by the U.S.
government, its agencies, or instrumentalities. The Fund may also invest in
certain collateralized mortgage obligations ("CMOs") and adjustable rate
mortgage securities ("ARMS"), both of which represent or are supported by direct
or indirect obligations of the U.S. government or its instrumentalities. The
Fund will invest, under normal circumstances, at least 65% of the value of its
total assets in U.S. government securities (including such CMOs and ARMS).
The U.S. government securities in which the Fund invests include:
. direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and
. 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 corporate bonds, notes and convertible debt securities in which the Fund may
invest must be rated, at the time of purchase, BBB or higher by Standard &
Poor's Ratings Group ("S&P") or Fitch Investor Services ("Fitch") or Baa or
higher by Moody's Investor's Service, Inc. ("Moody's") or, if unrated, of
comparable quality as determined by the Fund's adviser. (If a Security's rating
is reduced below the required minimum after the Fund has purchased it, the Fund
is not required to sell the security, but may consider doing so.) Bonds rated
BBB by S&P or Fitch 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 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.
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 adviser does not anticipate that the Fund's annual
turnover rate will exceed 200% under normal market conditions. A higher rate of
portfolio turnover may lead to increased costs and may also result in higher
taxes paid by the Fund's shareholders.
THE STRATEGIC STOCK FUND
The investment objective of The Strategic Stock Fund is to provide growth of
capital.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
-
primarily in common stocks of large, medium and small capitalization companies
which are either listed on the New York or American Stock Exchange or trade in
the over-the-counter markets. The securities in which the Fund invests include,
but are not limited to, the following securities. Unless indicated otherwise,
investment policies may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material changes in these policies
becomes effective.
COMMON STOCKS. The Fund will invest in stock that the Fund's investment
-
adviser's proprietary investment methodology has identified as having superior
appreciation potential. Factors such as product position, market share,
potential earnings growth, or asset values will be considered by the investment
adviser. Under normal market conditions, at least 65% of the Fund's portfolio
will be invested in common stocks.
The Fund is managed to take advantage of trends in the stock market that favor
different styles of stock selection (value or growth), and different sizes of
companies (large, medium and small capitalization). The value style seeks stocks
that, in the opinion of the adviser, are undervalued and are or will be worth
more than their current price. The growth style seeks stocks with high earnings
growth rates which, in the opinion of the adviser, will lead to appreciation in
stock price.
OTHER CORPORATE SECURITIES. The Fund may invest in preferred stocks, corporate
bonds, notes, warrants, rights, and convertible securities of these companies of
the kind described under "The Stock Fund".
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 and money market instruments (including
commercial paper) which are unrated but of comparable quality, including 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 BIF or the SAIF. These instruments may include
ECDs, Yankee CDs, and ETDs.
AMERICAN DEPOSITARY RECEIPTS ("ADRS"). The Fund may invest in ADRs.
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.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The adviser does not anticipate that the Fund's annual
portfolio turnover rate will exceed 200% under normal market conditions. A high
portfolio turnover rate may lead to increased costs and may also result in
higher taxes paid by the Fund's shareholders.
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, The Stock Fund and The
Strategic 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
and The Strategic Stock 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 Strategic 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 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, The Money Market Fund and The Strategic Stock 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 Strategic 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, The Stock Fund and The Strategic 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
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.
The Stock Fund and The Strategic Stock Fund, as with other mutual funds that
invest primarily in equity securities, are 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 Funds invest in small
capitalization stocks, there are some additional risk factors associated with
investments in the Funds. 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.
Further, in addition to exhibiting greater volatility, the stocks of small
companies may, to some degree, fluctuate independently of the stocks of large
companies. That is, the stocks of small companies may decline in price as the
price of large company stocks rises or vice versa. Therefore, investors should
expect that the Funds, to the extent that it is invested in small capitalization
stocks, will be more volatile than, and may fluctuate independently of, broad
stock market indices such as the Standard & Poor's 500 Index.
In addition, with respect to fixed income securities, investors should be aware
that prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.
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.
PUT AND CALL OPTIONS. The Stock Fund and The Strategic Stock Fund may purchase
-
put options on its portfolio securities. These options will be used as a hedge
to attempt to protect securities which the Funds hold against decreases in
value. These Funds may also write covered call options on all or any portion of
their portfolios to generate income for the Funds. The Funds will write call
options on securities either held in their portfolios or which they have the
right to obtain without payment of further consideration or for which they have
segregated cash or U.S. government securities in the amount of any additional
consideration.
The Stock Fund and the Strategic Stock 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 Funds purchase and write
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 Funds will not buy call
options or write put options without further notification to shareholders.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Stock Fund and The Strategic
-
Stock Fund may purchase and sell financial futures contracts to hedge all or a
portion of their portfolios 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 Stock Fund and The Strategic Stock 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 a 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, a Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.
A 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 a Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged.
RISKS. When a 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. A Fund's ability to establish and close out futures and
options positions depends on this secondary market.
FUTURES CONTRACTS AND OPTIONS TO BUY OR SELL SUCH CONTRACTS--THE VIRGINIA
MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND
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.
DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has traditionally
-
been applied to certain contracts (including futures, forward, option and swap
contracts) that "derive" their value from changes in the value of an underlying
security, currency, commodity or index. Certain types of securities that
incorporate the performance characteristics of these contracts are also referred
to as "derivatives." The term has also been applied to securities "derived" from
the cash flows from underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Funds will only
use derivative contracts for the purposes disclosed in the applicable prospectus
sections above. To the extent that a Fund invests in securities that could be
characterized as derivatives, it will only do so in a manner consistent with its
investment objectives, policies and limitations.
THE VIRTUS FUNDS INFORMATION
- --------------------------------------------------------------------------------
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 Virtus
Capital Management, Inc., 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; The Maryland Municipal
Bond Fund--.75%; and The Strategic Stock Fund--1.00%. The fee paid by The
U.S. Government Securities Fund, The Stock Fund, The Strategic 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. Virtus Capital Management, Inc., a Maryland
corporation formed in 1995 to succeed to the business of Signet Asset
Management (adviser to the Funds since 1990), is 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. Virtus Capital Management, Inc., which is a registered
investment adviser, manages, in addition to the Funds, three equity common
trust funds with $44 million in assets and three fixed income common trust
funds with $218 million in assets. As part of their regular banking
operations, Signet Bank may make loans to public companies. Virtus Capital
Management, Inc. also advises The Blanchard Group of Funds. 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. The
lending relationship will not be a factor in the selection of securities.
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 Virtus Capital Management, Inc.,
where he has been a fixed income portfolio manager since 1990. Prior to
joining Virtus Capital Management, Inc., 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, and The
Strategic Stock Fund since its inception. Mr. Allen is a Chartered
Financial Analyst and Chief Investment Officer for Virtus Capital
Management, Inc. Prior to joining Virtus Capital Management, Inc., 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
and The Strategic Stock 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 and
The Strategic Stock Fund; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as The
Tax-Free Money market Fund and The Strategic Stock Fund reasonably request for
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, and .25 of 1% of the average net asset value of
Strategic Stock 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 and
The Strategic Stock Fund. The Plan will not be activated unless and until a
second class of shares of The Tax-Free Money Market Fund and The Strategic Stock
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 and The Strategic
Stock Fund additional amounts predicated upon the amount of shares of The
Tax-Free Money Market Fund, The Strategic Stock Fund or certain other Funds of
The Virtus 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 or The Strategic Stock 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>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 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. With respect to The Strategic Stock Fund, the fee shall be at least
$75,000. 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,
Boston, Massachusetts, 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 expense 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' fee 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
Strategic 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
- --------------------------------------------------------------------------------
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
Strategic 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 Strategic 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 purchase 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 and The Strategic
Stock 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.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday, for
The U.S. Government Securities Fund, The Stock Fund, The Strategic Stock Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund, 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.
The net asset value is determined at 1:00 p.m. Eastern time, and 4:00 p.m.
Eastern time and as of the close of trading (normally 4:00 p.m., Eastern time)
on the New York Stock Exchange, Monday through Friday, for The Treasury Money
Market Fund, The Money Market Fund, and The Tax-Free Money Market Fund, except
on 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 Strategic 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 and The Strategic 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
Strategic 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
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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
Strategic 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 required
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 any amount to be sent to an address
other than that on record with a Fund, or a redemption payable other than to the
shareholder of record must have signatures on written redemption requests
guaranteed by:
. a trust company or commercial bank whose deposits are insured by BIF
which is administered by the FDIC;
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings and loan association whose deposits are insured
by the SAIF, which is administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Funds do no 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
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only shareholders of that Fund or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the operation of the Trust or a Fund and for
the election of Trustees under certain circumstances. As of November 6, 1995,
Bova & Co, Richmond, Virginia, owned approximately 8,096,722 Trust Shares of The
U.S. Government Securities Fund (80%); approximately 2,845,044 Trust Shares of
The Stock Fund (87%); approximately 5,519,877 shares of The Strategic Stock Fund
(91%); approximately 2,991,619 Trust Shares of The Virginia Municipal Bond Fund
(96%); approximately 807,429 Trust Shares of The Maryland Municipal Bond Fund
(92%); approximately 166,276,008 Trust Shares of The
Treasury Money Market Fund (75%); approximately 166,515,351 Trust Shares of The
Money Market Fund (97%); and approximately 66,885,852 shares of The Tax-Free
Money Market Fund (68%), 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 Virtus
Capital Management, Inc., 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 Virtus Capital Management, Inc. 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 Virtus Capital
Management, Inc. It is not expected that existing shareholders would suffer any
adverse financial consequences (if another adviser with equivalent abilities to
Virtus Capital Management, Inc. 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
Strategic 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 Strategic 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 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, The Stock Fund and The
Strategic 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
Strategic 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.
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.
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.
From time to time, advertisements for the Funds may refer to ratings, rankings,
and other information in 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.
To obtain more information and a prospectus for Investment Shares, investors may
call 1-800-723-9512.
ADDRESSES
- --------------------------------------------------------------------------------
The U.S. Government Securities Fund Federated Investors Tower
The Stock Fund Pittsburgh, Pennsylvania 15222-3779
The Strategic Stock Fund
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
Virtus Capital Management, Inc. 707 East Main Street
Suite 1300
Richmond, Virginia 23219
- -------------------------------------------------------------------------------
Custodian
Signet Trust Company 7 North Eighth Street
Richmond, Virginia 23219
- -------------------------------------------------------------------------------
Transfer Agent, and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- -------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- -------------------------------------------------------------------------------
THE VIRTUS FUNDS
TRUST SHARES
COMBINED PROSPECTUS
November 30, 1995
VIRTUS CAPITAL MANAGEMENT, INC.
A Subsidiary of Signet Banking Corporation
Investment Adviser
Federated Securities Corp. is the distributor of the Funds.
CUSIP 927913103 CUSIP 927913855
------
CUSIP 927913301 CUSIP 927913863
------
CUSIP 927913830 CUSIP 927913889
------
CUSIP 927913608 CUSIP 927913806
------
3042108A-I (11/95)
The Strategic
Stock Fund
November 30, 1995
Prospectus
Funds Managed by
[LOGO OF VIRTUS CAPITAL MANAGEMENT, INC.]
The Investment Adviser to The Virtus Funds is Virtus Capital Management, Inc.,
a subsidiary of Signet Banking Corporation. The Virtus Funds are administered
by subsidiaries of Federated Investors, independent of Signet.
Investment products offered through Signet Financial Services, Inc. are not
deposits, obligations of, or guaranteed by Signet Bank, and are not insured by
FDIC or any Federal agency. In addition, they involve risk, including possible
loss of principal invested. Member NASD.
Virtus Capital Management, Inc. is the investment adviser for The Virtus Funds.
Federated Securities Corp. is the distributor of the Funds.
Federated Securities Corp., Distributor, is independent of Signet Bank.
[LOGO OF VIRTUS FUNDS]
THE STRATEGIC STOCK FUND
(A PORTFOLIO OF THE VIRTUS FUNDS)
PROSPECTUS
The shares of The Strategic Stock Fund (the "Fund") offered by this prospectus
represent interests in a diversified portfolio in The Virtus Funds (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
seeks to provide growth of capital by investing primarily in common stocks.
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 THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated November 30,
1995, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing to the Trust or calling 800-723-9512.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated November 30, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies and Strategies 3
Acceptable Investments 3
Common Stocks 3
Other Corporate Securities 3
Commercial Paper 3
Bank Instruments 4
American Depositary Receipts ("ADRs") 4
U.S. Government Securities 4
Put and Call Options 4
Financial Futures and Options
on Futures 4
Risks 4
Derivative Contracts and Securities 5
Portfolio Turnover 5
Borrowing Money 5
Selling Short 5
Restricted and Illiquid Securities 5
When-Issued and Delayed Delivery
Transactions 5
Investing in Securities of Other
Investment Companies 6
Diversification 6
Repurchase Agreements 6
Lending of Portfolio Securities 6
Acquiring Securities 6
Investment Risks 6
THE VIRTUS FUNDS INFORMATION 7
- ------------------------------------------------------
Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Fund Shares 8
Distribution Plan 8
Administrative Arrangements 8
Glass-Steagall Act 8
Administration of the Funds 8
Administrative Services 8
Custodian 9
Transfer Agent and Dividend
Disbursing Agent 9
Independent Auditors 9
Expenses of the Fund 9
Brokerage Transactions 9
NET ASSET VALUE 9
- ------------------------------------------------------
INVESTING IN THE FUND 9
- ------------------------------------------------------
Share Purchases 9
By Check 9
By Wire 10
Systematic Investment Program 10
Minimum Investment Required 10
What Shares Cost 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
EXCHANGE PRIVILEGE 10
- ------------------------------------------------------
By Telephone 11
REDEEMING SHARES 11
- ------------------------------------------------------
By Telephone 11
By Mail 12
Contingent Deferred Sales Charge 12
Systematic Withdrawal Program 13
Accounts with Low Balances 13
SHAREHOLDER INFORMATION 13
- ------------------------------------------------------
Voting Rights 13
Massachusetts Partnership Law 14
EFFECT OF BANKING LAWS 14
- ------------------------------------------------------
TAX INFORMATION 14
- ------------------------------------------------------
Federal Income Tax 14
PERFORMANCE INFORMATION 15
- ------------------------------------------------------
ADDRESSES 16
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).......................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)............... None
Contingent Deferred Sales Charge (1) (as a percentage of original purchase price or redemption
proceeds, as applicable)........................................................................... 2.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)................................... None
Exchange Fee......................................................................................... None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of average net assets)
Management Fee (after waiver)........................................................................ 0.00%
12b-1 Fee (4)........................................................................................ 0.00%
Total Other Expenses (after waiver).................................................................. 0.44%
Total Fund Operating Expenses (4)............................................................... 0.44%
</TABLE>
- ------------
(1) The Contingent Deferred Sales Charge is 2.00% of the lesser of the original
purchase price or the net asset value of the shares redeemed within five
years of the purchase date. For a more complete description, see "Redeeming
Shares."
(2) The estimated management fee of the Fund has been reduced to reflect the
anticipated voluntary waiver by the investment adviser. The adviser can
terminate its voluntary waiver of fees at any time at its sole discretion.
The maximum management fee is 1.00%.
(3) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund will not pay or accrue 12b-1 fees until a separate class of
shares has been created for certain institutional investors. The Fund can
pay up to 0.25% as a 12b-1 fee to the distributor. See "The Virtus Funds
Information."
(4) Total Fund Operating Expenses for the Fund are estimated to be at 1.44%
absent the anticipated voluntary waiver by the investment adviser.
* Annual Fund Operating Expenses are estimated based on average expenses
expected to be incurred during the fiscal year ending September 30, 1996.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "The Virtus Funds Information" and "Investing in the Fund."
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 1 YEAR+ 3 YEARS 3 YEARS+
<S> <C> <C> <C> <C>
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............................................................... $25 $5 $37 $14
</TABLE>
+ Reflects expenses on the same investment, assuming no redemption.
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1996.
THE STRATEGIC STOCK FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated November 17, 1995, on the Fund's
Financial Statements is incorporated by reference to the Annual Report dated
September 30, 1995. 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,
1995(A)
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03
Net realized and unrealized gain (loss) on investments 2.03
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.06
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.03)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.03
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 20.59%
- --------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.44%(c)
Net investment income 0.46%(c)
Expense waiver/reimbursement (d) 1.03%(c)
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $78,388
Portfolio turnover 92 %
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from March 7, 1995 (date of initial
public investment) to September 30, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust 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. With respect to this Fund, as of the date of this
prospectus, the Board of Trustees (the "Board" or "Trustees") has not
established separate classes of shares. The Fund is designed for institutional
and retail customers of Signet Bank and its affiliates as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
investing primarily in common stocks. A minimum initial investment of $1,000 is
required. A contingent deferred sales charge may be imposed on all shares of the
Fund (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 of the Fund may be found under "Redeeming
Shares." The Fund is advised by Virtus Capital Management, Inc.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide growth of capital. The
investment objective cannot be changed without shareholder approval. While there
is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
INVESTMENT POLICIES AND STRATEGIES
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in common stocks of large, medium and small capitalization companies
which are either listed on the New York or American Stock Exchange or trade in
the over-the-counter markets. The securities in which the Fund invests include,
but are not limited to, the following securities. Unless indicated otherwise,
investment policies may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material changes in these policies
becomes effective.
COMMON STOCKS. The Fund will invest in stocks that the Fund's investment
adviser's proprietary investment methodology has identified as having superior
appreciation potential. Factors such as product position, market share,
potential earnings growth, or asset values will be considered by the investment
adviser. Under normal market conditions, at least 65% of the Fund's portfolio
will be invested in common stocks.
The Fund is managed to take advantage of trends in the stock market that favor
different styles of stock selection (value or growth), and different sizes of
companies (large, medium and small capitalization). The value style seeks stocks
that, in the opinion of the adviser, are undervalued and are or will be worth
more than their current price. The growth style seeks stocks with high earnings
growth rates which, in the opinion of the adviser, will lead to appreciation in
stock price.
OTHER CORPORATE SECURITIES. The Fund may invest in preferred stocks, corporate
bonds, notes, warrants, rights, and convertible securities of these companies.
The corporate bonds, notes, and convertible debt securities in which the Fund
may invest must be rated, at the time of purchase, BBB or better by Standard and
Poor's Ratings Group ("S&P"), or Fitch Investors Services ("Fitch"), or Baa or
better by Moody's Investors Service, Inc. (Moody's), or, if unrated, of
comparable quality as determined by the Fund's adviser. (If a security's rating
is reduced below the required minimum after the Fund has purchased it, the Fund
is not required to sell the security, but may consider doing so.) Bonds rated
"BBB" by Standard & Poor's or Fitch or "Baa" by Moody's have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to a 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 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"). The Fund may invest in 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.
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.
DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has traditionally
been applied to certain contracts (including, futures, forward, option and swap
contracts) that "derive" their value from changes in the value of an underlying
security, currency, commodity or index. Certain types of securities that
incorporate the performance characteristics of these contracts are also referred
to as "derivatives." The term has also been applied to securities "derived" from
the cash flows from underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Fund will only
use derivative contracts for the purposes disclosed in the applicable prospectus
sections above. To the extent that the Fund invests in securities that could be
characterized as derivatives, it will only do so in a manner consistent with its
investment objectives, policies and limitations.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The adviser does not anticipate that the Fund's annual
portfolio turnover rate will exceed 200% under normal market conditions. A high
portfolio turnover rate may lead to increased costs and may also result in
higher taxes paid by the Fund's shareholders.
BORROWING MONEY. The Fund will not borrow money directly or through reverse
repurchase agreements (arrangements in which the Fund sells a portfolio
instrument for a percentage of its cash value with an agreement to buy it back
on a set date) or pledge securities except, under certain circumstances, the
Fund may borrow money up to one-third of the value of its total assets and
pledge up to 15% of the value of those assets to secure such borrowings. This
policy cannot be changed without the approval of holders of a majority of the
Fund's shares.
SELLING SHORT. The Fund will not make short sales of securities, except in
certain limited circumstances.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are subject
to restriction on resale under federal securities law. The Fund will not invest
more than 10% of the value of its total 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). 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 the Fund's Shares.
The Fund will not invest more than 15% of its 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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous. Settlement dates may be a month or more
after entering into these transactions, and the market values of the securities
purchased may vary from the purchase dates. Accordingly, the Fund may pay
more/less than the market value of the securities on the settlement date. The
Fund may dispose of a commitment prior
to settlement if the adviser deems it appropriate to do so. In addition, the
Fund may enter into transactions to sell its purchase commitments to third
parties at current market values and simultaneously acquire other commitments to
purchase similar securities at later dates. The Fund may realize short-term
profits or losses upon the sale of such commitments.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The 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 Fund 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 such as management fees
and, therefore, any investment by the Fund in shares of another investment
company would be subject to such duplicate expenses. 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 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 the Fund's Shares.
REPURCHASE AGREEMENTS. The securities in which the Fund invests 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 the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive more or less than the repurchase price on
any sale of such securities.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
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.
This policy cannot be changed without the approval of holders of a majority of
the Fund's shares.
ACQUIRING SECURITIES. The 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 Fund's ADRs, ECDs, ETDs, Yankee CDs, and Europaper are subject to different
risks than domestic obligations of domestic banks or corporations. Examples of
these risks include international economic and political developments, foreign
governmental restrictions that may adversely affect the payment of principal or
interest, foreign withholding or other taxes on interest income, difficulties in
obtaining or enforcing a judgment against the issuing entity, and the possible
impact of interruptions in the flow of international currency transactions.
Different risks may also exist for ECDs, ETDs, and Yankee CDs because the banks
issuing these instruments, or their domestic or foreign branches, are not
necessarily subject to the same regulatory requirements that apply to domestic
banks, such as reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping, and the public availability of information. These
factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.
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 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.
Further, in addition to exhibiting greater volatility, the stocks of small
companies may, to some degree, fluctuate independently of the stocks of large
companies. That is, the stocks of small companies may decline in price as the
price of large company stocks rises or vice versa. Therefore, investors should
expect that the Fund, to the extent that it is invested in small capitalization
stocks, will be more volatile than, and may fluctuate independently of, broad
stock market indices such as the Standard & Poor's 500 Index.
In addition, with respect to fixed income securities, investors should be aware
that prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.
THE VIRTUS FUNDS INFORMATION
- --------------------------------------------------------------------------------
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 Fund are made by Virtus
Capital Management, Inc., the Fund's investment adviser (the "Adviser"), subject
to direction by the Trustees. The Adviser continually conducts investment
research and supervision for the Fund and is responsible for the purchase or
sale of portfolio instruments, for which it receives an annual fee from the
assets of the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee of
1.00% of the Fund's average net assets. The fee paid by the 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 at its sole
discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Virtus Capital Management, Inc., a Maryland
corporation formed in 1995 to succeed to the business of Signet Asset
Management (adviser to the Funds since 1990), is 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. Virtus Capital Management, Inc., which is a registered
investment adviser, manages, in addition to the Funds, three equity common
trust funds with $44 million in assets and three fixed income common trust
funds with $218 million in assets. Virtus Capital Management, Inc. also
advises The Blanchard Group of Funds. As part of their regular banking
operations, Signet Bank may make loans to public companies. Thus, it may be
possible, from time to time, for the Funds to hold or acquire the
securities of issuers which are also lending clients of Signet Bank. The
lending relationship will not be a factor in the selection of securities.
Garry M. Allen has managed the Fund since its inception. Mr. Allen is a
Chartered Financial Analyst and Chief Investment Officer for Virtus Capital
Management, Inc. Prior to joining Virtus Capital Management, Inc., Mr.
Allen was the 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 FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
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 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
Fund; assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as the 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 .25 of 1% of the average net asset value
of shares of the Fund 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 Fund. The Plan will not be
activated unless and until a second class of shares of the Fund, which will not
have a Rule 12b-1 Plan, is created.
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 Fund. Such payments will be
predicated upon the amount of shares of the Fund that are sold by the dealers.
ADMINISTRATIVE ARRANGEMENTS. The distributor may pay financial institutions a
fee based upon the average net asset value of shares of the Fund 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 Fund with certain administrative personnel and
services necessary to operate the Fund. 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
$75,000. 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 Fund. Under the Custodian Agreement, Signet Trust
Company holds the Fund's portfolio securities in safekeeping and keeps all
necessary records and documents relating to its duties.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, Massachusetts, is transfer agent for the shares of the Fund and dividend
disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche LLP, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of the Trust's
expenses. These expenses include, but are not limited to: the cost of organizing
the Trust and continuing its existence; Trustees fees; investment advisory and
administrative services; printing prospectuses and other Fund documents for
shareholders; registering the Trust and the Fund; taxes and commissions; issuing
purchasing, repurchasing and redeeming shares; fees for custodian, transfer
agent, dividend disbursing agent, shareholder servicing agents, and registrars;
printing, mailing, auditing, accounting, and legal expenses; reports to
shareholders and government agencies; meeting of Trustees and shareholders and
proxy solicitations therefore; insurance premiums; association membership dues;
and such nonrecurring and extraordinary expenses as may arise. However, the
adviser may voluntarily waive and/or reimburse some expenses.
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
- --------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
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 Fund may be purchased through Signet Financial Services, Inc.
or Signet Trust Company. In connection with the sale of shares of the Fund, the
distributor may from time to time offer certain items of nominal value to any
shareholder or investor. The Fund reserves the right to reject any purchase
request.
To purchase shares of the Fund through Signet Financial Services, Inc., call
toll-free 1-800-723-9512. Trust and institutional investors should contact their
account officer to make purchase requests through Signet Trust Company. Purchase
orders must be received by Signet Financial Services, Inc. or Signet Trust
Company before 4:00 p.m. (Eastern time). Payment for shares of the Fund may be
made by check or by wire. Payment must be received for shares purchased through
Signet Financial Services, Inc. within five days of placing the order. Payment
for shares purchased through Signet Trust Company must be received on the next
business day after 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. Shares of the Fund cannot be purchased by Federal Reserve Wire on
Columbus Day, Veterans' Day or Lee-Jackson-King Day. To purchase shares by wire,
trust and institutional investors should contact their trust investment adviser.
All other shareholders should contact Signet Financial Services, Inc.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, holders of Fund 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. 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 Fund are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Fund at the time of
purchase.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares of the 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 Fund, 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.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. In addition, quarterly confirmations are sent to report dividends
paid during that quarter.
DIVIDENDS
Dividends are declared and paid quarterly.
Unless cash payments are requested by shareholders in writing to the 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
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Holders of shares of the Fund have easy access to shares of the other funds
comprising the Trust and to shares of any Fund (a "Blanchard Fund") of The
Blanchard Group of Funds 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 exchange into a Virtus Fund must exchange shares having a net
asset value of at least $1,000, and shareholders who exchange into a Blanchard
Fund must exchange shares having a net asset value at least equal to the minimum
investment requirement of the applicable Blanchard Fund. 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 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 shortor 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. This privilege
is available to shareholders resident in any state in which the fund shares
being acquired may be sold.
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 the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
Any shares of the Fund 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 of the Fund 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 the 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
- --------------------------------------------------------------------------------
The Fund redeems its shares at their net asset value, less any applicable
contingent deferred sales charge, next determined after Signet Financial
Services, Inc. or Signet Trust Company receives the redemption request.
Redemptions will be made on days on which the Fund computes its net asset value.
Telephone or written requests for redemption must be received in proper form by
Signet Financial Services, Inc. or Signet Trust Company.
BY TELEPHONE. To redeem shares of the Fund through Signet Financial Services,
Inc., call toll-free 1-800-444-7123. Trust and institutional investors should
contact their account officer to make redemption requests through Signet Trust
Company. Shares of the Fund will be redeemed at the net asset value, less any
applicable contingent deferred sales charge, next determined after the Fund
receives the redemption request from Signet Financial Services, Inc. or Signet
Trust Company.
A redemption request must be received by Signet Financial Services, Inc. or
Signet Trust Company before 4:00 p.m. (Eastern time) in order for shares of the
Fund 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 of the Fund to be redeemed
at that day's net asset value. Signet Financial Services, Inc. and Signet Trust
Company are responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. Other registered
broker/dealers may charge customary fees and commissions for this service.
If, at any time, the Fund should determine it necessary to terminate or modify
this method of redemption, shareholders would be promptly notified.
An authorization form permitting the 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. or Signet Trust Company. Telephone
redemption instructions may be recorded. If reasonable procedures are not
followed by the 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 the Fund by sending a written
request to Signet Financial Services, Inc. Trust and institutional investors
should send a written request to Signet Trust Company. The written request
should include the shareholder's name, the Fund name, 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 any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by:
. a trust company or commercial bank whose deposits are insured by BIF,
which is administered by the FDIC;
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings and loan association whose deposits are insured
by the SAIF, which is administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
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
Shareholders redeeming shares from accounts in the Fund 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>
AMOUNT OF CONTINGENT DEFERRED
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 shares in other Virtus 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) or owned by directors and employees of the Fund, Signet Banking Corporation
or Federated Securities Corp. or their affiliates, or any bank or investment
dealer who has a sales agreement with Federated Securities Corp. with regard to
the Fund, and their spouses and children under 21; (v) or 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.; (vii) if the proceeds from the redemption
are used to purchase a Strive variable annuity within 10 days of the redemption;
(viii) purchased by a person who, at the time of purchase, owns shares of a
Blanchard Fund; (ix) purchased in exchange for shares of a Blanchard Fund
(unless such Blanchard Fund shares were themselves acquired in exchange for
shares of a Virtus Fund which imposed a contingent deferred sales charge); or
(x) purchased in exchange for shares of a Virtus Fund which shares originally
represented an interest in the Vista Federal Money Market Fund.
Contingent deferred sales charges are not charged when Fund shares are exchanged
for shares of any other portfolio of The Virtus Funds or when redemptions are
made by the Fund to liquidate accounts with low balances.
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 the Fund. For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in shares of the
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, the 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 the 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 the 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 the Fund and
for the election of Trustees under certain circumstances. As of November 6,
1995, Bova & Co, Richmond, Virginia, owned approximately 5,519,877 shares of The
Strategic Stock Fund (91%), and therefore, may, for certain purposes, be deemed
to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.
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 Virtus
Capital Management, Inc. may perform the services for the 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 Virtus Capital Management, Inc. from continuing to
perform all or a part of the above services for its customers and/or the 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 the Fund may
occur, including possible termination of any automatic or other Fund share
investment and redemption services then being provided by Virtus Capital
Management, Inc. It is not expected that existing shareholders would suffer any
adverse financial consequences (if another adviser with equivalent abilities to
Virtus Capital Management, Inc. is found) as a result of any of these
occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it 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.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
other portfolios of The Virtus Funds will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distribution, including capital gains, received. This
applies whether dividends and distributions are received in cash or as
additional shares.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund may advertise total return and 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 the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of shares of
the 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 the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
The Strategic Stock Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Virtus Capital Management, Inc. 707 East Main Street
Suite 1300
Richmond, Virginia 23219
- --------------------------------------------------------------------------------
Custodian
Signet Trust Company 7 North Eighth Street
Richmond, Virginia 23219
- --------------------------------------------------------------------------------
Transfer Agent, and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- --------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- --------------------------------------------------------------------------------
Cusip 927913806
G00528-01(11/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (1-8) The Financial Statements for the
fiscal year ended September 30, 1995,
are incorporated into the Statement of
Additional Information by reference from
the Funds' Annual Report dated September
30, 1995.
(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;
(11)
(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;(12)
(17) Copy of Financial Data Schedules;+
(18) Power of Attorney;(12)
+ 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).
(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)
(12) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 and Amendment No. 15 to its Registration Statement on
Form N-1A filed on May 26, 1995. (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 November 6, 1995
Shares of beneficial interest The U.S. Government Securities
Fund - Trust Shares 11
The U.S. Government Securities Fund
- Investment Shares 5,473
The Maryland Municipal Bond Fund
- Trust Shares 8
The Maryland Municipal Bond Fund
Investment Shares 1,322
The Money Market Fund
Trust Shares 10
The Money Market Fund
Investment Shares 1,383
The Treasury Money Market Fund
- Trust Shares 22
The Treasury Money Market Fund
- Investment Shares 655
The Stock Fund - Trust Shares
10
The Stock Fund
InvestmentShares 3,983
The Virginia Municipal Bond Fund
- Trust Shares 9
The Virginia Municipal Bond Fund
- Investment Shares
2,211
The Tax-Free Money Market
Fund 193
The Strategic Stock Fund 518
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
Virtus Funds Information - Management of The Virtus 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: American Leaders
Fund, Inc.; Annuity Management Series; Arrow Funds; Automated
Government Money Trust; BayFunds; The Biltmore Funds; The
Biltmore Municipal Funds; Blanchard Funds; Blanchard Precious
Metals, Inc.; Cash Trust Series, Inc.; Cash Trust Series II;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated ARMs Fund; Federated Equity Funds; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Master
Trust; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 3-5 Years;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; 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; Newpoint
Funds; 111 Corcoran Funds; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; The Shawmut Funds; 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;
The Virtus Funds; 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, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive VicePresident and
Federated Investors Tower President, Federated, Treasurer
Pittsburgh, PA 15222-3779 Securities Corp.
John W. McGonigle Director, Federated
Federated Investors Tower Securities Corp.
Pittsburgh, PA 15222-3779
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, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
James M. Heaton 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
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
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
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joeseph Kenedy 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
Steven A. La Versa 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
J. Michael Miller 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
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
John C. Shelar, Jr. 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
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
Paul A. Uhlman 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Assistant Secretary, Treasurer
Federated Investors Tower Federated Securities Corp.
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE VIRTUS 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 29th day of November,
1995.
THE VIRTUS FUNDS
BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
November 29, 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 November 29, 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
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg S-K
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of
The Virtus Funds:
We consent to the incorporation by reference in Post-Effective Amendment No. 13
to Registration Statement 33-36451 of The Virtus Funds (formerly, The Medalist
Funds) (comprising the following portfolios: The U.S. Government Securities
Fund, The Strategic Stock 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) of our report dated
November 17, 1995, appearing in the Annual Reports to Shareholders for The
Virtus Funds for the year ended September 30, 1995, and to the references to us
under the heading "Financial Highlights" in the Prospectuses, which are a part
of such Registration Statement.
By: DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
Form N-1A Exhibit No. 5(ii)
Reg. S-K Exhibit No. 10(ii)
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:
For m 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
-13-
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: THE MEDALIST FUNDS
/s/ John W. McGonigle By:/s/ E.C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ John W. McGonigle
Secretary Executive Vice President
(SEAL)
<TABLE> <S> <C>
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<NUMBER> 001
<NAME> The Virtus Funds
The U.S. Government Securities Fund
Trust Shares
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<NUMBER> 002
<NAME> The Virtus Funds
The U.S. Government Securities Fund
Investment Shares
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<NAME> The Virtus Funds
The Maryland Municipal Bond Fund
Trust Shares
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<NAME> The Virtus Funds
The Maryland Municipal Bond Fund
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<NUMBER> 005
<NAME> The Virtus Funds
The Money Market Fund
Trust Shares
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<NAME> The Virtus Funds
The Money Market Fund
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<SERIES>
<NUMBER> 007
<NAME> The Virtus Funds
The Treasury Money Market Fund
Trust Shares
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<PER-SHARE-DIVIDEND> 0.050
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<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 008
<NAME> The Virtus Funds
The Treasury Money Market Fund
Investment Shares
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Sep-30-1995
<INVESTMENTS-AT-COST> 115,521,383
<INVESTMENTS-AT-VALUE> 115,521,383
<RECEIVABLES> 2,577,248
<ASSETS-OTHER> 131,747,139
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 249,845,770
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<OTHER-ITEMS-LIABILITIES> 1,826,527
<TOTAL-LIABILITIES> 1,826,527
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 248,019,243
<SHARES-COMMON-STOCK> 39,363,101
<SHARES-COMMON-PRIOR> 21,882,908
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 39,363,101
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,060,335
<OTHER-INCOME> 0
<EXPENSES-NET> 2,873,680
<NET-INVESTMENT-INCOME> 24,186,655
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<NET-CHANGE-FROM-OPS> 24,186,655
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,573,033
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 44,802,002
<NUMBER-OF-SHARES-REDEEMED> 28,843,368
<SHARES-REINVESTED> 1,521,559
<NET-CHANGE-IN-ASSETS> (78,148,241)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,347,424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,343,165
<AVERAGE-NET-ASSETS> 469,484,800
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
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<PER-SHARE-DIVIDEND> 0.050
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<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 009
<NAME> The Virtus Funds
The Stock Fund
Trust Shares
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Sep-30-1995
<INVESTMENTS-AT-COST> 79,738,644
<INVESTMENTS-AT-VALUE> 88,805,905
<RECEIVABLES> 4,031,299
<ASSETS-OTHER> 10,220
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 92,847,424
<PAYABLE-FOR-SECURITIES> 2,805,536
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 2,994,131
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,597,501
<SHARES-COMMON-STOCK> 3,310,403
<SHARES-COMMON-PRIOR> 5,961,603
<ACCUMULATED-NII-CURRENT> 107,629
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,080,902
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,067,261
<NET-ASSETS> 45,344,738
<DIVIDEND-INCOME> 1,442,419
<INTEREST-INCOME> 258,149
<OTHER-INCOME> 0
<EXPENSES-NET> 947,215
<NET-INVESTMENT-INCOME> 753,353
<REALIZED-GAINS-CURRENT> 7,288,596
<APPREC-INCREASE-CURRENT> 8,056,089
<NET-CHANGE-FROM-OPS> 16,098,038
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 531,337
<DISTRIBUTIONS-OF-GAINS> 1,709,248
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,027,794
<NUMBER-OF-SHARES-REDEEMED> 3,766,090
<SHARES-REINVESTED> 87,096
<NET-CHANGE-IN-ASSETS> (7,259,700)
<ACCUMULATED-NII-PRIOR> 145,067
<ACCUMULATED-GAINS-PRIOR> 2,181,712
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 678,512
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,137,198
<AVERAGE-NET-ASSETS> 90,695,695
<PER-SHARE-NAV-BEGIN> 11.800
<PER-SHARE-NII> 0.120
<PER-SHARE-GAIN-APPREC> 2.200
<PER-SHARE-DIVIDEND> 0.120
<PER-SHARE-DISTRIBUTIONS> 0.300
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.700
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 010
<NAME> The Virtus Funds
The Stock Fund
Investment Shares
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Sep-30-1995
<INVESTMENTS-AT-COST> 79,738,644
<INVESTMENTS-AT-VALUE> 88,805,905
<RECEIVABLES> 4,031,299
<ASSETS-OTHER> 10,220
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 92,847,424
<PAYABLE-FOR-SECURITIES> 2,805,536
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 188,595
<TOTAL-LIABILITIES> 2,994,131
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,597,501
<SHARES-COMMON-STOCK> 3,249,476
<SHARES-COMMON-PRIOR> 2,265,177
<ACCUMULATED-NII-CURRENT> 107,629
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,080,902
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,067,261
<NET-ASSETS> 44,508,555
<DIVIDEND-INCOME> 1,442,419
<INTEREST-INCOME> 258,149
<OTHER-INCOME> 0
<EXPENSES-NET> 947,215
<NET-INVESTMENT-INCOME> 753,353
<REALIZED-GAINS-CURRENT> 7,288,596
<APPREC-INCREASE-CURRENT> 8,056,089
<NET-CHANGE-FROM-OPS> 16,098,038
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 259,454
<DISTRIBUTIONS-OF-GAINS> 680,158
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,471,204
<NUMBER-OF-SHARES-REDEEMED> 566,888
<SHARES-REINVESTED> 79,983
<NET-CHANGE-IN-ASSETS> (7,259,700)
<ACCUMULATED-NII-PRIOR> 145,067
<ACCUMULATED-GAINS-PRIOR> 2,181,712
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 678,512
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,137,198
<AVERAGE-NET-ASSETS> 90,695,695
<PER-SHARE-NAV-BEGIN> 11.800
<PER-SHARE-NII> 0.090
<PER-SHARE-GAIN-APPREC> 2.200
<PER-SHARE-DIVIDEND> 0.090
<PER-SHARE-DISTRIBUTIONS> 0.300
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.700
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> The Virtus Funds
The Virginia Municipal Bond Fund
Trust Shares
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Sep-30-1995
<INVESTMENTS-AT-COST> 99,822,159
<INVESTMENTS-AT-VALUE> 102,518,059
<RECEIVABLES> 4,738,029
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 107,256,088
<PAYABLE-FOR-SECURITIES> 2,648,746
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 364,677
<TOTAL-LIABILITIES> 3,013,423
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,083,957
<SHARES-COMMON-STOCK> 3,114,671
<SHARES-COMMON-PRIOR> 3,330,661
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,364,455)
<OVERDISTRIBUTION-GAINS> (172,737)
<ACCUM-APPREC-OR-DEPREC> 2,695,900
<NET-ASSETS> 33,669,594
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,673,654
<OTHER-INCOME> 0
<EXPENSES-NET> 1,125,010
<NET-INVESTMENT-INCOME> 4,548,644
<REALIZED-GAINS-CURRENT> (1,364,455)
<APPREC-INCREASE-CURRENT> 6,633,292
<NET-CHANGE-FROM-OPS> 9,817,481
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,532,726
<DISTRIBUTIONS-OF-GAINS> 329
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 599,178
<NUMBER-OF-SHARES-REDEEMED> 815,168
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (4,627,989)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,096)
<OVERDIST-NET-GAINS-PRIOR> (171,733)
<GROSS-ADVISORY-FEES> 775,247
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,352,311
<AVERAGE-NET-ASSETS> 103,483,803
<PER-SHARE-NAV-BEGIN> 10.260
<PER-SHARE-NII> 0.480
<PER-SHARE-GAIN-APPREC> 0.550
<PER-SHARE-DIVIDEND> 0.480
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.810
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> The Virtus Funds
The Virginia Municipal Bond Fund
Investment Shares
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Sep-30-1995
<INVESTMENTS-AT-COST> 99,822,159
<INVESTMENTS-AT-VALUE> 102,518,059
<RECEIVABLES> 4,738,029
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 107,256,088
<PAYABLE-FOR-SECURITIES> 2,648,746
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 364,677
<TOTAL-LIABILITIES> 3,013,423
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,083,957
<SHARES-COMMON-STOCK> 6,525,602
<SHARES-COMMON-PRIOR> 7,282,825
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,364,455)
<OVERDISTRIBUTION-GAINS> (172,737)
<ACCUM-APPREC-OR-DEPREC> 2,695,900
<NET-ASSETS> 70,573,071
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,673,654
<OTHER-INCOME> 0
<EXPENSES-NET> 1,125,010
<NET-INVESTMENT-INCOME> 4,548,644
<REALIZED-GAINS-CURRENT> (1,364,455)
<APPREC-INCREASE-CURRENT> 6,633,292
<NET-CHANGE-FROM-OPS> 9,817,481
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,014,821
<DISTRIBUTIONS-OF-GAINS> 675
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 939,334
<NUMBER-OF-SHARES-REDEEMED> 1,918,280
<SHARES-REINVESTED> 221,723
<NET-CHANGE-IN-ASSETS> (4,627,989)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,096)
<OVERDIST-NET-GAINS-PRIOR> (171,733)
<GROSS-ADVISORY-FEES> 775,247
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,352,311
<AVERAGE-NET-ASSETS> 103,483,803
<PER-SHARE-NAV-BEGIN> 10.260
<PER-SHARE-NII> 0.450
<PER-SHARE-GAIN-APPREC> 0.550
<PER-SHARE-DIVIDEND> 0.450
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.810
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> The Virtus Funds
The Tax-Free Money Market Fund
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Sep-30-1995
<INVESTMENTS-AT-COST> 76,032,528
<INVESTMENTS-AT-VALUE> 76,032,528
<RECEIVABLES> 6,290,885
<ASSETS-OTHER> 7,569
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 82,330,982
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 353,522
<TOTAL-LIABILITIES> 353,522
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,977,460
<SHARES-COMMON-STOCK> 81,977,460
<SHARES-COMMON-PRIOR> 21,966,640
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 81,977,460
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,071,247
<OTHER-INCOME> 0
<EXPENSES-NET> 204,976
<NET-INVESTMENT-INCOME> 1,866,271
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,866,271
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,866,271
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 244,825,710
<NUMBER-OF-SHARES-REDEEMED> 185,184,196
<SHARES-REINVESTED> 369,306
<NET-CHANGE-IN-ASSETS> 60,010,820
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 262,792
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 499,069
<AVERAGE-NET-ASSETS> 52,558,455
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.030
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 014
<NAME> The Virtus Funds
The Strategic Stock Fund
<PERIOD-TYPE> 7-mos
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-END> Sep-30-1995
<INVESTMENTS-AT-COST> 74,048,526
<INVESTMENTS-AT-VALUE> 79,202,241
<RECEIVABLES> 40,607
<ASSETS-OTHER> 803
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 79,243,651
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 855,614
<TOTAL-LIABILITIES> 855,614
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,476,555
<SHARES-COMMON-STOCK> 6,518,730
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 23,714
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,734,053
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,153,715
<NET-ASSETS> 78,388,037
<DIVIDEND-INCOME> 160,750
<INTEREST-INCOME> 176,530
<OTHER-INCOME> 0
<EXPENSES-NET> 164,733
<NET-INVESTMENT-INCOME> 172,547
<REALIZED-GAINS-CURRENT> 6,734,053
<APPREC-INCREASE-CURRENT> 5,153,715
<NET-CHANGE-FROM-OPS> 12,060,315
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 148,833
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,728,162
<NUMBER-OF-SHARES-REDEEMED> 2,222,973
<SHARES-REINVESTED> 13,541
<NET-CHANGE-IN-ASSETS> 78,388,037
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 374,393
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 551,202
<AVERAGE-NET-ASSETS> 66,249,334
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 2.030
<PER-SHARE-DIVIDEND> 0.030
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<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.030
<EXPENSE-RATIO> 0.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
