VIRTUS FUNDS
485APOS, 1996-11-22
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                                   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.   14   ...........       X

                                  and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940    X

   Amendment No.   17   ..........................       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)
    on                 pursuant to paragraph (b)
- - -    --------------
 X  60 days after filing pursuant to paragraph (a)(i)
    75 days after filing pursuant to paragraph (a)(ii)
    on                 pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:
    This post-effective amendment designates a new effective date for a
 -
previously filed 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, 1996; 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 Style Manager: Large Cap 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 Style Manager 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 will be
                                   filed by amendment.


TRUST SHARES
COMBINED PROSPECTUS
   
January XX, 1997
    
The U.S. Government Securities Fund
   
The Style Manager: Large Cap Fund

The Style Manager 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 Style Manager 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 Style Manager: Large Cap Fund

The Style Manager 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 STYLE MANAGER: LARGE CAP FUND, THE STYLE
MANAGER 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 Style
Manager 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 Style Manager Fund, dated January XX,
1996, 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, or a paper copy of this
prospectus, if you have received your prospectus electronically, free of
charge, obtain other information, or make inquiries about any of the Funds
by writing to the Trust or calling toll-free 1-800-723-9512.
    
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
   
Prospectus dated January XX, 1997
    
TABLE OF CONTENTS

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 Style
Manager 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 Style Manager: Large Cap Fund--seeks to provide growth of capital and
income by investing in common stocks of high quality companies;

The Style Manager 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 Style Manager 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 Style Manager 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."

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 Style Manager: Large Cap Fund

The investment objective of The Style Manager: Large Cap Fund is to provide
growth of capital and income.

Acceptable Investments.  The Fund pursues its investment objective by
investing in common stocks of large capitalization companies, with a market
capitalization of at least $1 billion at the time of investment, and which
are either listed on the New York or American Stock Exchanges or trade in
the over-the-counter market. 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 will invest in stocks that the Fund's investment
adviser's proprietary investment methodology has identified as having
superior potential for growth of capital and income. At least 65% of the
fund's portfolio will be invested in common stocks, unless it is in a
defensive position.

The Fund is managed to take advantage of trends in the stock market that
favor different styles of stock selection (value or growth). 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 higher earnings growth rates which, in the opinion of the
adviser, will lead to appreciation in stock price.
Other Corporate Securities.  The Fund will invest in stocks that the Fund's
investment adviser' 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 Style Manager Fund

The investment objective of The Style Manager 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 Style Manager: Large Cap
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

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 Style Manager:
Large Cap Fund and The Style Manager 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 Style
Manager: Large Cap Fund, and The Money Market Fund and The Style Manager
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 Style Manager: Large Cap Fund, The
Style Manager 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 Style Manager: Large Cap Fund, The Money Market Fund
and The Style Manager 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 Style Manager: Large Cap 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 Style Manager: Large Cap Fund, The Style Manager 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 Style Manager: Large Cap Fund and
The Style Manager 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 Style Manager: Large Cap Fund and The Style Manager 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 Style Manager: Large Cap Fund and The Style
Manager 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 Style Manager: Large Cap Fund and The Style Manager 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.

Futures and Options on Futures. The Style Manager: Large Cap Fund, The
Style Manager Fund, The Virginia Municipal Bond Fund and The Maryland
Municipal Bond Fund may purchase and sell futures contracts to hedge all or
a portion of their portfolios against changes in interest rates and market
conditions. 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.
Stock index futures contracts are based on indices that reflect the market
value of common stock of the firms included in the indices. An index
futures contract is an agreement to which two parties agree to take or make
delivery of an amount of cash equal to the difference between the value of
the index at the close of the last trading day of the contract and the
price at which the index contract was originally written.
The Style Manager: Large Cap Fund, The Style Manager Fund, The Virginia
Municipal Bond Fund and The Maryland Municipal Bond Fund may also write
call options and purchase put options on 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 legally permitted) to collateralize the position and
thereby insure that the 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 use of such futures contracts is
unleveraged.

Risks.  When a Fund uses financial futures and options on financial future
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.
    
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 Style Manager: Large Cap Fund, The Virginia Municipal Bond Fund; The
Maryland Municipal Bond Fund--.75%; and The Style Manager Fund--1.25%. The
fee paid by The U.S. Government Securities Fund, The Style Manager: Large
Cap Fund, The Style Manager 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 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 Style Manager: Large Cap Fund since July
1994, and The Style Manager 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.

Sub-Adviser to the Fund.  The Fund's sub-adviser is Trend Capital
Management, Inc.

Sub-Advisory Fees.  Pursuant to the terms of an investment sub-advisory
agreement between the adviser and Trend Capital Management, Inc. (the
`Sub-Adviser''), the Sub-Adviser furnishes certain investment advisory
services to the adviser, including investment research, statistical and
other factual information, and recommendations, based on the Sub-Adviser's
analysis of trends in the stock market that favor different styles of stock
selection (growth versus value) and different sizes of companies (large
versus small capitalization). For the services provided and the expenses
incurred by the Sub-Adviser pursuant to the sub-advisory agreement, with
respect to The Style Manager Fund, VCM will pay Trend an annual fee as
follows: (a) an amount equal to .10% of the first $60 million of the Fund's
average daily net assets; and (b) with respect to average daily net assets
of the Fund in excess of $60 million, an amount equal to (i) one-third of
VCM's advisory fee to the extent that such advisory fee is less than or
equals 1% of the Fund's average daily net assets (but not to exceed .25% of
the Fund's average daily net assets); plus (ii) to the extent that the
annual advisory fee exceeds 1% of the Fund's average daily net assets, an
additional amount equal to two-thirds of such excess.  With respect to The
Style Manager: Large Cap Fund, VCM will pay Trend an amount equal to .15%
of the first $100 million of the Fund's average daily net assets; and .33
1/3% of the Fund's average daily net assets in excess of $100 million.

Sub-Adviser's Backround. Trend Capital Management, Inc., a Minnesota
corporation located at 956 Interchange Tower, 600 S. Highway 169,
Minneapolis, Minnesota 55426, was founded in 1992 by Thomas G. Fox, its
President and Chief Investment Officer.  Trend provides investment advisory
services to individuals and institutions, and is registered as an
investment adviser with the Securities and Exchange Commission.  Trend also
provides general portfolio management services for certain clients subject
to the client's investment objective.  Trend does not provide investment
advisory services to any other mutual fund.
    
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 Style Manager 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 Style Manager
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 Style Manager 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 Style
Manager Fund. The Plan will not be activated unless and until a second
class of shares of The Tax-Free Money Market Fund and The Style Manager
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
Style Manager Fund additional amounts predicated upon the amount of shares
of The Tax-Free Money Market Fund, The Style Manager 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 Style
Manager 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:

Maximum                  Average Aggregate Daily
Administrative Fee       Net Assets of the Trust
   
 .15%                     on the first $250 million
 .125%                    on the next $250 million
 .10%                     on the next $250 million
 .075%                    on assets in excess of $750 million

The administrative fee received during any fiscal year shall be at least
$50,000 per Fund. With respect to The Style Manager 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 Shareholder
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 Style Manager:
Large Cap Fund, The Style Manager 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 Style Manager:
Large Cap Fund, The Style Manager 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 The Virtus
Funds 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 Trust Company before 10:00 a.m. (Eastern time) in order to begin
earning dividends on that day. For orders received after 10:00 a.m.
(Eastern time) payment must be received by 10:00 a.m. (Eastern time) on the
next business day after placing the order. With respect to The U.S.
Government Securities Fund, The Style Manager: Large Cap Fund, The Style
Manager 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 Style Manager 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 Style Manager: Large Cap Fund,
The Style Manager 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
Style Manager: Large Cap Fund, The Style Manager 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 Style Manager: Large Cap Fund and The Style Manager
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 Style Manager:
Large Cap Fund, The Style Manager Fund, The Virginia Municipal Bond Fund
and The Maryland Municipal Bond Fund, capital gains realized by a Fund, if
any, will be distributed at least once every 12 months.
    
Redeeming Shares

Each Fund redeems Shares at their net asset value next determined after
Signet Trust Company receives the redemption request. Redemptions will be
made on days on which a Fund computes its net asset value. Telephone or
written requests for redemption must be received in proper form by Signet
Trust Company.

By Telephone.  A shareholder may redeem Shares of a Fund by calling Signet
Trust Company to request the redemption. (Call 804-771-7470) Shares will be
redeemed at the net asset value next determined after a Fund receives the
redemption request from Signet Trust Company.

With respect to The Treasury Money Market Fund, The Money Market Fund, and
The Tax-Free Money Market Fund, redemption requests received before 11:00
a.m. (Eastern time) will be wired the same day, but will not be entitled to
that day's dividend. A redemption request must be received by Signet Trust
Company before 4:00 p.m. (Eastern time). Redemption requests through
registered broker/dealers must be received by Signet Trust Company before
3:00 p.m. (Eastern time). Signet Trust Company is responsible for promptly
submitting redemption requests and providing proper written redemption
instructions to a Fund. Other registered broker/dealers may charge
customary fees and commissions for this service.
   
With respect to The U.S. Government Securities Fund, The Style Manager:
Large Cap Fund, The Style Manager 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 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 Style
Manager: Large Cap Fund (87%); approximately 5,519,877 shares of The Style
Manager 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 Style Manager:
Large Cap Fund, The Style Manager 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 Style Manager: Large Cap Fund, The Style Manager 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 Style Manager:
Large Cap Fund and The Style Manager 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 Style
Manager: Large Cap Fund, The Style Manager 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 charge or other similar non-recurring
charges.

With respect to The U.S. Government Securities Fund and The Style Manager:
Large Cap 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 Style Manager: Large Cap 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 Style Manager: Large Cap Fund       Pittsburgh, Pennsylvania 15222-3779
The Style Manager 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 Virtus Funds
Trust Shares
consists of eight portfolios:
The U. S. Government Securities Fund;
The Style Manager: Large Cap Fund;
The Style Manager Fund;
The Virginia Municipal Bond Fund;
The Maryland Municipal Bond Fund;
The Treasury Money Market Fund;
The Money Market Fund; and
The Tax-Free Money Market Fund.
Combined Statement of Additional Information
    

   This Combined Statement of Additional Information should be read with
   the Combined Prospectus for the Trust Shares Janaury XX, 1997. This
   Statement is not a Prospectus itself. To receive a copy of the
   prospectus, write to or call the Trust.
   FEDERATED INVESTORS TOWER
   PITTSBURGH, PA 15222-3779

                      STATEMENT DATED JANUARY, XX, 1997
                                        


   FEDERATED INVESTORS
   Federated Investors Tower
   Pittsburgh, PA  15222-3779


Federated Securities Corp. is
CUSIP 927913863
CUSIP 927913830
CUSIP 927913889
CUSIP 927913608
CUSIP 927913806

                                         2102608B-I (1/97)



GENERAL INFORMATION ABOUT THE TRUST                                     1

INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS                          1

THE U.S. GOVERNMENT SECURITIES FUND                                     1

 Types of Investments           1
THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER FUND            2

 Commercial Paper               4
 Bank Instruments               4
THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND   5

 Acceptable Investments         5
 Types of Acceptable Investments5
THE TREASURY MONEY MARKET FUND  5

 Types of Investments           5
THE MONEY MARKET FUND           6

 Types of Investments           6
THE TAX-FREE MONEY MARKET FUND  6

PORTFOLIO INVESTMENTS AND STRATEGIES                                    6

 Repurchase Agreements          6
 Reverse Repurchase Agreements  6
 When-Issued and Delayed Delivery Transactions                          6
 Lending of Portfolio Securities7
 Restricted and Illiquid Securities                                     7
 Participation Interests        7
 Variable Rate Municipal Securities                                     8
 Municipal Leases               8


 Temporary Investments          8
 Adjustable Rate Mortgage Securities                                    8
 Portfolio Turnover             9
INVESTMENT LIMITATIONS          9

THE VIRTUS FUNDS MANAGEMENT    13

 The Funds                     18
 Fund Ownership                18
 Officers and Trustees Compensation                                    19
 Trustee Liability             20



INVESTMENT ADVISORY SERVICES   20

 Adviser to the Trust          20
 Advisory Fees                 20
ADMINISTRATIVE SERVICES        21

CUSTODIAN                      21

BROKERAGE TRANSACTIONS         21

PURCHASING SHARES              22

 Distribution Plan             22
 Conversion to Federal Funds   22
ADMINISTRATIVE ARRANGEMENTS    22

DETERMINING NET ASSET VALUE    22

 Determining Market Value of Securities                                23
 Use of the Amortized Cost Method                                      23
 Valuing Municipal Securities  24
 Use of Amortized Cost         24
REDEEMING SHARES               24

 Redemption in Kind            24
TAX STATUS                     25

 The Funds' Tax Status         25
 Shareholders' Tax Status      25
TOTAL RETURN                   26

YIELD                          26


EFFECTIVE YIELD                26

TAX-EQUIVALENT YIELD           27

PERFORMANCE COMPARISONS        30

 The U.S. Government Securities Fund                                   31
 The Style Manager: Large Cap Fund and The Style Manager Fund          32
 The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund 32
 The Treasury Money Market Fund32
 The Money Market Fund         32
 The Tax-Free Money Market Fund33


APPENDIX                       34

    


GENERAL INFORMATION ABOUT THE TRUST

   
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated June 20, 1990. As of the date of this Statement,
the Trust consists of eight separate portfolios of securities
(collectively, the `Funds'', individually, a ``Fund'') which are as
follows: The U. S. Government Securities Fund, The Style Manager: Large Cap
Fund, The Style Manager Fund, The Virginia Municipal Bond Fund, The
Maryland Municipal Bond Fund, The Treasury Money Market Fund, The Money
Market Fund, and The Tax-Free Money Market Fund. On October 1, 1992, the
name of the Trust was changed from `The SBK Select Series'' to ``Signet
Select Funds.''On August 15, 1994, the name of the Trust was changed from
`Signet Select Funds'' to ``The Medalist Funds.'' On February 15, 1995, the
name of the Trust was changed from "The Medalist Funds" to "The Virtus
Funds."
With the exception of The Tax-Free Money Market Fund and The Style Manager
Fund, which offer a single class of shares, the Funds are offered in two
classes, Investment Shares and Trust Shares. This Combined Statement of
Additional Information relates only to the Trust Shares of those Funds
offering classes and to shares of The Tax-Free Money Market Fundand The
Style Manager Fund.
    
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS

The prospectus discusses the objective of each Fund and the policies it
employs to achieve those objectives. The following discussion supplements
the description of the Funds' investment policies in the combined
prospectus.


The Funds' respective investment objectives cannot be changed without
approval of shareholders. The investment policies described below may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
Additional information about investment limitations, strategies that one or
more Funds may employ, and certain investment policies mentioned below
appear in the prospectus section `Portfolio Investments and Strategies.''
THE U.S. GOVERNMENT SECURITIES FUND

TYPES OF INVESTMENTS
The Fund invests primarily in securities which are guaranteed as to payment
of principal and interest by the U.S. government or its instrumentalities.
  U.S. GOVERNMENT OBLIGATIONS
     The types of U.S. government obligations in which the Fund may invest
     generally include direct obligations of the U.S. Treasury (such as
     U.S. Treasury bills, notes, and bonds) and obligations issued or
     guaranteed by U.S. government agencies or instrumentalities. These
     securities are backed by: the full faith and credit of the U.S.
     Treasury; the issuer's right to borrow from the U.S. Treasury; the
     discretionary authority of the U.S. government to purchase certain
     obligations of agencies or instrumentalities; or the credit of the
     agency or instrumentality issuing the obligations.
     Examples of agencies and instrumentalities which may not always
     receive financial support from the U.S. government are: the Farm
     Credit System; Federal Home Loan Banks; Farmers Home Administration;
     and Federal National Mortgage Association.
  COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
     Privately issued CMOs generally represent an ownership interest in
     federal agency mortgage pass-through securities such as those issued
     by the Government National Mortgage Association. The terms and
     characteristics of the mortgage instruments may vary among pass-
     through mortgage loan pools.
     The market for such CMOs has expanded considerably since its
     inception. The size of the primary issuance market and the active
     participation in the secondary market by securities dealers and other
     investors make government-related pools highly liquid.
        
THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER FUND

    
The Funds invest primarily in corporate securities, including common
stocks, preferred stocks, corporate bonds, notes, warrants and convertible
securities.
  CONVERTIBLE SECURITIES
     Convertible securities are fixed income securities which may be
     exchanged or converted into a predetermined number of the issuer's
     underlying common stock at the option of the holder during a specified
     time period. Convertible securities may take the form of convertible
     preferred stock, convertible bonds or debentures, units consisting of
     `usable'' bonds and warrants or a combination of the features of
     several of these securities. The investment characteristics of each
     convertible security vary widely, which allows convertible securities
     to be employed for different investment objectives.
     A Fund will exchange or convert the convertible securities held in its
     portfolio into shares of the underlying common stock in instances in
     which, in the investment adviser's opinion, the investment
     characteristics of the underlying common shares will assist the Fund
     in achieving its investment objectives. Otherwise, the Fund may hold
     or trade convertible securities. In selecting convertible securities
     for a Fund, the Fund's adviser evaluates the investment
     characteristics of the convertible security as a fixed income
     instrument, and the investment potential of the underlying equity
     security for capital appreciation. In evaluating these matters with
     respect to a particular convertible security, a Fund's adviser
     considers numerous factors, including the economic and political
     outlook, the value of the security relative to other investment
     alternatives, trends in the determinants of the issuer's profits, and
     the issuer's management capability and practices.
  WARRANTS
     Warrants are basically options to purchase common stock at a specific
     price (usually at a premium above the market value of the optioned
     common stock at issuance) valid for a specific period of time.
     Warrants may have a life ranging from less than a year to twenty years
     or may be perpetual. However, most warrants have expiration dates
     after which they are worthless. In addition, if the market price of
     the common stock does not exceed the warrant's exercise price during
     the life of the warrant, the warrant will expire as worthless.
     Warrants have no voting rights, pay no dividends, and have no rights
     with respect to the assets of the corporation issuing them. The
     percentage increase or decrease in the market price of the warrant may
     tend to be greater than the percentage increase or decrease in the
     market price of the optioned common stock.
  FUTURES AND OPTIONS TRANSACTIONS
     As a means of reducing fluctuations in the net asset value of shares
     of a Fund, the Fund may attempt to hedge all or a portion of its
     portfolio by buying and selling financial futures contracts, buying
     put options on portfolio securities and listed put options on futures
     contracts, and writing call options on futures contracts. a Fund may
     also write covered call options on portfolio securities to attempt to
     increase its current income. The Fund will maintain its positions in
     securities, option rights, and segregated cash subject to puts and
     calls until the options are exercised, closed, or have expired. An
     option position on financial futures contracts may be closed out only
     on an exchange which provides a secondary market from options of the
     same series.
  FINANCIAL FUTURES CONTRACTS
     A futures contract is a firm commitment by two parties: the seller,
     who agrees to make delivery of the specific type of security called
     for in the contract (`going short'') and the buyer, who agrees to
     take delivery of the security (`going long'') at a certain time in
     the future. Financial futures contracts call for the delivery of
     shares of common stocks represented in a particular index.
  PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
     A Fund may purchase listed put options on financial futures contracts.
     Unlike entering directly into a futures contract, which requires the
     purchaser to buy a financial instrument on a set date at a specified
     price, the purchase of a put option on a futures contract entitles
     (but does not obligate) its purchaser to decide on or before a future
     date whether to assume a short position at the specified price.
     Generally, if the hedged portfolio securities decrease in value during
     the term of an option, the related futures contracts will also
     decrease in value and the option will increase in value. In such an
     event, a Fund will normally close out its option by selling an
     identical option. If the hedge is successful, the proceeds received by
     a Fund upon the sale of the second option will be large enough to
     offset both the premium paid by the Fund for the original option plus
     the decrease in value of the hedged securities.
     Alternatively, the Fund may exercise its put option to close out the
     position. To do so, it would simultaneously enter into a futures
     contract of the type underlying the option (for a price less than the
     strike price of the option) and exercise the option. The Fund would
     then deliver the futures contract in return for payment of the strike
     price. If the Fund neither closes out nor exercises an option, the
     option will expire on the date provided in the option contract, and
     only the premium paid for the contract will be lost.
  CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
     In addition to purchasing put options on futures, a Fund may write
     listed call options on futures contracts to hedge its portfolio. When
     a Fund writes a call option on a futures contract, it is undertaking
     the obligation of assuming a short futures position (selling a futures
     contract) at the fixed strike price at any time during the life of the
     option if the option is exercised. As stock prices fall, causing the
     prices of futures to go down, the Fund's obligation under a call
     option on a future (to sell a futures contract) costs less to fulfill,
     causing the value of the Fund's call option position to increase.
     In other words, as the underlying futures price goes down below the
     strike price, the buyer of the option has no reason to exercise the
     call, so that the Fund keeps the premium received for the option. This
     premium can substantially offset the drop in value of the Fund's fixed
     income or indexed portfolio which is occurring as interest rates rise.
     Prior to the expiration of a call written by a Fund, or exercise of it
     by the buyer, the Fund may close out the option by buying an identical
     option. If the hedge is successful, the cost of the second option will
     be less than the premium received by the Fund for the initial option.
     The net premium income of the Fund will then substantially offset the
     decrease in value of the hedged securities.
     A Fund will not maintain open positions in futures contracts it has
     sold or call options it has written on futures contracts if, in the
     aggregate, the value of the open positions (marked to market) exceeds
     the current market value of its securities portfolio plus or minus the
     unrealized gain or loss on those open positions, adjusted for the
     correlation of volatility between the hedged securities and the
     futures contracts. If this limitation is exceeded at any time, the
     Fund will take prompt action to close out a sufficient number of open
     contracts to bring its open futures and options positions within this
     limitation.
  ``MARGIN'' IN FUTURES TRANSACTIONS
     Unlike the purchase or sale of a security, a Fund does not pay or
     receive money upon the purchase or sale of a futures contract. Rather,
     the Fund is required to deposit an amount of `initial margin'' in
     cash or U.S. Treasury bills with its custodian (or the broker, if
     legally permitted). The nature of initial margin in futures
     transactions is different from that of margin in securities
     transactions in that futures contract initial margin does not involve
     the borrowing of funds by the Fund to finance the transactions.
     Initial margin is in the nature of a performance bond or good faith
     deposit on the contract which is returned to the Fund upon termination
     of the futures contract, assuming all contractual obligations have
     been satisfied.
     A futures contract held by a Fund is valued daily at the official
     settlement price of the exchange on which it is traded. Each day the
     Fund pays or receives cash, called `variation margin,'' equal to the
     daily change in value of the futures contract. This process is known
     as `marking to market.'' Variation margin does not represent a
     borrowing or loan by the Fund but is instead settlement between the
     Fund and the broker of the amount one would owe the other if the
     futures contract expired. In computing its daily net asset value, the
     Fund will mark to market its open futures positions.
     The Fund is also required to deposit and maintain margin when it
     writes call options on futures contracts.
  PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
     A Fund may purchase put options on portfolio securities to protect
     against price movements in particular securities in its portfolio. A
     put option gives the Fund, in return for a premium, the right to sell
     the underlying security to the writer (seller) at a specified price
     during the term of the option.
  WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
     A Fund may also write covered call options to generate income. As
     writer of a call option, the Fund has the obligation upon exercise of
     the option during the option period to deliver the underlying security
     upon payment of the exercise price. The Fund may only sell call
     options either on securities held in its portfolio or on securities
     which it has the right to obtain without payment of further
     consideration (or has segregated cash in the amount of any additional
     consideration).
  OVER-THE-COUNTER OPTIONS
     A Fund may purchase and write over-the-counter options on portfolio
     securities in negotiated transactions with the buyers or writers of
     the options for those options on portfolio securities held by the Fund
     and not traded on an exchange.
     Over-the-counter options are two party contracts with price and terms
     negotiated between buyer and seller. In contrast, exchange-traded
     options are third party contracts with standardized strike prices and
     expiration dates and are purchased from a clearing corporation.
     Exchange-traded options have a continuous liquid market while over-
     the-counter options may not.
  U.S. GOVERNMENT OBLIGATIONS
     The types of U.S. government obligations in which the Fund may invest
     are those set forth under `The U.S. Government Securities Fund-U.S.
     Government Obligations.''
COMMERCIAL PAPER
A Fund may invest in commercial paper rated at least A-1 by Standard &
Poor's Ratings Group (`S&P''), Prime-1 by Moody's Investors Service, Inc.
(`Moody's''), or F-1 by Fitch Investors Service (``Fitch'') and money
market instruments (including commercial paper) which are unrated but of
comparable quality, including Canadian Commercial Paper (`CCPs'') and
Europaper. In the case where commercial paper, CCPs or Europaper have
received different ratings from different rating services, such commercial
paper, CCPs or Europaper is an acceptable investment so long as at least
one rating is one of the preceding high quality ratings and provided the
investment adviser has determined that such investment presents minimal
credit risks.
BANK INSTRUMENTS
A Fund may invest in the instruments of banks and savings and loans whose
deposits are insured by the Bank Insurance Fund (`BIF''), which is
administered by the Federal Deposit Insurance Corporation (`FDIC''), or
the Savings Association Insurance Fund (`SAIF''), which is administered by
the FDIC, such as certificates of deposit, demand and time deposits,
savings shares, and bankers' acceptances. These instruments are not
necessarily guaranteed by those organizations.


In addition to domestic bank obligations such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, the
Fund may invest in:
   o Eurodollar Certificates of Deposit (`ECDs'') issued by foreign
     branches of U.S. or foreign banks;
   o Eurodollar Time Deposits (`ETDs''), which are U.S. dollar-denominated
     deposits in foreign branches of U.S. or foreign banks;
   o Canadian Time Deposits, which are U.S. dollar-denominated deposits
     issued by branches of major Canadian banks located in the United
     States; and
   o Yankee Certificates of Deposit (`Yankee CDs''), which are U.S.
     dollar-denominated certificates of deposit issued by U.S. branches of
     foreign banks and held in the United States.
THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND

ACCEPTABLE INVESTMENTS
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
pursue their investment objectives by investing in professionally managed
portfolios of securities at least 65% of which are comprised of Virginia
(in the case of The Virginia Municipal Bond Fund) or Maryland (in the case
of The Maryland Municipal Bond Fund) municipal securities. The Funds will
invest their assets so that, under normal circumstances, at least 80% of
their annual interest income is exempt from federal regular and Virginia
(in the case of The Virginia Municipal Bond Fund) or Maryland (in the case
of The Maryland Municipal Bond Fund) state income taxes or that at least
80% of their total assets are invested in obligations, the interest income
from which is exempt from federal regular and Virginia (in the case of The
Virginia Municipal Bond Fund) or Maryland (in the case of The Maryland
Municipal Bond Fund) state income taxes.


  CHARACTERISTICS
     The municipal securities in which the Funds invest have the
     characteristics set forth in the prospectus. An unrated municipal
     security will be determined by a Fund's adviser to meet the quality
     standards established by the Fund's Board of Trustees if it is of
     comparable quality to the rated municipal securities which the Fund
     purchases. The Trustees consider the creditworthiness of the issuer of
     a municipal security, the issuer of a participation interest if the
     Fund has the right to demand payment from the issuer of the interest
     or the guarantor of payment by either of those issuers.
     If Moody's or S&P's ratings change because of changes in those
     organizations or in their rating systems, a Fund will try to use
     comparable ratings as standards in accordance with the investment
     policies described in the Fund's prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of Virginia and Maryland municipal securities are:
   o municipal notes and tax-exempt commercial paper;
   o serial bonds sold with a series of maturity dates;
   o tax anticipation notes sold to finance working capital needs of
     municipalities in anticipation of receiving taxes at a later date;
   o bond anticipation notes sold in anticipation of the issuance of
     longer-term bonds in the future;
   o revenue anticipation notes sold in expectation of receipt of federal
     income available under the Federal Revenue Sharing Program;
   o prerefunded municipal bonds refundable at a later date (payment of
     principal and interest on prerefunded bonds is assured through the
     first call date by the deposit in escrow of U.S. government
     securities); or
   o general obligation bonds secured by a municipality's pledge of
     taxation.
THE TREASURY MONEY MARKET FUND

TYPES OF INVESTMENTS
The Fund invests only in short-term U.S. Treasury obligations. Short-term
U.S. Treasury obligations as used herein refers to evidences of
indebtedness issued by the United States, or issued by an agency or
instrumentality thereof, and fully guaranteed as to principal and interest
by the United States, maturing in 397 days or less from the date of
acquisition unless they are purchased under a repurchase agreement that
provides for repurchase by the seller within one year from the date of
acquisition. The Fund may also retain Fund assets in cash.
THE MONEY MARKET FUND

TYPES OF INVESTMENTS
The Fund invests primarily in money market instruments maturing in 397 days
or less and which include, but are not limited to, commercial paper and
demand master notes, domestic and foreign bank instruments, U.S. government
obligations, and corporate debt obligations.
   
  BANK INSTRUMENTS
     The types of bank instruments in which the Fund invests are those set
     forth under `The Style Manager: Large Cap Fund-Bank Instruments.''
         
  U.S. GOVERNMENT OBLIGATIONS
     The types of U.S. government obligations in which the Fund may invest
     are those set forth under `The U.S. Government Securities Fund-U.S.
     Government Obligations.''


THE TAX-FREE MONEY MARKET FUND

The Fund invests in a portfolio of municipal securities maturing in 13
months or less. As a matter of investment policy, which cannot be changed
without shareholder approval, at least 80% of the Fund's annual interest
income will be exempt from federal income tax (including alternative
minimum tax). The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.
PORTFOLIO INVESTMENTS AND STRATEGIES

REPURCHASE AGREEMENTS
The Funds or their custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market
daily. In the event that a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Funds believe that under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in
favor of a Fund and allow retention or disposition of such securities. The
Funds will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement a Fund transfers possession of a portfolio instrument to another
person, such as a financial institution, broker, or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable a
Fund to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that a Fund will be able to avoid
selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of a
Fund sufficient to make payment for the securities to be purchased are
segregated on a Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Funds may engage in these transactions to an extent that would cause
the segregation of an amount up to 20% of the total value of their assets.
The Funds do not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of their respective assets.
   
LENDING OF PORTFOLIO SECURITIES
The collateral received when The U.S. Government Securities Fund, The Style
Manager: Large Cap Fund, The Style Manager Fund, and The Money Market Fund
lend portfolio securities must be valued daily and, should the market value
of the loaned securities increase, the borrower must furnish additional
collateral to the particular Fund. During the time portfolio securities are
on loan, the borrower pays a Fund any dividends or interest paid on such
securities. Loans are subject to termination at the option of a Fund or the
borrower. A Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest
earned on the cash or equivalent collateral to the borrower or placing
broker. The U.S. Government Securities Fund and The Style Manager: Large
Cap Fund do not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in restricted securities. Restricted securities are
any securities in which a Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restriction on
resale under federal securities law. However, The U.S. Government
Securities Fund, The Style Manager: Large Cap Fund, The Style Manager Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund will
limit investments in illiquid securities, including certain restricted
securities determined by the Trustees not to be liquid, and repurchase
agreements providing for settlement in more than seven days after notice,
to 15% of its net assets. In the case of The Virginia Municpal Bond Fund
and The Maryland Municipal Bond Fund, illiquid securities will include
participation interests and variable rate municipal securities without a
demand feature or with a demand feature of longer than seven days and which
the adviser believes cannot be sold within seven days. The Treasury Money
Market Fund, The Money Market Fund, and The Tax-Free Money Market Fund will
limit investments in illiquid securities, including certain securities
determined by the Trustees not to be liquid, and repurchase agreements
providing for settlement in more than seven days after notice, and in the
case of The Money Market Fund, specifically including non-negotiable fixed
income time deposits with maturities over seven days, to 10% of their net
assets.
The U.S. Government Securities Fund, The Style Manager: Large Cap Fund, The
Style Manager Fund,  and The Money Market Fund may invest in commercial
paper issued in reliance on the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933. Section 4(2) commercial paper
is restricted as to disposition under federal securities law and is
generally sold to institutional investors, such as the Fund, who agree that
they are purchasing the paper for investment purposes and not with a view
to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Funds believe that Section 4(2)
commercial paper and possibly certain other restricted securities which
meet the criteria for liquidity established by the Board of Trustees are
quite liquid. The Funds intend, therefore, to treat the restricted
securities which meet the criteria for liquidity established by the
Trustees, including Section 4(2) commercial paper, as determined by a
Fund's investment adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section
4(2) commercial paper is liquid, the Funds intend to not subject such paper
to the limitation applicable to restricted securities.
    
PARTICIPATION INTERESTS
The financial institutions from which The Virginia Municipal Bond Fund, The
Maryland Municipal Bond Fund, and The Tax-Free Money Market Fund purchase
participation interests frequently provide or secure from other financial
institutions irrevocable letters of credit or guarantees and give a Fund
the right to demand payment on specified notice (normally within thirty
days for The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund and seven days for The Tax-Free Money Market Fund) from the issuer of
the letter of credit or guarantee. These financial institutions may charge
certain fees in connection with their repurchase commitments, including a
fee equal to the excess of the interest paid on the municipal securities
over the negotiated yield at which the participation interests were
purchased by a Fund. By purchasing participation interests, a Fund is
buying a security meeting the maturity and quality requirements of a Fund
and is also receiving the tax-free benefits of the underlying securities.
In the acquisition of participation interests, a Fund's investment adviser
will consider the following quality factors:
   o the quality of the underlying municipal security (of which a Fund
     takes possession);
   o the quality of the issuer of the participation interest; and
   o a guarantee or letter of credit from a high-quality financial
     institution supporting the participation interest.
VARIABLE RATE MUNICIPAL SECURITIES
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund invest in variable municipal securities.
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for
fixed income obligations.
Many municipal securities with variable interest rates purchased by the The
Tax-Free Money Market Fund are subject to repayment of principal (usually
within seven days) on the The Tax-Free Money Market Fund's demand. For
purposes of determining the Fund's average maturity, the maturities of
these variable rate demand municipal securities (including participation
interests) are the longer of the periods remaining until the next
readjustment of their interest rates or the periods remaining until their
principal amounts can be recovered buy exercising the right to demand
payment. The terms of these variable rate demand instruments require
payment of principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests or a guarantor of
either issuer.
MUNICIPAL LEASES
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund may purchase municipal securities in the form of
participation interests which represent undivided proportional interests in
lease payments by a governmental or nonprofit entity. The lease payments
and other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations
may be subject to periodic appropriation. If the entity does not
appropriate funds for future lease payments, the entity cannot be compelled
to make such payments. Furthermore, a lease may provide that the
certificate trustee cannot accelerate lease obligations upon default. The
trustee would only be able to enforce lease payments as they became due. In
the event of a default or failure of appropriation, it is unlikely that the
trustee would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the adviser,
under the authority delegated by the Board of Trustees, will base its
determination on the following factors: (a) whether the lease can be
terminated by the lessee; (b) the potential recovery, if any, from a sale
of the leased property upon termination of the lease; (c) the lessee's
general credit strength (e.g., its debts, administrative, economic and
financial characteristics, and prospects); (d) the likelihood that the
lessee will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to its operations (e.g.,
the potential for an `event of nonappropriation''); and (e) any credit
enhancement of legal recourse provided upon an event of nonappropriation or
other termination of the lease.
TEMPORARY INVESTMENTS
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund and The
Tax-Free Money Market Fund may also invest in temporary investments during
times of unusual market conditions for defensive purposes and to maintain
liquidity.
From time to time, such as when suitable securities are not available to
the respective Fund, a Fund may invest a portion of its assets in cash. Any
portion of a Fund's assets maintained in cash will reduce the amount of
assets in securities held in the respective Fund, and could thereby reduce
a Fund's yield.
ADJUSTABLE RATE MORTGAGE SECURITIES
The U.S. Government Securities Fund invests in adjustable rate mortgage
securities (`ARMS''). Not unlike other U.S. government securities, the
market value of ARMS will generally vary inversely with changes in market
interest rates. Thus, the market value of ARMS generally declines when
interest rates rise and generally rises when interest rates decline.
While ARMS generally entail less risk of a decline during periods of
rapidly rising rates, ARMS may also have less potential for capital
appreciation than other similar investments (e.g. investments with
comparable maturities) because as interest rates decline, the likelihood
increases that mortgages will be prepaid. Furthermore, if ARMS are
purchased at a premium, mortgage foreclosures and unscheduled principal
payment may result in some loss of a holder's principal investment to the
extent of the premium paid. Conversely, if ARMS are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
   
PORTFOLIO TURNOVER
The Funds will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt
to achieve a Fund's investment objective. The Style Manager: Large Cap Fund
and The Style Manager Fund may experience greater portfolio turnover than
would be expected with a portfolio of higher-rated securities. A high
portfolio turnover will result in increased transaction costs to the Fund.
For the fiscal years ended September 30, 1995, 1994, and 1993, the
portfolio turnover rates were 82%, 227%, and 154%, respectively, for The
U.S. Government Securities Fund; 208%, 205%, and 67%, respectively, for The
Style Manager: Large Cap Fund; 26%, 29%, 17% for The Virginia Municipal
Bond Fund; and 21%, 27%, and 23%, respectively, for The Maryland Municipal
Bond Fund. For the period from March 7, 1995, (date of initial public
investment) to September 30, 1995 The Style Manager Fund's portfolio
turnover was 92%.
    
INVESTMENT LIMITATIONS

  ISSUING SENIOR SECURITIES AND BORROWING MONEY
   
     The Funds will not issue senior securities except that a Fund may
     borrow money directly or through reverse repurchase agreements in
     amounts up to one-third of the value of its net assets, including the
     amount borrowed. The Funds will not borrow money or engage in reverse
     repurchase agreements for investment leverage, but rather as a
     temporary, extraordinary, or emergency measure or to facilitate
     management of the portfolio by enabling a Fund to meet redemption
     requests when the liquidation of portfolio securities is deemed to be
     inconvenient or disadvantageous. A Fund will not purchase any
     securities while any borrowings in excess of 5% of its total assets
     are outstanding. With respect to The U.S. Government Securities Fund,
     The Style Manager: Large Cap Fund, The Style Manager Fund, The
     Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, The
     Treasury Money Market Fund, and The Money Market Fund, during the
     period any reverse repurchase agreements are outstanding, the Funds
     will restrict the purchase of portfolio securities to money market
     instruments maturing on or before the expiration date of the reverse
     repurchase agreements, but only to the extent necessary to assure
     completion of the reverse repurchase agreements.
  SELLING SHORT AND BUYING ON MARGIN
     The Funds will not purchase any securities on margin but they may
     obtain such short-term credits as may be necessary for clearance of
     transactions. With respect to The U.S. Government Securities Fund, The
     Style Manager: Large Cap Fund and The Style Manager Fund, the deposit
     or payment by the Fund of initial or variation margin in connection
     with financial futures contracts or related options transactions is
     not considered the purchase of a security on margin. The Virginia
     Municipal Bond Fund, The Maryland Municipal Bond Fund, The Treasury
     Money Market Fund, The Money Market Fund, and The Tax-Free Money
     Market Fund may not sell any securities short.
         
  PLEDGING ASSETS
     The Funds will not mortgage, pledge, or hypothecate any assets except
     to secure permitted borrowings. In these cases the Funds, except The
     Tax-Free Money Market Fund, may pledge assets having a market value
     not exceeding the lesser of the dollar amounts borrowed or 15% of the
     value of total assets of a Fund at the time of the pledge. Margin
     deposits for the purchase and sale of financial futures contracts and
     related options are not deemed to be a pledge.
  LENDING CASH OR SECURITIES
   
     The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund, The Treasury Money Market Fund and The
     Money Market Fund, will not lend any of their assets, except portfolio
     securities up to one-third of the value of their total assets. This
     shall not prevent a Fund from purchasing or holding bonds, debentures,
     notes, certificates of indebtedness, or other debt securities,
     entering into repurchase agreements, or engaging in other transactions
     where permitted by a Fund's investment objective, policies, and
     limitations or the Trust's Declaration of Trust.
         
     The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
     will not lend any of their assets, except that they may acquire
     publicly or nonpublicly issued municipal securities or temporary
     investments or enter into repurchase agreements as permitted by a
     Fund's investment objective, policies, limitations and Declaration of
     Trust.
     The Tax-Free Money Market Fund will not lend any of its assets except
     that it may purchase or hold portfolio securities permitted by its
     investment objective, policies and limitations, or Declaration of
     Trust.


  INVESTING IN RESTRICTED SECURITIES
   
     Except for The Tax-Free Money Market Fund, the Funds will not invest
     more than 10% of their net assets in securities subject to
     restrictions on resale under the Securities Act of 1933 (except
     certain restricted securities which meet the criteria for liquidity as
     established by the Board of Trustees. With respect to The U.S.
     Government Securities Fund, The Style Manager: Large Cap Fund, The
     Style Manager Fund and The Money Market Fund, this exception
     specifically extends to commercial paper issued under Section 4(2) of
     the Securities Act of 1933 and certain other restricted securities
     which meet the criteria for liquidity as established by the Board of
     Trustees).
     The Tax-Free Money Market Fund will not invest more than 10% of its
     total assets in securities subject to restrictions on resale under
     federal securities law, except for restricted securities determined to
     be liquid under criteria established by the Trustees.
  INVESTING IN COMMODITIES
     The Funds will not purchase or sell commodities, commodity contracts
     or commodity futures contracts except for financial futures contracts
     in the case of The Style Manager: Large Cap Fund and The Style Manager
     Fund.
  INVESTING IN REAL ESTATE
     The Funds will not purchase or sell real estate, including limited
     partnership interests with respect to The Style Manager Fund, although
     The U.S. Government Securities Fund, The Style Manager: Large Cap Fund
     and The Style Manager Fund may invest in securities secured by real
     estate or interests in real estate or issued by companies, including
     real estate investment trusts, which invest in real estate or
     interests therein. The Virginia Municipal Bond Fund, The Maryland
     Municipal Bond Fund, The Money Market Fund, and The Tax-Free Money
     Market Fund may invest in securities of issuers whose business
     involves the purchase or sale of real estate or in securities which
     are secured by real estate or interests in real estate.
  DIVERSIFICATION OF INVESTMENTS
     With respect to 75% of the value of its total assets, The U.S.
     Government Securities Fund, The Style Manager: Large Cap Fund, The
     Style Manager Fund and The Money Market Fund will not purchase
     securities issued by any one issuer (other than cash, cash items or
     securities issued or guaranteed by the government of the United States
     or its agencies or instrumentalities and repurchase agreements
     collateralized by such securities), if as a result more than 5% of the
     value of its total assets would be invested in the securities of that
     issuer. The U.S. Government Fund and The Style Manager: Large Cap Fund
     will not acquire more than 10% of the outstanding voting securities of
     any one issuer.
  CONCENTRATION OF INVESTMENTS
     The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund and The Money Market Fund will not invest
     25% or more of the value of their total assets in any one industry.
     With respect to The Money Market Fund, investing in bank instruments
     (such as time and demand deposits and certificates of deposit), U.S.
     government obligations, or instruments secured by these money market
     instruments, such as repurchase agreements for U.S. government
     obligations, shall not be considered investments in any one industry.
         
     The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
     will not purchase securities if, as a result of such purchase, 25% or
     more of the value of its total assets would be invested in any one
     industry or in industrial development bonds or other securities, the
     interest on which is paid from revenues of similar types of projects.
     However, these Funds may invest as temporary investments more than 25%
     of the value of its assets in cash or cash items, securities issued or
     guaranteed by the U.S. government, its agencies, or instrumentalities,
     or instruments secured by these money market instruments, such as
     repurchase agreements.
     The Tax-Free Money Market Fund will not invest 25% or more of the
     value of its total assets in any one industry, except that it may
     invest more than 25% of its total assets in securities issued or
     guaranteed by the U.S. government, its agencies or instrumentalities
     and industrial development bonds as long as they are not from the same
     facility or similar types of facilities. The Tax-Free Money Market
     Fund does not intend to purchase securities that would increase the
     percentage of its assets invested in the securities of governmental
     subdivisions located in any one state, territory, or U.S. possession
     to 25% or more.
  UNDERWRITING
     The Funds will not underwrite any issue of securities, except as a
     Fund may be deemed to be an underwriter under the Securities Act of
     1933 in connection with the sale of securities in accordance with its
     investment objective, policies, and limitations.
The above limitations cannot be changed with respect to a Fund without
approval of a majority of that Fund's Shares. The following limitations may
be changed by the Trustees without shareholder approval. Shareholders will
be notified before any material change in these limitations becomes
effective.


  INVESTING IN ILLIQUID SECURITIES
   
     The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund, The Virginia Municipal Bond Fund, and
     The Maryland Municipal Bond Fund will not invest more than 15% of the
     value of their net assets in illiquid securities, including repurchase
     agreements providing for settlement in more than seven days after
     notice, and certain restricted securities determined by the Trustees
     not to be liquid; and, in the case of The Virginia Municipal Bond Fund
     and The Maryland Municipal Bond Fund, specifically including
     participation interests and variable rate municipal securities without
     a demand feature or with a demand feature of longer than seven days
     and which the adviser believes cannot be sold within seven days. The
     Treasury Money Market Fund, The Money Market Fund, and The Tax-Free
     Money Market Fund will not invest more than 10% of the value of their
     net assets in illiquid securities, including repurchase agreements
     providing for settlement more than seven days after notice and certain
     securities determined by the Trustees not to be liquid; and, in the
     case of The Money Market Fund, specifically including non-negotiable
     fixed income time deposits with maturities over seven days.
  INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
     The Funds will limit their respective investment in other investment
     companies to no more than 3% of the total outstanding voting stock of
     any investment company, invest no more than 5% of total assets in any
     one investment company, or invest more than 10% of total assets in
     investment companies in general. The U.S. Government Securities Fund,
     The Style Manager: Large Cap Fund, The Style Manager Fund, The
     Treasury Money Market Fund and The Money Market Fund will purchase
     securities of closed-end investment companies only in open market


     transactions involving only customary broker's commissions. However,
     these limitations are not applicable if the securities are acquired in
     a merger, consolidation, reorganization, or acquisition of assets.
     With respect to The Treasury Money Market Fund and The Money Market
     Fund, the Funds will limit their investments and the securities of
     other investment companies to those of The Money Market Funds having
     investment objectives and policies similar to their own. The Virginia
     Municipal Bond Fund and The Maryland Municipal Bond Fund will invest
     in other investment companies primarily for the purposes of investing
     short-term cash which has not yet been invested in other portfolio
     instruments. The adviser will waive its investment advisory fee on
     assets invested in securities of open-end investment companies.
  INVESTING IN NEW ISSUERS
     The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund, The Money Market Fund, and The Tax-Free
     Money Market Fund will not invest more than 5% of the value of their
     total assets in securities of issuers which have records of less than
     three years of continuous operations, including the operation of any
     predecessor. The Virginia Municipal Bond Fund and The Maryland
     Municipal Bond Fund will not invest more than 5% of the value of its
     total assets in industrial development bonds where the payment of
     principal and interest is the responsibility of companies (or in the
     alternative guarantors, where applicable) which have records of less
     than three years of continuous operations, including the operation of
     any predecessor.
         
  INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
  OF THE TRUST
     A Fund will not purchase or retain the securities of any issuer if the


     officers and Trustees of the Trust or its investment adviser owning
     individually more than 1/2 of 1% of the issuer's securities together
     own more than 5% of the issuer's securities.
  INVESTING IN MINERALS
     A Fund will not purchase interests in oil, gas, or other mineral
     exploration or development programs or leases, although it may
     purchase the securities of issuers which invest in or sponsor such
     programs.
  ARBITRAGE TRANSACTIONS
     A Fund will not enter into transactions for the purpose of engaging in
     arbitrage.
  PURCHASING SECURITIES TO EXERCISE CONTROL
     A Fund will not purchase securities of a company for the purpose of
     exercising control or management.
  INVESTING IN WARRANTS
   
     The Funds will not invest in warrants, except that The Style Manager:
     Large Cap Fund and The Style Manager Fund may invest not more than 5%
     of its net assets in warrants, including those acquired in units or
     attached to other securities. To comply with certain state
     restrictions, the Fund will limit its investment in such warrants not
     listed on the New York or American Stock Exchanges to 2% of its net
     assets. (If state restrictions change, this latter restriction may be
     revised without notice to shareholders.) For purposes of this
     investment restriction, warrants will be valued at the lower of cost
     or market, except that warrants acquired by the Fund in units with or
     attached to securities may be deemed to be without value.
  INVESTING IN PUT OPTIONS
     Neither The U.S. Government Securities Fund, The Style Manager: Large


     Cap Fund, nor The Style Manager Fund will purchase put options on
     securities unless the securities are held in a Fund's portfolio and
     not more than 5% of the value of either Fund's total assets would be
     invested in premiums on open and put option positions.
  WRITING COVERED CALL OPTIONS
     Neither The U.S. Government Securities Fund, The Style Manager: Large
     Cap Fund, nor The Style Manager Fund will write call options on
     securities unless the securities are held in their portfolio or unless
     either Fund is entitled to them in deliverable form without further
     payment or after segregating cash in the amount of any further
     payment.
  SELLING SHORT
     Neither The U.S. Government Securities Fund, The Style Manager: Large
     Cap Fund, nor The Style Manager Fund will sell securities short unless
     (1) it owns, or has a right to acquire, an equal amount of such
     securities, or (2) it has segregated an amount of its other assets
     equal to the lesser of the market value of the securities sold short
     or the amount required to acquire such securities. The segregated
     amount will not exceed 10% of The U.S. Government Securities Fund's
     nor The Style Manager: Large Cap Fund's net assets. With respect to
     The Style Manager Fund, the segregated amount will not exceed 5% of
     the net equity of the Fund's net assets. The dollar amount of short
     sales at any one time shall not exceed 5% of the net equity of the
     Fund and the value of securities of any one issuer in which the Fund
     is short may not exceed the lesser of 2% of the value of the Fund's
     net assets or 2% of the Securities of any class of any issuer.
         
     While in a short position, the Fund will retain the securities, rights
     or segregated assets.


  DEALING IN PUTS AND CALLS
     The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund,
     and The Tax-Free Money Market Fund will not invest in puts, calls,
     straddles, spreads, or any combination of them except that The
     Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund may
     purchase put options on municipal securities in an amount up to 5% of
     its total assets or may purchase municipal securities accompanied by
     agreements of sellers to repurchase them at a Fund's option.
     Except with respect to the Funds' policy of borrowing money, if a
     percentage limitation is adhered to at the time of investment, a later
     increase or decrease in percentage resulting from any change in value
     or net assets will not result in a violation of such restriction.
        
     The U.S. Government Securities Fund, The Style Manager: Large Cap Fund
     and The Style Manager Fund have no present intent to borrow money,
     pledge securities or invest in restricted or illiquid securities in
     excess of 5% of the value of their respective net assets in the coming
     fiscal year. These Funds (1) will limit the aggregate value of the
     assets underlying covered call options or put options written by a
     Fund to not more than 25% of its net assets, (2) will limit the
     premiums paid for options purchased by a Fund to 20% of its net
     assets, and (3) will limit the margin deposits on futures contracts
     entered into by a Fund to 5% of its net assets. (If state requirements
     change, these restrictions may be revised without shareholder
     notification.)
         
     The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
     have no present intent to issue senior securities or borrow money,
     pledge securities, invest in restricted or illiquid securities or


     engage in when-issued and delayed delivery transactions in excess of
     5% of the value of its net assets during the fiscal period.
     The Treasury Money Market Fund and The Money Market Fund do not expect
     to issue senior securities or borrow money, pledge securities, engage
     in whenissued and delayed delivery transactions or reverse repurchase
     agreements, for The Money Market Fund only, in excess of 5% of the
     value of their net assets during the coming fiscal year.
     The Tax-Free Money Market Fund does not intend to borrow money or
     pledge securities in excess of 5% of the value of its net assets
     during the coming fiscal year.
     To comply with registration requirements in a certain state, The
     Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, The
     Money Market Fund, and The Tax-Free Money Market Fund will not invest
     in real estate limited partnerships.
        
THE VIRTUS FUNDS MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with The Virtus Funds, and principal occupations.


John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate:  July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or Managing


General Partner of the Funds. Mr. Donahue is the father of J. Christopher
Donahue, Executive Vice President of the Trust .


Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate:  February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.


John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate:  June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of the
Funds; formerly, President, Naples Property Management, Inc.


William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate:  July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.


 James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate:  May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.


Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate:  October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and


Montefiore Hospitals; Director, Trustee, or Managing General Partner of the
Funds.


Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate:  June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.


Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate:  October 22, 1930
Treasurer and Trustee
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Services Company; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some of the
Funds.




Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate:  March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation.


Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate:  October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.


John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate:  December 20, 1932
Trustee


President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the
Funds.


Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate:  September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; founding Chairman,
National Advisory Council for Environmental Policy and Technology and
Federal Emergency Management Advisory Board.


Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate:  June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.



J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate:  April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Administrative Services, Federated
Services Company, and Federated Shareholder Services; President or Vice
President of the Funds; Director, Trustee, or Managing General Partner of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee  of the Trust.


John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate:  October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee,
Federated Investors; Trustee, Federated Advisers, Federated Management, and
Federated Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Services Company; Executive Vice
President, Secretary, and Trustee, Federated Administrative Services;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.; Executive Vice President and Secretary of the Funds.


Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate:  May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.


Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 22, 1962

Vice President and Assistant Treasurer

Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Funds.


* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.




THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Government Money Trust; Blanchard Funds;
Blanchard Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series,
Inc.; 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; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for
U.S. Government Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Insurance Management Series; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High
Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust;  Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The
Shawmut Funds; Star Funds; The Starburst Funds; The Starburst Funds II;
Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; Trademark Funds; Trust for Financial Institutions;
Trust For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; World
Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the outstanding shares of each
Fund.
As of January XX, 1996, the following shareholders of record owned 5% or
more of the outstanding shares of the Funds:  Bova & Co, Richmond,
Virginia, owned approximately 70,313 Trust Shares of The Maryland Municipal
Bond Fund (8%); approximately 332,649 Trust Shares of The Style Manager:
Large Cap Fund (10%); approximately 55,270,819 Trust Shares of The Treasury
Money Market Fund (24%); and approximately 1,128,943 Trust Shares of The
U.S. Government Securities Fund (11%).
    


OFFICERS AND TRUSTEES COMPENSATION


NAME ,                AGGREGATE         TOTAL COMPENSATION
POSITION WITH         COMPENSATION FROM      PAID TO TRUSTEES FROM
TRUST                 TRUST+            TRUST AND FUND COMPLEX


John F. Donahue,
Chairman and Trustee  $ -0-             $ -0- for the Trust and
                                        69 investment companies



Thomas G. Bigley,
Trustee               $1540             $24,991 for the Trust and
                                        50 investment companies

John T. Conroy, Jr.,
Trustee               $2203             $136,100 for the Trust and
                                        65 investment companies
William J. Copeland,
Trustee               $2203             $136,100 for the Trust and
                                        65 investment companies

James E. Dowd,
Trustee               $2203             $136,100 for the Trust and
                                        65 investment companies

Lawrence D. Ellis, M.D.,
Trustee               $2038             $123,600 for the Trust and
                                        65 investment companies

Edward L. Flaherty, Jr.,
Trustee               $2203             $136,100 for the Trust and
                                        65 investment companies

Edward C. Gonzales,
President and Trustee $-0-              $ -0- for the Trust and
                                        18 investment companies

Peter E. Madden,


Trustee               $1739             $104,880 for the Trust and
                                        65 investment companies

Gregor F. Meyer,
Trustee               $2038             $123,600 for the Trust and
                                        65 investment companies

Wesley W. Posvar,
Trustee               $2038             $123,600 for the Trust and
                                        65 investment companies

Marjorie P. Smuts,
Trustee               $2038             $123,600 for the Trust and
                                        65 investment companies

+The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they are
not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE TRUST
The Trust's investment adviser is Virtus Capital Management, Inc. which is
a division of Signet Trust Company, a wholly-owned subsidiary of Signet
Banking Corporation. Because of the internal controls maintained by Signet


Bank to restrict the flow of non-public information, Fund investments are
typically made without any knowledge of Signet Bank's or its affiliates'
lending relationships with an issuer.
The adviser shall not be liable to the Trust, a Fund, or any shareholder of
any of the Funds for any losses that may be sustained in the purchase,
holding, or sale of any security or for anything done or omitted by it,
except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon it by its
contract with the Trust.
ADVISORY FEES
   
For its advisory services, Virtus Capital Management, Inc. receives an
annual investment advisory fee as described in the prospectus. During the
fiscal years ended September 30, 1995, 1994, and 1993, the adviser earned
fees from: The U.S. Government Securities Fund, of $1,581,364, $1,734,083,
and $1,375,434, of which $589,885, $734,744, and $784,857, were voluntarily
waived; The Style Manager: Large Cap Fund $678,512, $703,937, and $512,930,
of which $189,983, $214,366, and $372,554, were voluntarily waived; The
Style Manager Fund $374,393, for the period from March 7, 1995 (date of
initial public investment) to September 30, 1995, of which $374,393 was
voluntarily waived; The Virginia Municipal Bond Fund $775,247, $861,187,
and $519,326, of which $227,301, $314,920, and $345,108, were voluntarily
waived; The Maryland Municipal Bond Fund $316,194, $355,431, and $233,787,
of which $187,476, $241,790, and $231,723, were voluntarily waived; The
Treasury Money Market Fund $2,347,424, $1,388,302, and $922,509, of which
$469,485, $508,090, and $369,003, were voluntarily waived; and The Money
Market Fund $868,490, $709,679, and $729,525, of which $336,697, $354,839,
and $431,083, were voluntarily waived. For the fiscal year ended September
30, 1995 and for the period from July 27, 1994 to September 30, 1994 the
adviser earned $262,792 and $21,033, respectively,  from The Tax-Free Money
Market Fund, of which $262,792 and $19,388, respectively, were voluntarily
waived.
   SUB-ADVISER TO THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER
FUND
The Style Manager: Large Cap Fund and The Style Manager Fund's sub-adviser
is Trend Capital Management, Inc.
SUB-ADVISORY FEES
For its sub-advisory services, the Sub-Adviser receives an annual sub-
advisory fee as described in the prospectus.
ADMINISTRATIVE SERVICES

Federated Administrative Services, which is a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds for
the fees set forth in the prospectus. For the fiscal years ended September
30, 1995, 1994, and 1993, the Funds incurred costs for administrative
services as follows: The U.S. Government Securities Fund incurred $226,246,
$269,932, and$233,156; The Style Manager: Large Cap Fund incurred $97,229,
$109,075, and $86,960; The Style Manager Fund incurred $85,069 for the
period from March 7, 1995 (date of initial public investment) to September
30, 1995; The Virginia Municipal Bond Fund incurred $110,908, $133,956, and
$87,752; The Maryland Municipal Bond Fund incurred $45,246, $55,254,
and$49,614; The Treasury Money Market Fund incurred $500,283, $319,857, and
$235,278; and The Money Market Fund incurred $185,586, $165,549, and
$186,110; of which $0, $0, and $0 were voluntarily waived for The U.S.
Government Securities Fund; $0, $0, and $0 were voluntarily waived for The
Style Manager: Large Cap Fund; $0, $0, and $0, were voluntarily waived for
The Virginia Municipal Bond Fund; $0, $0, and $0 were voluntarily waived
for The Maryland Municipal Bond Fund; $0, $0, and $0 were voluntarily
waived for The Treasury Money Market Fund; and $0, $0, and $0 were


voluntarily waived for The Money Market Fund. For the fiscal year ended
September 30, 1995 and for for the period from July 27, 1994, to September
30, 1994, The Tax-Free Money Market Fund paid $58,355 and $8,904 for
administrative services, of which $0, and $0 was voluntarily waived.
    
CUSTODIAN

Signet Trust Company is custodian for the securities and cash of the Funds.
Under the Custodian Agreement, Signet Trust Company holds the Funds'
portfolio securities in safekeeping and keeps all necessary records and
documents relating to its duties. The custodian receives a fee at an annual
rate of .05 of 1% on the first $10 million of average net assets of each of
the eight respective portfolios and .025 of 1% on average net assets in
excess of $10 million. There is a $20 fee imposed on each transaction. The
custodian fee received during any fiscal year shall be at least $1,000 per
Fund.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the Board
of Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Funds or to the
adviser and may include:
   o advice as to the advisability of investing in securities;
   o security analysis and reports;
   o economic studies;
   o industry studies;
   o receipt of quotations for portfolio evaluations; and
   o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers may be used by the adviser in
advising the Funds and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses.
   
For the fiscal year ended September 30, 1995, The Style Manager: Large Cap
Fund paid $562,493 in commissions on brokerage transactions.
    
PURCHASING SHARES

Shares of the Funds are sold at their net asset value without a sales
charge on days the New York Stock Exchange is open for business. The
procedure for purchasing Shares of the Funds is explained in the prospectus
under `Investing in Shares.''
DISTRIBUTION PLAN
The Trust has adopted a Plan for Shares of the Funds pursuant to Rule 12b-1
which was promulgated by the Securities and Exchange Commission pursuant to
the Investment Company Act of 1940. The Plan provides that the Funds'
distributor, Federated Securities Corp., shall act as the distributor of
Shares, and it permits the payment of fees to brokers and dealers for
distribution and administrative services and to administrators for
administrative services. The Plan is designed to (i) stimulate brokers and
dealers to provide distribution and administrative support services to the
Funds and their holders of Shares and (ii) stimulate administrators to
render administrative support services to the Funds and their holders of
Shares. These services are to be provided by a representative who has
knowledge of the holder of Shares' particular circumstances and goals, and
include, but are not limited to: providing office space, equipment,
telephone facilities, and various personnel including clerical,
supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding the Funds; assisting
clients in changing dividend options, account designations, and addresses;
and providing such other services as the Trust reasonably requests.
Other benefits which the Funds hope to achieve through the Plan include,
but are not limited to the following: (1) an efficient and effective
administrative system; (2) a more efficient use of assets of holders of
Shares by having them rapidly invested in the Funds with a minimum of delay
and administrative detail; and (3) an efficient and reliable records system
for holders of Shares and prompt responses to shareholder requests and
inquiries concerning their accounts.
By adopting the Plan, the Board of Trustees expects that the Funds will be
able to achieve a more predictable flow of cash for investment purposes and
to meet redemptions. This will facilitate more efficient portfolio
management and assist the Funds in seeking to achieve their respective
investment objectives. By identifying potential investors in Shares whose
needs are served by a particular Fund's objective, and properly servicing
these accounts, the Funds may be able to curb sharp fluctuations in rates
of redemptions and sales.
   
For the fiscal years ended September 30, 1995, 1994, and 1993, the Funds
paid fees to brokers and administrators (financial institutions) pursuant
to the Plan as follows: The U.S. Government Securities Fund $268,621,
$299,048, and $0; The Style Manager: Large Cap Fund $80,046, $59,836, and
$0; The Style Manager Fund $0; The Virginia Municipal Bond Fund, of
$174,523, $190,877, and $0; The Maryland Municipal Bond Fund, of $80,136,
$89,447, and $0; The Treasury Money Market Fund, of $80,097, $52,221, and
$0; The Money Market Fund, of $79,316, $26,424, and $0. For the year ended
September 30, 1995, and for the period from July 27, 1994 to September 30,
1994, the Tax-Free Money Market Fund paid no fees pursuant to the Plan.
    
CONVERSION TO FEDERAL FUNDS
It is the policy of The Treasury Money Market Fund, The Money Market Fund,
and The Tax-Free Money Market Fund to be as fully invested as possible so
that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds.
Federated Services Company acts as the shareholder's agent in depositing
checks and converting them to federal funds.
ADMINISTRATIVE ARRANGEMENTS

For the fiscal years ended September 30, 1995, 1994 and 1993, the
distributor paid no administrative fees to brokers and administrators
(financial institutions).
DETERMINING NET ASSET VALUE

   


Net asset values of The U.S. Government Securities Fund, The Style Manager:
Large Cap Fund, The Style Manager Fund, The Virginia Municipal Bond Fund
and The Maryland Municipal Bond Fund generally change each day. The
Treasury Money Market Fund, The Money Market Fund, and The Tax-Free Money
Market Fund attempt to stabilize the value of their Shares at $1.00. The
days on which the net asset value is calculated by these Funds are
described in the prospectus.
    
DETERMINING MARKET VALUE OF SECURITIES
The market value of The U.S. Government Securities Fund's portfolio
securities are determined as follows:
   o according to the mean between the over-the-counter bid and asked
     prices provided by an independent pricing service, if available, or at
     fair value as determined in good faith by the Fund's Board of
     Trustees; or
   o for short-term obligations with remaining maturities of 60 days or
     less at the time of purchase at amortized cost unless the Board of
     Trustees determines that particular circumstances of the security
     indicate otherwise.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
   
The market value of portfolio securities of The Style Manager: Large Cap
Fund and The Style Manager Fund is determined as follows:
    
   o for equity securities, according to the last sale price on a national
     securities exchange, if available;


   o in the absence of recorded sales for listed equity securities,
     according to the mean between the last closing bid and asked prices;
   o for unlisted equity securities, the latest bid prices;
   o for bonds and other fixed income securities, as determined by an
     independent pricing service;
   o for short-term obligations, according to the mean between bid and
     asked prices as furnished by an independent pricing service or for
     short-term obligations with remaining maturities of 60 days or less at
     the time of purchase at amortized cost; or
   o for all other securities, at fair value as determined in good faith by
     the Board of Trustees.
      
The U.S. Government Securities Fund, The Style Manager: Large Cap Fund, and
The Style Manager Fund will value futures contracts, options, and put
options on futures and at their market values established by the exchanges
at the close of option trading on such exchanges unless the Board of
Trustees determine in good faith that another method of valuing option
positions is necessary to appraise their fair value. Over-the-counter put
options will be valued at the mean between the bid and the asked prices.
    
USE OF THE AMORTIZED COST METHOD
With respect to The Treasury Money Market Fund, The Money Market Fund, and
The Tax-Free Money Market Fund, the Trustees have decided that the best
method for determining the value of portfolio instruments is amortized
cost. Under this method, portfolio instruments are valued at the
acquisition cost as adjusted for amortization of premium or accumulation of
discount rather than at current market value.
A Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the
`Rule'') promulgated by the Securities and Exchange Commission under the
Investment Company Act of 1940. Under the Rule, the Trustees must establish
procedures reasonably designed to stabilize the net asset value per share,
as computed for purposes of distribution and redemption, at $1.00 per
Share, taking into account current market conditions and a Fund's
investment objective.
Under the Rule, a Fund is permitted to purchase instruments which are
subject to demand features or standby commitments. As defined by the Rule,
a demand feature entitles a Fund to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days'
notice or (2) at specified intervals not exceeding one year on no more than
30 days' notice. A standby commitment entitles a Fund to achieve same day
settlement and to receive an exercise price equal to the amortized cost of
the underlying instrument plus accrued interest at the time of exercise.
The Funds acquire instruments subject to demand features and standby
commitments to enhance the instrument's liquidity. The Funds treat demand
features and standby commitments as a part of the underlying instruments,
because the Funds do not acquire them for speculative purposes and cannot
transfer them separately from the underlying instruments. Therefore,
although the Rule defines demand features and standby commitments as
`puts'', the Fund does not consider them to be separate investments for
purposes of its investment policies.
  MONITORING PROCEDURES
     The Trustees' procedures include monitoring the relationship between
     the amortized cost value per share and the net asset value per share
     based upon available indications of market value. The Trustees will
     decide what, if any, steps should be taken if there is a difference of
     more than .5 of 1% between the two. The Trustees will take any steps
     they consider appropriate (such as redemption in kind or shortening
     the average portfolio maturity) to minimize any material dilution or
     other unfair results arising from differences between the two methods
     of determining net asset value.
  INVESTMENT RESTRICTIONS
     The Rule requires that a Fund limit its investments to instruments
     that, in the opinion of the Trustees, present minimal credit risks and
     have received the requisite rating from one or more nationally
     recognized statistical rating organizations. If the instruments are
     not rated, the Trustees must determine that they are of comparable
     quality. The Rule also requires a Fund to maintain a dollar-weighted
     average portfolio maturity (not more than 90 days) appropriate to the
     objective of maintaining a stable net asset value of $1.00 per Share.
     In addition, no instrument with a remaining maturity of more than 397
     days can be purchased by a Fund.
     Should the disposition of a portfolio security result in a dollar-
     weighted average portfolio maturity of more than 90 days, a Fund will
     invest its available cash to reduce the average maturity to 90 days or
     less as soon as possible.
A Fund may attempt to increase yield by trading portfolio securities to
take advantage of short-term market variations. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset
value is affected by any unrealized appreciation or depreciation of the
portfolio.
In periods of declining interest rates, the indicated daily yield on
Shares, computed by dividing the annualized daily income on a Fund's
portfolio by the net asset value computed as above, may tend to be higher
than a similar computation made by using a method of valuation based upon
market prices and estimates.


In periods of rising interest rates, the indicated daily yield on Shares
computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
VALUING MUNICIPAL SECURITIES
With respect to The Virginia Municipal Bond Fund, The Maryland Municipal
Bond Fund, and The Tax-Free Money Market Fund, the Board of Trustees uses
an independent pricing service to value municipal securities. The
independent pricing service takes into consideration: yield; stability;
risk; quality; coupon rate; maturity; type of issue; trading
characteristics; special circumstances of a security or trading market; and
any other factors or market data it considers relevant in determining
valuations for normal institutional size trading units of debt securities
and does not rely exclusively on quoted prices.
USE OF AMORTIZED COST
With respect to The Virginia Municipal Bond Fund and The Maryland Municipal
Bond Fund, the Board of Trustees has decided that the fair value of debt
securities purchased by a Fund with remaining maturities of 60 days or less
at the time of purchase shall be their amortized cost value, unless the
particular circumstances of the security indicate otherwise. Under this
method, portfolio instruments and assets are valued at the acquisition cost
as adjusted for amortization of premium or accumulation of discount rather
than at current market value. The Executive Committee continually assesses
this method of valuation and recommends changes where necessary to assure
that the Fund's portfolio instruments are valued at their fair value as
determined in good faith by the Trustees.
REDEEMING SHARES

Each Fund redeems Shares at the next computed net asset value after a Fund
receives the redemption request, less a contingent deferred sales charge,


if applicable. Redemption procedures are explained in the prospectus under
`Redeeming Trust Shares.''
REDEMPTION IN KIND
Although the Trust intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from a Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Board of Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which a Fund is obligated to redeem Shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of any
class' net asset value during any 90-day period. Although a Fund reserves
the right to redeem Shares in kind, it will activate this right only after
providing 60 days' notice to shareholders.
TAX STATUS

THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because they expect to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
among other requirements:
   o derive at least 90% of its gross income from dividends, interest, and
     gains from the sale of securities;
   o derive less than 30% of its gross income from the sale of securities
     held less than three months;
   o invest in securities within certain statutory limits; and


   o distribute to its shareholders at least 90% of its net income earned
     during the year.
SHAREHOLDERS' TAX STATUS
   
With respect to The U.S. Government Securities Fund, The Style Manager:
Large Cap Fund, The Style Manager Fund, The Treasury Money Market Fund and
The Money Market Fund, shareholders are subject to federal income tax on
dividends received as cash or additional shares. No portion of any income
dividend paid by a Fund is eligible for the dividends received deduction
available to corporations. These dividends, and any short-term capital
gains, are taxable as ordinary income.
With respect to The Virginia Municipal Bond Fund, The Maryland Municipal
Bond Fund, and The Tax-Free Money Market Fund, no portion of any income
dividend paid by a Fund is eligible for the dividends received deduction
available to corporations.
    
  CAPITAL GAINS
     Capital gains experienced by The Treasury Money Market Fund and The
     Money Market Fund could result in an increase in dividends. Capital
     losses could result in a decrease in dividends. If, for some
     extraordinary reason, these Funds realize net long-term capital gains,
     such net long-term capital gains will be distributed at least once
     every 12 months.
        
With respect to The U.S. Government Securities Fund, The Style Manager:
Large Cap Fund, and The Style Manager Fund long-term capital gains
distributed to shareholders will be treated as long-term capital gains
regardless of how long shareholders have held Shares.
    


With respect to The Maryland Municipal Bond Fund, The Virginia Municipal
Bond Fund, and The Tax-Free Money Market Fund, capital gains or losses may
be realized by a Fund on the sale of portfolio securities and as a result
of discounts from par value on securities held to maturity. Sales would
generally be made because of:
   o the availability of higher relative yields;
   o differentials in market values;
   o new investment opportunities;
   o changes in creditworthiness of an issuer; or
   o an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the Shares.
TOTAL RETURN

   
The average annual total return for The U.S. Government Securities Fund,
The Style Manager: Large Cap Fund, The Style Manager Fund, The Virginia
Municipal Bond Fund, and The Maryland Municipal Bond Fund, for the fiscal
year ended September 30, 1995 and for the period from October 12, 1990
(effective date of each Fund's registration statement) to September 30,
1995 was10.11% and 7.96%; 20.33% and 10.56% ; 10.27% and 7.13% %; 10.09%
and 6.72% for Trust Shares and 7.68% and 7.83%; 17.19% and 10.43%; 7.87%
and 6.99% ; 7.77% and 6.58% for Investment Shares.
    
The average annual total return for Shares of each Fund is the average
compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of shares


owned at the end of the period by the net asset value per share at the end
of the period. The number of shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000, adjusted over the period by any additional shares, assuming the
monthly/quarterly reinvestment of all dividends and distributions.
YIELD

The yield for the seven-day period ended September 30, 1995 for the The
Treasury Money Market Fund and The Money Market Fund were 5.24% and 5.22%,
for Trust Shares and 4.99% and 5.22%, for Investment Shares, respectively.
The yield for the seven-day period ended September 30, 1995 for the The
Tax-Free Money Market Fund was 3.79%.
   
The U.S. Government Securities Fund, The Style Manager: Large Cap Fund, The
Style Manager Fund, The Virginia Municipal Bond Fund and The Maryland
Municipal Bond Fund's yield for the thirty-day period ended September 30,
1995 were 6.48%, 1.40%, 4.19% and 4.07% for Trust Shares and 6.22%, 1.15%,
3.94% and 3.83% for Investment Shares. The yield for the thirty-day period
ended September 30, 1995 for The Style Manager Fund was 0.18%
    
The Treasury Money Market Fund, The Money Market Fund, and The Tax-Free
Money Market Fund calculate yield daily, based upon the seven days ending
on the day of the calculation, called the `base period.'' This yield is
computed by:
   o determining the net change in the value of a hypothetical account with
     a balance of one share at the beginning of the base period, with the
     net change excluding capital changes but including the value of any
     additional Shares purchased with dividends earned from the original
     one share and all dividends declared on the original and any purchased
     Shares;
   o dividing the net change in the account's value by the value of the
     account at the beginning of the base period to determine the base
     period return; and
   o multiplying the base period return by 365/7.
      
The yield for Shares of The U.S. Government Securities Fund, The Style
Manager: Large Cap Fund, The Style Manager Fund, The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund is determined by dividing
the net investment income per share (as defined by the Securities and
Exchange Commission) earned by the class of shares over a thirty-day period
by the maximum offering price per share of the class of shares on the last
day of the period. The yield of the Investment Shares of the Fund is
determined each day by dividing the net investment income per share (as
defined by the Securities and Exchange Commission) earned by the class of
shares over a thirty-day period by the maximum offering price per share of
the class of shares on the last day of the period. This value is then
annualized using semiannual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated
each month over a 12-month period and is reinvested every six months. The
yield does not necessarily reflect income actually earned by the Fund
because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
With respect to The U.S. Government Securities Fund and The Style Manager:
Large Cap Fund, the yield will be calculated separately for Investment
Shares and Trust Shares. Because Investment Shares are subject to a 12b-1


fee, the net yield for Trust Shares for the same period will exceed that of
Investment Shares.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
Fund, the performance will be reduced for those shareholders paying those
fees.
    
EFFECTIVE YIELD

The effective yield for the seven-day period ended September 30, 1995 for
the The Treasury Money Market Fund and The Money Market Fund was 5.37% and
5.36% for Trust Shares and 5.11% and 5.36% for Investment Shares,
respectively. The effective yield for the period ended September 30, 1995
for The Tax-Free Money Market Fund was 3.86%.
The effective yield of The Treasury Money Market Fund, The Money Market
Fund, and The Tax-Free Money Market Fund is computed by compounding the
unannualized base period return by:
   o adding 1 to the base period return;
   o raising the sum to the 365/7th power; and
   o subtracting 1 from the result.
TAX-EQUIVALENT YIELD

The tax-equivalent yield for both classes of shares for The Virginia
Municipal Bond Fund, The Maryland Municipal Bond Fund, and The Tax-Free
Money Market Fund is calculated similarly to the yield, but is adjusted to
reflect the taxable yield that either class would have had to earn to equal
its actual yield, assuming a 28% tax rate and also assuming that income
earned by the Fund is 100% tax-exempt.
The tax-equivalent yield for the Trust Shares for the thirty-day period
ended September 30, 1995, was 5.82% for The Virginia Municipal Bond Fund


and 5.65% for The Maryland Municipal Bond Fund. The tax-equivalent yield
for the Investment Shares was 5.47% for The Virginia Municipal Bond Fund
and 5.32% for The Maryland Municipal Bond Fund for the same period. The
tax-equivalent yield for The Tax-Free Money Market Fund for the same period
was 5.26%.
  TAX-EQUIVALENCY TABLES
     Both classes of shares may also use a tax-equivalency table in
     advertising and sales literature. The interest earned by the municipal
     bonds in the Fund's portfolio generally remains free from federal
     regular income tax, and is often free from state and local taxes as
     well. As the tables below indicate, a `tax-free'' investment is an
     attractive choice for investors, particularly in times of narrow
     spreads between tax-free and taxable yields.

                       TAXABLE YIELD EQUIVALENT FOR 1995
                              MULTISTATE MUNICIPAL FUNDS

    FEDERAL INCOME TAX BRACKET:
              15.00%  28.00%     31.00%      36.00%     39.60%



    JOINT        $1- $39,001-   $94,251-   $143,601-     OVER
    RETURN    39,000  94,250    143,600     256,500    256,500

    SINGLE       $1- $23,351-   $56,551-   $117,951-     OVER
    RETURN    23,350  56,550    117,950     256,500    256,500


Tax-Exempt


Yield                    Taxable Yield Equivalent


     1.00%     1.18%    1.39%     1.45%      1.56%       1.66%
     1.50%     1.76%    2.08%     2.17%      2.34%       2.48%
     2.00%     2.35%    2.78%     2.90%      3.13%       3.31%
     2.50%     2.94%    3.47%     3.62%      3.91%       4.14%
     3.00%     3.53%    4.17%     4.35%      4.69%       4.97%
     3.50%     4.12%    4.86%     5.07%      5.47%       5.79%
     4.00%     4.71%    5.56%     5.80%      6.25%       6.62%
     4.50%     5.29%    6.25%     6.52%      7.03%       7.45%
     5.00%     5.88%    6.94%     7.25%      7.81%       8.28%
     5.50%     6.47%    7.64%     7.97%      8.59%       9.11%
     6.00%     7.06%    8.33%     8.70%      9.38%       9.93%
     6.50%     7.65%    9.03%     9.42%     10.16%      10.76%
     7.00%     8.24%    9.72%    10.14%     10.94%      11.59%
     7.50%     8.82%   10.42%    10.87%     11.72%      12.42%
     8.00%     9.41%   11.11%    11.59%     12.50%      13.25%

    Note:  The maximum marginal tax rate for each bracket was used in
    calculating the taxable yield equivalent. Furthermore, additional
    state and local taxes paid on comparable taxable investments were not
    used to increase federal deductions.

    The chart above is for illustrative purposes only.  It is not an
    indicator of past or future performance of Fund shares.
    *  Some portion of the Fund's income may be subject to the federal
    alternative minimum tax and state and local income taxes.




                       TAXABLE YIELD EQUIVALENT FOR 1995
                           COMMONWEALTH OF VIRGINIA


    COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
              20.75%  33.75%     36.75%      41.75%     45.35%


    JOINT        $1-  $39,001   $94,251     $143,601     OVER
    RETURN:   39,000  94,250    143,600     256,500    $256,500

    SINGLE      $1    $23,351   $56,551     $117,951     OVER
    RETURN:   23,350  56,550    117.,950    256,500    $256,500


    TAX-EXEMPT
    YIELD            TAXABLE YIELD EQUIVALENT


     3.50%     4.42%    5.28%     5.53%      6.01%       6.40%
     4.00%     5.05%    6.04%     6.32%      6.87%       7.32%
     4.50%     5.68%    6.79%     7.11%      7.73%       8.23%
     5.00%     6.31%    7.55%     7.91%      8.58%       9.15%
     5.50%     6.94%    8.30%     8.70%      9.44%      10.06%
     6.00%     7.57%    9.06%     9.49%     10.30%      10.98%
     6.50%     8.20%    9.81%    10.28%     11.16%      11.89%
     7.00%     8.83%   10.57%    11.07%     12.02%      12.81%
     7.50%     9.46%   11.32%    11.86%     12.88%      13.72%
     8.00%    10.09%   12.08%    12.65%     13.73%      14.64%



    NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
    CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
    STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE NOT
    USED TO INCREASE FEDERAL DEDUCTIONS.
The charts above are for illustrative purposes only. They are not an
indicator of past or future performance of either class of shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.




                       TAXABLE YIELD EQUIVALENT FOR 1995
                               STATE OF MARYLAND
                          INCLUDING LOCAL INCOME TAX


    COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
            22.50% 32.50%  38.50%    40.00%    45.00%     48.60%


    JOINT    $1-   $39,001$94,251   $100,001  $143,601  OVER
    RETURN: 39,000 94,250 100,000   143,600   $256,500$256,500

    SINGLE   $1-   $23,351$56,551   $100,000  $117,951  OVER
    RETURN: 23,350 56,550 100,000   117,950   256,500$256,500


    TAX-EXEMPT


    YIELD            TAXABLE YIELD EQUIVALENT


     2.00%   2.58%   3.10%   3.25%     3.33%     3.64%     3.89%
     2.50%   3.23%   3.88%   4.07%     4.17%     4.55%     4.86%
     3.00%   3.87%   4.65%   4.88%     5.00%     5.45%     5.84%
     3.50%   4.52%   5.43%   5.69%     5.83%     6.36%     6.81%
     4.00%   5.16%   6.20%   6.50%     6.67%     7.27%     7.78%
     4.50%   5.81%   6.98%   7.32%     7.50%     8.18%     8.75%
     5.00%   6.45%   7.75%   8.13%     8.33%     9.09%     9.73%
     5.50%   7.10%   8.53%   8.94%     9.17%    10.00%    10.70%
     6.00%   7.74%   9.30%   9.76%    10.00%    10.91%    11.67%
     6.50%   8.39%  10.08%  10.57%    10.83%    11.82%    12.65%

    NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
    CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
    STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENT WERE NOT
    USED TO INCREASE FEDERAL DEDUCTIONS. THE LOCAL INCOME TAX RATE IS
    ASSUMED TO BE 50% OF THE STATE RATE FOR ALL COUNTIES EXCLUDING
    ALLEGHENY, BALTIMORE, MONTGOMERY, PRINCE GEORGE'S, TALBOT, AND
    WORCHESTER.

The charts above are for illustrative purposes only. They are not an
indicator of past or future performance of either class of shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
PERFORMANCE COMPARISONS

Each Fund's performance of both classes of shares depends upon such
variables as:


   o portfolio quality;
   o average portfolio maturity;
   o type of instruments in which the portfolio is invested;
      
   o changes in interest rates on money market instruments, in the case of
     The Treasury Money Market Fund and The Money Market Fund, or changes
     in interest rates and market value of portfolio securities in the case
     of U.S. Government Income Fund, The Style Manager: Large Cap Fund, The
     Style Manager Fund, The Virginia Municipal Bond Fund and Maryland
     Municipal Bond Fund;
   o changes in each Fund's or each class of Shares' expenses;
   o the relative amount of The Treasury Money Market Fund's and The Money
     Market Fund's cash flow; and
   o various other factors.
In the case of The U.S. Government Securities Fund, The Style Manager:
Large Cap Fund, The Style Manager Fund, The Virginia Municipal Bond Fund
and The Maryland Municipal Bond Fund, either class of shares' performance
fluctuates on a daily basis largely because net earnings and offering price
per Share fluctuate daily. Both net earnings and offering price per Share
are factors in the computation of yield and total return. `The Style
Manager Fund and The Style Manager: Large Cap Fund may also from time to
time provide information on, or use quotations from, studies of investment
analysts dealing with the management of equity portfolios on the basis of
`style'' selection (i.e., value vs. growth) and stock ``size'' (i.e., large
cap vs. small cap) and may also use historical data demonstrating the
performance records of the value, growth, large cap and small cap
components of the equity market, and combinations thereof.''
From time to time, the Funds may provide information on certain markets or
countries and specific equity securities and quote published editorial
comments and/or information from newspapers, magazines, investment
newsletters and other publications such as The Wall Street Journal, Money
Magazine, Forbes, Barron's, USA Today and Mutual Fund Investors. We may
also compare the historical returns on various investments, performance
indexes of those investments or economic indicators. In addition, the Funds
may reprint articles about the Fund and provide them to prospective
shareholders. The Broker/Dealer may also make available economic, financial
and investment reports to shareholders and prospective shareholders. In
order to describe these reports, the Funds may include descriptive
information on the reports in advertising literature sent to the public
prior to the mailing of a prospectus. Performance information may be quoted
numerically or may be represented in a table, graph, chart or other
illustration. It should be noted that such performance ratings and
comparison may be made with funds which may have different investment
restrictions, objectives, policies or techniques than the Funds, and that
such other funds or market indicators may be comprised of securities that
differ significantly from the Funds' investments.
The financial publications and/or indices which the Funds use in
advertising may include, but are not limted to:
    
THE U.S. GOVERNMENT SECURITIES FUND
   o MERRILL LYNCH COMPOSITE 1-5 YEAR TREASURY INDEX is comprised of
     approximately 66 issues of U.S. Treasury securities maturing between 1
     and 4.99 years, with coupon rates of 4.25% or more. These total return
     figures are calculated for one, three, six, and twelve month periods
     and year-to-date and include the value of the bond plus income and any
     price appreciation or depreciation.
   o SALOMON BROTHERS 3-5 YEARS GOVERNMENT INDEX quotes total returns for
     U.S. Treasury issues (excluding flower bonds) which have maturities of
     three to five years. These total returns are year-to-date figures
     which are calculated each month following January 1.
   o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all capital gains
     distributions and income dividends and takes income into account any
     change in net asset value over a specific period of time. From time to
     time, the Trust will quote its Lipper ranking in the U.S. Government
     funds category in advertising and sales literature.
   o MERRILL LYNCH 3-5 YEAR TREASURY INDEX is comprised of approximately 24
     issues of intermediate-term U.S. government and U.S. Treasury
     securities with maturities between 3 and 4.99 years and coupon rates
     above 4.25%. Index returns are calculated as total returns for periods
     of one, three, six and twelve months as well as year-to-date.
   o MERRILL LYNCH 3-YEAR TREASURY YIELD CURVE INDEX is an unmanaged index
     comprised of the most recently issued 3-year U.S. Treasury notes.
     Index returns are calculated as total returns for periods of one,
     three, six, and twelve months as well as year-to-date.
   o LEHMAN BROTHERS GOVERNMENT INTERMEDIATE INDEX is an unmanaged index
     comprised of all publicly issued, non-convertible domestic debt of the
     U.S. government, or any agency thereof, or any quasi-federal
     corporation and of corporate debt guaranteed by the U.S. government.
     Only notes and bonds with a minimum outstanding principal of $1
     million and maturities of 1-10 years.
   o 3 YEAR TREASURY NOTES Source: Wall Street Journal, Bloomberg Financial
     Markets, and Telerate.. MORNINGSTAR, INC., an independent rating
     service, is the publisher of the bi-weekly Mutual Fund Values. Mutual
     Fund Values rates more than 1,000 NASDAQ-listed mutual funds of all
     types, according to their risk-adjusted returns. The maximum rating is
     five stars, and ratings are effective for two weeks.
      
THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER FUND
    
   o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all capital gains
     distributions and income dividends and takes into account any change
     in net asset value over a specific period of time. From time to time,
     the Fund will quote its Lipper ranking in the `growth and income
     funds''category in advertising and sales literature.
   o DOW JONES INDUSTRIAL AVERAGE (`DJIA'') represents share prices of
     selected blue-chip industrial corporations as well as public utility
     and transportation companies. The DJIA indicates daily changes in the
     average price of stocks in any of its categories. It also reports
     total sales for each group of industries. Because it represents the
     top corporations of America, the DJIA index is a leading economic
     indicator for the stock market as a whole.
   o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
     composite index of common stocks in industry, transportation, and
     financial and publicutility companies, compares total returns of funds
     whose portfolios areinvested primarily in common stocks. In addition,
     the Standard & Poor's index assumes reinvestment of all dividends paid
     by stocks listed on the index. Taxes due on any of these distributions
     are not included, nor are brokerage or other fees calculated in the
     Standard & Poor's figures.
   o MORNINGSTAR, INC., an independent rating service, is the publisher of
     the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than


     1,000 NASDAQ-listed mutual funds of all types, according to their
     risk-adjusted returns.The maximum rating is five stars, and ratings
     are effective for two weeks.
THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND
   o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all capital gains
     distributions and income dividends and takes into account any change
     in net asset value over a specific period of time. From time to time,
     the Fund will quote its Lipper ranking in the `general municipal bond
     funds''category in advertising and sales literature.
   o MORNINGSTAR, INC., an independent rating service, is the publisher of
     the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
     1,000 NASDAQ-listed mutual funds of all types, according to their
     risk-adjusted returns.The maximum rating is five stars, and ratings
     are effective for two weeks.
THE TREASURY MONEY MARKET FUND
   o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all income dividends and
     capital gains distributions, if any. From time to time, the Fund will
     quote its Lipper ranking in the `short-term U.S. government funds''
     category in advertising and sales literature.
   o SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
     representative yields for selected securities, issued by the U.S.
     Treasury, maturing in 30 days.
THE MONEY MARKET FUND
   o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
     categories by making comparative calculations using total return.


     Total return assumes the reinvestment of all income dividends and
     capital gains distributions, if any. From time to time, the Fund will
     quote its Lipper ranking in the `money market instruments fund''
     category in advertising and sales literature.
   o BANK RATE MONITOR NATIONAL INDEX, Miami, Florida, is a financial
     reporting service which publishes weekly average rates of 50 leading
     bank and thrift institution money market deposit accounts. The rates
     published in the index are an average of the personal account rates
     offered on the Wednesday prior to the date of publication by ten of
     the largest banks and thrifts in each of the five largest Standard
     Metropolitan Statistical Areas. Account minimums range upward from
     $2,500 in each institution and compounding methods vary. If more than
     one rate is offered, the lowest rate is used. Rates are subject to
     change at any time specified by the institution. Investors may use
     such indices or reporting services in addition to either class of
     shares' prospectus to obtain a more complete view of the Share's
     performance before investing. Of course, when comparing performance of
     either class of shares to any index, factors such as portfolio
     composition and prevailing market conditions should be considered in
     assessing the significance of such comparisons.
THE TAX-FREE MONEY MARKET FUND
   o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all income dividends and
     capital gains distributions, if any. From time to time, the Fund will
     quote its Lipper ranking in the `Tax-Free Money Market Funds''
     category in advertising and sales literature.
   o IBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of
     hundreds of money market funds on a weekly basis, and through its


     Money Market Insight publication, reports monthly and 12-month-to-date
     investment results for the same money funds.
   o MONEY, A MONTHLY MAGAZINE, regularly ranks money market funds in
     various categories based on the latest available seven-day compound
     effective yield. From time to time, the Fund will quote its Money
     ranking in advertising and sales literature.
   o SALOMON BROTHERS SIX-MONTH PRIME MUNI NOTES is an index of selected
     municipal notes, maturing in six months, whose yields are chosen as
     representative of this market. Calculations are made weekly and
     monthly.
   o SALOMON BROTHERS ONE-MONTH TAX-EXEMPT COMMERCIAL PAPER is an index of
     selected tax-exempt commercial paper issues, maturing in one month,
     whose yields are chosen as representative of this particular market.
     It is a weekly quote of the most representative yields for selected
     securities, issued by the U.S. Treasury, maturing in 30 days.
     Calculations are made weekly and monthly. Ehrlich-Bober & Co., Inc.
     also tracks this Salomon Brothers Index.
Advertisements and other sales literature for both classes of shares may
quote total returns which are calculated on non-standardized base periods.
These total returns also represent the historic change in the value of an
investment in either class of shares based on monthly reinvestment of
dividends over a specified period of time.
The financial statements for the fiscal period ended September 30, 1995,
are incorporated herein by reference from the Funds' Annual Report dated
September 30, 1995. A copy of the Annual Report for a Fund may be obtained
without charge by contacting Signet Trust Company at the address located on
the back cover of the combined prospectus or by calling 804-771-7470.




APPENDIX

STANDARD AND POOR'S RATINGS GROUP MUNICIPAL BOND RATING DEFINITIONS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB, B, CCC, CC-Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.
CI-The rating CI is reserved for income bonds on which no interest is being
paid.


D-Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATING DEFINITIONS
AAA-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as `gilt edge.'' Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group,
 they comprise what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long term risks appear somewhat larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment some time in the
future. Baa-Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.


BA-Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA-Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated F-
1+.
NR-NR indicates that Fitch does not the specific issue.


Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in AAA category.
STANDARD & POOR'S CORPORATION, MUNICIPAL NOTE RATINGS
SP-1-Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2-Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, SHORT-TERM LOAN RATINGS
MIG1/VMIG1-This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG2/VMIG2-This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.







INVESTMENT SHARES

COMBINED PROSPECTUS
   
January xx, 1997
    
The U.S. Government Securities Fund
   


The Style Manager: Large Cap Fund
    
   
The Style Manager 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 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.

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 Style Manager 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 Style Manager: Large Cap Fund (formerly, The Stock Fund)
    
   
The Style Manager Fund (formerly, 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 STYLE MANAGER: LARGE CAP FUND, THE STYLE MANAGER 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
Style Manager 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 Style Manager Fund, dated January
xx, 1997, 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 or a paper copy of this
prospectus, if you have received your prospectus electronically, free of
charge, obtain other information, or make inquiries about any of the Funds
by writing to the Trust or calling toll-free 1-800-723-9512.
    
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
   
Prospectus dated January xx, 1997
    

TABLE OF CONTENTS

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 Style Manager 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 Style Manager: Large Cap Fund--seeks to provide growth of capital and
income by investing in common stocks;
    
   
The Style Manager 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 "Style Manager Shares") of The Tax-Free Money
Market Fund and The Style Manager Fund (Investment Shares, Tax-Free Money
Market Shares and Style Manager 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 Style Manager: Large Cap
Fund, The Style Manager 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."

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 Style Manager: Large Cap Fund

The investment objective of The Style Manager: Large Cap Fund is to provide
growth of capital and income.

Acceptable Investments.  The Fund pursues its investment objective by
investing in common stocks of large capitalization companies, with a market
capitalization of at least $1 billion at the time of investment, and which
are either listed on the New York or American Stock Exchanges or trade in


the over-the-counter market. 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 will invest in stocks that the Fund's investment
adviser's proprietary investment methodology has identified as having
superior potential for growth of capital and income. At least 65% of the
Fund's portfolio will be invested in common stocks, unless it is in a
defensive position.
    
The Fund is managed to take advantage of trends in the stock market that
favor different styles of stock selection (value or growth). 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 higher 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 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 Style Manager Fund

The investment objective of The Style Manager 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. 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

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 Style Manager:
Large Cap Fund and The Style Manager 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 Style
Manager: Large Cap Fund, The Money Market Fund and The Style Manager 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 Style Manager: Large Cap Fund, The
Style Manager 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 Style Manager: Large Cap Fund, The Money Market Fund
and The Style Manager 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 Style Manager: Large Cap 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 Style Manager: Large Cap Fund, The Style Manager 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 Style Manager: Large Cap Fund and
The Style Manager 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 Style Manager: Large Cap Fund and The Style Manager 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 Style Manager: Large Cap Fund and The Style
Manager 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 Style Manager: Large Cap Fund and The Style Manager 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 Style Manager: Large Cap
Fund, The Style Manager Fund, The Virginia Municipal Bond Fund and The
Maryland Municipal Bond Fund may purchase and sell financial futures
contracts to hedge all or a portion of their portfolios against changes in
interest rates and market conditions. 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.

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



The Style Manager: Large Cap Fund, The Style Manager Fund, The Virginia
Municpal Bond Fund and The Maryland Municipal Bond 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.


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%; The U.S. Government Securities Fund, The
Style Manager: Large Cap Fund, The Virginia Municipal Bond Fund; and The
Maryland Municipal Bond Fund--.75%; and The Strategic Stock Fund--1.25%.
The fee paid by The U.S. Government Securities Fund, The Style Manager:


Large Cap Fund, The Style Manager 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 at any time with
respect to a Fund at its sole discretion.
    
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 Style Manager: Large Cap Fund since July
1994, and The Style Manager 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.
    
   
Sub-Adviser. Pursuant to the terms of an investment sub-advisory agreement
between the Adviser and Trend Capital Management, Inc. (the `Sub-
Adviser'), the Sub-Adviser furnishes certain investment advisory services
to the adviser, including investment research, statistical and other
factual information, and recommendations, based on the Sub-Adviser's
analysis of trends in the stock market that favor different styles of stock
selection (growth versus value) and different sizes of companies (large
versus small capitalization). For the services provided and the expenses
incurred by the Sub-Adviser pursuant to the sub-advisory agreement, with
respect to The Style Manager Fund, the Adviser will pay Trend an annual fee
as follows: (a) an amount equal to .10% of the first $60 million of the
Fund's average daily net assets; and (b) with respect to average daily net
assets of the Fund in excess of $60 million, an amount equal to (i) one-
third of the Adviser's advisory fee to the extent that such advisory fee is
less than or equals 1% of the Fund's average daily net assets (but not to
exceed .25% of the Fund's average daily net assets); plus (ii) to the
extent that the annual advisory fee exceeds 1% of the Fund's average daily


net assets, an additional amount equal to two-thirds of such excess.  With
respect to The Style Manager: Large Cap Fund, the Adviser will pay Trend an
amount equal to .15% of the first $100 million of the Fund's average daily
net assets; and .33 1/3% of the Fund's average daily net assets in excess
of $100 million.

Sub-Adviser's Backround. Trend Capital Management, Inc., a Minnesota
corporation located at 956 Interchange Tower, 600 S. Highway 169,
Minneapolis, Minnesota 55426, was founded in 1992 by Thomas G. Fox, its
President and Chief Investment Officer.  Trend provides investment advisory
services to individuals and institutions, and is registered as an
investment adviser with the Securities and Exchange Commission.  Trend also
provides general portfolio management services for certain clients subject
to the client's investment objective.  Trend does not provide investment
advisory services to any other mutual fund.
    
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
Funds 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 Style Manager 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:

                         Average Combined Aggregate Daily
Maximum                  Net Assets of the Trust
Administrative Fee       and the Blanchard Group of Funds

 .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

The administrative fee received during any fiscal year shall be at least
$75,000 per Fund. Federated Administrative Services may voluntarily waive a
portion of its fee.

Custodian.  Signet Trust Company, Richmond, Virginia, is custodian for the
securities and cash of the Funds. Under the Custodian Agreement, Signet
Trust Company holds the Funds' portfolio securities in safekeeping and
keeps all necessary records and documents relating to its duties.
   
Transfer Agent and Dividend Disbursing Agent.  Federated Shareholder
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

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 Style Manager:
Large Cap Fund, The Style Manager 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
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 Style Manager:
Large Cap Fund, The Style Manager 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 The Virtus
Funds 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 10:00 a.m. (Eastern time) in
order to begin earning dividends on that day. For orders received after
10:00 a.m. (Eastern time) payment must be received by 10:00 a.m. (Eastern
time) on the next business day after placing the order. With respect to The
U.S. Government Securities Fund, The Style Manager: Large Cap Fund, The
Style Manager 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 third 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 Style Manager: Large Cap Fund,
The Style Manager 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 Shareholder 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
Style Manager: Large Cap Fund, The Style Manager 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 Style Manager: Large Cap Fund and The Style Manager
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 Style Manager:
Large Cap Fund, The Style Manager 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, less any
applicable contingent deferred sales charge, 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 Style Manager:
Large Cap Fund, The Style Manager 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
Style Manager: Large Cap Fund, The Style Manager 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:

                            CONTINGENT DEFERRED    AMOUNT OF PURCHASE
SALES CHARGE 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

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); (x) purchased in exchange for shares of
a Virtus Fund which shares originally represented an interest in the Vista
Federal Money Market Fund; or (xi) purchased through entities having "no
transaction fee" aggreements with the Funds.
    
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 Style Manager: Large Cap Fund, The Style Manager 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 Style
Manager: Large Cap 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 Style
Manager 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 Style Manager:
Large Cap Fund, The Style Manager 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 Style Manager: Large Cap Fund, The Style Manager 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 Style Manager:
Large Cap Fund and The Style Manager 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 Style
Manager: Large Cap Fund, The Style Manager 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 Style Manager:
Large Cap 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 Style Manager: Large Cap Fund     Pittsburgh, Pennsylvania 15222-3779
The Style Manager 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 Shareholder Services CompanyP.O. Box 8600
                                      Boston, Massachusetts 02266-8600

Independent Auditors
Deloitte & Touche LLP                 2500 One PPG Place
                                      Pittsburgh, Pennsylvania 15222-5401


THIS PAGE INTENTIONALLY LEFT BLANK

The Virtus Funds Investment Shares

Combined Prospectus
   
January xx, 1997
    
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 (1/97)
    


The Virtus Funds
Investment Shares
consists of eight portfolios:
The U. S. Government Securities Fund;
   The Style Manager: Large Cap Fund;    
   The Style Manager Fund;    
The Virginia Municipal Bond Fund;
The Maryland Municipal Bond Fund;
The Treasury Money Market Fund;
The Money Market Fund; and
The Tax-Free Money Market Fund.
Combined Statement of Additional Information

      
   This Combined Statement of Additional Information should be read with
   the Combined Prospectus for the Investment Shares (``Investment
   Shares'') of The Virtus Funds (the `Trust''), dated January xx, 1996.
   This Statement is not a prospectus itself. To receive a copy of the
   prospectus, write to or call the Trust.     

   FEDERATED INVESTORS TOWER
   PITTSBURGH, PA 15222-3779

                      Statement dated January xx, 1997     


FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779




Federated Securities Corp. is the distributor of the Funds
and is a subsidiary of Federated Investors.
   CUSIP 927913202
CUSIP 927913848
CUSIP 927913400
CUSIP 927913871
CUSIP 927913509
CUSIP 927913889
CUSIP 927913707
CUSIP 927913806

2102608B-R (1/97)     


GENERAL INFORMATION ABOUT THE TRUST                                     1

INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS                          1

THE U.S. GOVERNMENT SECURITIES FUND                                     1

 Types of Investments           1
THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER FUND            1

 Commercial Paper               4
 Bank Instruments               4
THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND   4

 Acceptable Investments         5
 Types of Acceptable Investments5
THE TREASURY MONEY MARKET FUND  5

 Types of Investments           5
THE MONEY MARKET FUND           6

 Types of Investments           6
THE TAX-FREE MONEY MARKET FUND  6

PORTFOLIO INVESTMENTS AND STRATEGIES                                    6

 Repurchase Agreements          6
 Reverse Repurchase Agreements  6
 When-Issued and Delayed Delivery Transactions                          6
 Lending of Portfolio Securities7
 Restricted and Illiquid Securities                                     7
 Participation Interests        7
 Variable Rate Municipal Securities                                     8
 Municipal Leases               8


 Temporary Investments          8
 Adjustable Rate Mortgage Securities                                    8
 Portfolio Turnover             9
INVESTMENT LIMITATIONS          9

THE VIRTUS FUNDS MANAGEMENT    13

 The Funds                     17
 Fund Ownership                17
 Officers and Trustees Compensation                                    18
 Trustee Liability             19



INVESTMENT ADVISORY SERVICES   19

 Adviser to the Trust          19
 Advisory Fees                 19
ADMINISTRATIVE SERVICES        20

CUSTODIAN                      20

BROKERAGE TRANSACTIONS         20

PURCHASING SHARES              20

 Distribution Plan             20
 Conversion to Federal Funds   21
DETERMINING NET ASSET VALUE    21

 Determining Market Value of Securities                                21
 Use of the Amortized Cost Method                                      22
 Valuing Municipal Securities  23
 Use of Amortized Cost         23
REDEEMING SHARES               23

 Redemption in Kind            23
TAX STATUS                     23

 The Funds' Tax Status         23
 Shareholders' Tax Status      23
TOTAL RETURN                   24

YIELD                          24

EFFECTIVE YIELD                25


TAX-EQUIVALENT YIELD           25

PERFORMANCE COMPARISONS        29

 The U.S. Government Securities Fund                                   29
 The Style Manager: Large Cap Fund and The Style Manager Fund          30
 The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund 30
 The Treasury Money Market Fund30
 The Money Market Fund         30
 The Tax-Free Money Market Fund31
APPENDIX                       32


GENERAL INFORMATION ABOUT THE TRUST

   The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated June 20, 1990. As of the date of this Statement,
the Trust consists of eight separate portfolios of securities
(collectively, the `Funds'', individually, a ``Fund'') which are as
follows: The U. S. Government Securities Fund, The Style Manager: Large Cap
Fund, The Style Manager Fund, The Virginia Municipal Bond Fund, The
Maryland Municipal Bond Fund, The Treasury Money Market Fund, The Money
Market Fund, and The Tax-Free Money Market Fund. On October 1, 1992, the
name of the Trust was changed from `The SBK Select Series'' to ``Signet
Select Funds.''On August 15, 1994, the name of the Trust was changed from
`Signet Select Funds'' to ``The Medalist Funds.'' On February 15, 1995, the
name of the Trust was changed from "The Medalist Funds" to "The Virtus
Funds."     
   With the exception of The Tax-Free Money Market Fund and The Style
Manager Fund, which offer a single class of shares, the Funds are offered
in two classes, Investment Shares and Trust Shares. This Combined Statement
of Additional Information relates only to the Investment Shares of those
Funds offering classes and to shares of The Tax-Free Money Market Fund and
The Style Manager Fund.    
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS

The prospectus discusses the objective of each Fund and the policies it
employs to achieve those objectives. The following discussion supplements
the description of the Funds' investment policies in the combined
prospectus.
The Funds' respective investment objectives cannot be changed without
approval of shareholders. The investment policies described below may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
Additional information about investment limitations, strategies that one or
more Funds may employ, and certain investment policies mentioned below
appear in the prospectus section `Portfolio Investments and Strategies.''
THE U.S. GOVERNMENT SECURITIES FUND

TYPES OF INVESTMENTS
The Fund invests primarily in securities which are guaranteed as to payment
of principal and interest by the U.S. government or its instrumentalities.
  U.S. GOVERNMENT OBLIGATIONS
     The types of U.S. government obligations in which the Fund may invest
     generally include direct obligations of the U.S. Treasury (such as
     U.S. Treasury bills, notes, and bonds) and obligations issued or
     guaranteed by U.S. government agencies or instrumentalities. These
     securities are backed by: the full faith and credit of the U.S.
     Treasury; the issuer's right to borrow from the U.S. Treasury; the
     discretionary authority of the U.S. government to purchase certain
     obligations of agencies or instrumentalities; or the credit of the
     agency or instrumentality issuing the obligations.
     Examples of agencies and instrumentalities which may not always
     receive financial support from the U.S. government are: the Farm
     Credit System; Federal Home Loan Banks; Farmers Home Administration;
     and Federal National Mortgage Association.
  COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
     Privately issued CMOs generally represent an ownership interest in
     federal agency mortgage pass-through securities such as those issued
     by the Government National Mortgage Association. The terms and
     characteristics of the mortgage instruments may vary among pass-
     through mortgage loan pools.
     The market for such CMOs has expanded considerably since its
     inception. The size of the primary issuance market and the active
     participation in the secondary market by securities dealers and other
     investors make government-related pools highly liquid.
   

THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER FUND

    
The Funds invest primarily in corporate securities, including common
stocks, preferred stocks, corporate bonds, notes, warrants and convertible
securities.
  CONVERTIBLE SECURITIES
     Convertible securities are fixed income securities which may be
     exchanged or converted into a predetermined number of the issuer's
     underlying common stock at the option of the holder during a specified
     time period. Convertible securities may take the form of convertible
     preferred stock, convertible bonds or debentures, units consisting of
     `usable'' bonds and warrants or a combination of the features of
     several of these securities. The investment characteristics of each
     convertible security vary widely, which allows convertible securities
     to be employed for different investment objectives.
     A Fund will exchange or convert the convertible securities held in its
     portfolio into shares of the underlying common stock in instances in
     which, in the investment adviser's opinion, the investment
     characteristics of the underlying common shares will assist the Fund
     in achieving its investment objectives. Otherwise, the Fund may hold
     or trade convertible securities. In selecting convertible securities
     for a Fund, the Fund's adviser evaluates the investment
     characteristics of the convertible security as a fixed income
     instrument, and the investment potential of the underlying equity
     security for capital appreciation. In evaluating these matters with
     respect to a particular convertible security, a Fund's adviser
     considers numerous factors, including the economic and political
     outlook, the value of the security relative to other investment
     alternatives, trends in the determinants of the issuer's profits, and
     the issuer's management capability and practices.
  WARRANTS
     Warrants are basically options to purchase common stock at a specific
     price (usually at a premium above the market value of the optioned
     common stock at issuance) valid for a specific period of time.
     Warrants may have a life ranging from less than a year to twenty years
     or may be perpetual. However, most warrants have expiration dates
     after which they are worthless. In addition, if the market price of
     the common stock does not exceed the warrant's exercise price during
     the life of the warrant, the warrant will expire as worthless.
     Warrants have no voting rights, pay no dividends, and have no rights
     with respect to the assets of the corporation issuing them. The
     percentage increase or decrease in the market price of the warrant may
     tend to be greater than the percentage increase or decrease in the
     market price of the optioned common stock.
  FUTURES AND OPTIONS TRANSACTIONS
     As a means of reducing fluctuations in the net asset value of shares
     of a Fund, the Fund may attempt to hedge all or a portion of its
     portfolio by buying and selling financial futures contracts, buying
     put options on portfolio securities and listed put options on futures
     contracts, and writing call options on futures contracts. A Fund may
     also write covered call options on portfolio securities to attempt to
     increase its current income. The Fund will maintain its positions in
     securities, option rights, and segregated cash subject to puts and
     calls until the options are exercised, closed, or have expired. An
     option position on financial futures contracts may be closed out only
     on an exchange which provides a secondary market from options of the
     same series.
  FINANCIAL FUTURES CONTRACTS
     A futures contract is a firm commitment by two parties: the seller,
     who agrees to make delivery of the specific type of security called
     for in the contract (`going short'') and the buyer, who agrees to
     take delivery of the security (`going long'') at a certain time in
     the future. Financial futures contracts call for the delivery of
     shares of common stocks represented in a particular index.
  PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
     A Fund may purchase listed put options on financial futures contracts.
     Unlike entering directly into a futures contract, which requires the
     purchaser to buy a financial instrument on a set date at a specified
     price, the purchase of a put option on a futures contract entitles
     (but does not obligate) its purchaser to decide on or before a future
     date whether to assume a short position at the specified price.
     Generally, if the hedged portfolio securities decrease in value during
     the term of an option, the related futures contracts will also
     decrease in value and the option will increase in value. In such an
     event, a Fund will normally close out its option by selling an
     identical option. If the hedge is successful, the proceeds received by
     a Fund upon the sale of the second option will be large enough to
     offset both the premium paid by the Fund for the original option plus
     the decrease in value of the hedged securities.
     Alternatively, the Fund may exercise its put option to close out the
     position. To do so, it would simultaneously enter into a futures
     contract of the type underlying the option (for a price less than the
     strike price of the option) and exercise the option. The Fund would
     then deliver the futures contract in return for payment of the strike
     price. If the Fund neither closes out nor exercises an option, the
     option will expire on the date provided in the option contract, and
     only the premium paid for the contract will be lost.
  CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
     In addition to purchasing put options on futures, a Fund may write
     listed call options on futures contracts to hedge its portfolio. When
     a Fund writes a call option on a futures contract, it is undertaking
     the obligation of assuming a short futures position (selling a futures
     contract) at the fixed strike price at any time during the life of the
     option if the option is exercised. As stock prices fall, causing the
     prices of futures to go down, the Fund's obligation under a call
     option on a future (to sell a futures contract) costs less to fulfill,
     causing the value of the Fund's call option position to increase.
     In other words, as the underlying futures price goes down below the
     strike price, the buyer of the option has no reason to exercise the
     call, so that the Fund keeps the premium received for the option. This
     premium can substantially offset the drop in value of the Fund's fixed
     income or indexed portfolio which is occurring as interest rates rise.
     Prior to the expiration of a call written by a Fund, or exercise of it
     by the buyer, the Fund may close out the option by buying an identical
     option. If the hedge is successful, the cost of the second option will
     be less than the premium received by the Fund for the initial option.
     The net premium income of the Fund will then substantially offset the
     decrease in value of the hedged securities.
     A Fund will not maintain open positions in futures contracts it has
     sold or call options it has written on futures contracts if, in the
     aggregate, the value of the open positions (marked to market) exceeds
     the current market value of its securities portfolio plus or minus the
     unrealized gain or loss on those open positions, adjusted for the
     correlation of volatility between the hedged securities and the
     futures contracts. If this limitation is exceeded at any time, the
     Fund will take prompt action to close out a sufficient number of open
     contracts to bring its open futures and options positions within this
     limitation.
  ``MARGIN'' IN FUTURES TRANSACTIONS
     Unlike the purchase or sale of a security, a Fund does not pay or
     receive money upon the purchase or sale of a futures contract. Rather,
     the Fund is required to deposit an amount of `initial margin'' in
     cash or U.S. Treasury bills with its custodian (or the broker, if
     legally permitted). The nature of initial margin in futures
     transactions is different from that of margin in securities
     transactions in that futures contract initial margin does not involve
     the borrowing of funds by the Fund to finance the transactions.
     Initial margin is in the nature of a performance bond or good faith
     deposit on the contract which is returned to the Fund upon termination
     of the futures contract, assuming all contractual obligations have
     been satisfied.
     A futures contract held by a Fund is valued daily at the official
     settlement price of the exchange on which it is traded. Each day the
     Fund pays or receives cash, called `variation margin,'' equal to the
     daily change in value of the futures contract. This process is known
     as `marking to market.'' Variation margin does not represent a
     borrowing or loan by the Fund but is instead settlement between the
     Fund and the broker of the amount one would owe the other if the
     futures contract expired. In computing its daily net asset value, the
     Fund will mark to market its open futures positions.
     The Fund is also required to deposit and maintain margin when it
     writes call options on futures contracts.
  PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
     A Fund may purchase put options on portfolio securities to protect
     against price movements in particular securities in its portfolio. A
     put option gives the Fund, in return for a premium, the right to sell
     the underlying security to the writer (seller) at a specified price
     during the term of the option.
  WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
     A Fund may also write covered call options to generate income. As
     writer of a call option, the Fund has the obligation upon exercise of
     the option during the option period to deliver the underlying security
     upon payment of the exercise price. The Fund may only sell call
     options either on securities held in its portfolio or on securities
     which it has the right to obtain without payment of further
     consideration (or has segregated cash in the amount of any additional
     consideration).

  OVER-THE-COUNTER OPTIONS
     A Fund may purchase and write over-the-counter options on portfolio
     securities in negotiated transactions with the buyers or writers of
     the options for those options on portfolio securities held by the Fund
     and not traded on an exchange.
     Over-the-counter options are two party contracts with price and terms
     negotiated between buyer and seller. In contrast, exchange-traded
     options are third party contracts with standardized strike prices and
     expiration dates and are purchased from a clearing corporation.
     Exchange-traded options have a continuous liquid market while over-
     the-counter options may not.
  U.S. GOVERNMENT OBLIGATIONS
     The types of U.S. government obligations in which the Fund may invest
     are those set forth under `The U.S. Government Securities Fund-U.S.
     Government Obligations.''

COMMERCIAL PAPER
A Fund may invest in commercial paper rated at least A-1 by Standard &
Poor's Ratings Group (`S&P''), Prime-1 by Moody's Investors Service, Inc.
(`Moody's''), or F-1 by Fitch Investors Service (``Fitch'') and money
market instruments (including commercial paper) which are unrated but of
comparable quality, including Canadian Commercial Paper (`CCPs'') and
Europaper. In the case where commercial paper, CCPs or Europaper have
received different ratings from different rating services, such commercial
paper, CCPs or Europaper is an acceptable investment so long as at least
one rating is one of the preceding high quality ratings and provided the
investment adviser has determined that such investment presents minimal
credit risks.

BANK INSTRUMENTS
A Fund may invest in the instruments of banks and savings and loans whose
deposits are insured by the Bank Insurance Fund (`BIF''), which is
administered by the Federal Deposit Insurance Corporation (`FDIC''), or
the Savings Association Insurance Fund (`SAIF''), which is administered by
the FDIC, such as certificates of deposit, demand and time deposits,
savings shares, and bankers' acceptances. These instruments are not
necessarily guaranteed by those organizations.


In addition to domestic bank obligations such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, the
Fund may invest in:
   o Eurodollar Certificates of Deposit (`ECDs'') issued by foreign
     branches of U.S. or foreign banks;
   o Eurodollar Time Deposits (`ETDs''), which are U.S. dollar-denominated
     deposits in foreign branches of U.S. or foreign banks;
   o Canadian Time Deposits, which are U.S. dollar-denominated deposits
     issued by branches of major Canadian banks located in the United
     States; and
   o Yankee Certificates of Deposit (`Yankee CDs''), which are U.S.
     dollar-denominated certificates of deposit issued by U.S. branches of
     foreign banks and held in the United States.


THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND

ACCEPTABLE INVESTMENTS
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
pursue their investment objectives by investing in professionally managed
portfolios of securities at least 65% of which are comprised of Virginia
(in the case of The Virginia Municipal Bond Fund) or Maryland (in the case
of The Maryland Municipal Bond Fund) municipal securities. The Funds will
invest their assets so that, under normal circumstances, at least 80% of
their annual interest income is exempt from federal regular and Virginia
(in the case of The Virginia Municipal Bond Fund) or Maryland (in the case
of The Maryland Municipal Bond Fund) state income taxes or that at least
80% of their total assets are invested in obligations, the interest income
from which is exempt from federal regular and Virginia (in the case of The


Virginia Municipal Bond Fund) or Maryland (in the case of The Maryland
Municipal Bond Fund) state income taxes.
  CHARACTERISTICS
     The municipal securities in which the Funds invest have the
     characteristics set forth in the prospectus. An unrated municipal
     security will be determined by a Fund's adviser to meet the quality
     standards established by the Fund's Board of Trustees if it is of
     comparable quality to the rated municipal securities which the Fund
     purchases. The Trustees consider the creditworthiness of the issuer of
     a municipal security, the issuer of a participation interest if the
     Fund has the right to demand payment from the issuer of the interest
     or the guarantor of payment by either of those issuers.
     If Moody's or S&P's ratings change because of changes in those
     organizations or in their rating systems, a Fund will try to use
     comparable ratings as standards in accordance with the investment
     policies described in the Fund's prospectus.

TYPES OF ACCEPTABLE INVESTMENTS
Examples of Virginia and Maryland municipal securities are:
   o municipal notes and tax-exempt commercial paper;
   o serial bonds sold with a series of maturity dates;
   o tax anticipation notes sold to finance working capital needs of
     municipalities in anticipation of receiving taxes at a later date;
   o bond anticipation notes sold in anticipation of the issuance of
     longer-term bonds in the future;
   o revenue anticipation notes sold in expectation of receipt of federal
     income available under the Federal Revenue Sharing Program;
   o prerefunded municipal bonds refundable at a later date (payment of
     principal and interest on prerefunded bonds is assured through the
     first call date by the deposit in escrow of U.S. government
     securities); or
   o general obligation bonds secured by a municipality's pledge of
     taxation.

THE TREASURY MONEY MARKET FUND

TYPES OF INVESTMENTS
The Fund invests only in short-term U.S. Treasury obligations. Short-term
U.S. Treasury obligations as used herein refers to evidences of
indebtedness issued by the United States, or issued by an agency or
instrumentality thereof, and fully guaranteed as to principal and interest
by the United States, maturing in 397 days or less from the date of
acquisition unless they are purchased under a repurchase agreement that
provides for repurchase by the seller within one year from the date of
acquisition. The Fund may also retain Fund assets in cash.
THE MONEY MARKET FUND

TYPES OF INVESTMENTS
The Fund invests primarily in money market instruments maturing in 397 days
or less and which include, but are not limited to, commercial paper and
demand master notes, domestic and foreign bank instruments, U.S. government
obligations, and corporate debt obligations.
  BANK INSTRUMENTS
        The types of bank instruments in which the Fund invests are those
     set forth under `The Style Manager: Large Cap Fund-Bank
     Instruments.''    
  U.S. GOVERNMENT OBLIGATIONS
     The types of U.S. government obligations in which the Fund may invest
     are those set forth under `The U.S. Government Securities Fund-U.S.
     Government Obligations.''


THE TAX-FREE MONEY MARKET FUND

The Fund invests in a portfolio of municipal securities maturing in 13
months or less. As a matter of investment policy, which cannot be changed
without shareholder approval, at least 80% of the Fund's annual interest
income will be exempt from federal income tax (including alternative
minimum tax). The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.
PORTFOLIO INVESTMENTS AND STRATEGIES

REPURCHASE AGREEMENTS
The Funds or their custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market
daily. In the event that a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Funds believe that under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in
favor of a Fund and allow retention or disposition of such securities. The
Funds will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the adviser to be creditworthy pursuant to guidelines established by the
Trustees.

REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement a Fund transfers possession of a portfolio instrument to another
person, such as a financial institution, broker, or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable a
Fund to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that a Fund will be able to avoid
selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.

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

LENDING OF PORTFOLIO SECURITIES
   The collateral received when The U.S. Government Securities Fund, The
Style Manager: Large Cap Fund, The Style Manager Fund,  and The Money
Market Fund lend portfolio securities must be valued daily and, should the
market value of the loaned securities increase, the borrower must furnish
additional collateral to the particular Fund. During the time portfolio
securities are on loan, the borrower pays a Fund any dividends or interest
paid on such securities. Loans are subject to termination at the option of
a Fund or the borrower. A Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower
or placing broker. The U.S. Government Securities Fund and The Style
Manager: Large Cap Fund do not have the right to vote securities on loan,
but would terminate the loan and regain the right to vote if that were
considered important with respect to the investment.     

RESTRICTED AND ILLIQUID SECURITIES
   The Funds may invest in restricted securities. Restricted securities are
any securities in which a Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restriction on
resale under federal securities law. However, The U.S. Government
Securities Fund, The Style Manager: Large Cap Fund, The Style Manager Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund will
limit investments in illiquid securities, including certain restricted
securities determined by the Trustees not to be liquid, and repurchase
agreements providing for settlement in more than seven days after notice,
to 15% of its net assets. In the case of The Virginia Municpal Bond Fund
and The Maryland Municipal Bond Fund, illiquid securities will include
participation interests and variable rate municipal securities without a
demand feature or with a demand feature of longer than seven days and which
the adviser believes cannot be sold within seven days. The Treasury Money
Market Fund, The Money Market Fund, and The Tax-Free Money Market Fund will
limit investments in illiquid securities, including certain securities
determined by the Trustees not to be liquid, and repurchase agreements
providing for settlement in more than seven days after notice, and in the
case of The Money Market Fund, specifically including non-negotiable fixed
income time deposits with maturities over seven days, to 10% of their net
assets.     

   The U.S. Government Securities Fund, The Style Manager: Large Cap Fund,
The Style Manager Fund, and The Money Market Fund may invest in commercial
paper issued in reliance on the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933. Section 4(2) commercial paper
is restricted as to disposition under federal securities law and is
generally sold to institutional investors, such as the Fund, who agree that
they are purchasing the paper for investment purposes and not with a view
to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Funds believe that Section 4(2)
commercial paper and possibly certain other restricted securities which
meet the criteria for liquidity established by the Board of Trustees are
quite liquid. The Funds intend, therefore, to treat the restricted
securities which meet the criteria for liquidity established by the
Trustees, including Section 4(2) commercial paper, as determined by a
Fund's investment adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section
4(2) commercial paper is liquid, the Funds intend to not subject such paper
to the limitation applicable to restricted securities.     

PARTICIPATION INTERESTS
The financial institutions from which The Virginia Municipal Bond Fund, The
Maryland Municipal Bond Fund, and The Tax-Free Money Market Fund purchase
participation interests frequently provide or secure from other financial
institutions irrevocable letters of credit or guarantees and give a Fund
the right to demand payment on specified notice (normally within thirty
days for The Virginia Municipal Bond Fund and The Maryland Municipal Bond
Fund and seven days for The Tax-Free Money Market Fund) from the issuer of
the letter of credit or guarantee. These financial institutions may charge
certain fees in connection with their repurchase commitments, including a
fee equal to the excess of the interest paid on the municipal securities
over the negotiated yield at which the participation interests were
purchased by a Fund. By purchasing participation interests, a Fund is
buying a security meeting the maturity and quality requirements of a Fund
and is also receiving the tax-free benefits of the underlying securities.
In the acquisition of participation interests, a Fund's investment adviser
will consider the following quality factors:
   o the quality of the underlying municipal security (of which a Fund
     takes possession);
   o the quality of the issuer of the participation interest; and
   o a guarantee or letter of credit from a high-quality financial
     institution supporting the participation interest.

VARIABLE RATE MUNICIPAL SECURITIES
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund invest in variable municipal securities.
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for
fixed income obligations.
Many municipal securities with variable interest rates purchased by the The
Tax-Free Money Market Fund are subject to repayment of principal (usually
within seven days) on the The Tax-Free Money Market Fund's demand. For
purposes of determining the Fund's average maturity, the maturities of
these variable rate demand municipal securities (including participation
interests) are the longer of the periods remaining until the next
readjustment of their interest rates or the periods remaining until their
principal amounts can be recovered buy exercising the right to demand
payment. The terms of these variable rate demand instruments require
payment of principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests or a guarantor of
either issuer.

MUNICIPAL LEASES
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, and The
Tax-Free Money Market Fund may purchase municipal securities in the form of
participation interests which represent undivided proportional interests in
lease payments by a governmental or nonprofit entity. The lease payments
and other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or
thenature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments, the entity cannot be
compelled to make such payments. Furthermore, a lease may provide that the
certificate trustee cannot accelerate lease obligations upon default. The
trustee would only be able to enforce lease payments as they became due. In
the event of a default or failure of appropriation, it is unlikely that the
trustee would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the adviser,
under the authority delegated by the Board of Trustees, will base its
determination on the following factors: (a) whether the lease can be
terminated by the lessee; (b) the potential recovery, if any, from a sale
of the leased property upon termination of the lease; (c) the lessee's
general credit strength (e.g., its debts, administrative, economic and
financial characteristics, and prospects); (d) the likelihood that the
lessee will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to its operations (e.g.,
the potential for an `event of nonappropriation''); and (e) any credit
enhancement of legal recourse provided upon an event of nonappropriation or
other termination of the lease.

TEMPORARY INVESTMENTS
The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund and The
Tax-Free Money Market Fund may also invest in temporary investments during
times of unusual market conditions for defensive purposes and to maintain
liquidity.
From time to time, such as when suitable securities are not available to
the respective Fund, a Fund may invest a portion of its assets in cash. Any
portion of a Fund's assets maintained in cash will reduce the amount of
assets in securities held in the respective Fund, and could thereby reduce
a Fund's yield.

ADJUSTABLE RATE MORTGAGE SECURITIES
The U.S. Government Securities Fund invests in adjustable rate mortgage
securities (`ARMS''). Not unlike other U.S. government securities, the
market value of ARMS will generally vary inversely with changes in market
interest rates. Thus, the market value of ARMS generally declines when
interest rates rise and generally rises when interest rates decline.
While ARMS generally entail less risk of a decline during periods of
rapidly rising rates, ARMS may also have less potential for capital
appreciation than other similar investments (e.g. investments with
comparable maturities) because as interest rates decline, the likelihood
increases that mortgages will be prepaid. Furthermore, if ARMS are
purchased at a premium, mortgage foreclosures and unscheduled principal
payment may result in some loss of a holder's principal investment to the
extent of the premium paid. Conversely, if ARMS are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.

PORTFOLIO TURNOVER
   The Funds will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in an
attempt to achieve a Fund's investment objective. The Style Manager: Large
Cap Fund and The Style Manager Fund may experience greater portfolio
turnover than would be expected with a portfolio of higher-rated
securities. A high portfolio turnover will result in increased transaction
costs to the Fund. For the fiscal years ended September 30, 1995, 1994, and
1993, the portfolio turnover rates were 82%, 227%, and 154%, respectively,
for The U.S. Government Securities Fund; 208%, 205%, and 67%, respectively,
for The Style Manager: Large Cap Fund; 26%, 29%, 17% for The Virginia
Municipal Bond Fund; and 21%, 27%, and 23%, respectively, for The Maryland
Municipal Bond Fund. For the period from March 7, 1995, (date of initial
public investment) to September 30, 1995 The Style Manager Fund's portfolio
turnover was 92%.     
INVESTMENT LIMITATIONS
  ISSUING SENIOR SECURITIES AND BORROWING MONEY
        The Funds will not issue senior securities except that a Fund may
     borrow money directly or through reverse repurchase agreements in
     amounts up to one-third of the value of its net assets, including the
     amount borrowed. The Funds will not borrow money or engage in reverse
     repurchase agreements for investment leverage, but rather as a
     temporary, extraordinary, or emergency measure or to facilitate
     management of the portfolio by enabling a Fund to meet redemption
     requests when the liquidation of portfolio securities is deemed to be
     inconvenient or disadvantageous. A Fund will not purchase any
     securities while any borrowings in excess of 5% of its total assets
     are outstanding. With respect to The U.S. Government Securities Fund,
     The Style Manager: Large Cap Fund, The Style Manager Fund, The
     Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, The
     Treasury Money Market Fund, and The Money Market Fund, during the
     period any reverse repurchase agreements are outstanding, the Funds
     will restrict the purchase of portfolio securities to money market
     instruments maturing on or before the expiration date of the reverse
     repurchase agreements, but only to the extent necessary to assure
     completion of the reverse repurchase agreements.     
  SELLING SHORT AND BUYING ON MARGIN
        The Funds will not purchase any securities on margin but they may
     obtain such short-term credits as may be necessary for clearance of
     transactions. With respect to The U.S. Government Securities Fund, The
     Style Manager: Large Cap Fund, and The Style Manager Fund, the deposit
     or payment by the Fund of initial or variation margin in connection
     with financial futures contracts or related options transactions is
     not considered the purchase of a security on margin. The Virginia
     Municipal Bond Fund, The Maryland Municipal Bond Fund, The Treasury
     Money Market Fund, The Money Market Fund, and The Tax-Free Money
     Market Fund may not sell any securities short.     

  PLEDGING ASSETS
     The Funds will not mortgage, pledge, or hypothecate any assets except
     to secure permitted borrowings. In these cases the Funds, except The
     Tax-Free Money Market Fund, may pledge assets having a market value
     not exceeding the lesser of the dollar amounts borrowed or 15% of the
     value of total assets of a Fund at the time of the pledge. Margin
     deposits for the purchase and sale of financial futures contracts and
     related options are not deemed to be a pledge.

  LENDING CASH OR SECURITIES
        The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund, The Treasury Money Market Fund and The
     Money Market Fund, will not lend any of their assets, except portfolio
     securities up to one-third of the value of their total assets. This
     shall not prevent a Fund from purchasing or holding bonds, debentures,
     notes, certificates of indebtedness, or other debt securities,
     entering into repurchase agreements, or engaging in other transactions
     where permitted by a Fund's investment objective, policies, and
     limitations or the Trust's Declaration of Trust.     
     The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
     will not lend any of their assets, except that they may acquire
     publicly or nonpublicly issued municipal securities or temporary
     investments or enter into repurchase agreements as permitted by a
     Fund's investment objective, policies, limitations and Declaration of
     Trust.
     The Tax-Free Money Market Fund will not lend any of its assets except
     that it may purchase or hold portfolio securities permitted by its
     investment objective, policies and limitations, or Declaration of
     Trust.

  INVESTING IN RESTRICTED SECURITIES
        Except for The Tax-Free Money Market Fund, the Funds will not
     invest more than 10% of their net assets in securities subject to
     restrictions on resale under the Securities Act of 1933 (except
     certain restricted securities which meet the criteria for liquidity as
     established by the Board of Trustees. With respect to The U.S.
     Government Securities Fund, The Style Manager: Large Cap Fund, The
     Style Manager Fund and The Money Market Fund, this exception
     specifically extends to commercial paper issued under Section 4(2) of
     the Securities Act of 1933 and certain other restricted securities
     which meet the criteria for liquidity as established by the Board of
     Trustees).     
     The Tax-Free Money Market Fund will not invest more than 10% of its
     total assets in securities subject to restrictions on resale under
     federal securities law, except for restricted securities determined to
     be liquid under criteria established by the Trustees.

  INVESTING IN COMMODITIES
        The Funds will not purchase or sell commodities, commodity
     contracts or commodity futures contracts except for financial futures
     contracts in the case of The Style Manager: Large Cap Fund and The
     Style Manager Fund.    

  INVESTING IN REAL ESTATE
        The Funds will not purchase or sell real estate, including limited
     partnership interests with respect to The Style Manager Fund, although
     The U.S. Government Securities Fund, The Style Manager: Large Cap Fund
     and The Style Manager Fund may invest in securities secured by real
     estate or interests in real estate or issued by companies, including
     real estate investment trusts, which invest in real estate or
     interests therein. The Virginia Municipal Bond Fund, The Maryland
     Municipal Bond Fund, The Money Market Fund, and The Tax-Free Money
     Market Fund may invest in securities of issuers whose business
     involves the purchase or sale of real estate or in securities which
     are secured by real estate or interests in real estate.     

  DIVERSIFICATION OF INVESTMENTS
        With respect to 75% of the value of its total assets, The U.S.
     Government Securities Fund, The Style Manager: Large Cap Fund, The
     Style Manager Fund and The Money Market Fund will not purchase
     securities issued by any one issuer (other than cash, cash items or
     securities issued or guaranteed by the government of the United States
     or its agencies or instrumentalities and repurchase agreements
     collateralized by such securities), if as a result more than 5% of the
     value of its total assets would be invested in the securities of that
     issuer. The U.S. Government Fund and The Style Manager: Large Cap Fund
     will not acquire more than 10% of the outstanding voting securities of
     any one issuer.     

  CONCENTRATION OF INVESTMENTS
        The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund and The Money Market Fund will not invest
     25% or more of the value of their total assets in any one industry.
     With respect to The Money Market Fund, investing in bank instruments
     (such as time and demand deposits and certificates of deposit), U.S.
     government obligations, or instruments secured by these money market
     instruments, such as repurchase agreements for U.S. government
     obligations, shall not be considered investments in any one industry.
         
     The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
     will not purchase securities if, as a result of such purchase, 25% or
     more of the value of its total assets would be invested in any one
     industry or in industrial development bonds or other securities, the
     interest on which is paid from revenues of similar types of projects.
     However, these Funds may invest as temporary investments more than 25%
     of the value of its assets in cash or cash items, securities issued or
     guaranteed by the U.S. government, its agencies, or instrumentalities,
     or instruments secured by these money market instruments, such as
     repurchase agreements.
     The Tax-Free Money Market Fund will not invest 25% or more of the
     value of its total assets in any one industry, except that it may
     invest more than 25% of its total assets in securities issued or
     guaranteed by the U.S. government, its agencies or instrumentalities
     and industrial development bonds as long as they are not from the same
     facility or similar types of facilities. The Tax-Free Money Market
     Fund does not intend to purchase securities that would increase the
     percentage of its assets invested in the securities of governmental
     subdivisions located in any one state, territory, or U.S. possession
     to 25% or more.

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

The above limitations cannot be changed with respect to a Fund without
approval of a majority of that Fund's Shares. The following limitations may
be changed by the Trustees without shareholder approval. Shareholders will
be notified before any material change in these limitations becomes
effective.

  INVESTING IN ILLIQUID SECURITIES
        The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund, The Virginia Municipal Bond Fund, and
     The Maryland Municipal Bond Fund will not invest more than 15% of the
     value of their net assets in illiquid securities, including repurchase
     agreements providing for settlement in more than seven days after
     notice, and certain restricted securities determined by the Trustees
     not to be liquid; and, in the case of The Virginia Municipal Bond Fund
     and The Maryland Municipal Bond Fund, specifically including
     participation interests and variable rate municipal securities without
     a demand feature or with a demand feature of longer than seven days
     and which the adviser believes cannot be sold within seven days. The
     Treasury Money Market Fund, The Money Market Fund, and The Tax-Free
     Money Market Fund will not invest more than 10% of the value of their
     net assets in illiquid securities, including repurchase agreements
     providing for settlement more than seven days after notice and certain
     securities determined by the Trustees not to be liquid; and, in the
     case of The Money Market Fund, specifically including non-negotiable
     fixed income time deposits with maturities over seven days.     

  INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
        The Funds will limit their respective investment in other
     investment companies to no more than 3% of the total outstanding
     voting stock of any investment company, invest no more than 5% of
     total assets in any one investment company, or invest more than 10% of
     total assets in investment companies in general. The U.S. Government
     Securities Fund, The Style Manager: Large Cap Fund, The Style Manager
     Fund, The Treasury Money Market Fund and The Money Market Fund will
     purchase securities of closed-end investment companies only in open
     market transactions involving only customary broker's commissions.
     However, these limitations are not applicable if the securities are
     acquired in a merger, consolidation, reorganization, or acquisition of
     assets. With respect to The Treasury Money Market Fund and The Money
     Market Fund, the Funds will limit their investments and the securities
     of other investment companies to those of The Money Market Funds
     having investment objectives and policies similar to their own. The
     Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund will
     invest in other investment companies primarily for the purposes of
     investing short-term cash which has not yet been invested in other
     portfolio instruments. The adviser will waive its investment advisory
     fee on assets invested in securities of open-end investment companies.
         

  INVESTING IN NEW ISSUERS
        The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund, The Money Market Fund, and The Tax-Free
     Money Market Fund will not invest more than 5% of the value of their
     total assets in securities of issuers which have records of less than
     three years of continuous operations, including the operation of any
     predecessor. The Virginia Municipal Bond Fund and The Maryland
     Municipal Bond Fund will not invest more than 5% of the value of its
     total assets in industrial development bonds where the payment of
     principal and interest is the responsibility of companies (or in the
     alternative guarantors, where applicable) which have records of less
     than three years of continuous operations, including the operation of
     any predecessor.     

  INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
  OF THE TRUST
     A Fund will not purchase or retain the securities of any issuer if the
     officers and Trustees of the Trust or its investment adviser owning
     individually more than 1/2 of 1% of the issuer's securities together
     own more than 5% of the issuer's securities.

  INVESTING IN MINERALS
     A Fund will not purchase interests in oil, gas, or other mineral
     exploration or development programs or leases, although it may
     purchase the securities of issuers which invest in or sponsor such
     programs.

  ARBITRAGE TRANSACTIONS
     A Fund will not enter into transactions for the purpose of engaging in
     arbitrage.

  PURCHASING SECURITIES TO EXERCISE CONTROL
     A Fund will not purchase securities of a company for the purpose of
     exercising control or management.

  INVESTING IN WARRANTS
        The Funds will not invest in warrants, except that The Style
     Manager: Large Cap Fund and The Style Manager Fund may invest not more
     than 5% of its net assets in warrants, including those acquired in
     units or attached to other securities. To comply with certain state
     restrictions, the Fund will limit its investment in such warrants not
     listed on the New York or American Stock Exchanges to 2% of its net
     assets. (If state restrictions change, this latter restriction may be
     revised without notice to shareholders.) For purposes of this
     investment restriction, warrants will be valued at the lower of cost
     or market, except that warrants acquired by the Fund in units with or
     attached to securities may be deemed to be without value.     

  INVESTING IN PUT OPTIONS
        Neither The U.S. Government Securities Fund, The Style Manager:
     Large Cap Fund, nor The Stategic Stock Fund will purchase put options
     on securities unless the securities are held in a Fund's portfolio and
     not more than 5% of the value of either Fund's total assets would be
     invested in premiums on open and put option positions.     
  WRITING COVERED CALL OPTIONS
        Neither The U.S. Government Securities Fund, The Style Manager:
     Large Cap Fund, nor The Style Manager Fund will write call options on
     securities unless the securities are held in their portfolio or unless
     either Fund is entitled to them in deliverable form without further
     payment or after segregating cash in the amount of any further
     payment.     


  SELLING SHORT
        Neither The U.S. Government Securities Fund, The Style Manager:
     Large Cap Fund, nor The Style Manager Fund will sell securities short
     unless (1) it owns, or has a right to acquire, an equal amount of such
     securities, or (2) it has segregated an amount of its other assets
     equal to the lesser of the market value of the securities sold short
     or the amount required to acquire such securities. The segregated
     amount will not exceed 10% of The U.S. Government Securities Fund's
     nor The Style Manager: Large Cap Fund's net assets.
     With respect to The Style Manager Fund, the segregated amount will not
     exceed 5% of the net equity of the Fund's net assets. The dollar
     amount of short sales at any one time shall not exceed 5% of the net
     equity of the Fund and the value of securities of any one issuer in
     which the Fund is short may not exceed the lesser of 2% of the value
     of the Fund's net assets or 2% of the securities of any class of any
     issuer.     
     While in a short position, the Fund will retain the securities, rights
     or segregated assets.

  DEALING IN PUTS AND CALLS
     The Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund,
     and The Tax-Free Money Market Fund will not invest in puts, calls,
     straddles, spreads, or any combination of them except that The
     Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund may
     purchase put options on municipal securities in an amount up to 5% of
     its total assets or may purchase municipal securities accompanied by
     agreements of sellers to repurchase them at a Fund's option.
     Except with respect to the Funds' policy of borrowing money, if a
     percentage limitation is adhered to at the time of investment, a later
     increase or decrease in percentage resulting from any change in value
     or net assets will not result in a violation of such restriction.
        The U.S. Government Securities Fund, The Style Manager: Large Cap
     Fund and The Style Manager Fund have no present intent to borrow
     money, pledge securities or invest in restricted or illiquid
     securities in excess of 5% of the value of their respective net assets
     in the coming fiscal year. These Funds (1) will limit the aggregate
     value of the assets underlying covered call options or put options
     written by a Fund to not more than 25% of its net assets, (2) will
     limit the premiums paid for options purchased by a Fund to 20% of its
     net assets, and (3) will limit the margin deposits on futures
     contracts entered into by a Fund to 5% of its net assets. (If state
     requirements change, these restrictions may be revised without
     shareholder notification.)     
     The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund
     have no present intent to issue senior securities or borrow money,
     pledge securities, invest in restricted or illiquid securities or
     engage in when-issued and delayed delivery transactions in excess of
     5% of the value of its net assets during the fiscal period.
     The Treasury Money Market Fund and The Money Market Fund do not expect
     to issue senior securities or borrow money, pledge securities, engage
     in whenissued and delayed delivery transactions or reverse repurchase
     agreements, for The Money Market Fund only, in excess of 5% of the
     value of their net assets during the coming fiscal year.
     The Tax-Free Money Market Fund does not intend to borrow money or
     pledge securities in excess of 5% of the value of its net assets
     during the coming fiscal year.
     To comply with registration requirements in a certain state, The
     Virginia Municipal Bond Fund, The Maryland Municipal Bond Fund, The
     Money Market Fund, and The Tax-Free Money Market Fund will not invest
     in real estate limited partnerships.


THE VIRTUS FUNDS MANAGEMENT

OFFICERS AND TRUSTEES ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH THE VIRTUS FUNDS, AND PRINCIPAL OCCUPATIONS.


John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate:  July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or Managing
General Partner of the Funds. Mr. Donahue is the father of J. Christopher
Donahue, Executive Vice President of the Trust .


Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate:  February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.




John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate:  June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of the
Funds; formerly, President, Naples Property Management, Inc.


William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate:  July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.


James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate:  May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.


Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate:  October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of the
Funds.


Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate:  June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;


Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.


Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate:  October 22, 1930
Treasurer and Trustee
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Services Company; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some of the
Funds.







Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate:  March 16, 1942


Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation.


Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate:  October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.


John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate:  December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the
Funds.


Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh


Pittsburgh, PA
Birthdate:  September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; founding Chairman,
National Advisory Council for Environmental Policy and Technology and
Federal Emergency Management Advisory Board.


Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate:  June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.



J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate:  April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport


Research, Ltd.; Trustee, Federated Administrative Services, Federated
Services Company, and Federated Shareholder Services; President or Vice
President of the Funds; Director, Trustee, or Managing General Partner of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee  of the Trust.


John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate:  October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee,
Federated Investors; Trustee, Federated Advisers, Federated Management, and
Federated Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Services Company; Executive Vice
President, Secretary, and Trustee, Federated Administrative Services;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.; Executive Vice President and Secretary of the Funds.


Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate:  May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.




Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 22, 1962

Vice President and Assistant Treasurer

Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Funds.


* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.


THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Government Money Trust; Blanchard Funds;
Blanchard Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series,
Inc.; 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; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for
U.S. Government Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Insurance Management Series; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High
Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust;  Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The
Shawmut Funds; Star Funds; The Starburst Funds; The Starburst Funds II;
Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; Trademark Funds; Trust for Financial Institutions;
Trust For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; World
Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the outstanding shares of each
Fund.
   As of January xx, 1996, the following shareholders of record owned 5% or
more of the outstanding shares of the Funds:     




OFFICERS AND TRUSTEES COMPENSATION


NAME ,                AGGREGATE         TOTAL COMPENSATION
POSITION WITH         COMPENSATION FROM      PAID TO TRUSTEES FROM
TRUST                 TRUST+            TRUST AND FUND COMPLEX


John F. Donahue,
Chairman and Trustee  $ -0-             $ -0- for the Trust and
                                        69 investment companies

Thomas G. Bigley,
Trustee               $1540             $24,991 for the Trust and
                                        50 investment companies

John T. Conroy, Jr.,
Trustee               $2203             $136,100 for the Trust and
                                        65 investment companies
William J. Copeland,
Trustee               $2203             $136,100 for the Trust and
                                        65 investment companies

James E. Dowd,
Trustee               $2203             $136,100 for the Trust and
                                        65 investment companies

Lawrence D. Ellis, M.D.
Trustee               $2038             $123,600 for the Trust and
                                        65 investment companies

Edward L. Flaherty, Jr.,
Trustee               $2203             $136,100 for the Trust and
                                        65 investment companies

Edward C. Gonzales,
President and Trustee $-0-              $ -0- for the Trust and
                                        18 investment companies

Peter E. Madden,
Trustee               $1739             $104,880 for the Trust and
                                        65 investment companies

Gregor F. Meyer,
Trustee               $2038             $123,600 for the Trust and
                                        65 investment companies

Wesley W. Posvar,
Trustee               $2038             $123,600 for the Trust and
                                        65 investment companies

Marjorie P. Smuts,
Trustee               $2038             $123,600 for the Trust and
                                        65 investment companies

+The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.


TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they are
not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE TRUST
The Trust's investment adviser is Virtus Capital Management, Inc., which is
a division of Signet Trust Company, a wholly-owned subsidiary of Signet
Banking Corporation. Because of the internal controls maintained by Signet
Bank to restrict the flow of non-public information, Fund investments are
typically made without any knowlidge of Signet Bank's or its affiliates'
lending relationships with an issuer.
The adviser shall not be liable to the Trust, a Fund, or any shareholder of
any of the Funds for any losses that may be sustained in the purchase,
holding, or sale of any security or for anything done or omitted by it,
except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon it by its
contract with the Trust.
ADVISORY FEES
   For its advisory services, Virtus Capital Management, Inc. receives an
annual investment advisory fee as described in the prospectus. During the
fiscal years ended September 30, 1995, 1994, and 1993, the adviser earned
fees from: The U.S. Government Securities Fund, of $1,581,364, $1,734,083,
and $1,375,434, of which $589,885, $734,744, and $784,857, were voluntarily
waived; The Style Manager: Large Cap Fund $678,512, $703,937, and $512,930,
of which $189,983, $214,366, and $372,554, were voluntarily waived; The
Style Manager Fund $374,393, for the period from March 7, 1995 (date of


initial public investment) to September 30, 1995, of which $374,393 was
voluntarily waived; The Virginia Municipal Bond Fund $775,247, $861,187,
and $519,326, of which $227,301, $314,920, and $345,108, were voluntarily
waived; The Maryland Municipal Bond Fund $316,194, $355,431, and $233,787,
of which $187,476, $241,790, and $231,723, were voluntarily waived; The
Treasury Money Market Fund $2,347,424, $1,388,302, and $922,509, of which
$469,485, $508,090, and $369,003, were voluntarily waived; and The Money
Market Fund $868,490, $709,679, and $729,525, of which $336,697, $354,839,
and $431,083, were voluntarily waived. For the fiscal year ended September
30, 1995 and for the period from July 27, 1994 to September 30, 1994 the
adviser earned $262,792 and $21,033, respectively,  from The Tax-Free Money
Market Fund, of which $262,792 and $19,388, respectively, were voluntarily
waived.     
   SUB-ADVISER TO THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER
FUND
The Style Manager: Large Cap Fund and The Style Manager Fund's sub-adviser
is Trend Capital Management, Inc.
SUB-ADVISORY FEES
For its sub-advisory services, the Sub-Adviser receives an annual sub-
advisory fee as described in the prospectus.     
ADMINISTRATIVE SERVICES

   Federated Administrative Services, which is a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds for
the fees set forth in the prospectus. For the fiscal years ended September
30, 1995, 1994, and 1993, the Funds incurred costs for administrative
services as follows: The U.S. Government Securities Fund incurred $226,246,
$269,932, and$233,156; The Style Manager: Large Cap Fund incurred $97,229,
$109,075, and $86,960; The Style Manager Fund incurred $85,069 for the
period from March 7, 1995 (date of initial public investment) to September


30, 1995; The Virginia Municipal Bond Fund incurred $110,908, $133,956, and
$87,752; The Maryland Municipal Bond Fund incurred $45,246, $55,254,
and$49,614; The Treasury Money Market Fund incurred $500,283, $319,857, and
$235,278; and The Money Market Fund incurred $185,586, $165,549, and
$186,110; of which $0, $0, and $0 were voluntarily waived for The U.S.
Government Securities Fund; $0, $0, and $0 were voluntarily waived for The
Style Manager: Large Cap Fund; $0, $0, and $0, were voluntarily waived for
The Virginia Municipal Bond Fund; $0, $0, and $0 were voluntarily waived
for The Maryland Municipal Bond Fund; $0, $0, and $0 were voluntarily
waived for The Treasury Money Market Fund; and $0, $0, and $0 were
voluntarily waived for The Money Market Fund. For the fiscal year ended
September 30, 1995 and for the period from July 27, 1994, to September 30,
1994, The Tax-Free Money Market Fund paid $58,355 and $8,904 for
administrative services, of which $0, and $0 was voluntarily waived.     
CUSTODIAN

Signet Trust Company is custodian for the securities and cash of the Funds.
Under the Custodian Agreement, Signet Trust Company holds the Funds'
portfolio securities in safekeeping and keeps all necessary records and
documents relating to its duties. The custodian receives a fee at an annual
rate of .05 of 1% on the first $10 million of average net assets of each of
the eight respective portfolios and .025 of 1% on average net assets in
excess of $10 million. There is a $20 fee imposed on each transaction. The
custodian fee received during any fiscal year shall be at least $1,000 per
Fund.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally


use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the Board
of Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Funds or to the
adviser and may include:
   o advice as to the advisability of investing in securities;
   o security analysis and reports;
   o economic studies;
   o industry studies;
   o receipt of quotations for portfolio evaluations; and
   o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers may be used by the adviser in
advising the Funds and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses.
   For the fiscal year ended September 30, 1995, The Style Manager: Large
Cap Fund paid $562,493 in commissions on brokerage transactions.     
PURCHASING SHARES

Shares of the Funds are sold at their net asset value without a sales
charge on days the New York Stock Exchange is open for business. The


procedure for purchasing Shares of the Funds is explained in the prospectus
under `Investing in Shares.''
DISTRIBUTION PLAN
The Trust has adopted a Plan for Shares of the Funds pursuant to Rule 12b-1
which was promulgated by the Securities and Exchange Commission pursuant to
the Investment Company Act of 1940. The Plan provides that the Funds'
distributor, Federated Securities Corp., shall act as the distributor of
Shares, and it permits the payment of fees to brokers and dealers for
distribution and administrative services and to administrators for
administrative services. The Plan is designed to (i) stimulate brokers and
dealers to provide distribution and administrative support services to the
Funds and their holders of Shares and (ii) stimulate administrators to
render administrative support services to the Funds and their holders of
Shares. These services are to be provided by a representative who has
knowledge of the holder of Shares' particular circumstances and goals, and
include, but are not limited to: providing office space, equipment,
telephone facilities, and various personnel including clerical,
supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding the Funds; assisting
clients in changing dividend options, account designations, and addresses;
and providing such other services as the Trust reasonably requests.
Other benefits which the Funds hope to achieve through the Plan include,
but are not limited to the following: (1) an efficient and effective
administrative system; (2) a more efficient use of assets of holders of
Shares by having them rapidly invested in the Funds with a minimum of delay
and administrative detail; and (3) an efficient and reliable records system


for holders of Shares and prompt responses to shareholder requests and
inquiries concerning their accounts.
By adopting the Plan, the Board of Trustees expects that the Funds will be
able to achieve a more predictable flow of cash for investment purposes and
to meet redemptions. This will facilitate more efficient portfolio
management and assist the Funds in seeking to achieve their respective
investment objectives. By identifying potential investors in Shares whose
needs are served by a particular Fund's objective, and properly servicing
these accounts, the Funds may be able to curb sharp fluctuations in rates
of redemptions and sales.
   For the fiscal years ended September 30, 1995, 1994, and 1993, the Funds
paid fees to brokers and administrators (financial institutions) pursuant
to the Plan as follows: The U.S. Government Securities Fund $268,621,
$299,048, and $0; The Style Manager: Large Cap Fund $80,046, $59,836, and
$0; The Style Manager Fund $0; The Virginia Municipal Bond Fund, of
$174,523, $190,877, and $0; The Maryland Municipal Bond Fund, of $80,136,
$89,447, and $0; The Treasury Money Market Fund, of $80,097, $52,221, and
$0; The Money Market Fund, of $79,316, $26,424, and $0. For the year ended
September 30, 1995, and for the period from July 27, 1994 to September 30,
1994, the Tax-Free Money Market Fund paid no fees pursuant to the Plan.
    
CONVERSION TO FEDERAL FUNDS
It is the policy of The Treasury Money Market Fund, The Money Market Fund,
and The Tax-Free Money Market Fund to be as fully invested as possible so
that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds.
Federated Services Company acts as the shareholder's agent in depositing
checks and converting them to federal funds.


DETERMINING NET ASSET VALUE

   Net asset values of The U.S. Government Securities Fund, The Style
Manager: Large Cap Fund, The Style Manager Fund, The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund generally change each day.
The Treasury Money Market Fund, The Money Market Fund, and The Tax-Free
Money Market Fund attempt to stabilize the value of their Shares at $1.00.
The days on which the net asset value is calculated by these Funds are
described in the prospectus.     
DETERMINING MARKET VALUE OF SECURITIES
The market value of The U.S. Government Securities Fund's portfolio
securities is determined as follows:
   o according to the mean between the over-the-counter bid and asked
     prices provided by an independent pricing service, if available, or at
     fair value as determined in good faith by the Fund's Board of
     Trustees; or
   o for short-term obligations with remaining maturities of 60 days or
     less at the time of purchase at amortized cost unless the Board of
     Trustees determines that particular circumstances of the security
     indicate otherwise.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
   The market value of portfolio securities of The Style Manager: Large Cap
Fund and The Style Manager Fund is determined as follows:     
   o for equity securities, according to the last sale price on a national
     securities exchange, if available;


   o in the absence of recorded sales for listed equity securities,
     according to the mean between the last closing bid and asked prices;
   o for unlisted equity securities, the latest bid prices;
   o for bonds and other fixed income securities, as determined by an
     independent pricing service;
   o for short-term obligations, according to the mean between bid and
     asked prices as furnished by an independent pricing service or for
     short-term obligations with remaining maturities of 60 days or less at
     the time of purchase at amortized cost; or
   o for all other securities, at fair value as determined in good faith by
     the Board of Trustees.
   The U.S. Government Securities Fund, The Style Manager: Large Cap Fund,
and The Style Manager Fund will value futures contracts, options, and put
options on futures and at their market values established by the exchanges
at the close of option trading on such exchanges unless the Board of
Trustees determine in good faith that another method of valuing option
positions is necessary to appraise their fair value. Over-the-counter put
options will be valued at the mean between the bid and the asked prices.
    
USE OF THE AMORTIZED COST METHOD
With respect to The Treasury Money Market Fund, The Money Market Fund, and
The Tax-Free Money Market Fund, the Trustees have decided that the best
method for determining the value of portfolio instruments is amortized
cost. Under this method, portfolio instruments are valued at the
acquisition cost as adjusted for amortization of premium or accumulation of
discount rather than at current market value.
A Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the
`Rule'') promulgated by the Securities and Exchange Commission under the


Investment Company Act of 1940. Under the Rule, the Trustees must establish
procedures reasonably designed to stabilize the net asset value per share,
as computed for purposes of distribution and redemption, at $1.00 per
Share, taking into account current market conditions and a Fund's
investment objective.
Under the Rule, a Fund is permitted to purchase instruments which are
subject to demand features or standby commitments. As defined by the Rule,
a demand feature entitles a Fund to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days'
notice or (2) at specified intervals not exceeding one year on no more than
30 days' notice. A standby commitment entitles a Fund to achieve same day
settlement and to receive an exercise price equal to the amortized cost of
the underlying instrument plus accrued interest at the time of exercise.
The Funds acquire instruments subject to demand features and standby
commitments to enhance the instrument's liquidity. The Funds treat demand
features and standby commitments as a part of the underlying instruments,
because the Funds do not acquire them for speculative purposes and cannot
transfer them separately from the underlying instruments. Therefore,
although the Rule defines demand features and standby commitments as
`puts'', the Fund does not consider them to be separate investments for
purposes of its investment policies.
  MONITORING PROCEDURES
     The Trustees' procedures include monitoring the relationship between
     the amortized cost value per share and the net asset value per share
     based upon available indications of market value. The Trustees will
     decide what, if any, steps should be taken if there is a difference of
     more than .5 of 1% between the two. The Trustees will take any steps
     they consider appropriate (such as redemption in kind or shortening
     the average portfolio maturity) to minimize any material dilution or


     other unfair results arising from differences between the two methods
     of determining net asset value.

  INVESTMENT RESTRICTIONS
     The Rule requires that a Fund limit its investments to instruments
     that, in the opinion of the Trustees, present minimal credit risks and
     have received the requisite rating from one or more nationally
     recognized statistical rating organizations. If the instruments are
     not rated, the Trustees must determine that they are of comparable
     quality. The Rule also requires a Fund to maintain a dollar-weighted
     average portfolio maturity (not more than 90 days) appropriate to the
     objective of maintaining a stable net asset value of $1.00 per Share.
     In addition, no instrument with a remaining maturity of more than 397
     days can be purchased by a Fund.

     Should the disposition of a portfolio security result in a dollar-
     weighted average portfolio maturity of more than 90 days, a Fund will
     invest its available cash to reduce the average maturity to 90 days or
     less as soon as possible.

A Fund may attempt to increase yield by trading portfolio securities to
take advantage of short-term market variations. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset
value is affected by any unrealized appreciation or depreciation of the
portfolio.
In periods of declining interest rates, the indicated daily yield on
Shares, computed by dividing the annualized daily income on a Fund's
portfolio by the net asset value computed as above, may tend to be higher


than a similar computation made by using a method of valuation based upon
market prices and estimates.
In periods of rising interest rates, the indicated daily yield on Shares
computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
VALUING MUNICIPAL SECURITIES
With respect to The Virginia Municipal Bond Fund, The Maryland Municipal
Bond Fund, and The Tax-Free Money Market Fund, the Board of Trustees uses
an independent pricing service to value municipal securities. The
independent pricing service takes into consideration: yield; stability;
risk; quality; coupon rate; maturity; type of issue; trading
characteristics; special circumstances of a security or trading market; and
any other factors or market data it considers relevant in determining
valuations for normal institutional size trading units of debt securities
and does not rely exclusively on quoted prices.
USE OF AMORTIZED COST
With respect to The Virginia Municipal Bond Fund and The Maryland Municipal
Bond Fund, the Board of Trustees has decided that the fair value of debt
securities purchased by a Fund with remaining maturities of 60 days or less
at the time of purchase shall be their amortized cost value, unless the
particular circumstances of the security indicate otherwise. Under this
method, portfolio instruments and assets are valued at the acquisition cost
as adjusted for amortization of premium or accumulation of discount rather
than at current market value. The Executive Committee continually assesses
this method of valuation and recommends changes where necessary to assure
that the Fund's portfolio instruments are valued at their fair value as
determined in good faith by the Trustees.


REDEEMING SHARES

Each Fund redeems Shares at the next computed net asset value after a Fund
receives the redemption request, less a contingent deferred sales charge,
if applicable. Redemption procedures are explained in the prospectus under
`Redeeming Investment Shares.''
REDEMPTION IN KIND
Although the Trust intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from a Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Board of Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which a Fund is obligated to redeem Shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of any
class' net asset value during any 90-day period. Although a Fund reserves
the right to redeem Shares in kind, it will activate this right only after
providing 60 days' notice to shareholders.
TAX STATUS

THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because they expect to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
among other requirements:
   o derive at least 90% of its gross income from dividends, interest, and
     gains from the sale of securities;


   o derive less than 30% of its gross income from the sale of securities
     held less than three months;
   o invest in securities within certain statutory limits; and
   o distribute to its shareholders at least 90% of its net income earned
     during the year.
SHAREHOLDERS' TAX STATUS
   With respect to The U.S. Government Securities Fund, The Style Manager:
Large Cap Fund, The Style Manager Fund, The Treasury Money Market Fund and
The Money Market Fund, shareholders are subject to federal income tax on
dividends received as cash or additional shares. No portion of any income
dividend paid by a Fund is eligible for the dividends received deduction
available to corporations. These dividends, and any short-term capital
gains, are taxable as ordinary income.     
With respect to The Virginia Municipal Bond Fund, The Maryland Municipal
Bond Fund, and The Tax-Free Money Market Fund, no portion of any income
dividend paid by a Fund is eligible for the dividends received deduction
available to corporations.
  CAPITAL GAINS
     Capital gains experienced by The Treasury Money Market Fund and The
     Money Market Fund could result in an increase in dividends. Capital
     losses could result in a decrease in dividends. If, for some
     extraordinary reason, these Funds realize net long-term capital gains,
     such net long-term capital gains will be distributed at least once
     every 12 months.

   With respect to The U.S. Government Securities Fund, The Style Manager:
Large Cap Fund and The Style Manager Fund, long-term capital gains
distributed to shareholders will be treated as long-term capital gains
regardless of how long shareholders have held Shares.     


With respect to The Maryland Municipal Bond Fund, The Virginia Municipal
Bond Fund, and The Tax-Free Money Market Fund, capital gains or losses may
be realized by a Fund on the sale of portfolio securities and as a result
of discounts from par value on securities held to maturity. Sales would
generally be made because of:
   o the availability of higher relative yields;
   o differentials in market values;
   o new investment opportunities;
   o changes in creditworthiness of an issuer; or
   o an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the Shares.
TOTAL RETURN

   The average annual total return for The U.S. Government Securities Fund,
The Style Manager: Large Cap Fund, The Virginia Municipal Bond Fund, and
The Maryland Municipal Bond Fund, for the fiscal year ended September 30,
1995 and for the period from October 12, 1990 (effective date of each
Fund's registration statement) to September 30, 1995 was7.68% and 7.83%;
17.91% and 10.43% ; 7.87% and 6.99%; 7.77% and 6.58% % for Investment
Shares and 10.11% and 7.96% %; 20.33% and 10.56% ; 10.27% and 7.13% ;
10.09% and 6.72% % for Trust Shares. The Style Manager Fund's cumulative
total return for the period from March 7, 1995 (date of initial public
investment) to September 30, 1995 was 18.59%.    
The average annual total return for Shares of each Fund is the average
compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of shares


owned at the end of the period by the net asset value per share at the end
of the period. The number of shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000, adjusted over the period by any additional shares, assuming the
monthly/quarterly reinvestment of all dividends and distributions.
YIELD

The yield for the seven-day period ended September 30, 1995 for the The
Treasury Money Market Fund and The Money Market Fund were 4.99 % and 5.22
%, for Investment Shares and 5.24 % and 5.22 %, for Trust Shares,
respectively. The yield for the seven-day period ended September 30, 1995
for the The Tax-Free Money Market Fund was 3.79 %.
   The U.S. Government Securities Fund, The Style Manager: Large Cap Fund,
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund's
yield for the thirty-day period ended September 30, 1995 were 6.22%, 1.15%,
3.94% and 3.83% for Investment Shares and 6.48%, 1.40%, 4.19% and 4.07% for
Trust Shares. The yield for the thirty-day period ended September 30, 1995
for The Style Manager Fund was 0.18%.    
The Treasury Money Market Fund, The Money Market Fund, and The Tax-Free
Money Market Fund calculate yield daily, based upon the seven days ending
on the day of the calculation, called the `base period.'' This yield is
computed by:
   o determining the net change in the value of a hypothetical account with
     a balance of one share at the beginning of the base period, with the
     net change excluding capital changes but including the value of any
     additional Shares purchased with dividends earned from the original
     one share and all dividends declared on the original and any purchased
     Shares;


   o dividing the net change in the account's value by the value of the
     account at the beginning of the base period to determine the base
     period return; and
   o multiplying the base period return by 365/7.
   The yield for Shares of The U.S. Government Securities Fund, The Style
Manager: Large Cap Fund, The Style Manager Fund, The Virginia Municipal
Bond Fund and The Maryland Municipal Bond Fund is determined by dividing
the net investment income per share (as defined by the Securities and
Exchange Commission) earned by the class of shares over a thirty-day period
by the maximum offering price per share of the class of shares on the last
day of the period. The yield of the Investment Shares of the Fund is
determined each day by dividing the net investment income per share (as
defined by the Securities and Exchange Commission) earned by the class of
shares over a thirty-day period by the maximum offering price per share of
the class of shares on the last day of the period. This value is then
annualized using semiannual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated
each month over a 12-month period and is reinvested every six months. The
yield does not necessarily reflect income actually earned by the Fund
because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
With respect to The U.S. Government Securities Fund and The Style Manager:
Large Cap Fund, the yield will be calculated separately for Investment
Shares and Trust Shares. Because Investment Shares are subject to a 12b-1
fee, the net yield for Trust Shares for the same period will exceed that of
Investment Shares.     
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a


Fund, the performance will be reduced for those shareholders paying those
fees.
EFFECTIVE YIELD

The effective yield for the seven-day period ended September 30, 1995 for
the The Treasury Money Market Fund and The Money Market Fund was 5.11% and
5.36% for Investment Shares and 5.37% and 5.36% for Trust Shares,
respectively. The effective yield for the period ended September 30, 1995
for The Tax-Free Money Market Fund was 3.86%.
The effective yield of The Treasury Money Market Fund, The Money Market
Fund, and The Tax-Free Money Market Fund is computed by compounding the
unannualized base period return by:
   o adding 1 to the base period return;
   o raising the sum to the 365/7th power; and
   o subtracting 1 from the result.
TAX-EQUIVALENT YIELD

The tax-equivalent yield for both classes of shares for The Virginia
Municipal Bond Fund and The Maryland Municipal Bond Fund, and for The Tax-
Free Money Market Fund is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that either class would have had to
earn to equal its actual yield, assuming a 28% tax rate and also assuming
that income earned by the Fund is 100% tax-exempt.
The tax-equivalent yield for the Investment Shares for the thirty-day
period ended September 30, 1995, was 5.47% for The Virginia Municipal Bond
Fund and 5.32% for The Maryland Municipal Bond Fund. The tax-equivalent
yield for the Trust Shares was 5.82% for The Virginia Municipal Bond Fund
and 5.65% for The Maryland Municipal Bond Fund for the same period. The
tax-equivalent yield for The Tax-Free Money Market Fund for the same period
was 5.26%.


  TAX-EQUIVALENCY TABLES
     Both classes of shares may also use a tax-equivalency table in
     advertising and sales literature. The interest earned by the municipal
     bonds in the Fund's portfolio generally remains free from federal
     regular income tax, and is often free from state and local taxes as
     well. As the tables below indicate, a `tax-free'' investment is an
     attractive choice for investors, particularly in times of narrow
     spreads between tax-free and taxable yields.



                       TAXABLE YIELD EQUIVALENT FOR 1995
                              MULTISTATE MUNICIPAL FUNDS

    FEDERAL INCOME TAX BRACKET:
              15.00%  28.00%     31.00%      36.00%     39.60%



    JOINT        $1- $39,001-   $94,251-   $143,601-     OVER
    RETURN    39,000  94,250    143,600     256,500    256,500

    SINGLE       $1- $23,351-   $56,551-   $117,951-     OVER
    RETURN    23,350  56,550    117,950     256,500    256,500


Tax-Exempt
Yield                    Taxable Yield Equivalent


     1.00%     1.18%    1.39%     1.45%      1.56%       1.66%


     1.50%     1.76%    2.08%     2.17%      2.34%       2.48%
     2.00%     2.35%    2.78%     2.90%      3.13%       3.31%
     2.50%     2.94%    3.47%     3.62%      3.91%       4.14%
     3.00%     3.53%    4.17%     4.35%      4.69%       4.97%
     3.50%     4.12%    4.86%     5.07%      5.47%       5.79%
     4.00%     4.71%    5.56%     5.80%      6.25%       6.62%
     4.50%     5.29%    6.25%     6.52%      7.03%       7.45%
     5.00%     5.88%    6.94%     7.25%      7.81%       8.28%
     5.50%     6.47%    7.64%     7.97%      8.59%       9.11%
     6.00%     7.06%    8.33%     8.70%      9.38%       9.93%
     6.50%     7.65%    9.03%     9.42%     10.16%      10.76%
     7.00%     8.24%    9.72%    10.14%     10.94%      11.59%
     7.50%     8.82%   10.42%    10.87%     11.72%      12.42%
     8.00%     9.41%   11.11%    11.59%     12.50%      13.25%
    Note:  The maximum marginal tax rate for each bracket was used in
    calculating the taxable yield equivalent. Furthermore, additional
    state and local taxes paid on comparable taxable investments were not
    used to increase federal deductions.
    The chart above is for illustrative purposes only.  It is not an
    indicator of past or future performance of Fund shares.
    *  Some portion of the Fund's income may be subject to the federal
    alternative minimum tax and state and local income taxes.




                       TAXABLE YIELD EQUIVALENT FOR 1995
                           COMMONWEALTH OF VIRGINIA




    COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
              20.75%  33.75%     36.75%      41.75%     45.35%


    JOINT        $1-  $39,001   $94,251     $143,601     OVER
    RETURN:   39,000  94,250    143,600     256,500    $256,500

    SINGLE      $1    $23,351   $56,551     $117,951     OVER
    RETURN:   23,350  56,550    117.,950    256,500    $256,500


    TAX-EXEMPT
    YIELD            TAXABLE YIELD EQUIVALENT


     3.50%     4.42%    5.28%     5.53%      6.01%       6.40%
     4.00%     5.05%    6.04%     6.32%      6.87%       7.32%
     4.50%     5.68%    6.79%     7.11%      7.73%       8.23%
     5.00%     6.31%    7.55%     7.91%      8.58%       9.15%
     5.50%     6.94%    8.30%     8.70%      9.44%      10.06%
     6.00%     7.57%    9.06%     9.49%     10.30%      10.98%
     6.50%     8.20%    9.81%    10.28%     11.16%      11.89%
     7.00%     8.83%   10.57%    11.07%     12.02%      12.81%
     7.50%     9.46%   11.32%    11.86%     12.88%      13.72%
     8.00%    10.09%   12.08%    12.65%     13.73%      14.64%

    NOTE:  THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
    CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL


    STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE NOT
    USED TO INCREASE FEDERAL DEDUCTIONS.




                       TAXABLE YIELD EQUIVALENT FOR 1995
                               STATE OF MARYLAND
                          INCLUDING LOCAL INCOME TAX


    COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
            22.50% 32.50%  38.50%    40.00%    45.00%     48.60%


    JOINT    $1-   $39,001$94,251   $100,001  $143,601  OVER
    RETURN: 39,000 94,250 100,000   143,600   $256,500$256,500

    SINGLE   $1-   $23,351$56,551   $100,000  $117,951  OVER
    RETURN: 23,350 56,550 100,000   117,950   256,500$256,500


    TAX-EXEMPT
    YIELD            TAXABLE YIELD EQUIVALENT


     2.00%   2.58%   3.10%   3.25%     3.33%     3.64%     3.89%
     2.50%   3.23%   3.88%   4.07%     4.17%     4.55%     4.86%
     3.00%   3.87%   4.65%   4.88%     5.00%     5.45%     5.84%
     3.50%   4.52%   5.43%   5.69%     5.83%     6.36%     6.81%
     4.00%   5.16%   6.20%   6.50%     6.67%     7.27%     7.78%


     4.50%   5.81%   6.98%   7.32%     7.50%     8.18%     8.75%
     5.00%   6.45%   7.75%   8.13%     8.33%     9.09%     9.73%
     5.50%   7.10%   8.53%   8.94%     9.17%    10.00%    10.70%
     6.00%   7.74%   9.30%   9.76%    10.00%    10.91%    11.67%
     6.50%   8.39%  10.08%  10.57%    10.83%    11.82%    12.65%

    NOTE:  THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
    CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
    STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENT WERE NOT
    USED TO INCREASE FEDERAL DEDUCTIONS. THE LOCAL INCOME TAX RATE IS
    ASSUMED TO BE 50% OF THE STATE RATE FOR ALL COUNTIES EXCLUDING
    ALLEGHENY, BALTIMORE, MONTGOMERY, PRINCE GEORGE'S, TALBOT, AND
    WORCHESTER.
    The charts above are for illustrative purposes only. They are not an
    indicator of past or future performance of either class of shares.
    Some portion of the Fund's income may be subject to the federal
    alternative minimum tax and state and local taxes.



PERFORMANCE COMPARISONS

Each Fund's performance of both classes of shares depends upon such
variables as:
   o      portfolio quality;
   o average portfolio maturity;
   o      type of instruments in which the portfolio is invested;
   o    changes in interest rates on money market instruments, in the case
     of The Treasury Money Market Fund and The Money Market Fund, or
     changes in interest rates and market value of portfolio securities in


     the case of U.S. Government Income Fund, The Style Manager: Large Cap
     Fund, The Style Manager Fund, The Virginia Municipal Bond Fund and
     Maryland Municipal Bond Fund;     
   o changes in each Fund's or each class of Shares' expenses;
   o the relative amount of The Treasury Money Market Fund's and The Money
     Market Fund's cash flow; and
   o various other factors.
   In the case of The U.S. Government Securities Fund, The Style Manager:
Large Cap Fund, The Style Manager Fund, The Virginia Municipal Bond Fund
and The Maryland Municipal Bond Fund, either class of shares' performance
fluctuates on a daily basis largely because net earnings and offering price
per Share fluctuate daily. Both net earnings and offering price per Share
are factors in the computation of yield and total return.  The Style
Manager Fund and The Style Manger:  Large Cap Fund may also from time to
time provide information on, or use quotations from, studies of investment
analysts dealing with the management of equity portfolios on the basis of
`style'' selection (i.e., value vs. growth) and stock ``size'' (i.e., large
cap vs. small cap) and may also use historical data demostrating the
performance records of the value, growth, large cap and small cap
components of the equity market, and combinations thereof.     
From time to time, the Funds may provide information on certain markets or
countries and specific equity securities and quote published editorial
comments and/or information from newspapers, magazines, investment
newsletters and other publications such as The Wall Street Journal, Money
Magazine, Forbes, Barron's, USA Today and Mutual Fund Investors. We may
also compare the historical returns on various investments, performance
indexes of those investments or economic indicators. In addition, the Funds
may reprint articles about the Funds and provide them to prospective
shareholders. The Broker/Dealer may also make available economic, financial


and investment reports to shareholders and prospective shareholders. In
order to describe these reports, the Funds may include descriptive
information on the reports in advertising literature sent to the public
prior to the mailing of a prospectus. Performance information may be quoted
numerically or may be represented in a table, graph, chart or other
illustration. It should be noted that such performance ratings and
comparison may be made with funds which may have different investment
restrictions, objectives, policies or techniques than the Funds, and that
such other funds or market indicators may be comprised of securities that
differ significantly from the Funds' investments.
The financial publications and/or indices which the Funds use in
advertising may include, but are not limited to:
THE U.S. GOVERNMENT SECURITIES FUND
   o MERRILL LYNCH COMPOSITE 1-5 YEAR TREASURY INDEX is comprised of
     approximately 66 issues of U.S. Treasury securities maturing between 1
     and 4.99 years, with coupon rates of 4.25% or more. These total return
     figures are calculated for one, three, six, and twelve month periods
     and year-to-date and include the value of the bond plus income and any
     price appreciation or depreciation.
   o SALOMON BROTHERS 3-5 YEARS GOVERNMENT INDEX quotes total returns for
     U.S. Treasury issues (excluding flower bonds) which have maturities of
     three to five years. These total returns are year-to-date figures
     which are calculated each month following January 1.
   o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all capital gains
     distributions and income dividends and takes income into account any
     change in net asset value over a specific period of time. From time to


     time, the Trust will quote its Lipper ranking in the U.S. Government
     funds category in advertising and sales literature.
   o MERRILL LYNCH 3-5 YEAR TREASURY INDEX is comprised of approximately 24
     issues of intermediate-term U.S. government and U.S. Treasury
     securities with maturities between 3 and 4.99 years and coupon rates
     above 4.25%. Index returns are calculated as total returns for periods
     of one, three, six and twelve months as well as year-to-date.
   o MERRILL LYNCH 3-YEAR TREASURY YIELD CURVE INDEX is an unmanaged index
     comprised of the most recently issued 3-year U.S. Treasury notes.
     Index returns are calculated as total returns for periods of one,
     three, six, and twelve months as well as year-to-date.
   o LEHMAN BROTHERS GOVERNMENT INTERMEDIATE INDEX is an unmanaged index
     comprised of all publicly issued, non-convertible domestic debt of the
     U.S. government, or any agency thereof, or any quasi-federal
     corporation and of corporate debt guaranteed by the U.S. government.
     Only notes and bonds with a minimum outstanding principal of $1
     million and maturities of 1-10 years.
   o 3 YEAR TREASURY NOTES Source: Wall Street Journal, Bloomberg Financial
     Markets, and Telerate.. MORNINGSTAR, INC., an independent rating
     service, is the publisher of the bi-weekly Mutual Fund Values. Mutual
     Fund Values rates more than 1,000 NASDAQ-listed mutual funds of all
     types, according to their risk-adjusted returns. The maximum rating is
     five stars, and ratings are effective for two weeks.
   THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER FUND    
   o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all capital gains
     distributions and income dividends and takes into account any change
     in net asset value over a specific period of time. From time to time,


     the Fund will quote its Lipper ranking in the `growth and income
     funds''category in advertising and sales literature.
   o DOW JONES INDUSTRIAL AVERAGE (`DJIA'') represents share prices of
     selected blue-chip industrial corporations as well as public utility
     and transportation companies. The DJIA indicates daily changes in the
     average price of stocks in any of its categories. It also reports
     total sales for each group of industries. Because it represents the
     top corporations of America, the DJIA index is a leading economic
     indicator for the stock market as a whole.
   o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
     composite index of common stocks in industry, transportation, and
     financial and publicutility companies, compares total returns of funds
     whose portfolios areinvested primarily in common stocks. In addition,
     the Standard & Poor's index assumes reinvestment of all dividends paid
     by stocks listed on the index. Taxes due on any of these distributions
     are not included, nor are brokerage or other fees calculated in the
     Standard & Poor's figures.
   o MORNINGSTAR, INC., an independent rating service, is the publisher of
     the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
     1,000 NASDAQ-listed mutual funds of all types, according to their
     risk-adjusted returns.The maximum rating is five stars, and ratings
     are effective for two weeks.
THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND
   o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all capital gains
     distributions and income dividends and takes into account any change
     in net asset value over a specific period of time. From time to time,


     the Fund will quote its Lipper ranking in the `general municipal bond
     funds''category in advertising and sales literature.
   o MORNINGSTAR, INC., an independent rating service, is the publisher of
     the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
     1,000 NASDAQ-listed mutual funds of all types, according to their
     risk-adjusted returns.The maximum rating is five stars, and ratings
     are effective for two weeks.
THE TREASURY MONEY MARKET FUND
   o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all income dividends and
     capital gains distributions, if any. From time to time, the Fund will
     quote its Lipper ranking in the `short-term U.S. government funds''
     category in advertising and sales literature.
   o SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
     representative yields for selected securities, issued by the U.S.
     Treasury, maturing in 30 days.


THE MONEY MARKET FUND
   o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all income dividends and
     capital gains distributions, if any. From time to time, the Fund will
     quote its Lipper ranking in the `money market instruments fund''
     category in advertising and sales literature.
   o BANK RATE MONITOR NATIONAL INDEX, Miami, Florida, is a financial
     reporting service which publishes weekly average rates of 50 leading
     bank and thrift institution money market deposit accounts. The rates


     published in the index are an average of the personal account rates
     offered on the Wednesday prior to the date of publication by ten of
     the largest banks and thrifts in each of the five largest Standard
     Metropolitan Statistical Areas. Account minimums range upward from
     $2,500 in each institution and compounding methods vary. If more than
     one rate is offered, the lowest rate is used. Rates are subject to
     change at any time specified by the institution. Investors may use
     such indices or reporting services in addition to either class of
     shares' prospectus to obtain a more complete view of the Share's
     performance before investing. Of course, when comparing performance of
     either class of shares to any index, factors such as portfolio
     composition and prevailing market conditions should be considered in
     assessing the significance of such comparisons.
THE TAX-FREE MONEY MARKET FUND
   o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
     categories by making comparative calculations using total return.
     Total return assumes the reinvestment of all income dividends and
     capital gains distributions, if any. From time to time, the Fund will
     quote its Lipper ranking in the `Tax-Free Money Market Funds''
     category in advertising and sales literature.
   o IBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of
     hundreds of money market funds on a weekly basis, and through its
     Money Market Insight publication, reports monthly and 12-month-to-date
     investment results for the same money funds.
   o MONEY, A MONTHLY MAGAZINE, regularly ranks money market funds in
     various categories based on the latest available seven-day compound
     effective yield. From time to time, the Fund will quote its Money
     ranking in advertising and sales literature.


   o SALOMON BROTHERS SIX-MONTH PRIME MUNI NOTES is an index of selected
     municipal notes, maturing in six months, whose yields are chosen as
     representative of this market. Calculations are made weekly and
     monthly.
   o SALOMON BROTHERS ONE-MONTH TAX-EXEMPT COMMERCIAL PAPER is an index of
     selected tax-exempt commercial paper issues, maturing in one month,
     whose yields are chosen as representative of this particular market.
     It is a weekly quote of the most representative yields for selected
     securities, issued by the U.S. Treasury, maturing in 30 days.
     Calculations are made weekly and monthly. Ehrlich-Bober & Co., Inc.
     also tracks this Salomon Brothers Index.
Advertisements and other sales literature for both classes of shares may
quote total returns which are calculated on non-standardized base periods.
These total returns also represent the historic change in the value of an
investment in either class of shares based on monthly reinvestment of
dividends over a specified period of time.
The financial statements for the fiscal period ended September 30, 1995,
are incorpoarted herein by reference from the Funds' Annual Report dated
September 30, 1995. A copy of the Annual Report for a Fund may be obtained
without charge by contacting Signet Trust Company at the address located on
the back cover of the combined prospectus or by calling 804-771-7470.


APPENDIX

STANDARD AND POOR'S RATINGS GROUP MUNICIPAL BOND RATING DEFINITIONS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.


AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB, B, CCC, CC-Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.
CI-The rating CI is reserved for income bonds on which no interest is being
paid.
D-Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATING DEFINITIONS
AAA-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as `gilt edge.'' Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized


are most unlikely to impair the fundamentally strong position of such
issues.
AA-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment some time in the
future.
BAA-Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA-Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in


default or there may be present elements of danger with respect to
principal or interest.
CA-Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.


FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated F-
1+.
NR-NR indicates that Fitch does not the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in AAA category.
STANDARD & POOR'S CORPORATION, MUNICIPAL NOTE RATINGS
SP-1-Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.


SP-2-Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, SHORT-TERM LOAN RATINGS
MIG1/VMIG1-This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG2/VMIG2-This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.


PART C. OTHER INFORMATION.

Item 24.  Financial Statements and Exhibits:
          (a)  Financial Statements (1-8)    The Financial Statements will
                                     be filed by amendment.
          (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)
                     (ix)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 Exhibit A thereto; (+)
                    (ii) Conformed copy of Amendment No. 1 to the
                         Investment Advisory Contract of the Registrant;
                         (+)
                    (iii)..........Conformed copy of Sub-Advisory Agreement
                         of the Registrant and Exhibits A and B thereto;
                         (+)
                (6) (i)  Conformed copy of Distributor's Contract of the
                         Registrant and Exhibits A-D thereto;(10)
                    (ii) Conformed copy of Exhibit E to the Distributor's
                         Contract of the Registrant; (+)


                    (iii)..........Conformed copy of Exhibit F to the
                         Distributor's Contract of the Registrant; (+)
                (7) Not applicable;
                (8) (i)  Conformed copy of Custodian Agreement of the
                         Registrant;(9)
                    (ii) Conformed copy of Amendment No. 1 to the Custodian
                         Contract of the Registrant; (+)

  +  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) Not applicable;
               (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) Conformed copy of Multiple Class Plan of the
                    Registrant; (+)
               (19) 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 19, 1996

          Shares of beneficial interest The U.S. Government Securities Fund
               - Trust                  Shares                8


                                        The U.S. Government Securities Fund
               - Investment             Shares            5,751
                                        The Maryland Municipal Bond   Fund
               - Trust Shares           5
                                        The Maryland Municipal Bond   Fund
                                        Investment Shares 1,377
                                        The Money Market Fund
                                        Trust Shares          7
                                        The Money Market Fund
                                        Investment Shares 4,287
                                        The Treasury Money Market     Fund
               - Trust Shares           16
                                        The Treasury Money Market     Fund
               -
                                        Investment Shares 8,653
                                        The Style Manager: Large Cap
                                        Fund - Trust Shares   7
                                        The Style Manager: Large Cap
                                        Fund Investment Shares6,581
                                        The Virginia Municipal Bond   Fund
               - Trust Shares           6
                                        The Virginia Municipal Bond   Fund
               -
                                        Investment Shares 2,159
                                        The Tax-Free Money Market
                                        Fund                272
                                        The Style Manager Fund2,383

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: 111 Corcoran Funds; Annuity
          Management Series; Arrow Funds; Automated Government Money Trust;
          BayFunds; Blanchard Funds; Blanchard Precious Metals Fund, Inc.;
          Cash Trust Series II; Cash Trust Series, Inc.; DG Investor


          Series; Edward D. Jones & Co. Daily Passport Cash Trust;
          Federated Adjustable Rate U.S. Government Fund, Inc.; Federated
          American Leaders Fund, Inc.; Federated ARMs Fund; Federated
          Equity Funds; Federated Equity Income Fund, Inc.; Federated Fund
          for U.S. Government Securities, Inc.; Federated GNMA Trust;
          Federated Government Income Securities, Inc.; Federated
          Government Trust; Federated High Income Bond Fund, Inc.;
          Federated High Yield Trust; Federated Income Securities Trust;
          Federated Income Trust; Federated Index Trust; Federated
          Institutional Trust; Federated Insurance Series; Federated
          Investment Portfolios; Federated Investment Trust; Federated
          Master Trust; Federated Municipal Opportunities Fund, Inc.;
          Federated Municipal Securities Fund, Inc.; Federated Municipal
          Trust; Federated Short-Term Municipal Trust; Federated Short-Term
          U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
          Federated Stock Trust; Federated Tax-Free Trust; Federated Total
          Return Series, Inc.; Federated U.S. Government Bond Fund;
          Federated U.S. Government Securities Fund: 1-3 Years; Federated
          U.S. Government Securities Fund: 2-5 Years; Federated U.S.
          Government Securities Fund: 5-10 Years; Federated Utility Fund,
          Inc.; First Priority Funds; Fixed Income Securities, Inc.; High
          Yield Cash Trust; Independence One Mutual Funds; Intermediate
          Municipal Trust; International Series, Inc.; Investment Series
          Funds, Inc.; Investment Series Trust; Liberty U.S. Government
          Money Market Trust; Liquid Cash Trust; Managed Series Trust;
          Marshall Funds, Inc.; Money Market Management, Inc.; Money Market
          Obligations Trust; Money Market Trust; Municipal Securities
          Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument
          Funds; SouthTrust Vulcan Funds; Star Funds; Targeted Duration


          Trust; Tax-Free Instruments Trust; The Biltmore Funds; The
          Biltmore Municipal Funds; The Monitor Funds; The Planters Funds;
          The Starburst Funds; The Starburst Funds II; The Virtus Funds;
          Tower Mutual Funds; Trust for Financial Institutions; Trust for
          Government Cash Reserves; Trust for Short-Term U.S. Government
          Securities; Trust for U.S. Treasury Obligations; Vision Group of
          Funds, Inc.; and World Investment Series, Inc.

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



          (b)

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


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

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

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

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

Mark R. Gensheimer        Executive Vice President of       --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

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

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

Richard W. Boyd           Senior Vice President,       --
Federated Investors Tower Federated Securities Corp.


Pittsburgh, PA 15222-3779

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

Dale R. Browne            Vice President,              --


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

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

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

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

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

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

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


       (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

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

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

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


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

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

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

Stephen 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

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



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


Robert D. Oehlschlager    Vice President,              --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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



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

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

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

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

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


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

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

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



       (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

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

Charlene H. Jennings      Assistant Vice President,         --
Federated Investors Tower Federated Securities Corp.


Pittsburgh, PA 15222-3779

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

Leslie K. Platt           Assistant Secretary,         --
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 Virtus Funds              Federated Investors Tower
          .....                    Pittsburgh, PA

          Federated Services Company
          (Transfer Agent, Dividend


          Disbursing Agent and  ...Federated Investors Tower
          Portfolio Recordkeeper)..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(a) 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 22nd day of November,
1996.

                             THE VIRTUS FUNDS

               BY: /s/ C. Grant Anderson
               C. Grant Anderson, Assistant Secretary
               Attorney in Fact for John F. Donahue
               November 22, 1996


   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 22, 1996
   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)

Thomas G. Bigley*           Trustee

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

John E. Murray, Jr.*        Trustee

Wesley W. Posvar*           Trustee

Marjorie P. Smuts*          Trustee

* By Power of Attorney



                             THE VIRTUS FUNDS

                       INVESTMENT ADVISORY CONTRACT

     This Contract is made between Virtus Capital Management, Inc., a
Maryland Corporation having its principal place of business in Richmond,
Virginia (the "Adviser"), and The Virtus Funds, a Massachusetts business
trust having its principal place of business in Pittsburgh, Pennsylvania
(the "Trust").

    WHEREAS, the Trust is an open-end management investment company as
    that term is defined in the Investment Company Act of 1940 (the "Act")
    and is registered as such with the Securities and Exchange Commission;
    and

    WHEREAS, the Adviser is engaged in the business of rendering
    investment advisory and management services.

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

     1.  The Trust hereby appoints Adviser as Investment Adviser for each
of the portfolios ("Funds") of the Trust, which may be offered in one or
more classes of shares ("Classes"), on whose behalf the Trust executes an
exhibit to this Contract, and Adviser, by its execution of each such
exhibit,  accepts the appointments.  Subject to the direction of the
Trustees of the Trust, Adviser shall provide investment research and
supervision of the investments of each of the Funds and conduct a
continuous program of investment evaluation and of appropriate sale or
other disposition and reinvestment of each Fund's assets.

     2.  Adviser, in its supervision of the investments of each of the Fund
will be guided by each of the Fund's fundamental investment policies and
the provisions and restrictions contained in the Declaration of Trust and
By-Laws of the Trust and as set forth in the Registration Statement and
exhibits as may be on file with the Securities and Exchange Commission.

     3.  The Trust shall pay or cause to be paid, on behalf of each Fund or
Class, all of the Fund's or Classes' expenses and the Fund's or Classes'
allocable share of Trust expenses.

     4.  The Trust, on behalf of each of the Funds shall pay to Adviser,
for all services rendered to such Fund by Adviser hereunder, the fees set
forth in the exhibits attached hereto.

     5.  The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation to the extent that any Fund's expenses
exceed such lower expense limitation as the Adviser may, by notice to the
Trust, voluntarily declare to be effective.  Furthermore, the Adviser may,
if it deems appropriate, assume expenses of one or more Fund or Class to
the extent that any Fund's or Classes' expenses exceed such lower expense
limitation as the Adviser may, by notice to the Trust, voluntarily declare
to be effective.

     6.  This Contract shall begin for each Fund on the date that the Trust
executes an exhibit to this Contract relating to such Fund.  This Contract
shall remain in effect for each Fund for two years from the date of its
execution and from year to year thereafter, subject to the provisions for
termination and all of the other terms and conditions hereof if: (a) such
continuation shall be specifically approved at least annually by the vote
of a majority of the Trustees of the Trust, including a majority of the
Trustees who are not parties to this Contract or interested persons of any
such party (other than as Trustees of the Trust) cast in person at a
meeting called for that purpose; and (b) Adviser shall not have notified
the Trust in writing at least sixty (60) days prior to the anniversary date
of this Contract in any year thereafter that it does not desire such
continuation with respect to that Fund.

     7.  Notwithstanding any provision in this Contract, it may be
terminated at any time with respect to any Fund, without the payment of any
penalty, by the Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of that Fund, as defined in Section 2(a)(42)
of the Act on sixty (60) days' written notice to Adviser.

     8.  This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment.  Adviser may employ
or contract with such other person, persons, corporation or corporations at
its own cost and expense as it shall determine in order to assist it in
carrying out this Contract.

     9.  In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties under this Contract on the
part of Adviser, Adviser shall not be liable to the Trust or to any of the
Funds or to any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses that may be
sustained in the purchase, holding or sale of any security.

     10.  This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of Trustees who
are not parties to this Contract or interested persons of any such party to
this Contract (other than as Trustees of the Trust), cast in person at a
meeting called for that purpose, and on behalf of a Fund by a majority of
the outstanding voting securities of such Fund as defined in Section
2(a)(42) of the Act.

     11.  Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations pursuant to this Contract of a particular Fund and of
the Trust with respect to that particular Fund be limited solely to the
assets of that particular Fund, and Adviser shall not seek satisfaction of
any such obligation from the assets of any other Fund, the shareholders of
any Fund, the Trustees, officers, employees or agents of the Trust, or any
of them.

     12.  This Contract shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.

     13.  This Contract will become binding on the parties hereto upon
their execution of the attached exhibits to this Contract.


                                 EXHIBIT A

                    THE U.S. GOVERNMENT SECURITIES FUND
                              THE STOCK FUND
                     THE VIRGINIA MUNICIPAL BOND FUND
                     THE MARYLAND MUNICIPAL BOND FUND
                      THE TREASURY MONEY MARKET FUND
                           THE MONEY MARKET FUND
                      THE TAX-FREE MONEY MARKET FUND
                         THE STRATEGIC STOCK FUND

       Name of Fund                     Percentage of Net Assets
       The U.S. Government Securities Fund .75 of 1%
       The Stock Fund                      .75 of 1%
       The Virginia Municipal Bond Fund    .75 of 1%
       The Maryland Municipal Bond Fund    .75 of 1%
       The Treasury Money Market Fund      .50 of 1%
       The Money Market Fund               .50 of 1%
       The Tax-Free Money Market Fund      .50 of 1%
       The Strategic Stock Fund                   1.00%

     For all services rendered by Adviser hereunder, 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 the
following percentage (the "applicable percentage") of the average daily net
assets of each Fund.

     The fee shall be accrued daily at the rate of 1/365th of the
applicable percentage 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 1st day of March, 1995.

Attest:                         VIRTUS CAPITAL MANAGEMENT, INC.



/s/  Josie C. Rosson               By:   /s/  Garry M. Allen
     Secretary                     President


Attest:        

                              THE VIRTUS FUNDS



/s/  S. Elliott Cohan              By:  /s/  John W. McGonigle
Assistant Secretary                Vice President




                              AMENDMENT NO. 1
                                  to the
                       INVESTMENT ADVISORY CONTRACT
                                  between
           VIRTUS CAPITAL MANAGEMENT, INC. and THE VIRTUS FUNDS
                       contract dated March 1, 1995

                    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
                      THE TAX-FREE MONEY MARKET FUND
                          THE STYLE MANAGER FUND
                     THE STYLE MANAGER: LARGE CAP FUND

NAME OF FUND                                        PERCENTAGE OF NET
ASSETS
The Treasury Money Market Fund                         .50 of 1%
The Money Market Fund                                  .50 of 1%
The Tax-Free Money Market Fund                         .50 of 1%
The U.S. Government Securities Fund                    .75 of 1%
The Virginia Municipal Bond Fund                       .75 of 1%
The Maryland Municipal Bond Fund                       .75 of 1%
The Style Manager: Large Cap Fund                      .75 of 1%
The Style Manager Fund                                1.25 of 1%

     For all services rendered by Adviser hereunder, 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 the
following
percentage (the "applicable percentage") of the average daily net assets of
each Fund.

     The fee shall be accrued daily at the rate of 1/365th of the
applicable
percentage 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 21st day of October, 1996 .

                     VIRTUS CAPITAL MANAGEMENT, INC.
Attest:

/s/ Rhonda M. Watson                          By:/s/ Garry M. Allen
Assistant Secretary                     President

                          THE VIRTUS FUNDS

Attest:

/s/ C. Grant Anderson                         By:/s/ Richard B. Fisher
Assistant Secretary                           Vice President         




                          SUB-ADVISORY AGREEMENT

     THIS AGREEMENT is made between Virtus Capital Management, Inc.
(hereinafter referred to as "Adviser") and Trend Capital Management, Inc.
located in Minneapolis, Minnesota (hereinafter referred to as the "Sub-
Adviser").

                                WITNESSETH:

     That the parties hereto, intending to be legally bound hereby agree as
follows:

      1. Sub-Adviser hereby agrees to furnish to Adviser in its capacity as
investment adviser to The Virtus Funds (the "Trust") such investment
advice, statistical and other factual information, as may from time to time
be reasonably requested by Adviser for one or more of the portfolios
("Funds") of the Trust, which may be offered in one or more classes of
shares ("Classes").

       2. For its services under this Agreement, Sub-Adviser shall receive
from Adviser an annual fee ("the Sub-Advisory Fee"), as set forth in the
exhibits hereto. In the event that the fee due from the Trust to the
Adviser on behalf of the Funds is reduced in order to meet expense
limitations imposed on the Funds by state securities laws or regulations,
the Sub-Advisory Fee shall be reduced by the same percentage as is the
existing percentage that it receives of the Adviser's fee. (For example, if
the total fee paid by the Trust to the Adviser were 1.00% of average daily
net assets of the Fund, and the Sub-Adviser was entitled to receive a sub-
advisory fee of .25% of the Fund's average daily net assets, then in the
event there was a reduction in fees from the Trust to the Adviser for the
above-stated reason, then the reduction in the sub-advisory fee would be
25% of the reduction in the advisory fee).
     Notwithstanding any other provision of this Agreement, the Sub-Adviser
may from time to time and for such periods as it deems appropriate, reduce
its compensation (and, if appropriate, assume expenses of the Fund or the
Class of the Fund) to the extent that the Fund's expenses exceed such lower
expense limitation as the Sub-Adviser may, by notice to the Trust on behalf
of the Fund, voluntarily declare to be effective.

      3. This Agreement shall begin for the Fund on the date that the
parties execute an exhibit to this Agreement relating to such Funds and
shall continue in effect for the Fund for two years from the date of its
execution and from year to year thereafter, subject to the provisions for
termination and all of the other terms and conditions hereof if: (a) such
continuation shall be specifically approved at least annually by the vote
of a majority of the Trustees of the Trust, including a majority of the
Trustees who are not parties to this Agreement or interested persons of any
such party (other than as Trustees of the Trust) cast in person at a
meeting called for that purpose;  and (b) Adviser shall not have notified
the Trust in writing at least sixty (60) days prior to the anniversary date
of this Agreement in any year
thereafter that it does not desire such continuation with respect to each
Fund.

     4. Notwithstanding any provision in this Agreement, it may be
terminated at any time without the payment of any penalty: (a) by the
Trustees of the Trust or by a vote of a majority of the outstanding voting
securities (as defined in Section 2(a)(42) of the Investment Company Act of
1940) of the Fund on sixty (60) days' written notice to Adviser; (b) by
Sub-Adviser or Adviser upon 120 days' written notice to the other party to
the Agreement.

     5. This Agreement shall automatically terminate: (a) in the event of
its assignment (as defined in the Investment Company Act of 1940); or (b)
in the event of termination of the Investment Advisory Contract for any
reason whatsoever.

      6. So long as both Adviser and Sub-Adviser shall be legally qualified
to act as an investment adviser to the Funds, neither Adviser nor Sub-
Adviser shall act as an investment adviser (as such term is defined in the
Investment Company Act of 1940) to the Funds except as provided herein and
in the
Investment Advisory Contract or in such other manner as may be expressly
agreed between Adviser and Sub-Adviser.

     Provided, however, that if the Adviser or Sub-Adviser shall resign
prior to the end of any term of this Agreement or for any reason be unable
or unwilling to serve for a successive term which has been approved by the
Trustees of the Trust pursuant to the provisions of Paragraph 3 of this
Agreement or Paragraph 6 of the Investment Advisory Contract, the remaining
party, Sub-Adviser or Adviser as the case may be, shall not be prohibited
from serving as an investment adviser to such Fund by reason of the
provisions of this Paragraph 6.

     7. This Agreement may be amended from time to time by agreement of
theparties hereto provided that such amendment shall be approved both by
the vote of a majority of Trustees of the Trust, including a majority of
Trustees who are not parties to this Agreement or interested persons, as
defined in Section 2(a)(19) of the Investment Company Act of 1940, of any
such party at a meeting called for that purpose, and, where required by
Section 15(a)(2) of the Investment Company Act of 1940, by the holders of a
majority of the outstanding voting securities (as defined in Section
2(a)(42) of the Investment Company Act of 1940) of each Fund.

     8. Adviser agrees that, except as otherwise provided by law or
agreement of the parties or as may be necessary to effect the purpose and
intent of this Agreement, the advice and information provided by Sub-
Adviser to Adviser hereunder, and the trends identified therein, shall be
held as confidential by
Adviser and shall not be resold or passed on by Adviser in written or oral
form by Adviser to any other non-affiliated person without Sub-Adviser's
express prior written consent.

     9. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Sub-Adviser or reckless disregard by the Sub-
Adviser of its duties under this Agreement, the Sub-Adviser shall not be
liable to the Adviser, the Trust or to any shareholder of the Trust for any
act or omission
in the course of, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding or sale of any
security.




                                 EXHIBIT A

                             THE VIRTUS FUNDS
                          THE STYLE MANAGER FUND

                           SUB-ADVISORY CONTRACT

     For all services rendered by Sub-Adviser hereunder, Adviser shall pay
Sub-Adviser a Sub-Advisory Fee as follows: (a) an amount equal to .10% of
the first $60 million of the Fund's average daily net assets; and (b) with
respect to average daily net assets of the Fund in excess of $60 million,
an amount equal to (i) one-third of VCM's advisory fee to the extent that
such advisory fee is less than or equals 1% of the Fund's average daily net
assets (but not to exceed .25% of the Fund's average daily net assets);
plus (ii) to the extent that the annual advisory fee exceeds 1% of the
Fund's average daily net assets, an additional amount equal to two-thirds
of such excess. The Sub- Advisory Fee shall be accrued daily, and paid
monthly as set forth in the
Advisory Contract dated March 1, 1995.

      This Exhibit duly incorporates by reference the Sub-Advisory
Agreement.

       IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by their duly authorized officers, and their
corporate seals to be affixed hereto this 21st day of October, 1996.

                                                                 VIRTUS
CAPITAL MANAGEMENT, INC.

Attest:


/s/ Rhonda M. Watson                         By/s/ Garry M. Allen

Assistant Vice President            President


                                                                   TREND
CAPITAL MANAGEMENT, INC.



/s/ Timothy O'Malley                         By/s/ Thomas G. Fox
Secretary                                    President

                                 EXHIBIT B

                             THE VIRTUS FUNDS
                     THE STYLE MANAGER: LARGE CAP FUND

                           SUB-ADVISORY CONTRACT


      For all services rendered by Sub-Adviser hereunder, Adviser shall pay
Sub-Adviser a Sub-Advisory Fee equal to .15% of the first $100 million of
the Fund's average daily net assets; and .33 1/3% of the Fund's average
daily net assets in excess of $100 million. The Sub-Advisory Fee shall be
accrued daily, and paid monthly as set forth in the Advisory Contract dated
March 1, 1995.

      This Exhibit duly incorporates by reference the Sub-Advisory
Agreement.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by their duly authorized officers, and their
corporate seals to be affixed hereto this 21st day of October, 1996.

                                                            VIRTUS CAPITAL
MANAGEMENT, INC.

Attest:


/s/ Rhonda M. Watson                         By/s/ Garry M. Allen

Assistant Vice President                     President

                                                             TREND
CAPITAL MANAGEMENT, INC.



/s/ Timothy O'Malley                         By/s/ Thomas G. Fox
Secretary                                    President




                                 Exhibit E
                         to Distributor's Contract

                            THE MEDALIST FUNDS

                         The Strategic Stock Fund

     The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 12th day of October, 1990,  between The
Medalist Funds and Federated Securities Corp. with respect to the Classes
of the Funds set forth above:

     1.  The Trust hereby appoints FSC to select a group of brokers
("Brokers") to sell shares of the above-listed series and Classes
("Shares"), at the current offering price thereof as described and set
forth in the prospectuses of the Trust, and to render administrative
support services to the Trust and its shareholders.  In addition, the Trust
hereby appoints FSC to select a group of Administrators ("Administrators")
to render administrative support services to the Trust and its
shareholders.

     2.  Administrative support services may include, but are not limited
to, the following eleven functions:  (1) account openings:  the Broker or
Administrator communicates account openings via computer terminals located
on the Broker or Administrator's premises; 2) account closings:  the Broker
or Administrator communicates account closings via computer terminals; 3)
enter purchase transactions:  purchase transactions are entered through the
Broker or Administrator's own personal computer or through the use of a
toll-free telephone number; 4) enter redemption transactions:  Broker or
Administrator enters redemption transactions in the same manner as
purchases; 5) account maintenance:  Broker or Administrator provides or
arranges to provide accounting support for all transactions.  Broker or
Administrator also wires funds and receives funds for Trust share purchases
and redemptions, confirms and reconciles all transactions, reviews the
activity in the Trust's accounts, and provides training and supervision of
its personnel; 6) interest posting:  Broker or Administrator posts and
reinvests dividends to the Trust's accounts; 7) prospectus and shareholder
reports:  Broker or Administrator maintains and distributes current copies
of prospectuses and shareholder reports; 8) advertisements:  the Broker or
Administrator continuously advertises the availability of its services and
products; 9) customer lists:  the Broker or Administrator continuously
provides names of potential customers; 10) design services:  the Broker or
Administrator continuously designs material to send to customers and
develops methods of making such materials accessible to customers; and 11)
consultation services:  the Broker or Administrator continuously provides
information about the product needs of customers.

     3.  FSC will enter into separate written agreements with various firms
to provide the services set forth in Paragraph 1 herein.  During the term
of this Agreement, the Trust will reimburse FSC for payments made by FSC to
obtain services pursuant to this Agreement, a monthly fee computed at the
annual rate of up to .25% of the average aggregate net asset value of the
Investment Shares held during the month.  For the month in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of any fee payable on the basis of the number of days that the
Agreement is in effect during the month.  The fees paid hereunder shall be
in an amount equal to the aggregate amount of periodic fees paid by FSC to
Brokers and Administrators pursuant to Paragraph 4 herein.

     4.  FSC, in its sole discretion, may pay Brokers and Administrators a
periodic fee in respect of Shares owned from time to time by their clients
or customers.  The schedules of such fees and the basis upon which such

                                -13-
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.
                                -13-


/s/ S. Elliott Cohan               By:/s/ John W. McGonigle
     Secretary                          Executive Vice President
(SEAL)





                                 Exhibit F
                                  to the
                          Distributor's Contract

                             THE VIRTUS FUNDS
                           The Money Market Fund
                             Investment Shares
                      The Treasury Money Market Fund
                             Investment Shares
                      The Tax-Free Money Market Fund

       The following provisions are hereby incorporated and made part of
     the Distributor's Contract dated October 12, 1990, between The Virtus
     Funds and Federated Securities Corp. with respect to the Class of the
     Fund set forth above:
  1.  The Trust hereby appoints FSC to select a group of financial
      institutions ("Financial Institutions") to sell shares of the above-
      listed series and Class ("Shares"), at the current offering price
      thereof as described and set forth in the prospectuses of the Trust.
  2.  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 1% of the average
      aggregate net asset value of the 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 Financial
      Institutions pursuant to Paragraph 3 herein.
  3.  FSC, in its sole discretion, may pay Financial Institutions a
      periodic fee in respect of Shares owned from time to time by their
      clients or customers. The schedules of such fees and the basis upon
      which such fees will be paid shall be determined from time to time
      by the Trust's Board of Trustees.
  4.  FSC may from time-to-time and for such periods as it deems
      appropriate reduce its compensation to the extent any Class'
      expenses exceed such lower expense limitation as FSC may, by notice
      to the Trust, voluntarily declare to be effective.
  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 2, 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 Virtus Funds
     and Federated Securities Corp., The Virtus Funds executes and delivers
     this Exhibit on behalf of The Money Market Fund, The Treasury Money
     Market Fund and The Tax-Free Money Market Fund first set forth in this
     Exhibit.











The Virtus Funds                Page 2                  March 1, 1996
       Witness the due execution hereof this 1st day of  March, 1996.

ATTEST:                            The Virtus Funds


/s/ John W. McGonigle              By:/s/ Edward C. Gonzales
Secretary                          President
(SEAL)

ATTEST:                            FEDERATED SECURITIES CORP.


/s/ Byron F. Bowman                By:/s/ David M. Taylor
Secretary                          Executive Vice President
(SEAL)



















                              AMENDMENT NO. 1
                                    to
                            Custodian Contract
                                  between
                 THE VIRTUS FUNDS and SIGNET TRUST COMPANY
                       contract dated October 1, 1992

ADD section 16.:    OVERDRAFTS

If the Custodian should in its sole discretion advance funds on behalf of
any Series which results in an overdraft because the moneys held by the
Custodian in the separate account for such Series shall be insufficient to
pay the total mount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Proper Instruction, or which
results in an overdraft in  the separate account of such Series for some
other reason, such overdraft shall be deemed to be a loan made by the
Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360 day
year for the actual number of days involved) equal to one percent over the
Federal Funds Rate.


     IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the day and year first written
above.

Attest:                                 The Virtus Funds,



/s/ C. Grant Anderson                   By:/s/ Joseph S. Machi
Assistant Secretary                     Vice President
C. Grant Anderson                       Joseph S. Machi


Attest:                                 Signet Trust Company



/s/ Marie B. Wimble                /s/ Joseph A. Rose
Secretary                          Sr. Vice President





                             THE VIRTUS FUNDS
                            MULTIPLE CLASS PLAN

     This Multiple Class Plan ("Plan") is adopted by THE VIRTUS FUNDS (the
"Trust"), a Massachusetts Business Trust, with respect to the classes of
shares ("Classes") of the portfolios of the Trust (the "Funds") set forth
in exhibits hereto.

     PURPOSE
1.   This Plan is adopted pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "Rule"), so as to allow the Trust to
issue more than one class of shares of any or all of the Funds ("Covered
Classes") in reliance on the Rule and to make payments as contemplated
herein.

2.   SEPARATE ARRANGEMENTS/CLASS DIFFERENCES
     a.  Designation of Classes:  The Funds set forth on Exhibit A offer
two classes of shares:  Investment Shares and Trust Shares.
     b.  Sales Load and Expenses:  Purchases of Investment Shares of non-
money market funds are subject to a contingent deferred sales charge as
described in the Prospectus.  No expenses are allocated to Trust Shares as
a class.  The only expenses allocated to Investment Shares as a class are
the expenses incurred under the applicable distribution plan adopted
pursuant to Rule 12b-1.
     c.  Distribution of Shares:  Investment Shares are sold primarily to
individuals who purchase shares through Signet Financial Services, Inc., an
afiliate of Signet Trust Company.  Systematic withdrawal as it relates to
Investment Shares, is as described in the applicable prospectus.  Trust
Shares are offered primarily to trusts, fiduciaries and other institutions
through the Trust Division of Signet Trust Company.
     d.  Voting Rights:  Shareholders of each class are entitled to one
vote for each share held on the record date for any action requiring a vote
by the shareholders and a proportionate fractional vote for each fractional
share held. Shareholders of the Trust will vote in the aggregate and not by
Fund or class except (i) as otherwise expressly required by law or when the
Trustees determine that the matter to be voted upon affects only the
interests of the shareholders of a particular Fund or class, and (ii) only
holders of Investment Shares will be entitled to vote on matters submitted
to shareholder vote with respect to the Rule 12b-1 Plan applicable to such
class.

3.   EXPENSE ALLOCATIONS
     The expenses incurred pursuant to the Rule 12b-1 Plan will be borne
solely by the Investment Shares class of the applicable Fund, and
constitute the only expenses allocated to one class and not the other.

4.   EXCHANGE FEATURES
     Holders of Investment Shares of any Virtus Fund may exchange such
shares for Investment Shares of any other Virtus Fund; for shares of any
Virtus Fund having only one class; or for shares of any fund in the
Blanchard Group of Funds.  Shares may be exchanged at net asset value.

     EFFECTIVENESS
5.   This Plan shall become effective with respect to each class, (i) to
the extent required by the Rule, after approval by a majority vote of:
(a) the Trust's Board of Trustees ; (b) the members of the Board of the
Trust who are not interested persons of the Trust and have no direct or
indirect financial interest in the operation of the Trust's Plan , and/or
(ii) upon execution of an exhibit adopting this Plan with respect to such
class.




                                        2


                                 EXHIBIT A
                                  to the
                            Multiple Class Plan
                             THE VIRTUS FUNDS
                             INVESTMENT SHARES
                               TRUST SHARES
                    The U.S. Government Securities Fund
                    The Style Manager:  Large Cap Fund
                     The Virginia Municipal Bond Fund
                     The Maryland Municipal Bond Fund
                      The Treasury Money Market Fund
                           The Money Market Fund

       This Multiple Class Plan is adopted by THE VIRTUS FUNDS with
     respect to the Class(es) of Shares of the portfolio of THE VIRTUS
     FUNDS set forth above.
       Witness the due execution hereof this 1st day of June, 1995.

                              THE VIRTUS FUNDS


                              By:/s/ Edward C. Gonzales
                              Title:  President
                              Date:







<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   022                                            
     <NAME>                     The Virtus Funds                               
                                The Maryland Municipal Bond Fund               
                                Investment Shares                              
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           42,527,135                                     
<INVESTMENTS-AT-VALUE>          42,599,498                                     
<RECEIVABLES>                   575,131                                        
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  43,174,629                                     
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       205,292                                        
<TOTAL-LIABILITIES>             205,292                                        
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        42,898,627                                     
<SHARES-COMMON-STOCK>           3,182,033                                      
<SHARES-COMMON-PRIOR>           3,008,082                                      
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         (1,653)                                        
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        72,363                                         
<NET-ASSETS>                    33,889,516                                     
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               1,083,498                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  280,874                                        
<NET-INVESTMENT-INCOME>         802,624                                        
<REALIZED-GAINS-CURRENT>        699,687                                        
<APPREC-INCREASE-CURRENT>       (873,985)                                      
<NET-CHANGE-FROM-OPS>           628,326                                        
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       618,093                                        
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         347,008                                        
<NUMBER-OF-SHARES-REDEEMED>     217,860                                        
<SHARES-REINVESTED>             44,803                                         
<NET-CHANGE-IN-ASSETS>          1,349,339                                      
<ACCUMULATED-NII-PRIOR>         999                                            
<ACCUMULATED-GAINS-PRIOR>       (639,922)                                      
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      (61,419)                                       
<GROSS-ADVISORY-FEES>           161,021                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 355,623                                        
<AVERAGE-NET-ASSETS>            42,915,973                                     
<PER-SHARE-NAV-BEGIN>           10.690                                         
<PER-SHARE-NII>                 0.200                                          
<PER-SHARE-GAIN-APPREC>         (0.040)                                        
<PER-SHARE-DIVIDEND>            0.200                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             10.650                                         
<EXPENSE-RATIO>                 1.36                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   021                                            
     <NAME>                     The Virtus Funds                               
                                The Maryland Municipal Bond Fund               
                                Trust Shares                                   
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           42,527,135                                     
<INVESTMENTS-AT-VALUE>          42,599,498                                     
<RECEIVABLES>                   575,131                                        
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  43,174,629                                     
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       205,292                                        
<TOTAL-LIABILITIES>             205,292                                        
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        42,898,627                                     
<SHARES-COMMON-STOCK>           852,539                                        
<SHARES-COMMON-PRIOR>           885,591                                        
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         (1,653)                                        
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        72,363                                         
<NET-ASSETS>                    9,079,821                                      
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               1,083,498                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  280,874                                        
<NET-INVESTMENT-INCOME>         802,624                                        
<REALIZED-GAINS-CURRENT>        699,687                                        
<APPREC-INCREASE-CURRENT>       (873,985)                                      
<NET-CHANGE-FROM-OPS>           628,326                                        
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       185,530                                        
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         59,977                                         
<NUMBER-OF-SHARES-REDEEMED>     93,028                                         
<SHARES-REINVESTED>             0                                              
<NET-CHANGE-IN-ASSETS>          1,349,339                                      
<ACCUMULATED-NII-PRIOR>         999                                            
<ACCUMULATED-GAINS-PRIOR>       (639,922)                                      
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      (61,419)                                       
<GROSS-ADVISORY-FEES>           161,021                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 355,623                                        
<AVERAGE-NET-ASSETS>            42,915,973                                     
<PER-SHARE-NAV-BEGIN>           10.690                                         
<PER-SHARE-NII>                 0.220                                          
<PER-SHARE-GAIN-APPREC>         (0.040)                                        
<PER-SHARE-DIVIDEND>            0.220                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             10.650                                         
<EXPENSE-RATIO>                 1.11                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   032                                            
     <NAME>                     The Virtus Funds                               
                                The Money Market Fund                          
                                Investment Shares                              
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           258,049,395                                    
<INVESTMENTS-AT-VALUE>          258,049,395                                    
<RECEIVABLES>                   2,181,039                                      
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  260,230,434                                    
<PAYABLE-FOR-SECURITIES>        973,482                                        
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       1,148,643                                      
<TOTAL-LIABILITIES>             2,122,125                                      
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        258,108,309                                    
<SHARES-COMMON-STOCK>           89,607,355                                     
<SHARES-COMMON-PRIOR>           41,813,494                                     
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         0                                              
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        0                                              
<NET-ASSETS>                    89,607,355                                     
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               6,728,396                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  701,526                                        
<NET-INVESTMENT-INCOME>         6,026,870                                      
<REALIZED-GAINS-CURRENT>        0                                              
<APPREC-INCREASE-CURRENT>       0                                              
<NET-CHANGE-FROM-OPS>           6,026,870                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       1,765,582                                      
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         92,919,982                                     
<NUMBER-OF-SHARES-REDEEMED>     46,467,870                                     
<SHARES-REINVESTED>             1,341,749                                      
<NET-CHANGE-IN-ASSETS>          42,533,996                                     
<ACCUMULATED-NII-PRIOR>         0                                              
<ACCUMULATED-GAINS-PRIOR>       0                                              
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      0                                              
<GROSS-ADVISORY-FEES>           600,084                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 955,166                                        
<AVERAGE-NET-ASSETS>            240,033,410                                    
<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>                 0.59                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   031                                            
     <NAME>                     The Virtus Funds                               
                                The Money Market Fund                          
                                Trust Shares                                   
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           258,049,395                                    
<INVESTMENTS-AT-VALUE>          258,049,395                                    
<RECEIVABLES>                   2,181,039                                      
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  260,230,434                                    
<PAYABLE-FOR-SECURITIES>        973,482                                        
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       1,148,643                                      
<TOTAL-LIABILITIES>             2,122,125                                      
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        258,108,309                                    
<SHARES-COMMON-STOCK>           168,500,954                                    
<SHARES-COMMON-PRIOR>           173,760,819                                    
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         0                                              
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        0                                              
<NET-ASSETS>                    168,500,954                                    
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               6,728,396                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  701,526                                        
<NET-INVESTMENT-INCOME>         6,026,870                                      
<REALIZED-GAINS-CURRENT>        0                                              
<APPREC-INCREASE-CURRENT>       0                                              
<NET-CHANGE-FROM-OPS>           6,026,870                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       4,261,288                                      
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         205,755,970                                    
<NUMBER-OF-SHARES-REDEEMED>     211,015,835                                    
<SHARES-REINVESTED>             0                                              
<NET-CHANGE-IN-ASSETS>          42,533,996                                     
<ACCUMULATED-NII-PRIOR>         0                                              
<ACCUMULATED-GAINS-PRIOR>       0                                              
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      0                                              
<GROSS-ADVISORY-FEES>           600,084                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 955,166                                        
<AVERAGE-NET-ASSETS>            240,033,410                                    
<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>                 0.58                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   07                                             
     <NAME>                     The Virtus Funds                               
                                The Tax-Free Money Market Fund                 
                                                                               
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           85,477,405                                     
<INVESTMENTS-AT-VALUE>          85,477,405                                     
<RECEIVABLES>                   705,536                                        
<ASSETS-OTHER>                  7,569                                          
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  86,190,510                                     
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       632,574                                        
<TOTAL-LIABILITIES>             632,574                                        
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        85,557,936                                     
<SHARES-COMMON-STOCK>           85,557,936                                     
<SHARES-COMMON-PRIOR>           81,977,460                                     
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         0                                              
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        0                                              
<NET-ASSETS>                    85,557,936                                     
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               1,962,203                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  282,497                                        
<NET-INVESTMENT-INCOME>         1,679,706                                      
<REALIZED-GAINS-CURRENT>        0                                              
<APPREC-INCREASE-CURRENT>       0                                              
<NET-CHANGE-FROM-OPS>           1,679,706                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       1,679,706                                      
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         206,012,489                                    
<NUMBER-OF-SHARES-REDEEMED>     202,626,981                                    
<SHARES-REINVESTED>             194,968                                        
<NET-CHANGE-IN-ASSETS>          3,580,476                                      
<ACCUMULATED-NII-PRIOR>         0                                              
<ACCUMULATED-GAINS-PRIOR>       0                                              
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      0                                              
<GROSS-ADVISORY-FEES>           275,002                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 488,231                                        
<AVERAGE-NET-ASSETS>            110,000,748                                    
<PER-SHARE-NAV-BEGIN>           1.000                                          
<PER-SHARE-NII>                 0.020                                          
<PER-SHARE-GAIN-APPREC>         0.000                                          
<PER-SHARE-DIVIDEND>            0.020                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             1.000                                          
<EXPENSE-RATIO>                 0.51                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   042                                            
     <NAME>                     The Virtus Funds                               
                                The Treasury Money Market Fund                 
                                Investment Shares                              
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           410,033,603                                    
<INVESTMENTS-AT-VALUE>          410,033,603                                    
<RECEIVABLES>                   2,967,850                                      
<ASSETS-OTHER>                  3,776                                          
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  413,005,229                                    
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       1,891,145                                      
<TOTAL-LIABILITIES>             1,891,145                                      
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        0                                              
<SHARES-COMMON-STOCK>           165,454,563                                    
<SHARES-COMMON-PRIOR>           39,363,101                                     
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         0                                              
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        0                                              
<NET-ASSETS>                    165,287,630                                    
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               8,617,761                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  1,041,592                                      
<NET-INVESTMENT-INCOME>         7,576,169                                      
<REALIZED-GAINS-CURRENT>        0                                              
<APPREC-INCREASE-CURRENT>       0                                              
<NET-CHANGE-FROM-OPS>           7,576,169                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       1,484,150                                      
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         154,455,939                                    
<NUMBER-OF-SHARES-REDEEMED>     29,499,298                                     
<SHARES-REINVESTED>             1,134,821                                      
<NET-CHANGE-IN-ASSETS>          163,094,841                                    
<ACCUMULATED-NII-PRIOR>         0                                              
<ACCUMULATED-GAINS-PRIOR>       0                                              
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      0                                              
<GROSS-ADVISORY-FEES>           769,904                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 1,197,860                                      
<AVERAGE-NET-ASSETS>            307,961,405                                    
<PER-SHARE-NAV-BEGIN>           1.000                                          
<PER-SHARE-NII>                 0.020                                          
<PER-SHARE-GAIN-APPREC>         0.000                                          
<PER-SHARE-DIVIDEND>            0.020                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             1.000                                          
<EXPENSE-RATIO>                 0.83                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   041                                            
     <NAME>                     The Virtus Funds                               
                                The Treasury Money Market Fund                 
                                Trust Shares                                   
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           410,033,603                                    
<INVESTMENTS-AT-VALUE>          410,033,603                                    
<RECEIVABLES>                   2,967,850                                      
<ASSETS-OTHER>                  3,776                                          
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  413,005,229                                    
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       1,891,145                                      
<TOTAL-LIABILITIES>             1,891,145                                      
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        0                                              
<SHARES-COMMON-STOCK>           245,826,453                                    
<SHARES-COMMON-PRIOR>           208,656,142                                    
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         0                                              
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        0                                              
<NET-ASSETS>                    245,826,454                                    
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               8,617,761                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  1,041,592                                      
<NET-INVESTMENT-INCOME>         7,576,169                                      
<REALIZED-GAINS-CURRENT>        0                                              
<APPREC-INCREASE-CURRENT>       0                                              
<NET-CHANGE-FROM-OPS>           7,576,169                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       6,092,019                                      
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         299,921,078                                    
<NUMBER-OF-SHARES-REDEEMED>     262,750,767                                    
<SHARES-REINVESTED>             0                                              
<NET-CHANGE-IN-ASSETS>          163,094,841                                    
<ACCUMULATED-NII-PRIOR>         0                                              
<ACCUMULATED-GAINS-PRIOR>       0                                              
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      0                                              
<GROSS-ADVISORY-FEES>           769,904                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 1,197,860                                      
<AVERAGE-NET-ASSETS>            307,961,405                                    
<PER-SHARE-NAV-BEGIN>           1.000                                          
<PER-SHARE-NII>                 0.020                                          
<PER-SHARE-GAIN-APPREC>         0.000                                          
<PER-SHARE-DIVIDEND>            0.020                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             1.000                                          
<EXPENSE-RATIO>                 0.64                                           
<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 U.S. Government Securities Fund            
                                Investment Shares                              
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           216,358,071                                    
<INVESTMENTS-AT-VALUE>          212,508,094                                    
<RECEIVABLES>                   3,944,359                                      
<ASSETS-OTHER>                  183                                            
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  216,452,636                                    
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       1,380,243                                      
<TOTAL-LIABILITIES>             1,380,243                                      
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        230,658,927                                    
<SHARES-COMMON-STOCK>           11,943,581                                     
<SHARES-COMMON-PRIOR>           11,328,043                                     
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         (11,736,557)                                   
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        (3,849,977)                                    
<NET-ASSETS>                    119,409,354                                    
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               8,012,778                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  1,073,049                                      
<NET-INVESTMENT-INCOME>         6,939,729                                      
<REALIZED-GAINS-CURRENT>        (677,723)                                      
<APPREC-INCREASE-CURRENT>       (2,345,715)                                    
<NET-CHANGE-FROM-OPS>           3,916,291                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       3,689,625                                      
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         1,595,307                                      
<NUMBER-OF-SHARES-REDEEMED>     1,260,817                                      
<SHARES-REINVESTED>             281,048                                        
<NET-CHANGE-IN-ASSETS>          (1,140,482)                                    
<ACCUMULATED-NII-PRIOR>         45,566                                         
<ACCUMULATED-GAINS-PRIOR>       (8,207,295)                                    
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      2,897,104                                      
<GROSS-ADVISORY-FEES>           826,927                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 1,277,177                                      
<AVERAGE-NET-ASSETS>            219,682,199                                    
<PER-SHARE-NAV-BEGIN>           10.130                                         
<PER-SHARE-NII>                 0.320                                          
<PER-SHARE-GAIN-APPREC>         (0.130)                                        
<PER-SHARE-DIVIDEND>            0.320                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             10.000                                         
<EXPENSE-RATIO>                 1.09                                           
<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 U.S. Government Securities Fund            
                                Trust Shares                                   
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           216,358,071                                    
<INVESTMENTS-AT-VALUE>          212,508,094                                    
<RECEIVABLES>                   3,944,359                                      
<ASSETS-OTHER>                  183                                            
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  216,452,636                                    
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       1,380,243                                      
<TOTAL-LIABILITIES>             1,380,243                                      
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        230,658,927                                    
<SHARES-COMMON-STOCK>           9,568,438                                      
<SHARES-COMMON-PRIOR>           10,006,598                                     
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         (11,736,557)                                   
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        (3,849,977)                                    
<NET-ASSETS>                    95,663,039                                     
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               8,012,778                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  1,073,049                                      
<NET-INVESTMENT-INCOME>         6,939,729                                      
<REALIZED-GAINS-CURRENT>        (677,723)                                      
<APPREC-INCREASE-CURRENT>       (2,345,715)                                    
<NET-CHANGE-FROM-OPS>           3,916,291                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       3,250,105                                      
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         854,384                                        
<NUMBER-OF-SHARES-REDEEMED>     1,292,543                                      
<SHARES-REINVESTED>             0                                              
<NET-CHANGE-IN-ASSETS>          (1,140,482)                                    
<ACCUMULATED-NII-PRIOR>         45,566                                         
<ACCUMULATED-GAINS-PRIOR>       (8,207,295)                                    
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      2,897,104                                      
<GROSS-ADVISORY-FEES>           826,927                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 1,277,177                                      
<AVERAGE-NET-ASSETS>            219,682,199                                    
<PER-SHARE-NAV-BEGIN>           10.130                                         
<PER-SHARE-NII>                 0.330                                          
<PER-SHARE-GAIN-APPREC>         (0.130)                                        
<PER-SHARE-DIVIDEND>            0.330                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             10.000                                         
<EXPENSE-RATIO>                 0.84                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   052                                            
     <NAME>                     The Virtus Funds                               
                                The Style Manager: Large Cap Fund              
                                Investment Shares                              
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           90,099,444                                     
<INVESTMENTS-AT-VALUE>          94,998,358                                     
<RECEIVABLES>                   256,543                                        
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  95,254,901                                     
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       191,799                                        
<TOTAL-LIABILITIES>             191,799                                        
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        80,566,535                                     
<SHARES-COMMON-STOCK>           3,771,489                                      
<SHARES-COMMON-PRIOR>           3,249,476                                      
<ACCUMULATED-NII-CURRENT>       70,495                                         
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         9,527,158                                      
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        4,898,914                                      
<NET-ASSETS>                    50,548,508                                     
<DIVIDEND-INCOME>               1,339,779                                      
<INTEREST-INCOME>               111,233                                        
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  546,346                                        
<NET-INVESTMENT-INCOME>         904,666                                        
<REALIZED-GAINS-CURRENT>        10,334,252                                     
<APPREC-INCREASE-CURRENT>       (4,168,347)                                    
<NET-CHANGE-FROM-OPS>           7,070,571                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       469,931                                        
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           3,989,081                                      
<NUMBER-OF-SHARES-SOLD>         514,163                                        
<NUMBER-OF-SHARES-REDEEMED>     331,494                                        
<SHARES-REINVESTED>             339,344                                        
<NET-CHANGE-IN-ASSETS>          5,209,809                                      
<ACCUMULATED-NII-PRIOR>         107,629                                        
<ACCUMULATED-GAINS-PRIOR>       7,080,902                                      
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      0                                              
<GROSS-ADVISORY-FEES>           344,898                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 591,943                                        
<AVERAGE-NET-ASSETS>            92,047,009                                     
<PER-SHARE-NAV-BEGIN>           13.700                                         
<PER-SHARE-NII>                 0.120                                          
<PER-SHARE-GAIN-APPREC>         0.910                                          
<PER-SHARE-DIVIDEND>            0.130                                          
<PER-SHARE-DISTRIBUTIONS>       1.200                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             13.400                                         
<EXPENSE-RATIO>                 1.30                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   051                                            
     <NAME>                     The Virtus Funds                               
                                The Style Manager: Large Cap Fund              
                                Trust Shares                                   
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           90,099,444                                     
<INVESTMENTS-AT-VALUE>          94,998,358                                     
<RECEIVABLES>                   256,543                                        
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  95,254,901                                     
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       191,799                                        
<TOTAL-LIABILITIES>             191,799                                        
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        80,566,535                                     
<SHARES-COMMON-STOCK>           3,321,997                                      
<SHARES-COMMON-PRIOR>           3,310,403                                      
<ACCUMULATED-NII-CURRENT>       70,495                                         
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         9,527,158                                      
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        4,898,914                                      
<NET-ASSETS>                    44,514,594                                     
<DIVIDEND-INCOME>               1,339,779                                      
<INTEREST-INCOME>               111,233                                        
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  546,346                                        
<NET-INVESTMENT-INCOME>         904,666                                        
<REALIZED-GAINS-CURRENT>        10,334,252                                     
<APPREC-INCREASE-CURRENT>       (4,168,347)                                    
<NET-CHANGE-FROM-OPS>           7,070,571                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       471,869                                        
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           3,898,915                                      
<NUMBER-OF-SHARES-SOLD>         235,321                                        
<NUMBER-OF-SHARES-REDEEMED>     259,410                                        
<SHARES-REINVESTED>             35,683                                         
<NET-CHANGE-IN-ASSETS>          5,209,809                                      
<ACCUMULATED-NII-PRIOR>         107,629                                        
<ACCUMULATED-GAINS-PRIOR>       7,080,902                                      
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      0                                              
<GROSS-ADVISORY-FEES>           344,898                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 591,943                                        
<AVERAGE-NET-ASSETS>            92,047,009                                     
<PER-SHARE-NAV-BEGIN>           13.700                                         
<PER-SHARE-NII>                 0.140                                          
<PER-SHARE-GAIN-APPREC>         0.900                                          
<PER-SHARE-DIVIDEND>            0.140                                          
<PER-SHARE-DISTRIBUTIONS>       1.200                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             13.400                                         
<EXPENSE-RATIO>                 1.05                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   08                                             
     <NAME>                     The Virtus Funds                               
                                The Style Manager Fund                         
                                                                               
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           62,502,127                                     
<INVESTMENTS-AT-VALUE>          65,295,702                                     
<RECEIVABLES>                   241,301                                        
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  65,537,003                                     
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       66,312                                         
<TOTAL-LIABILITIES>             66,312                                         
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        60,713,441                                     
<SHARES-COMMON-STOCK>           6,034,452                                      
<SHARES-COMMON-PRIOR>           6,518,730                                      
<ACCUMULATED-NII-CURRENT>       76,392                                         
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         1,887,283                                      
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        2,793,575                                      
<NET-ASSETS>                    65,470,691                                     
<DIVIDEND-INCOME>               1,015,781                                      
<INTEREST-INCOME>               42,040                                         
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  273,644                                        
<NET-INVESTMENT-INCOME>         784,177                                        
<REALIZED-GAINS-CURRENT>        3,296,520                                      
<APPREC-INCREASE-CURRENT>       (2,360,140)                                    
<NET-CHANGE-FROM-OPS>           1,720,557                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       731,499                                        
<DISTRIBUTIONS-OF-GAINS>        8,143,290                                      
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         820,854                                        
<NUMBER-OF-SHARES-REDEEMED>     2,089,611                                      
<SHARES-REINVESTED>             784,479                                        
<NET-CHANGE-IN-ASSETS>          (12,917,346)                                   
<ACCUMULATED-NII-PRIOR>         23,714                                         
<ACCUMULATED-GAINS-PRIOR>       6,734,053                                      
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      0                                              
<GROSS-ADVISORY-FEES>           341,646                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 485,618                                        
<AVERAGE-NET-ASSETS>            70,090,828                                     
<PER-SHARE-NAV-BEGIN>           12.030                                         
<PER-SHARE-NII>                 0.130                                          
<PER-SHARE-GAIN-APPREC>         0.160                                          
<PER-SHARE-DIVIDEND>            0.120                                          
<PER-SHARE-DISTRIBUTIONS>       1.350                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             10.850                                         
<EXPENSE-RATIO>                 0.80                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   062                                            
     <NAME>                     The Virtus Funds                               
                                The Virginia Municipal Bond Fund               
                                Investment Shares                              
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           102,145,380                                    
<INVESTMENTS-AT-VALUE>          102,176,469                                    
<RECEIVABLES>                   1,538,889                                      
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  103,715,358                                    
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       507,910                                        
<TOTAL-LIABILITIES>             507,910                                        
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        102,612,393                                    
<SHARES-COMMON-STOCK>           6,581,956                                      
<SHARES-COMMON-PRIOR>           6,525,602                                      
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         563,966                                        
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        31,089                                         
<NET-ASSETS>                    70,776,209                                     
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               2,668,816                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  619,009                                        
<NET-INVESTMENT-INCOME>         2,049,807                                      
<REALIZED-GAINS-CURRENT>        2,101,158                                      
<APPREC-INCREASE-CURRENT>       (2,664,811)                                    
<NET-CHANGE-FROM-OPS>           1,486,154                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       1,368,827                                      
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         641,842                                        
<NUMBER-OF-SHARES-REDEEMED>     664,648                                        
<SHARES-REINVESTED>             79,161                                         
<NET-CHANGE-IN-ASSETS>          (1,035,217)                                    
<ACCUMULATED-NII-PRIOR>         0                                              
<ACCUMULATED-GAINS-PRIOR>       (1,364,455)                                    
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      (172,737)                                      
<GROSS-ADVISORY-FEES>           392,448                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 680,496                                        
<AVERAGE-NET-ASSETS>            104,605,774                                    
<PER-SHARE-NAV-BEGIN>           10.810                                         
<PER-SHARE-NII>                 0.210                                          
<PER-SHARE-GAIN-APPREC>         (0.060)                                        
<PER-SHARE-DIVIDEND>            0.210                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             10.750                                         
<EXPENSE-RATIO>                 1.26                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>

<TABLE> <S> <C>

                                                                               
<S>                             <C>                                            
                                                                               
<ARTICLE>                       6                                              
<SERIES>                                                                       
     <NUMBER>                   061                                            
     <NAME>                     The Virtus Funds                               
                                The Virginia Municipal Bond Fund               
                                Trust Shares                                   
<PERIOD-TYPE>                   6-mos                                          
<FISCAL-YEAR-END>               Sep-30-1996                                    
<PERIOD-END>                    Mar-31-1996                                    
<INVESTMENTS-AT-COST>           102,145,380                                    
<INVESTMENTS-AT-VALUE>          102,176,469                                    
<RECEIVABLES>                   1,538,889                                      
<ASSETS-OTHER>                  0                                              
<OTHER-ITEMS-ASSETS>            0                                              
<TOTAL-ASSETS>                  103,715,358                                    
<PAYABLE-FOR-SECURITIES>        0                                              
<SENIOR-LONG-TERM-DEBT>         0                                              
<OTHER-ITEMS-LIABILITIES>       507,910                                        
<TOTAL-LIABILITIES>             507,910                                        
<SENIOR-EQUITY>                 0                                              
<PAID-IN-CAPITAL-COMMON>        102,612,393                                    
<SHARES-COMMON-STOCK>           3,016,003                                      
<SHARES-COMMON-PRIOR>           3,114,671                                      
<ACCUMULATED-NII-CURRENT>       0                                              
<OVERDISTRIBUTION-NII>          0                                              
<ACCUMULATED-NET-GAINS>         563,966                                        
<OVERDISTRIBUTION-GAINS>        0                                              
<ACCUM-APPREC-OR-DEPREC>        31,089                                         
<NET-ASSETS>                    32,431,239                                     
<DIVIDEND-INCOME>               0                                              
<INTEREST-INCOME>               2,668,816                                      
<OTHER-INCOME>                  0                                              
<EXPENSES-NET>                  619,009                                        
<NET-INVESTMENT-INCOME>         2,049,807                                      
<REALIZED-GAINS-CURRENT>        2,101,158                                      
<APPREC-INCREASE-CURRENT>       (2,664,811)                                    
<NET-CHANGE-FROM-OPS>           1,486,154                                      
<EQUALIZATION>                  0                                              
<DISTRIBUTIONS-OF-INCOME>       680,980                                        
<DISTRIBUTIONS-OF-GAINS>        0                                              
<DISTRIBUTIONS-OTHER>           0                                              
<NUMBER-OF-SHARES-SOLD>         272,174                                        
<NUMBER-OF-SHARES-REDEEMED>     370,842                                        
<SHARES-REINVESTED>             0                                              
<NET-CHANGE-IN-ASSETS>          (1,035,217)                                    
<ACCUMULATED-NII-PRIOR>         0                                              
<ACCUMULATED-GAINS-PRIOR>       (1,364,455)                                    
<OVERDISTRIB-NII-PRIOR>         0                                              
<OVERDIST-NET-GAINS-PRIOR>      (172,737)                                      
<GROSS-ADVISORY-FEES>           392,448                                        
<INTEREST-EXPENSE>              0                                              
<GROSS-EXPENSE>                 680,496                                        
<AVERAGE-NET-ASSETS>            104,605,774                                    
<PER-SHARE-NAV-BEGIN>           10.810                                         
<PER-SHARE-NII>                 0.220                                          
<PER-SHARE-GAIN-APPREC>         (0.060)                                        
<PER-SHARE-DIVIDEND>            0.220                                          
<PER-SHARE-DISTRIBUTIONS>       0.000                                          
<RETURNS-OF-CAPITAL>            0.000                                          
<PER-SHARE-NAV-END>             10.750                                         
<EXPENSE-RATIO>                 1.01                                           
<AVG-DEBT-OUTSTANDING>          0                                              
<AVG-DEBT-PER-SHARE>            0.000                                          
                                                                               

</TABLE>


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