VIRTUS FUNDS, 497, 1997-12-01

VIRTUS FUNDS
497, 1997-12-01

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INVESTMENT SHARES
COMBINED PROSPECTUS

November 30, 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] VIRTUS
CAPITAL MANAGEMENT, INC.
Investment products available through Signet Financial Services, Inc. (member
NASD) are not deposits, obligations of, or guaranteed by any bank. They
are not insured by the FDIC. In addition, they involve risk, including the
possible loss of principal invested.
Virtus Capital Management, Inc., an affiliate of Signet Financial Services,
Inc., is the investment adviser to the Virtus Funds and is compensated for this
service.
[LOGO] VIRTUS
FUNDS

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

. 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 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 November 30, 1997, with the
Securities and Exchange Commission ("SEC"). The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information 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. This Statement of Additional Information, Material incorporated
by reference into this document, and other information regarding the Trust is
maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

The Board of Trustees of the Trust has approved
an Agreement and Plan of Reorganization, on behalf of each Fund, pursuant to
which, on or about February 27, 1998, all of the assets, and certain liabilities
of each Fund would be acquired in exchange for shares of certain similarly
managed funds (the "Acquiring Funds") that are advised by affiliates of First
Union Corporation. The reorganizations would result in the liquidation and
termination of each Fund. Pursuant to the reorganizations, holders of Shares of
each Fund would receive, tax-free, that number of shares of an Acquiring Fund
having a value equal to the value of such shareholders' Shares immediately prior
to the reorganizations. Consummation of the reorganizations is subject to
approval of the shareholders of the Funds at a meeting scheduled to be held on
February 20, 1998.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

Prospectus dated November 30, 1997

TABLE OF CONTENTS

- --------------------------------------------------------------------------------
SYNOPSIS 1
- -------------------------------------
Special Considerations 1
SUMMARY OF FUND EXPENSES 2
- -------------------------------------
FINANCIAL HIGHLIGHTS 4
- -------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF
EACH FUND 12
- -------------------------------------
The U.S. Government Securities
Fund 12
The Style Manager: Large Cap Fund 13
The Style Manager Fund 14
The Virginia Municipal Bond Fund
and The Maryland Municipal Bond
Fund 15
The Treasury Money Market Fund 15
The Money Market Fund 16
The Tax-Free Money Market Fund 16
Investment Limitations 17
PORTFOLIO INVESTMENTS AND
STRATEGIES 17
- -------------------------------------
Regulatory Compliance 17
Borrowing Money 17
Selling Short 18
Restricted and Illiquid
Securities 18
When-Issued and Delayed Delivery
Transactions 18
Investing in Securities of Other
Investment Companies 18
Diversification 18
Non-Diversification 19
Repurchase Agreements 19
Lending of Portfolio Securities 19
Acquiring Securities 19
Investment Risks 19
Variable Rate Demand Notes 20
Credit Enhancement 20
Demand Features 20
Participation Interests 21
Variable Rate Municipal
Securities 21
Municipal Leases 21
Temporary Investments 21
Municipal Securities 21
THE VIRTUS FUNDS INFORMATION 24
- -------------------------------------
Management of the Trust 24
Distribution of Shares of the
Funds 25
Administration of the Funds 26
NET ASSET VALUE 26
- -------------------------------------
INVESTING IN SHARES 26
- -------------------------------------
Share Purchases 26
Systematic Investment Program 27
Minimum Investment Required 27
What Shares Cost 27
Confirmations and Account
Statements 28
Dividends 28
Capital Gains 28
EXCHANGE PRIVILEGE 28
- -------------------------------------
REDEEMING SHARES 29
- -------------------------------------
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 30
Contingent Deferred Sales Charge--
The Treasury Money Market Fund,
The Money Market Fund, The Tax-
Free Money Market Fund and
Blanchard Funds 31
Systematic Withdrawal Program 31
Check-Writing Privilege 32
Accounts with Low Balances 32
SHAREHOLDER INFORMATION 32
- -------------------------------------
Voting Rights 32
EFFECT OF BANKING LAWS 32
- -------------------------------------
TAX INFORMATION 33
- -------------------------------------
Federal Income Tax 33
PERFORMANCE INFORMATION 34
- -------------------------------------
OTHER CLASSES OF SHARES 35
- -------------------------------------
ADDRESSES 36
- -------------------------------------

SYNOPSIS
- -------------------------------------------------------------------------------
The Trust, an open-end, management investment company, was established as a
Massachusetts business trust under a Declaration of Trust dated June 20, 1990.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Board of Trustees (the "Board" or "Trustees") have
established a single class of shares for The Tax-Free Money Market Fund and The
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."

SUMMARY OF FUND EXPENSES--INVESTMENT SHARES, STYLE
MANAGER SHARES AND TAX-FREE MONEY MARKET SHARES
- -------------------------------------------------------------------------------
The following Fee Table and Example summarize the various costs and expenses
that a shareholder of Investment Shares, Style Manager Shares and Tax-Free Money
Market Shares will bear either directly or indirectly. SHAREHOLDER TRANSACTION
EXPENSES <TABLE> <CAPTION>
THE
STYLE THE THE THE THE
THE U.S. MANAGER: THE VIRGINIA MARYLAND TREASURY THE TAX-FREE
GOVERNMENT LARGE STYLE MUNICIPAL MUNICIPAL MONEY MONEY MONEY
SECURITIES CAP MANAGER BOND BOND MARKET MARKET MARKET
FUND FUND FUND FUND FUND FUND FUND FUND
---------- -------- ------- --------- --------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Contingent Deferred
Sales Charge (as a
percentage of amount
redeemed, if
applicable)(1)........ 2.00% 2.00% 2.00% 2.00% 2.00% None None None
</TABLE>
ANNUAL INVESTMENT SHARES, STYLE MANAGER SHARES AND TAX-FREE MONEY MARKET
SHARES OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12B-1 OTHER OPERATING
FEES (2) FEES (3) EXPENSES EXPENSES (4)
---------- -------- -------- ------------
<S> <C> <C> <C> <C>
The U.S. Government Securities Fund... 0.75% 0.25% 0.45% 1.45%
The Style Manager: Large Cap Fund..... 0.75% 0.25% 0.59% 1.59%
The Style Manager Fund................ 0.75% 0.00% 0.56% 1.31%
The Virginia Municipal Bond Fund...... 0.75% 0.25% 0.48% 1.48%
The Maryland Municipal Bond Fund...... 0.75% 0.25% 1.17% 2.17%
The Treasury Money Market Fund........ 0.50% 0.25% 0.28% 1.03%
The Money Market Fund................. 0.50% 0.25% 0.29% 1.04%
The Tax-Free Money Market Fund........ 0.36% 0.00% 0.46% 0.82%
</TABLE>
(1) A contingent deferred sales charge of 2.00% will be imposed on The Treasury
Money Market Fund, The Money Market Fund and The Tax-Free Money Market Fund
only in limited circumstances in which Shares being redeemed are acquired in
exchange for Investment Shares in those Virtus Funds which charge a
contingent deferred sales charge. The contingent deferred sales charge is
2.00% of the lesser of the original purchase price or the net asset value of
Shares redeemed within five years of purchase date.
(2) The management fees for The Style Manager Fund and The Tax-Free Money Market
Fund have been reduced to reflect voluntary waivers by the investment
adviser. The Adviser can terminate these voluntary waivers at any time at
their sole discretion. The maximum management fee for The Style Manager Fund
and The Tax-Free Money Market Fund is 1.25% and 0.50%, respectively.
(3) Fees are paid by Investment Shares of each Fund for distribution and/or
administrative services provided with respect to Investment Shares. Total
payments of up to 0.25% of the average daily net assets attributable to
Investment Shares are permitted under the Distribution Plans. The Style
Manager Fund and The Tax-Free Money Market Fund will not accrue or pay 12b-1
fees until a separate class of shares has been created for certain
institutional investors. The Style Manager Fund and The Tax-Free Money
Market Fund can pay up to 0.25% as a 12b-1 fee to the distributor. See
"Management of the Trust--Distribution Plans."
(4) The Total Investment Shares Operating Expenses for The Style Manager Fund
and The Tax-Free Money Market Fund would be 1.81% and 0.96%, respectively,
absent the voluntary waivers described in note 2 above.
The Annual Investment Operating Expenses for 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 were 1.25%,
1.49%, 1.17%, 1.36%, 1.69%, 0.98%, 0.97%, and 0.79%, respectively, for the
fiscal year ended September 30, 1997. The Annual Investment Operating Expenses
in the table above are based on estimated expenses expected during fiscal year
ending September 30, 1998. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted under the rules of
the National Association of Securities Dealers Inc. EXAMPLE You would pay the
following expenses on a $1,000 investment assuming (1) 5% annual return and (2)
redemption at the end of each time period. <TABLE> <CAPTION>
1 YEAR 1 YEAR(+) 3 YEARS 3 YEARS(+) 5 YEARS 10 YEARS
------ --------- ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
The U.S. Government
Securities Fund........... $35 $15 $68 $46 $ 79 $174
The Style Manager: Large
Cap Fund.................. $37 $16 $72 $50 $ 87 $189
The Style Manager Fund.... $34 $13 $64 $42 $ 72 $158
The Virginia Municipal
Bond Fund................. $36 $15 $69 $47 $ 81 $177
The Maryland Municipal
Bond Fund................. $43 $22 $90 $68 $116 $250
The Treasury Money Market
Fund...................... $11 $11 $33 $33 $ 57 $126
The Money Market Fund..... $11 $11 $33 $33 $ 57 $127
The Tax-Free Money Market
Fund...................... $ 8 $ 8 $26 $26 $ 46 $101
</TABLE>
+Reflects expenses on the same investment, assuming no redemption. The purpose
of the foregoing Example is to assist an investor in understanding the various
costs and expenses that a shareholder of Investment Shares, Style Manager Shares
and Tax-Free Money Market Shares will bear, either directly or indirectly. For a
more complete description of the various costs and expenses, see "The Virtus
Funds Information" and "Investing in Shares." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees. THE ABOVE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN.

THE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.89 $10.13 $ 9.83 $10.90 $10.95 $10.54 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.60 0.62 0.64 0.61 0.66 0.75 0.78
Net realized and
unrealized gain (loss)
on investments 0.06 (0.24) 0.30 (0.94) 0.03 0.50 0.54
- ----------------------------------------------------------------------------------------------------
Total from investment
operations 0.66 0.38 0.94 (0.33) 0.69 1.25 1.32
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.60) (0.62) (0.64) (0.61) (0.66)(e) (0.75) (0.78)
Distributions from net
realized gain on
investments -- -- -- -- (0.08) (0.09) --
Distributions in excess
of net realized gain on
investments (e) -- -- -- (0.13) -- -- --
- ----------------------------------------------------------------------------------------------------
Total distributions (0.60) (0.62) (0.64) (0.74) (0.74) (0.84) (0.78)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.95 $ 9.89 $10.13 $ 9.83 $10.90 $10.95 $10.54
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 6.89% 3.79% 9.84% (3.36)% 6.82% 12.42% 14.00%
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.25% 1.14% 1.01% 0.99% 0.77% 0.52% 0.64%(c)
Net investment income 6.07% 6.11% 6.41% 5.94% 5.91% 7.01% 8.03%(c)
Expense
waiver/reimbursement
(d) 0.02% 0.13% 0.28% 0.32% 0.43% 0.65% 0.93%(c)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $105,248 $116,418 $114,803 $112,439 $119,187 $40,274 $10
Portfolio turnover 80% 118% 82% 227% 154% 201% 101%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.89 $10.13 $ 9.83 $10.90 $10.95 $10.54 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.63 0.64 0.66 0.63 0.67 0.75 0.78
Net realized and
unrealized gain
(loss) on investments 0.06 (0.24) 0.30 (0.94) 0.03 0.50 0.54
- ----------------------------------------------------------------------------------------------------
Total from investment
operations 0.69 0.40 0.96 (0.31) 0.70 1.25 1.32
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.63) (0.64) (0.66) (0.63) (0.67)(e) (0.75) (0.78)
Distributions from net
realized
gain on investments -- -- -- -- (0.08) (0.09) --
Distributions in excess
of net
realized gain on
investments (e) -- -- -- (0.13) -- -- --
- ----------------------------------------------------------------------------------------------------
Total distributions (0.63) (0.64) (0.66) (0.76) (0.75) (0.84) (0.78)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.95 $ 9.89 $10.13 $ 9.83 $10.90 $10.95 $10.54
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 7.16% 4.05% 10.11% (3.12)% 6.94% 12.42% 14.00%
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.00% 0.89% 0.76% 0.74% 0.63% 0.52% 0.64%(c)
Net investment income 6.32% 6.36% 6.66% 6.19% 6.17% 7.01% 8.03%(c)
Expense
waiver/reimbursement
(d) 0.02% 0.13% 0.28% 0.32% 0.43% 0.65% 0.93%(c)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $52,177 $78,998 $101,410 $107,103 $112,334 $95,610 $27,565
Portfolio turnover 80% 118% 82% 227% 154% 201% 101%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e)Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal tax purposes.
Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.
THE STYLE MANAGER: LARGE CAP FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund. <TABLE> <CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
INVESTMENT SHARES 1997(E) 1996 1995(E) 1994 1993 1992 1991(A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $13.68 $13.70 $11.80 $12.39 $12.02 $11.86 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.13 0.27 0.09 0.17 0.24 0.26 0.32
Net realized and
unrealized gain (loss)
on investments 4.47 1.18 2.20 (0.39) 0.54 0.46 1.85
- --------------------------------------------------------------------------------------------
Total from investment
operations 4.60 1.45 2.29 (0.22) 0.78 0.72 2.17
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.14) (0.27) (0.09) (0.17) (0.25) (0.25) (0.31)
Distributions from net
realized gain on
investments (1.83) (1.20) (0.30) (0.20) (0.16) (0.31) --
- --------------------------------------------------------------------------------------------
Total distributions (1.97) (1.47) (0.39) (0.37) (0.41) (0.56) (0.31)
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $16.31 $13.68 $13.70 $11.80 $12.39 $12.02 $11.86
- --------------------------------------------------------------------------------------------
TOTAL RETURN (B) 37.02% 11.28% 20.02% (1.72%) 6.31% 6.31% 22.68%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.49% 1.36% 1.21% 1.20% 0.87% 0.95% 0.80%(c)
Net investment income 0.88% 2.01% 0.67% 1.40% 1.81% 2.25% 3.05%(c)
Expense
waiver/reimbursement
(d) -- -- 0.21% 0.23% 0.55% 0.34% 0.38%(c)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $80,073 $59,891 $44,509 $26,739 $18,691 $2,290 $488
Average commission rate
paid (f) $0.0783 $0.0616 -- -- -- -- --
Portfolio turnover 56% 151% 208% 205% 67% 38% 84%
- --------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
TRUST SHARES 1997(E) 1996 1995(E) 1994 1993 1992 1991(A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $13.68 $13.70 $11.80 $12.39 $12.02 $11.86 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.18 0.33 0.12 0.20 0.28 0.26 0.32
Net realized and
unrealized gain (loss)
on investments 4.46 1.15 2.20 (0.40) 0.51 0.46 1.85
- --------------------------------------------------------------------------------------------
Total from investment
operations 4.64 1.48 2.32 (0.20) 0.79 0.72 2.17
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.18) (0.30) (0.12) (0.19) (0.26) (0.25) (0.31)
Distributions from net
realized gain on
investments (1.83) (1.20) (0.30) (0.20) (0.16) (0.31) --
- --------------------------------------------------------------------------------------------
Total distributions (2.01) (1.50) (0.42) (0.39) (0.42) (0.56) (0.31)
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $16.31 $13.68 $13.70 $11.80 $12.39 $12.02 $11.86
- --------------------------------------------------------------------------------------------
TOTAL RETURN (B) 37.37% 11.55% 20.33% (1.50%) 6.42% 6.31% 22.68%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.24% 1.11% 0.96% 0.95% 0.66% 0.95% 0.80%(c)
Net investment income 1.17% 2.26% 0.92% 1.68% 2.09% 2.25% 3.05%(c)
Expense
waiver/reimbursement
(d) -- -- 0.21% 0.23% 0.55% 0.34% 0.38%(c)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $26,611 $33,683 $45,345 $70,374 $65,841 $49,581 $37,032
Average commission rate
paid (f) $0.0783 $0.0616 -- -- -- -- --
Portfolio turnover 56% 151% 208% 205% 67% 38% 84%
- --------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE STYLE MANAGER FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund. <TABLE> <CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------------
1997 1996 1995(A)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.47 $12.03 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.23 0.31 0.03
Net realized and unrealized gain on investments 4.54 0.77 2.03
- -----------------------------------------------------------------------------
Total from investment operations 4.77 1.08 2.06
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.24) (0.29) (0.03)
Distributions from net realized gain on
investments (0.63) (1.35) --
- -----------------------------------------------------------------------------
Total distributions (0.87) (1.64) (0.03)
- -----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.37 $11.47 $12.03
- -----------------------------------------------------------------------------
TOTAL RETURN (B) 44.01% 10.19% 20.59%
- -----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.17% 0.99% 0.44%*
Net investment income 1.76% 2.63% 0.46%*
Expense waiver/reimbursement (c) 0.50% 0.44% 1.03%*
- -----------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $76,874 $62,783 $78,388
Average commission rate paid (d) $0.0789 $0.0514 --
Portfolio turnover 94% 112% 92%
- -----------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from March 7, 1995 (date of initial
public investment) to September 30, 1995.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE VIRGINIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund. <TABLE> <CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.68 $10.81 $10.26 $11.26 $10.46 $10.18 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.42 0.41 0.45 0.45 0.51 0.54 0.57
Net realized and
unrealized gain (loss)
on investments 0.39 (0.13) 0.55 (0.92) 0.89 0.29 0.18
- ---------------------------------------------------------------------------------------------
Total from investment
operations 0.81 0.28 1.00 (0.47) 1.40 0.83 0.75
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.42) (0.41) (0.45) (0.45)(g) (0.51) (0.54) (0.57)
Distributions from net
realized gain on
investments -- -- -- (0.06) (0.09) (0.01) --
Distributions in excess
of net realized gain
on investments (b) -- -- -- (0.02) -- -- --
- ---------------------------------------------------------------------------------------------
Total distributions (0.42) (0.41) (0.45) (0.53) (0.60) (0.55) (0.57)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $11.07 $10.68 $10.81 $10.26 $11.26 $10.46 $10.18
- ---------------------------------------------------------------------------------------------
TOTAL RETURN (D) 7.74% 2.60% 10.00% (4.25)% 13.49% 8.51% 7.64%
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.36% 1.32% 1.17% 1.15% 0.90% 0.83% 0.47%(c)
Net investment income 3.87% 3.78% 4.32% 4.22% 4.68% 5.14% 6.08%(c)
Expense
waiver/reimbursement
(e) -- 0.02% 0.22% 0.27% 0.50% 0.86% 1.70%(c)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $58,881 $65,700 $70,572 $74,706 $63,492 $20,883 $6,031
Portfolio turnover 19% 129% 26% 29% 17% 51% 27%
- ---------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.68 $10.81 $10.26 $11.26 $10.46 $10.18 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.45 0.44 0.48 0.48 0.53 0.54 0.57
Net realized and
unrealized gain (loss)
on investments 0.39 (0.13) 0.55 (0.92) 0.89 0.29 0.18
- ---------------------------------------------------------------------------------------------
Total from investment
operations 0.84 0.31 1.03 (0.44) 1.42 0.83 0.75
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.45) (0.44) (0.48) (0.48)(f) (0.53) (0.54) (0.57)
Distributions from net
realized gain on
investments -- -- -- (0.06) (0.09) (0.01) --
Distributions in excess
of net realized gain
on investments (b) -- -- -- (0.02) -- -- --
- ---------------------------------------------------------------------------------------------
Total distributions (0.45) (0.44) (0.48) (0.56) (0.62) (0.55) (0.57)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $11.07 $10.68 $10.81 $10.26 $11.26 $10.46 $10.18
- ---------------------------------------------------------------------------------------------
TOTAL RETURN (D) 8.00% 2.86% 10.27% (4.01%) 13.62% 8.51% 7.64%
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.11% 1.06% 0.92% 0.90% 0.75% 0.83% 0.47%(c)
Net investment income 4.12% 4.03% 4.57% 4.47% 4.85% 5.14% 6.08%(c)
Expense
waiver/reimbursement
(e) -- 0.02% 0.22% 0.27% 0.50% 0.86% 1.70%(c)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $19,891 $28,110 $33,670 $34,165 $41,204 $20,852 $8,546
Portfolio turnover 19% 129% 26% 29% 17% 51% 27%
- ---------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

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

(f) Amount includes distributions to shareholders in excess of net investment
income of $0.0002 per share.

(g) Amount includes distributions to shareholders in excess of net investment
income of $0.0001 per share.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE MARYLAND MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.56 $10.69 $10.17 $11.24 $10.39 $10.10 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.37 0.38 0.40 0.45 0.49 0.54 0.53
Net realized and
unrealized gain (loss)
on investments 0.35 (0.13) 0.54 (0.97) 0.85 0.29 0.10
- -----------------------------------------------------------------------------------------
Total from investment
operations 0.72 0.25 0.94 (0.52) 1.34 0.83 0.63
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.37) (0.38) (0.40) (0.45) (0.49) (0.54) (0.53)
Distributions from net
realized gain
on investments -- -- (0.02) (0.10) -- -- --
- -----------------------------------------------------------------------------------------
Total distributions (0.37) (0.38) (0.42) (0.55) (0.49) (0.54) (0.53)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $10.91 $10.56 $10.69 $10.17 $11.24 $10.39 $10.10
- -----------------------------------------------------------------------------------------
TOTAL RETURN (B) 6.92% 2.36% 9.81% (4.74%) 13.24% 8.31% 6.64%
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.69% 1.43% 1.24% 1.17% 1.00% 0.59% 0.60%(c)
Net investment income 3.45% 3.57% 4.24% 4.22% 4.50% 5.11% 5.66%(c)
Expense
waiver/reimbursement
(d) -- 0.25% 0.44% 0.51% 0.77% 1.91% 1.05%(c)
- -----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $27,786 $31,284 $32,172 $34,580 $33,907 $4,053 $2,940
Portfolio turnover 13% 138% 21% 27% 23% 34% 35%
- -----------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.56 $10.69 $10.17 $11.24 $10.39 $10.10 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.40 0.41 0.42 0.48 0.50 0.54 0.53
Net realized and
unrealized gain (loss)
on investments 0.35 (0.13) 0.54 (0.97) 0.85 0.29 0.10
- -----------------------------------------------------------------------------------------
Total from investment
operations 0.75 0.28 0.96 (0.49) 1.35 0.83 0.63
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.40) (0.41) (0.42) (0.48) (0.50) (0.54) (0.53)
Distributions from net
realized gain
on investments -- -- (0.02) (0.10) -- -- --
- -----------------------------------------------------------------------------------------
Total distributions (0.40) (0.41) (0.44) (0.58) (0.50) (0.54) (0.53)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $10.91 $10.56 $10.69 $10.17 $11.24 $10.39 $10.10
- -----------------------------------------------------------------------------------------
TOTAL RETURN (B) 7.19% 2.61% 10.09% (4.50%) 13.37% 8.31% 6.64%
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.44% 1.18% 0.99% 0.92% 0.86% 0.59% 0.60%(c)
Net investment income 3.70% 3.82% 4.49% 4.46% 4.64% 5.11% 5.66%(c)
Expense
waiver/reimbursement
(d) -- 0.25% 0.44% 0.51% 0.77% 1.91% 1.05%(c)
- -----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $5,683 $8,889 $9,447 $11,301 $12,014 $6,004 $556
Portfolio turnover 13% 138% 21% 27% 23% 34% 35%
- -----------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

Further information and the Fund's performance is contained in the Fund's Annual
Report dated September 30, 1997, which can be obtained free of charge.
THE TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.02 0.04 0.06
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.02) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.58% 4.67% 4.98% 2.90% 2.52% 3.61% 5.90%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.98% 0.90% 0.85% 0.84% 0.70% 0.70% 0.51%(c)
Net investment income 4.49% 4.49% 4.92% 3.05% 2.47% 3.49% 5.65%(c)
Expense
waiver/reimbursement
(d) 0.01% 0.09% 0.10% 0.18% 0.20% 0.11% 0.27%(c)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $121,299 $146,161 $39,363 $21,883 $20,382 $12,960 $548
- -------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03 0.04 0.06
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03) (0.04) (0.06)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.84% 4.89% 5.24% 3.16% 2.64% 3.61% 5.90%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.73% 0.65% 0.60% 0.59% 0.58% 0.70% 0.51%(c)
Net investment income 4.74% 4.81% 5.17% 3.30% 2.60% 3.49% 5.65%(c)
Expense
waiver/reimbursement
(d) 0.01% 0.06% 0.10% 0.18% 0.20% 0.11% 0.27%(c)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $196,450 $226,978 $208,656 $304,285 $152,921 $163,451 $129,959
- -------------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.
THE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03 0.04 0.06
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03) (0.04) (0.06)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.67% 4.91% 5.11% 3.10% 2.77% 3.79% 5.92%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.97% 0.73% 0.80% 0.80% 0.64% 0.64% 0.51%(c)
Net investment income 4.57% 4.77% 5.04% 3.07% 2.68% 3.64% 5.99%(c)
Expense
waiver/reimbursement
(d) 0.02% 0.23% 0.21% 0.25% 0.30% 0.29% 0.36%(c)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $77,220 $83,525 $41,813 $15,236 $9,905 $5,803 $1
- ------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03 0.04 0.06
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03) (0.04) (0.06)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.93% 5.04% 5.36% 3.35% 2.89% 3.79% 5.92%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.72% 0.60% 0.57% 0.55% 0.50% 0.64% 0.51%(c)
Net investment income 4.81% 4.93% 5.27% 3.25% 2.83% 3.64% 5.99%(c)
Expense
waiver/reimbursement
(d) 0.02% 0.12% 0.19% 0.25% 0.30% 0.29% 0.36%(c)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $164,290 $160,675 $173,761 $132,445 $134,397 $136,616 $57,432
- ------------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.
THE TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1997 1996 1995 1994(A)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.01
- ----------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment
income (0.03) (0.03) (0.03) (0.01)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------
TOTAL RETURN (B) 2.83% 3.01% 3.53% 0.45%
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.79% 0.56% 0.39% 0.36%(c)
Net investment income 2.79% 2.95% 3.55% 2.65%(c)
Expense waiver/reimbursement (d) 0.16% 0.20% 0.56% 0.70%(c)
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $57,370 $52,499 $81,977 $21,967
- ----------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from July 27, 1994 (date of initial
public investment) to September 30, 1994.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated September 30, 1997, which can be obtained free of charge.

INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND
- -------------------------------------------------------------------------------

The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus, and in the case of The
Treasury Money Market Fund, The Money Market Fund and The Tax-Free Money Market
Fund by complying with the diversification and other requirements of Rule 2a-7
under the Investment Company Act of 1940 which regulates money market mutual
funds.

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;

. notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of
the United States;

. notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

. notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.

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 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 associations (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. 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. The
securities in which the Fund invests include, but are not limited to, the
following securities.

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 of large capitalization
companies. 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 associations (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 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 total assets in
securities subject to restrictions on resale under the Securities Act of 1933
(except for certain restricted securities which meet the criteria for liquidity
as established by the Board of Trustees). 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. 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, unless
permitted to do so by order of the SEC. 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.
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.

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 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.

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
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Board of Trustees (the "Board" or the "Trustees") is
responsible for managing the business affairs of the Trust and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.

INVESTMENT ADVISER. Investment
decisions for the Trust are made by Virtus Capital Management, Inc., the Trust's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and supervision for each Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the assets of each Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee at
annual rates equal to percentages of the relevant Fund's average net assets as
follows: The Treasury Money Market Fund, The Money Market Fund, and The
Tax-Free Money Market Fund--.50%; 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 Style Manager Fund-- 1.25%. 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. On July
18, 1997, Signet Banking Corporation entered into a definitive Agreement and
Plan of Reorganization whereby Signet Banking Corporation would be acquired by
First Union Corporation, a bank holding company headquartered in Charlotte,
North Carolina. Virtus Capital Management, Inc., which is a registered
investment adviser, manages, in addition to the Funds, three fixed income
common trust funds with $131 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.

John S. Hall has managed The U.S. Government Securities Fund since
December 1996. Mr. Hall served in a supervisory capacity for The Maryland
Municipal Bond Fund, The Virginia Municipal Bond Fund and The Tax-Free
Money Market Fund since December 1996 and has managed those Funds since
June 1997. Mr. Hall is a Chartered Financial Analyst and, is currently
Vice President and Senior Fixed Income Portfolio Manager for Virtus
Capital Management, Inc. Prior to joining Virtus Capital Management, Inc.,
Mr. Hall had been Director of Fixed Income Portfolio Management for
Hibernia National Bank, since 1993.

Tanya Orr Bird has managed The Style Manager: Large Cap Fund and The Style
Manager Fund since July 1997, having previously assisted with those
duties. Ms. Bird is a Chartered Financial Analyst and is currently Vice
President and Managing Director for Virtus Capital Management, Inc. Prior
to joining Virtus Capital Management, Inc., Ms. Bird had been in
Institutional Marketing for Signet Trust Company (October 1994-December
1994). Previously, Ms. Bird was a Consultant for William M. Mercer Asset
Planning, Inc. (June 1989-October 1994).

SUB-ADVISER TO THE STYLE MANAGER FUND: LARGE CAP AND THE STYLE MANAGER
FUND. Trend Capital Management, Inc. is the sub-adviser to The Style Manager:
Large Cap Fund and The Style Manager Fund.

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).

SUB-ADVISORY FEES. 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 BACKGROUND.
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 SEC. 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 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 and The Tax-Free Money
Market Fund, the Plan will not be activated unless and until a second class of
shares of each 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 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.

ADMINISTRATION OF THE FUNDS
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Funds with certain administrative personnel
and services necessary to operate each Fund and the separate classes. Such
services include shareholder servicing and certain legal and accounting
services. Federated Administrative Services provides these at an annual rate as
specified below: <TABLE> <CAPTION>
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS OF THE TRUST AND THE
ADMINISTRATION FEE BLANCHARD GROUP OF FUNDS
------------------ -----------------------------------
<S> <C>
.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
</TABLE>

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.

BROKERAGE TRANSACTIONS. When selecting brokers and dealers to handle the
purchase and sale of portfolio instruments, the Adviser looks for prompt
execution of the order at a favorable price. In working with dealers, the
Adviser will generally utilize those who are recognized dealers in specific
portfolio instruments, except when a better price and execution of the order can
be obtained elsewhere. In selecting among firms believed to meet these criteria,
the Adviser may give consideration to those firms which have sold or are selling
shares of the Trust. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Board of Trustees.

NET ASSET VALUE
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With respect to The Treasury Money Market Fund, The Money Market Fund, and The
Tax-Free Money Market Fund, each Fund attempts to stabilize the net asset value
of its Shares at $1.00 by valuing its portfolio securities using the amortized
cost method. The net asset value for Shares is determined by adding the interest
of the Shares in the value of all securities and other assets of the Fund,
subtracting the interest of the Shares in the liabilities of the Fund and those
attributable to Shares and dividing the remainder by the total number of Shares
outstanding. Of course, these Funds cannot guarantee that their net asset value
will always remain at $1.00 per Share. With respect to The U.S. Government
Securities Fund, The 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.

CONFIRMATIONS AND ACCOUNT STATEMENTS

Shareholders will receive
detailed confirmations of transactions (except for systematic program
transactions). 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. Share
certificates are not issued unless requested by contacting Signet Financial
Services, Inc. in writing.

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 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:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
AMOUNT OF PURCHASE SALES CHARGE
------------------ -------------------
<S> <C>
Under $100,000 2.0%
$100,000-$249,999 1.5%
$250,000-$399,999 1.0%
$400,000-$499,999 0.5%
$500,000 or more None
</TABLE>
Separate purchases will not be aggregated for purposes of determining the
applicable contingent deferred sales charge. In instances in which Fund Shares
have been acquired in exchange for Investment Shares in other Virtus Funds, (i)
the purchase price is the price of the Shares when originally purchased and (ii)
the five year period will begin on the date of the original purchase. The
contingent deferred sales charge will not be imposed on Shares acquired (i)
through the reinvestment of dividends or distribution of capital gains, (ii)
prior to October 1, 1992, or (iii) in exchange for Shares acquired prior to
October 1, 1992. In computing the contingent deferred sales charge, if any,
redemptions are deemed to have occurred in the following order: 1) Shares
acquired through the reinvestment of dividends and long-term capital gains, 2)
Shares purchased prior to October 1, 1992 (including Shares acquired in exchange
for Shares purchased prior to October 1, 1992), 3) Shares purchased more than
five years before the date of redemption, and 4) Shares purchased after October
1, 1992 and redeemed within five years of the date of purchase, determined on a
first- in, first-out basis. The contingent deferred sales charge will not be
imposed on redemption of Shares (i) following the death or disability (as
defined in the Internal Revenue Code) of a shareholder; (ii) to the extent that
the redemption represents a minimum required distribution from an IRA or other
retirement plan to a shareholder who has attained the age of 70 1/2; (iii) owned
by the Trust Division of Signet Trust Company or other affiliates of Signet
Banking Corporation representing funds which are held in a fiduciary, agency,
custodial, or similar capacity; (iv) owned by directors and employees of the
Fund, Signet Banking Corporation or Federated Securities Corp. or their
affiliates, or any bank or investment dealer who has a sales agreement with
Federated Securities Corp. with regard to the Fund, and their spouses and
children under 21; owned by non-trust customers ("customers") of fee-based
planners, investment advisers or banking institutions (collectively,
"Institutions") where such Institutions have an agreement with, and such
customers have a brokerage account with, Signet Financial Services, Inc.; (vi)
purchased through the Imprint Program sponsored by Signet Financial Services,
Inc.; (vii) if the proceeds from the redemption are used to purchase a Strive
variable annuity within 10 days of the redemption; (viii) purchased by a person
who, at the time of purchase owns shares of a Blanchard Fund; (ix) purchased in
exchange for shares of a Blanchard Fund (unless such Blanchard Fund shares were
themselves acquired in exchange for shares of a Virtus Fund which imposed a
contingent deferred sales charge); (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" agreements 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, other than retirement accounts subject to
required minimum distributions. 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 October 31, 1997,
Stephens, Inc., Little Rock, AR, for the exclusive benefit of its customers,
owned 4,204,370 (40.26%) Investment Shares of The U.S. Government Securities
Fund; 1,742,805 (34.81%) Shares of The Style Manager Fund; 1,758,994 (33.10%)
Investment Shares of The Virginia Municipal Bond Fund; 629,671 (25.07%)
Investment Shares of The Maryland Municipal Bond Fund; and 21,024,493 (27.80%)
Investment Shares of The Money Market Fund. As of October 31, 1997, Bova & Co.,
Richmond, VA, acting in various capacities for numerous accounts, owned
5,165,113 (100%) Trust Shares of The U.S. Government Securities Fund; 1,613,118
(99%) Trust Shares of The Style Manager: Large Cap Fund; 1,693,162 (33.82%)
Shares of The Style Manager Fund; 1,802,105 (99.78%) Trust Shares of The
Virginia Municipal Bond Fund; 434,681 (100%) Trust Shares of The Maryland
Municipal Bond Fund; 206,184,801 (99.92%) Trust Shares of The Treasury Money
Market Fund; 177,645,283 (96.43%) Trust Shares of The Money Market Fund; and
42,583,759 (75.60%) Shares of The Tax-Free Money Market Fund, and therefore,
may, for certain purposes, be deemed to control each 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.

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.

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 or gains from obligations issued by or on behalf
of the Commonwealth of Virginia or any political subdivision thereof; or (ii)
interest or gains 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
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
The U.S. Government Securities Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
The Style Manager: Large Cap Fund
The Style Manager Fund
The Virginia Municipal Bond
The Maryland Municipal Bond Fund
The Treasury Money Market Fund
The Money Market 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 Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- -------------------------------------------------------------------------------------------------
</TABLE>

THE VIRTUS FUNDS
INVESTMENT SHARES
COMBINED PROSPECTUS

November 30, 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 927913509 CUSIP 927913848 CUSIP 927913889 CUSIP 927913400
CUSIP 927913707 CUSIP 927913871 CUSIP 927913806
3042108A-R (11/97)

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.

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the Prospectus for
the Investment Shares ("Investment Shares") of The Virtus Funds (the "Trust"),
dated November 30, 1997. This Statement is not a prospectus itself. You may
request a copy of a prospectus or a paper copy of this Statement of Additional
Information, if you have received it electronically, free of charge by writing
to the Trust or calling toll-free 1-800-723-9512.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated November 30, 1997
[GRAPHIC OMITTED]

CUSIP 927913202 CUSIP 927913848 CUSIP 927913400 CUSIP 927913871 CUSIP
927913509 CUSIP 927913889 CUSIP 927913707 CUSIP 927913806 2102608B-R
(11/97)

<PAGE>

TABLE OF CONTENTS

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 Investments 5

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 Securities 7
Restricted and Illiquid Securities 7
Participation Interests 7
Variable Rate Municipal Securities 8
Municipal Leases 8
Temporary Investments 8
Adjustable Rate Mortgage Securities 8
Portfolio Turnover 9

INVESTMENT LIMITATIONS 9

VIRTUS FUNDS MANAGEMENT 12
Fund Ownership 16
Officers and Trustees Compensation 17
Trustee Liability 17

INVESTMENT ADVISORY SERVICES 17
Adviser to the Trust 17
Advisory Fees 18
Sub-Adviser to The Style Manager:
Large Cap Fund and The Style Manager Fund 18
Sub-Advisory Fees 18

OTHER SERVICES 18
Administrative Services 18
Custodian 19
Transfer Agent 19
Independent Auditors 19

BROKERAGE TRANSACTIONS 19

PURCHASING SHARES 20
Distribution Plan 20
Conversion to Federal Funds 20

DETERMINING NET ASSET VALUE 21
Determining Market Value of Securities21
Use of the Amortized Cost Method 21
Valuing Municipal Securities 22
Use of Amortized Cost 23

REDEEMING SHARES 23
Redemption in Kind 23

MASSACHUSETTS PARTNERSHIP LAW 23

TAX STATUS 23
The Funds' Tax Status 23
Shareholders' Tax Status 24

TOTAL RETURN 24

YIELD 25

EFFECTIVE YIELD 26

TAX-EQUIVALENT YIELD 26

PERFORMANCE COMPARISONS 29
The U.S. Government Securities Fund 30
The Style Manager: Large Cap Fund and The Style Manager Fund 31
The Virginia Municipal Bond Fund and The Maryland Municipal Bond Fund 31
The Treasury Money Market Fund 31
The Money Market Fund 31
The Tax-Free Money Market Fund 32

FINANCIAL STATEMENTS 32

APPENDIX 33

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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.

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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.

<PAGE>

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.

<PAGE>

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 associations 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.

<PAGE>

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.

<PAGE>

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.

<PAGE>

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.

<PAGE>

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 by
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.

<PAGE>

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, 1997 and 1996, the portfolio turnover rates were 80% and 118%,
respectively, for The U.S. Government Securities Fund; 56% and 151%,
respectively, for The Style Manager: Large Cap Fund; 19% and 129%, respectively,
for The Virginia Municipal Bond Fund; 13% and 138%, respectively, for The
Maryland Municipal Bond Fund; and 94% and 112%, respectively, for The Style
Manager Fund.

INVESTMENT LIMITATIONS

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Funds will not issue senior securities except that a Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its net assets, including the amount borrowed.
The Funds will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by enabling
a Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. A Fund will
not purchase any securities while any borrowings in excess of 5% of its
total assets are outstanding. With respect to The U.S. Government
Securities Fund, The 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.

<PAGE>

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.

<PAGE>

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 , unless permitted to do so by order of the SEC. 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.

PURCHASING SECURITIES TO EXERCISE CONTROL

A Fund will not purchase securities of a company for the purpose of
exercising control or management.

SELLING SHORT

With respect to The Style Manager Fund, the segregated amount will not
exceed 5% of the Fund's net assets. The dollar amount of short sales at
any one time shall not exceed 5% of the Fund's net assets 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.

<PAGE>

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,
sell securities short, or invest in restricted or illiquid securities in excess
of 5% of the value of their respective net assets in the coming fiscal year.

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, sell securities short, 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, sell securities short,
engage in when-issued 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, sell securities
short, or pledge securities in excess of 5% of the value of its net assets
during the coming fiscal year.

VIRTUS FUNDS MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with 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 or Trustee of the Funds.Mr. Donahue is the
father of J. Christopher Donahue, Executive Vice President of the Company.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934

Trustee

Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.

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; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

<PAGE>

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.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932

Trustee

Professor of Medicine, 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 or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930

President, 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
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.

<PAGE>

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942

Trustee

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

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925

Trustee

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935

Trustee

Public relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

<PAGE>

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 Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Chairman and Trustee of the Company.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938

Executive Vice President and Secretary

Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some 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 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.

@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board between meetings
of the Board.

<PAGE>

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated Government
Money Trust; 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; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; and World Investment Series, Inc. FUND
OWNERSHIP

Officers and Trustees own less than 1% of the outstanding shares of each Fund.

As of October 31, 1997, the following shareholders of record owned 5% or more of
the outstanding shares of the Funds: Stephens Inc., Little Rock, AR, for the
exclusive benefit of their customers owned approximately 4,204,370 (40.26%) of
the Investment Shares of U.S. Government Securities Fund; 1,208,630 (24.63%) of
the Investment Shares of The Style Manager: Large Cap Fund; 1,742,805 (34.81%)
of the Shares of The Style Manager Fund; 1,758,994 (33.10%) of the Investment
Shares of The Virginia Municipal Bond Fund; 629,671 (25.07%) of the Investment
Shares of The Maryland Municipal Bond Fund; 18,064,663 (15.34%) of the
Investment Shares of Treasury Money Market Fund; 21,024,493 (27.80%) of the
Investment Shares of Money Market Fund; and 3,716,118 (6.60%) of the Shares of
The Tax-Free Money Market Fund. As of October 31, 1997, Bova & Co., Richmond,
VA, acting in various capacities for numerous accounts, owned approximately
5,165,113 (100%) of the Trust Shares of The U.S. Government Securities Fund;
1,613,118 (99%) of the Trust Shares of The Style Manager: Large Cap Fund;
1,693,162 (33.82%) of the Shares of The Style Manager Fund; 1,802,105 (99.78%)
of the Trust Shares of The Virginia Municipal Bond Fund; 434,681 (100%) of the
Trust Shares of The Maryland Municipal Bond Fund; 206,814,801 (99.92%) of the
Trust Shares of Treasury Money Market Fund; 177,645,283 (96.43%) of the Trust
Shares of The Money Market Fund; and 42,583,759 (75.60%) of the Shares of The
Tax-Free Money Market Fund.

<PAGE>

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, $0 $-0- for the Trust and
Chairman and Trustee 2 investment companies
Thomas G. Bigley $2,001 $3,217 for the Trust and
Trustee 2 investment companies
John T. Conroy, Jr., $2,198 $3,538 for the Trust and
Trustee 2 investment companies
William J. Copeland, $2,198 $3,538 for the Trust and
Trustee 2 investment companies
James E. Dowd $2,198 $3,538 for the Trust and
Trustee 2 investment companies
Lawrence D. Ellis, M.D., $2,001 $3,217 for the Trust and
Trustee 2 investment companies
Edward L. Flaherty, Jr., $2,198 $3,538 for the Trust and
Trustee 2 investment companies
Edward C. Gonzales, $0 $-0- for the Trust and
President, Treasurer and Trustee 2 investment companies
Peter E. Madden, $2,001 $3,217 for the Trust and
Trustee 2 investment companies
Wesley W. Posvar, $2,001 $3,217 for the Trust and
Trustee 2 investment companies
Marjorie P. Smuts, $2,001 $3,217 for the Trust and
Trustee 2 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., 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.

<PAGE>

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, 1997, 1996, and 1995, the adviser earned fees from: The U.S.
Government Securities Fund of $1,325,841, $1,612,364, and $1,581,364,
respectively, of which $37,709, $276,121, and $589,885, respectively, were
voluntarily waived; The Style Manager: Large Cap Fund of $749,609, $704,007, and
$678,512, respectively, of which $0, $0, and $189,983, respectively, were
voluntarily waived; The Virginia Municipal Bond Fund of $650,276, $762,051, and
$775,247, respectively, of which $0, $20,993, and $227,301, respectively, were
voluntarily waived; The Maryland Municipal Bond Fund of $273,851, $315,941, and
$316,194, respectively, of which $0, $106,102, and $187,476, respectively, were
voluntarily waived; The Treasury Money Market Fund of $1,897,464, $1,721,497,
and $2,347,424, respectively, of which $46,840, $209,248, and $469,485,
respectively, were voluntarily waived; The Money Market Fund of $1,250,019,
$1,249,811, and $868,490, respectively, of which $57,472, $299,129, and
$336,697, respectively, were voluntarily waived; and The Tax Free Money Market
Fund of $302,027, $462,900 and $262,792, respectively, of which $94,455,
$184,473, and $262,792, respectively, were voluntarily waived. During the fiscal
years ended September 30, 1997, 1996 and for the period from March 7, 1995 (date
of initial public investment) to September 30, 1996, the adviser earned fees
from The Style Manager Fund of $830,673, $657,611 and $374,393, respectively, of
which $326,846, $290,966 and $374,393, respectively, were voluntarily waived.

SUB-ADVISER TO THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER FUND

Trend Capital Management, Inc. is the sub-adviser to The Style Manager:
Large Cap Fund and The Style Manager Fund.

SUB-ADVISORY FEES

For its sub-advisory services, the Sub-Adviser receives an annual sub-advisory
fee as described in the prospectus. For the fiscal years ended September 30,
1997, 1996, and 1995, the sub-adviser earned fees from The Style Manager; Large
Cap Fund of $144,886, $0, and $0, respectively, of which $0, $0, and $0,
respectively, were voluntarily waived. For the fiscal years ended September 30,
1997, 1996, and for the period from March 7, 1995 (date of initial public
investment) to September 30, 1995, the sub-adviser earned fees from The Style
Manager Fund of $74,119, $0, and $0, respectively, of which $0, $0, and $0,
respectively, were voluntarily waived.

OTHER SERVICES

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, 1997, 1996,
and 1995, the Funds incurred administrative services fees as follows: The U.S.
Government Securities Fund incurred $172,113, $211,649, and $226,246,
respectively, none of which was voluntarily waived; The Style Manager: Large Cap
Fund incurred $97,360, $92,298, and $97,229, respectively, none of which was
voluntarily waived; The Virginia Municipal Bond Fund incurred $84,421, $100,059,
and $110,908, respectively, none of which was voluntarily waived; The Maryland
Municipal Bond Fund incurred $75,000, $67,667, and $45,246, respectively, none
of which was voluntarily waived; The Treasury Money Market Fund incurred
$369,581, $336,951, and $500,283, respectively, none of which was voluntarily
waived; The Money Market Fund incurred $243,450, $254,134, and $185,586,
respectively, none of which was voluntarily waived; and The Tax-Free Money
Market Fund incurred $75,171, $95,363, and $58,355, respectively, none of which
was voluntarily waived. For the fiscal years ended September 30, 1997, 1996 and
for the period from March 7, 1995 (date of initial public investment) to
September 30, 1995, The Style Manager Fund incurred $75,125, $93,863 and
$85,069, respectively, in administrative services fees, none of which was
voluntarily waived.

<PAGE>

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

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.

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 years ended September 30, 1997, 1996 and 1995, The Style Manager:
Large Cap Fund paid $140,842, $403,888 and $562,493, respectively, in
commissions on brokerage transactions. For the fiscal years ended September 30,
1997, 1996 and for the period from March 7, 1995 (date of initial public
investment) to September 30, 1995, The Style Manager Fund paid $215,622,
$311,323, and $0, respectively, in commissions on brokerage transactions.

<PAGE>

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 Investment Shares of the 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 and The
Money Market Fund and Shares of The Style Manager Fund and The Tax-Free Money
Market Fund 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, 1997, 1996, and 1995, the Funds paid
fees to brokers and administrators (financial institutions) pursuant to the Plan
as follows: The U.S. Government Securities Fund $279,386, $297,511, and
$268,621, respectively; The Style Manager: Large Cap Fund $175,775, $128,090,
and $80,046, respectively; The Virginia Municipal Bond Fund, $158,225, $174,114,
and $174,523, respectively; The Maryland Municipal Bond Fund, $73,620, $82,278,
and $80,136, respectively; The Treasury Money Market Fund, $331,053, $270,001,
and $80,097, respectively; and The Money Market Fund, $206,038, $198,913, and
$79,316, respectively. For the fiscal years ended September 30, 1997, 1996 and
1995, the Tax-Free Money Market Fund paid no fees pursuant to the Plan. For the
fiscal years ended September 30, 1997, 1996 and for the period from March 7,
1995 (date of initial public investment) to September 30, 1995, The Style
Manager 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.

<PAGE>

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.

<PAGE>

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 .50%
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.

<PAGE>

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.

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.

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 invest in securities within certain statutory limits; and

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

<PAGE>

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 returns for Investment Shares and Trust Shares of The
U.S. Government Securities Fund for the one-year and five-year periods ended
September 30, 1997 and for the period from October 16, 1990 (date of initial
public investment) to September 30, 1997 were 4.75%, 4.70%, 7.10% and 7.16%,
4.93%, 7.27%, respectively.

The average annual total returns for Investment Shares and Trust Shares of The
Style Manager: Large Cap Fund for the one-year and five-year periods ended
September 30, 1997 and for the period from October 16, 1990 (date of initial
public investment) to September 30, 1997 were 37.02%, 13.84%, 14.03% and 37.37%,
14.09%, 14.21%, respectively.

The average annual total returns for The Style Manager Fund for the one-year
period ended September 30, 1997 and for the period from March 7, 1995 (date of
initial public investment) to September 30, 1997 were 41.85% and 28.04%,
respectively.

The average annual total returns for Investment Shares and Trust Shares of The
Virginia Municipal Bond Fund for the one-year and five-year periods ended
September 30, 1997 and for the period from October 16, 1990 (date of initial
public investment) to September 30, 1997 were 7.74%, 5.73%, 6.45% and 8.00%,
5.96%, 6.62%, respectively.

The average annual total returns for Investment Shares and Trust Shares of The
Maryland Municipal Bond Fund for the one-year and five-year periods ended
September 30, 1997 and for the period from October 16, 1990 (date of initial
public investment) to September 30, 1997 were 6.92%, 5.33%, 6.01% and 7.19%,
5.56%, 6.18%, respectively.

<PAGE>

The average annual total returns for Investment Shares and Trust Shares of The
Treasury Money Market Fund for the one-year and five-year periods ended
September 30, 1997 and for the period from October 16, 1990 (date of initial
public investment) to September 30, 1997 were 4.58%, 3.93%, 4.18% and 4.84%,
4.15%, 4.34%, respectively.

The average annual total returns for Investment Shares and Trust Shares of The
Money Market Fund for the one-year and five-year periods ended September 30,
1997 and for the period from October 16, 1990 (date of initial public
investment) to September 30, 1997 were 4.67%, 4.11%, 4.36% and 4.93%, 4.31%,
4.50%, respectively.

The average annual total returns for The Tax-Free Money Market Fund for the
one-year period ended September 30, 1997 and for the period from July 27, 1994
(date of initial public investment) to September 30, 1997 were 2.83% and 3.09%,
respectively.

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 if 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, 1997 for The Treasury
Money Market Fund and The Money Market Fund were 4.54% and 4.59%, respectively,
for Investment Shares and 4.79% and 4.84%, respectively, for Trust Shares. The
yield for the seven-day period ended September 30, 1997 for The Tax-Free Money
Market Fund was 3.06%.

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, 1997 was 5.27%, 0.36%, 3.72% and 3.10%
for Investment Shares and 5.52%, 0.61%, 3.97% and 3.35% for Trust Shares. The
yield for the thirty-day period ended September 30, 1997 for The Style Manager
Fund was 0.23%.

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.

<PAGE>

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 yields for the seven-day period ended September 30, 1997 for The
Treasury Money Market Fund and The Money Market Fund were 4.64% and 4.70%,
respectively, for Investment Shares and 4.90% and 4.96%, respectively, for Trust
Shares. The effective yield for the period ended September 30, 1997 for The
Tax-Free Money Market Fund was 3.11%.

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, 1997, was 5.17% for The Virginia Municipal Bond Fund and
4.31% for The Maryland Municipal Bond Fund. The tax-equivalent yield for the
Trust Shares was 5.51% for The Virginia Municipal Bond Fund and 4.65% for The
Maryland Municipal Bond Fund for the same period. The tax-equivalent yield for
The Tax-Free Money Market Fund for the seven-day period ended September 30,
1997, was 4.25%.

<PAGE>

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 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:

15.00% 28.00% 31.00% 36.00% 39.60%

JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050

SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050

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.

<PAGE>

TAXABLE YIELD EQUIVALENT FOR 1997

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

JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050

SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050

Tax-Exempt
Yield Taxable Yield Equivalent

1.50% 1.89% 2.26% 2.37% 2.58% 2.74%
2.00% 2.52% 3.02% 3.16% 3.43% 3.66%
2.50% 3.15% 3.77% 3.95% 4.29% 4.57%
3.00% 3.79% 4.53% 4.74% 5.15% 5.49%
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%

<PAGE>

TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF MARYLAND
INCLUDING LOCAL INCOME TAX
COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
22.50% 35.50% 38.50% 43.50% 47.10%

JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN: 41,200 99,600 151,750 271,050 $271,050

SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN: 24,650 59,750 124,650 271,050 $271,050

TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT

2.00% 2.58% 3.10% 3.25% 3.54% 3.78%
2.50% 3.23% 3.88% 4.07% 4.42% 4.73%
3.00% 3.87% 4.65% 4.88% 5.31% 5.67%
3.50% 4.52% 5.43% 5.69% 6.19% 6.62%
4.00% 5.16% 6.20% 6.50% 7.08% 7.56%
4.50% 5.81% 6.98% 7.32% 7.96% 8.51%
5.00% 6.45% 7.75% 8.13% 8.85% 9.45%
5.50% 7.10% 8.53% 8.94% 9.73% 10.40%
6.00% 7.74% 9.30% 9.76% 10.62% 11.34%
6.50% 8.39% 10.08% 10.57% 11.50% 12.29%

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 LOCAL INCOME TAX RATE IS ASSUMED TO BE
50% OF THE STATE RATE FOR ALL COUNTIES EXCLUDING ALLEGANY, BALITMORE,
MONTGOMERY, PRINCE GEORGE'S, QUEEN ANNE'S, ST. MARY'S, SOMERSET, TALBOT,
WICOMICO, AND WORCESTER.

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.

<PAGE>

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 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 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.

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.

<PAGE>

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 public utility companies, compares total returns of funds
whose portfolios are invested 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.

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.

<PAGE>

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.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Trust may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by the Trust's portfolio managers and their views and analysis on
how such developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion t the more than 6,000 funds available.

FINANCIAL STATEMENTS

The financial statements for the fiscal period ended September 30, 1997, are
incorporated herein by reference from the Funds' Annual Report dated September
30, 1997. 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.

<PAGE>

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.

<PAGE>

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.

TRUST SHARES
COMBINED PROSPECTUS

November 30, 1997

. The U.S. Government Securities Funds
. 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]VIRTUS
CAPITAL MANAGEMENT, INC.
Investment products are not deposits, obligations of, or guaranteed by any
bank. They are not insured by the FDIC. In addition, they involve risk,
including the possible loss of principal invested.
Virtus Capital Management, Inc., an affiiate of Signet Trust Company, is
the investment adviser to the Virtus Funds and is compensated for this service.
[LOGO] VIRTUS
FUNDS

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 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 November 30, 1997, with the
Securities and Exchange Commission ("SEC"). 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. This Statement of Additional Information, Material incorporated
by reference into this document, and other information regarding the Trust is
maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

The Board of Trustees of the Trust has approved an Agreement and Plan of
Reorganization, on behalf of each Fund, pursuant to which, on or about February
27, 1998, all of the assets, and certain liabilities of each Fund would be
acquired in exchange for shares of certain similarly managed funds (the
"Acquiring Funds") that are advised by affiliates of First Union Corporation.
The reorganizations would result in the liquidation and termination of each
Fund. Pursuant to the reorganizations, holders of Shares of each Fund would
receive, tax-free, that number of shares of an Acquiring Fund having a value
equal to the value of such shareholders' Shares immediately prior to the
reorganizations. Consummation of the reorganizations is subject to approval of
the shareholders of the Funds at a meeting scheduled to be held on February 20,
1998.

Prospectus dated November 30, 1997

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SYNOPSIS 1
- -------------------------------------
Special Considerations 1
SUMMARY OF FUND EXPENSES 2
- -------------------------------------
FINANCIAL HIGHLIGHTS 3
- -------------------------------------
INVESTMENT OBJECTIVE AND POLICIES OF
EACH FUND 11
- -------------------------------------
The U.S. Government Securities
Fund 11
The Style Manager: Large Cap Fund 12
The Style Manager Fund 13
The Virginia Municipal Bond Fund
and The Maryland Municipal Bond
Fund 14
The Treasury Money Market Fund 14
The Money Market Fund 15
The Tax-Free Money Market Fund 15
Investment Limitations 16
PORTFOLIO INVESTMENTS AND
STRATEGIES 16
- -------------------------------------
Regulatory Compliance 16
Borrowing Money 16
Selling Short 17
Restricted and Illiquid
Securities 17
When-Issued and Delayed Delivery
Transactions 17
Investing in Securities of Other
Investment Companies 17
Diversification 17
Non-Diversification 18
Repurchase Agreements 18
Lending of Portfolio Securities 18
Acquiring Securities 18
Investment Risks 18
Variable Rate Demand Notes 19
Credit Enhancement 19
Demand Features 19
Participation Interests 19
Variable Rate Municipal
Securities 20
Municipal Leases 20
Temporary Investments 20
Municipal Securities 20
THE VIRTUS FUNDS INFORMATION 23
- -------------------------------------
Management of the Trust 23
Distribution of Shares of the
Funds 24
Administration of the Funds 25
NET ASSET VALUE 25
- -------------------------------------
INVESTING IN SHARES 26
- -------------------------------------
Share Purchases 26
Minimum Investment Required 26
What Shares Cost 26
Confirmations and Account
Statements 27
Dividends 27
Capital Gains 27
REDEEMING SHARES 27
- -------------------------------------
SHAREHOLDER INFORMATION 28
- -------------------------------------
Voting Rights 28
EFFECT OF BANKING LAWS 29
- -------------------------------------
TAX INFORMATION 29
- -------------------------------------
Federal Income Tax 29
PERFORMANCE INFORMATION 30
- -------------------------------------
OTHER CLASSES OF SHARES 31
- -------------------------------------
ADDRESSES 32
- -------------------------------------

SYNOPSIS
- -------------------------------------------------------------------------------

The Trust, an open-end, management investment company, was established as a
Massachusetts business trust under a Declaration of Trust dated June 20, 1990.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the 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 "The Style Manager") of The Tax-Free Money Market Fund and The Style
Manager Fund (Trust Shares, Tax-Free Money Market Shares and The Style Manager
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."

SUMMARY OF FUND EXPENSES--TRUST SHARES, STYLE
MANAGER SHARES AND TAX-FREE MONEY MARKET SHARES
- -------------------------------------------------------------------------------

The following Fee Table and Example summarize the various costs and expenses
that a shareholder of Trust Shares, Style Manager Shares and Tax-Free Money
Market Shares will bear either directly or indirectly.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
THE THE
THE THE
THE U.S. THE STYLE THE VIRGINIA MARYLAND TREASURY
THE TAX-FREE
GOVERNMENT MANAGER: STYLE MUNICIPAL MUNICIPAL MONEY
MONEY MONEY
SECURITIES LARGE CAP MANAGER BOND BOND MARKET
MARKET MARKET
FUND FUND FUND FUND FUND FUND
FUND FUND
---------- --------- ------- --------- --------- --------
- ------ --------
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Contingent Deferred
Sales Charge (as a
percentage of amount
redeemed, if
applicable)........... None None 2.00% None None None
None None
</TABLE>

ANNUAL TRUST SHARES, STYLE MANAGER SHARES AND TAX-FREE MONEY MARKET SHARES
OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12B-1 OTHER OPERATING
FEES (1) FEES (2) EXPENSES EXPENSES (3)
---------- -------- -------- ------------
<S> <C> <C> <C> <C>
The U.S. Government Securities Fund... 0.75% None 0.45% 1.20%
The Style Manager: Large Cap Fund..... 0.75% None 0.59% 1.34%
The Style Manager Fund................ 0.75% 0.00% 0.56% 1.31%
The Virginia Municipal Bond Fund...... 0.75% None 0.48% 1.23%
The Maryland Municipal Bond Fund...... 0.75% None 1.17% 1.92%
The Treasury Money Market Fund........ 0.50% None 0.28% 0.78%
The Money Market Fund................. 0.50% None 0.29% 0.79%
The Tax-Free Money Market Fund........ 0.36% 0.00% 0.46% 0.82%
</TABLE>
(1) The management fees for The Style Manager Fund and The Tax-Free Money Market
Fund have been reduced to reflect voluntary waivers by the investment
adviser. The Adviser can terminate these voluntary waivers at any time at
their sole discretion. The maximum management fee for The Style Manager Fund
and The Tax-Free Money Market Fund is 1.25% and 0.50%, respectively.
(2) The Style Manager Fund and The Tax-Free Money Market Fund will not accrue or
pay 12b-1 fees until a separate class of shares has been created for certain
institutional investors. The Style Manager Fund and The Tax-Free Money
Market Fund can pay up to 0.25% as a 12b-1 fee to the distributor. See
"Management of the Trust--Distribution Plans."
(3) The Total Trust Shares Operating Expenses for The Style Manager Fund and The
Tax-Free Money Market Fund would be 1.81% and 0.96%, respectively, absent
the voluntary waivers described in note 1 above.

The Annual Trust Operating Expenses for 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 were 1.00%, 1.24%, 1.17%,
1.11%, 1.44%, 0.73%, 0.72%, and 0.79%, respectively, for the fiscal year ended
September 30, 1997. The Annual Trust Operating Expenses in the table above are
based on estimated expenses expected during fiscal year ending September 30,
1998.

EXAMPLE:

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period. The Funds
charge no contingent deferred sales charges for Trust Shares or Tax-Free Money
Market Shares.

<TABLE>
<CAPTION>
1 YEAR 1 YEAR (+) 3 YEARS 3 YEARS (+) 5 YEARS 10 YEARS
------ ---------- ------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
The U.S. Government
Securities Fund......... $12 $12 $38 $38 $66 $145
The Style Manager: Large
Cap Fund................ $14 $14 $42 $42 $73 $161
The Style Manager Fund.. $34 $13 $64 $42 $72 $158
The Virginia Municipal
Bond Fund............... $13 $13 $39 $39 $68 $149
The Maryland Municipal
Bond Fund............... $20 $20 $60 $60 $104 $224
The Treasury Money
Market Fund............. $8 $8 $25 $25 $43 $97
The Money Market Fund... $8 $8 $25 $25 $44 $98
The Tax-Free Money
Market Fund............. $8 $8 $26 $26 $46 $101
</TABLE>
+Reflects expenses on the same investment, assuming no redemption.

The purpose of the foregoing Example is to assist an investor in understanding
the various costs and expenses that a shareholder of Trust Shares, Style Manager
Shares and Tax-Free Money Market Shares will bear, either directly or
indirectly. For a more complete description of the various costs and expenses,
see "The Virtus Funds Information" and "Investing in Shares." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

THE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated November 7, 1997, on the Fund's
financial statements for the year ended September 30, 1997, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- ----------------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993
1992 1991(A)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.89 $10.13 $ 9.83 $10.90 $10.95
$10.54 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.60 0.62 0.64 0.61 0.66
0.75 0.78
Net realized and
unrealized gain (loss)
on investments 0.06 (0.24) 0.30 (0.94) 0.03
0.50 0.54
- ----------------------------------------------------------------------------------------------------
Total from investment
operations 0.66 0.38 0.94 (0.33) 0.69
1.25 1.32
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.60) (0.62) (0.64) (0.61) (0.66)(e)
(0.75) (0.78)
Distributions from net
realized gain on
investments -- -- -- -- (0.08)
(0.09) --
Distributions in excess
of net realized gain on
investments (e) -- -- -- (0.13) --
- -- --
- ----------------------------------------------------------------------------------------------------
Total distributions (0.60) (0.62) (0.64) (0.74) (0.74)
(0.84) (0.78)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.95 $ 9.89 $10.13 $ 9.83 $10.90
$10.95 $10.54
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 6.89% 3.79% 9.84% (3.36)% 6.82%
12.42% 14.00%
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.25% 1.14% 1.01% 0.99% 0.77%
0.52% 0.64%(c)
Net investment income 6.07% 6.11% 6.41% 5.94% 5.91%
7.01% 8.03%(c)
Expense
waiver/reimbursement
(d) 0.02% 0.13% 0.28% 0.32% 0.43%
0.65% 0.93%(c)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $105,248 $116,418 $114,803 $112,439 $119,187
$40,274 $10
Portfolio turnover 80% 118% 82% 227% 154%
201% 101%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- ----------------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993
1992 1991(A)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.89 $10.13 $ 9.83 $10.90 $10.95
$10.54 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.63 0.64 0.66 0.63 0.67
0.75 0.78
Net realized and
unrealized gain
(loss) on investments 0.06 (0.24) 0.30 (0.94) 0.03
0.50 0.54
- ----------------------------------------------------------------------------------------------------
Total from investment
operations 0.69 0.40 0.96 (0.31) 0.70
1.25 1.32
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.63) (0.64) (0.66) (0.63) (0.67)(e)
(0.75) (0.78)
Distributions from net
realized
gain on investments -- -- -- -- (0.08)
(0.09) --
Distributions in excess
of net
realized gain on
investments (e) -- -- -- (0.13) --
- -- --
- ----------------------------------------------------------------------------------------------------
Total distributions (0.63) (0.64) (0.66) (0.76) (0.75)
(0.84) (0.78)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.95 $ 9.89 $10.13 $ 9.83 $10.90
$10.95 $10.54
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 7.16% 4.05% 10.11% (3.12)% 6.94%
12.42% 14.00%
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.00% 0.89% 0.76% 0.74% 0.63%
0.52% 0.64%(c)
Net investment income 6.32% 6.36% 6.66% 6.19% 6.17%
7.01% 8.03%(c)
Expense
waiver/reimbursement
(d) 0.02% 0.13% 0.28% 0.32% 0.43%
0.65% 0.93%(c)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $52,177 $78,998 $101,410 $107,103 $112,334
$95,610 $27,565
Portfolio turnover 80% 118% 82% 227% 154%
201% 101%
- ----------------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE STYLE MANAGER: LARGE CAP FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- --------------------------------------------------------------
INVESTMENT SHARES 1997(E) 1996 1995(E) 1994 1993 1992
1991(A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $13.68 $13.70 $11.80 $12.39 $12.02 $11.86
$10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.13 0.27 0.09 0.17 0.24 0.26
0.32
Net realized and
unrealized gain (loss)
on investments 4.47 1.18 2.20 (0.39) 0.54 0.46
1.85
- --------------------------------------------------------------------------------------------
Total from investment
operations 4.60 1.45 2.29 (0.22) 0.78 0.72
2.17
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.14) (0.27) (0.09) (0.17) (0.25) (0.25)
(0.31)
Distributions from net
realized gain on
investments (1.83) (1.20) (0.30) (0.20) (0.16) (0.31) --
- --------------------------------------------------------------------------------------------
Total distributions (1.97) (1.47) (0.39) (0.37) (0.41) (0.56)
(0.31)
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $16.31 $13.68 $13.70 $11.80 $12.39 $12.02
$11.86
- --------------------------------------------------------------------------------------------
TOTAL RETURN (B) 37.02% 11.28% 20.02% (1.72%) 6.31% 6.31%
22.68%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.49% 1.36% 1.21% 1.20% 0.87% 0.95%
0.80%(c)
Net investment income 0.88% 2.01% 0.67% 1.40% 1.81% 2.25%
3.05%(c)
Expense
waiver/reimbursement
(d) -- -- 0.21% 0.23% 0.55% 0.34%
0.38%(c)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $80,073 $59,891 $44,509 $26,739 $18,691 $2,290
$488
Average commission rate
paid (f) $0.0783 $0.0616 -- -- -- -- --
Portfolio turnover 56% 151% 208% 205% 67% 38%
84%
- --------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- --------------------------------------------------------------
TRUST SHARES 1997(E) 1996 1995(E) 1994 1993 1992
1991(A)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $13.68 $13.70 $11.80 $12.39 $12.02 $11.86
$10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.18 0.33 0.12 0.20 0.28 0.26
0.32
Net realized and
unrealized gain (loss)
on investments 4.46 1.15 2.20 (0.40) 0.51 0.46
1.85
- --------------------------------------------------------------------------------------------
Total from investment
operations 4.64 1.48 2.32 (0.20) 0.79 0.72
2.17
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.18) (0.30) (0.12) (0.19) (0.26) (0.25)
(0.31)
Distributions from net
realized gain on
investments (1.83) (1.20) (0.30) (0.20) (0.16) (0.31) --
- --------------------------------------------------------------------------------------------
Total distributions (2.01) (1.50) (0.42) (0.39) (0.42) (0.56)
(0.31)
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $16.31 $13.68 $13.70 $11.80 $12.39 $12.02
$11.86
- --------------------------------------------------------------------------------------------
TOTAL RETURN (B) 37.37% 11.55% 20.33% (1.50%) 6.42% 6.31%
22.68%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.24% 1.11% 0.96% 0.95% 0.66% 0.95%
0.80%(c)
Net investment income 1.17% 2.26% 0.92% 1.68% 2.09% 2.25%
3.05%(c)
Expense
waiver/reimbursement
(d) -- -- 0.21% 0.23% 0.55% 0.34%
0.38%(c)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $26,611 $33,683 $45,345 $70,374 $65,841 $49,581
$37,032
Average commission rate
paid (f) $0.0783 $0.0616 -- -- -- -- --
Portfolio turnover 56% 151% 208% 205% 67% 38%
84%
- --------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE STYLE MANAGER FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------------
1997 1996 1995(A)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.47 $12.03 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.23 0.31 0.03
Net realized and unrealized gain (loss) on
investments 4.54 0.77 2.03
- ------------------------------------------------------------------------
Total from investment operations 4.77 1.08 2.06
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.24) (0.29) (0.03)
Distributions from net realized gain on
investments (0.63) (1.35) --
- ------------------------------------------------------------------------
Total distributions (0.87) (1.64) (0.03)
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.37 $11.47 $12.03
- ------------------------------------------------------------------------
TOTAL RETURN (B) 44.01% 10.19% 20.59%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.17% 0.99% 0.44%*
Net investment income 1.76% 2.63% 0.46%*
Expense waiver/reimbursement (c) 0.50% 0.44% 1.03%*
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $76,874 $62,783 $78,388
Average commission rate paid (d) $0.0789 $0.0514 --
Portfolio turnover 94% 112% 92%
- ------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from March 7, 1995 (date of initial
public investment) to September 30, 1995.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE VIRGINIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- ----------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992
1991(A)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.68 $10.81 $10.26 $11.26 $10.46 $10.18
$10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.42 0.41 0.45 0.45 0.51 0.54
0.57
Net realized and
unrealized gain (loss)
on investments 0.39 (0.13) 0.55 (0.92) 0.89 0.29
0.18
- ---------------------------------------------------------------------------------------------
Total from investment
operations 0.81 0.28 1.00 (0.47) 1.40 0.83
0.75
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.42) (0.41) (0.45) (0.45)(g) (0.51) (0.54)
(0.57)
Distributions from net
realized gain on
investments -- -- -- (0.06) (0.09) (0.01)
- --
Distributions in excess
of net realized gain
on investments (b) -- -- -- (0.02) -- --
- --
- ---------------------------------------------------------------------------------------------
Total distributions (0.42) (0.41) (0.45) (0.53) (0.60) (0.55)
(0.57)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $11.07 $10.68 $10.81 $10.26 $11.26 $10.46
$10.18
- ---------------------------------------------------------------------------------------------
TOTAL RETURN (D) 7.74% 2.60% 10.00% (4.25)% 13.49% 8.51%
7.64%
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.36% 1.32% 1.17% 1.15% 0.90% 0.83%
0.47%(c)
Net investment income 3.87% 3.78% 4.32% 4.22% 4.68% 5.14%
6.08%(c)
Expense
waiver/reimbursement
(e) -- 0.02% 0.22% 0.27% 0.50% 0.86%
1.70%(c)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $58,881 $65,700 $70,572 $74,706 $63,492 $20,883
$6,031
Portfolio turnover 19% 129% 26% 29% 17% 51%
27%
- ---------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- ----------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992
1991(A)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.68 $10.81 $10.26 $11.26 $10.46 $10.18
$10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.45 0.44 0.48 0.48 0.53 0.54
0.57
Net realized and
unrealized gain (loss)
on investments 0.39 (0.13) 0.55 (0.92) 0.89 0.29
0.18
- ---------------------------------------------------------------------------------------------
Total from investment
operations 0.84 0.31 1.03 (0.44) 1.42 0.83
0.75
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.45) (0.44) (0.48) (0.48)(f) (0.53) (0.54)
(0.57)
Distributions from net
realized gain on
investments -- -- -- (0.06) (0.09) (0.01)
- --
Distributions in excess
of net realized gain
on investments (b) -- -- -- (0.02) -- --
- --
- ---------------------------------------------------------------------------------------------
Total distributions (0.45) (0.44) (0.48) (0.56) (0.62) (0.55)
(0.57)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $11.07 $10.68 $10.81 $10.26 $11.26 $10.46
$10.18
- ---------------------------------------------------------------------------------------------
TOTAL RETURN (D) 8.00% 2.86% 10.27% (4.01%) 13.62% 8.51%
7.64%
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.11% 1.06% 0.92% 0.90% 0.75% 0.83%
0.47%(c)
Net investment income 4.12% 4.03% 4.57% 4.47% 4.85% 5.14%
6.08%(c)
Expense
waiver/reimbursement
(e) -- 0.02% 0.22% 0.27% 0.50% 0.86%
1.70%(c)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $19,891 $28,110 $33,670 $34,165 $41,204 $20,852
$8,546
Portfolio turnover 19% 129% 26% 29% 17% 51%
27%
- ---------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

(f) Amount includes distributions to shareholders in excess of net investment
income of $0.0002 per share.

(g) Amount includes distributions to shareholders in excess of net investment
income of $0.0001 per share.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE MARYLAND MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.56 $10.69 $10.17 $11.24 $10.39 $10.10 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.37 0.38 0.40 0.45 0.49 0.54 0.53
Net realized and
unrealized gain (loss)
on investments 0.35 (0.13) 0.54 (0.97) 0.85 0.29 0.10
- -----------------------------------------------------------------------------------------
Total from investment
operations 0.72 0.25 0.94 (0.52) 1.34 0.83 0.63
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.37) (0.38) (0.40) (0.45) (0.49) (0.54) (0.53)
Distributions from net
realized gain
on investments -- -- (0.02) (0.10) -- -- --
- -----------------------------------------------------------------------------------------
Total distributions (0.37) (0.38) (0.42) (0.55) (0.49) (0.54) (0.53)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $10.91 $10.56 $10.69 $10.17 $11.24 $10.39 $10.10
- -----------------------------------------------------------------------------------------
TOTAL RETURN (B) 6.92% 2.36% 9.81% (4.74%) 13.24% 8.31% 6.64%
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.69% 1.43% 1.24% 1.17% 1.00% 0.59%
0.60%(c)
Net investment income 3.45% 3.57% 4.24% 4.22% 4.50% 5.11%
5.66%(c)
Expense
waiver/reimbursement
(d) -- 0.25% 0.44% 0.51% 0.77% 1.91%
1.05%(c)
- -----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $27,786 $31,284 $32,172 $34,580 $33,907 $4,053 $2,940
Portfolio turnover 13% 138% 21% 27% 23% 34% 35%
- -----------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992 1991(A)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.56 $10.69 $10.17 $11.24 $10.39 $10.10 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.40 0.41 0.42 0.48 0.50 0.54 0.53
Net realized and
unrealized gain (loss)
on investments 0.35 (0.13) 0.54 (0.97) 0.85 0.29 0.10
- -----------------------------------------------------------------------------------------
Total from investment
operations 0.75 0.28 0.96 (0.49) 1.35 0.83 0.63
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.40) (0.41) (0.42) (0.48) (0.50) (0.54) (0.53)
Distributions from net
realized gain
on investments -- -- (0.02) (0.10) -- -- --
- -----------------------------------------------------------------------------------------
Total distributions (0.40) (0.41) (0.44) (0.58) (0.50) (0.54) (0.53)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $10.91 $10.56 $10.69 $10.17 $11.24 $10.39 $10.10
- -----------------------------------------------------------------------------------------
TOTAL RETURN (B) 7.19% 2.61% 10.09% (4.50%) 13.37% 8.31% 6.64%
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.44% 1.18% 0.99% 0.92% 0.86% 0.59%
0.60%(c)
Net investment income 3.70% 3.82% 4.49% 4.46% 4.64% 5.11%
5.66%(c)
Expense
waiver/reimbursement
(d) -- 0.25% 0.44% 0.51% 0.77% 1.91%
1.05%(c)
- -----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $5,683 $8,889 $9,447 $11,301 $12,014 $6,004 $556
Portfolio turnover 13% 138% 21% 27% 23% 34% 35%
- -----------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- --------------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992
1991(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.02
0.04 0.06
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.02)
(0.04) (0.06)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.58% 4.67% 4.98% 2.90% 2.52%
3.61% 5.90%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.98% 0.90% 0.85% 0.84% 0.70%
0.70% 0.51%(c)
Net investment income 4.49% 4.49% 4.92% 3.05% 2.47%
3.49% 5.65%(c)
Expense
waiver/reimbursement
(d) 0.01% 0.09% 0.10% 0.18% 0.20%
0.11% 0.27%(c)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $121,299 $146,161 $39,363 $21,883 $20,382
$12,960 $548
- -------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- --------------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992
1991(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03
0.04 0.06
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03)
(0.04) (0.06)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.84% 4.89% 5.24% 3.16% 2.64%
3.61% 5.90%
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.73% 0.65% 0.60% 0.59% 0.58%
0.70% 0.51%(c)
Net investment income 4.74% 4.81% 5.17% 3.30% 2.60%
3.49% 5.65%(c)
Expense
waiver/reimbursement
(d) 0.01% 0.06% 0.10% 0.18% 0.20%
0.11% 0.27%(c)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $196,450 $226,978 $208,656 $304,285 $152,921 $163,451
$129,959
- -------------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- -------------------------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993 1992
1991(A)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03
0.04 0.06
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03) (0.04)
(0.06)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
- ------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.67% 4.91% 5.11% 3.10% 2.77%
3.79% 5.92%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.97% 0.73% 0.80% 0.80% 0.64%
0.64% 0.51%(c)
Net investment income 4.57% 4.77% 5.04% 3.07% 2.68%
3.64% 5.99%(c)
Expense
waiver/reimbursement
(d) 0.02% 0.23% 0.21% 0.25% 0.30%
0.29% 0.36%(c)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $77,220 $83,525 $41,813 $15,236 $9,905
$5,803 $1
- ------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,

- -------------------------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993 1992
1991(A)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03
0.04 0.06
- ------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03) (0.04)
(0.06)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
- ------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.93% 5.04% 5.36% 3.35% 2.89%
3.79% 5.92%
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.72% 0.60% 0.57% 0.55% 0.50%
0.64% 0.51%(c)
Net investment income 4.81% 4.93% 5.27% 3.25% 2.83%
3.64% 5.99%(c)
Expense
waiver/reimbursement
(d) 0.02% 0.12% 0.19% 0.25% 0.30%
0.29% 0.36%(c)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $164,290 $160,675 $173,761 $132,445 $134,397 $136,616
$57,432
- ------------------------------------------------------------------------------------------------
</TABLE>

(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated September 30, 1997, which can be obtained free of charge.

THE TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

(a) Reflects operations for the period from July 27, 1994 (date of initial
public investment) to September 30, 1994.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated September 30, 1997, which can be obtained free of charge.

INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND
- -------------------------------------------------------------------------------

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;

. notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of
the United States;

. notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

. notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.

CMOS. The Fund may also invest in CMOs which are rated AAA 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 of large capitalization companies,
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.

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.

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".

BANK INSTRUMENTS. The fund may invest in instruments of domestic and foreign
banks and savings associations (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.

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.

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.

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
total assets in securities subject to restrictions on resale under the
Securities Act of 1933 (except for certain restricted securities which meet the
criteria for liquidity as established by the Board of Trustees). 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.

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

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.

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.

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

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

VARIABLE RATE MUNICIPAL SECURITIES

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.

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 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.

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 investment
advisory contract provides for the voluntary waiver of expenses at any time
with respect to a Fund at its sole discretion.

SUB-ADVISER TO THE STYLE MANAGER FUND: LARGE CAP AND THE STYLE MANAGER
FUND. Trend Capital Management, Inc. is the sub-adviser to The Style Manager:
Large Cap Fund and The Style Manager Fund.

SUB-ADVISER'S BACKGROUND. 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 SEC.
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
The Tax-Free Money Market Fund and The Style Manager Fund. 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 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 representing an expense to the Trust shall not exceed an annual rate of
.25% of the average net asset value of shares of The Style Manager Fund or The
Tax-Free Money Market Fund held in the accounts during the period for which the
brokers, dealers and administrators provide services. Any fees paid by the
distributor 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.

ADMINISTRATION OF THE FUNDS

ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Funds with certain administrative personnel
and services necessary to operate each Fund and the separate classes. Such
services include shareholder servicing and certain legal and accounting
services. Federated Administrative Services provides these at an annual rate as
specified below:

<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS OF THE TRUST AND
ADMINISTRATION FEE THE BLANCHARD GROUP OF FUNDS
------------------ -----------------------------------
<S> <C>
.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
</TABLE>

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.

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

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.

CONFIRMATIONS AND ACCOUNT STATEMENTS

Shareholders will receive detailed confirmations of transactions. 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. Share certificates are not issued unless
requested by contacting Signet Financial Services, Inc. in writing.

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.

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 request
to Signet Trust Company. The written request should include the shareholder's
name, the Fund name, the class of shares, the account number, and the Share or
dollar amount requested. If share certificates have been issued, they must be
properly endorsed and should be sent by registered or certified mail with the
written request to Signet Trust Company.

Shareholders requesting a redemption of 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 October 31, 1997,
Stephens, Inc., Little Rock, AR, for the exclusive benefit of its customers,
owned 4,204,370 (40.26%) Investment Shares of The U.S. Government Securities
Fund; 1,742,805 (34.81%) Shares of The Style Manager Fund; 1,758,994 (33.10%)
Investment Shares of The Virginia Municipal Bond Fund; 629,671 (25.07%)
Investment Shares of The Maryland Municipal Bond Fund; and 21,024,493 (27.80%)
Investment Shares of The Money Market Fund. As of October 31, 1997, Bova & Co.,
Richmond, VA, acting in various capacities for numerous accounts, owned
5,165,113 (100%) Trust Shares of The U.S. Govenment Securities Fund; 1,613,118
(99%) Trust Shares of The Style Manager: Large Cap Fund; 1,693,162 (33.82%)
Shares of The Style Manager Fund; 1,802,105 (99.78%) Trust Shares of The
Virginia Municipal Bond Fund; 434,681 (100%) Trust Shares of The Maryland
Municipal Bond Fund; 206,814,801 (99.92%) Trust Shares of The Treasury Money
Market Fund; 177,645,283 (96.43%) Trust Shares of The Money Market Fund; and
42,583,759 (75.60%) Shares of The Tax-Free Money Market Fund. Therefore, these
shareholders 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.

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.

TAX INFORMATION
- -------------------------------------------------------------------------------

FEDERAL INCOME TAX

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.

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.

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.

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 Trust may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Trust's 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 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% for The Treasury Money Market Fund and
The Money Market Fund and .25% 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
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
The U.S. Government Securities Fund Federated Investors Tower
The Style Manager: Large Cap Fund Pittsburgh, Pennsylvania
15222-3779
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
- -------------------------------------------------------------------------------------------------
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 Company Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- -------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania
15222-5401
- -------------------------------------------------------------------------------------------------
</TABLE>

THE VIRTUS FUNDS
TRUST SHARES

COMBINED PROSPECTUS

November 30, 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 927913509 CUSIP 927913848 CUSIP 927913889 CUSIP 927913400
CUSIP 927913707 CUSIP 927913871 CUSIP 927913806 3042108A-I (11/97)

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.

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the Prospectus for
the Trust Shares dated November 30, 1997. This Statement is not a Prospectus
itself. You may request a copy of a prospectus or a paper copy of this Statement
of Additional Information, if you have received it electronically, free of
charge by writing to the Trust or calling toll-free 1-800-723-9512.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated November 30, 1997
[GRAPHIC OMITTED]

CUSIP 927913103 CUSIP 927913855 CUSIP 927913301 CUSIP 927913863 CUSIP
927913830 CUSIP 927913889 CUSIP 927913608 CUSIP 927913806 2102608B-I
(11/97)

<PAGE>

TABLE OF CONTENTS

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 Investments 5

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

INVESTMENT LIMITATIONS 9

VIRTUS FUNDS MANAGEMENT 12
Fund Ownership 16
Officers and Trustees Compensation 17
Trustee Liability 17

INVESTMENT ADVISORY SERVICES 17
Adviser to the Trust 17
Advisory Fees 18
Sub-Adviser to the Style Manager: Large Cap Fund and
The Style Manager Fund 18
Sub-Advisory Fees 18

OTHER SERVICES 18
Fund Administration 18
Custodian 19
Transfer Agent 19
Independent Auditors 19

BROKERAGE TRANSACTIONS 19

PURCHASING SHARES 19
Distribution Plan 20
Conversion to Federal Funds 20

DETERMINING NET ASSET VALUE 20
Determining Market Value of Securities20
Use of the Amortized Cost Method 21
Valuing Municipal Securities 22
Use of Amortized Cost 22

REDEEMING SHARES 22
Redemption in Kind 22

MASSACHUSETTS PARTNERSHIP LAW 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 28
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 Fund 30
The Money Market Fund 31
The Tax-Free Money Market Fund 31

FINANCIAL STATEMENTS 32

APPENDIX 33

<PAGE>

GENERAL INFORMATION ABOUT THE TRUST

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 Fund and The Style Manager Fund.

INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS

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)

<PAGE>

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

WARRANTS

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

PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS

<PAGE>

CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS

"MARGIN" IN FUTURES TRANSACTIONS

The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.

PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES

<PAGE>

WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES

OVER-THE-COUNTER OPTIONS

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

BANK INSTRUMENTS

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.

<PAGE>

THE VIRGINIA MUNICIPAL BOND FUND AND THE MARYLAND MUNICIPAL BOND FUND

ACCEPTABLE INVESTMENTS

CHARACTERISTICS

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

<PAGE>

THE MONEY MARKET FUND

TYPES OF INVESTMENTS

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

PORTFOLIO INVESTMENTS AND STRATEGIES

REPURCHASE AGREEMENTS

REVERSE REPURCHASE AGREEMENTS

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

<PAGE>

LENDING OF PORTFOLIO SECURITIES

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 Municipal 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.

PARTICIPATION INTERESTS

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.

<PAGE>

VARIABLE RATE MUNICIPAL SECURITIES

Many municipal securities with variable interest rates purchased by The Tax-Free
Money Market Fund are subject to repayment of principal (usually within seven
days) on 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 by 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

TEMPORARY INVESTMENTS

ADJUSTABLE RATE MORTGAGE SECURITIES

<PAGE>

PORTFOLIO TURNOVER

For the fiscal years ended September 30, 1997 and 1996, the portfolio turnover
rates were 80% and 118%, respectively, for The U.S. Government Securities Fund;
56% and 151%, respectively, for The Style Manager: Large Cap Fund; 19% and 129%,
respectively, for The Virginia Municipal Bond Fund; 13% and 138%, respectively,
for The Maryland Municipal Bond Fund; and 94% and 112%, respectively, for The
Style Manager Fund.

INVESTMENT LIMITATIONS

ISSUING SENIOR SECURITIES AND BORROWING MONEY

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

LENDING CASH OR SECURITIES

<PAGE>

INVESTING IN RESTRICTED SECURITIES

INVESTING IN COMMODITIES

INVESTING IN REAL ESTATE

DIVERSIFICATION OF INVESTMENTS

CONCENTRATION OF INVESTMENTS

<PAGE>

UNDERWRITING

INVESTING IN ILLIQUID SECURITIES

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, unless permitted to do so by order of the SEC. 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.

PURCHASING SECURITIES TO EXERCISE CONTROL

A Fund will not purchase securities of a company for the purpose of
exercising control or management.

<PAGE>

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 Fund's net assets. The dollar amount of short
sales at any one time shall not exceed 5% of the Fund's net assets 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.

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,
sell securities short, or invest in restricted or illiquid securities in excess
of 5% of the value of their respective net assets in the coming fiscal year.

The Tax-Free Money Market Fund does not intend to borrow money, sell securities
short, or pledge securities in excess of 5% of the value of its net assets
during the coming fiscal year.

VIRTUS FUNDS MANAGEMENT

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

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934

Trustee

<PAGE>

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

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918

Trustee

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

<PAGE>

Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930

President, Treasurer and Trustee

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942

Trustee

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

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925

Trustee

<PAGE>

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935

Trustee

Public relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949

Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938

Executive Vice President and Secretary

Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.; Executive Vice President and Secretary of the Funds; Treasurer
of some of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923

Vice President

Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 22, 1962

Vice President and Assistant Treasurer

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.

@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board between meetings
of the Board.

<PAGE>

Officers and Trustees own less than 1% of the outstanding shares of each Fund.

<PAGE>

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, $0 $-0- for the Trust and
Chairman and Trustee 2 investment companies
Thomas G. Bigley $2,001 $3,217 for the Trust and
Trustee 2 investment companies
John T. Conroy, Jr., $2,198 $3,538 for the Trust and
Trustee 2 investment companies
William J. Copeland, $2,198 $3,538 for the Trust and
Trustee 2 investment companies
James E. Dowd $2,198 $3,538 for the Trust and
Trustee 2 investment companies
Lawrence D. Ellis, M.D., $2,001 $3,217 for the Trust and
Trustee 2 investment companies
Edward L. Flaherty, Jr., $2,198 $3,538 for the Trust and
Trustee 2 investment companies
Edward C. Gonzales, $0 $-0- for the Trust and
President, Treasurer and Trustee 2 investment companies
Peter E. Madden, $2,001 $3,217 for the Trust and
Trustee 2 investment companies
Wesley W. Posvar, $2,001 $3,217 for the Trust and
Trustee 2 investment companies
Marjorie P. Smuts, $2,001 $3,217 for the Trust and
Trustee 2 investment companies

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

TRUSTEE LIABILITY

INVESTMENT ADVISORY SERVICES

ADVISER TO THE TRUST

<PAGE>

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, 1997, 1996, and 1995, the adviser earned fees from:
The U.S. Government Securities Fund of $1,325,841, $1,612,364, and $1,581,364,
respectively, of which $37,709, $276,121, and $589,885, respectively, were
voluntarily waived; The Style Manager: Large Cap Fund of $749,69, $704,007, and
$678,512, respectively, of which $0, $0, and $189,983, respectively, were
voluntarily waived; The Virginia Municipal Bond Fund of $650,276, $762,051, and
$775,247, respectively, of which $0, $20,993, and $227,301, respectively, were
voluntarily waived; The Maryland Municipal Bond Fund of $273,851, $315,941, and
$316,194, respectively, of which $0, $106,102, and $187,476, respectively, were
voluntarily waived; The Treasury Money Market Fund of $1,897,464, $1,721,497,
and $2,347,424, respectively, of which $46,840, $209,248, and $469,485,
respectively, were voluntarily waived; The Money Market Fund of $1,250,019,
$1,249,811, and $868,490, respectively, of which $57,472, $299,129, and
$336,697, respectively, were voluntarily waived; and The Tax-Free Money Market
Fund of $302,027, $462,900 and $262,792, respectively, of which $94,455,
$184,473, and $262,792, respectively, were voluntarily waived. During the fiscal
years ended September 30, 1997, 1996 and for the period from March 7, 1995 (date
of initial public investment) to September 30, 1996, the adviser earned fees
from The Style Manager Fund of $830,673, $657,611 and $374,393, respectively, of
which $326,846, $290,966 and $374,393, respectively, were voluntarily waived.

SUB-ADVISER TO THE STYLE MANAGER: LARGE CAP FUND AND THE STYLE MANAGER FUND

Trend Capital Management, Inc. is the sub-adviser to The Style Manager:
Large Cap Fund and The Style Manager Fund.

SUB-ADVISORY FEES

For its sub-advisory services, the Sub-Adviser receives an annual sub-advisory
fee as described in the prospectus. For the fiscal years ended September 30,
1997, 1996, and 1995, the sub-adviser earned fees from The Style Manager; Large
Cap Fund of $144,886, $0, and $0, respectively, none of which, respectively,
were voluntarily waived. For the fiscal years ended September 30, 1997, 1996,
and for the period from March 7, 1995 (date of initial public investment) to
September 30, 1995, the sub-adviser earned fees from The Style Manager Fund of
$74,119, $0 and $0, respectively, none of which, respectively, were voluntarily
waived.

OTHER SERVICES

FUND ADMINISTRATION

<PAGE>

CUSTODIAN

TRANSFER 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.

BROKERAGE TRANSACTIONS

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.

PURCHASING SHARES

<PAGE>

DISTRIBUTION PLAN

The Trust has adopted a Plan for Shares of The Style Manager Fund and The
Tax-Free Money Market Fund 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.

For the fiscal years ended September 30, 1997, 1996 and 1995, the Tax-Free Money
Market Fund paid no fees pursuant to the Plan. For the fiscal years ended
September 30, 1997, 1996 and for the period from March 7, 1995 to September 30,
1996, The Style Manager Fund paid no fees pursuant to the Plan.

CONVERSION TO FEDERAL FUNDS

DETERMINING NET ASSET VALUE

DETERMINING MARKET VALUE OF SECURITIES

The market value of The U.S. Government Securities Fund's portfolio securities
are determined as follows:

<PAGE>

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 all other securities, at fair value as determined in good faith by
the Board of Trustees.

USE OF THE AMORTIZED COST METHOD

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%
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.

<PAGE>

INVESTMENT RESTRICTIONS

VALUING MUNICIPAL SECURITIES

USE OF AMORTIZED COST

REDEEMING SHARES

REDEMPTION IN KIND

<PAGE>

MASSACHUSETTS PARTNERSHIP LAW

TAX STATUS

THE FUNDS' TAX STATUS

o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;

o invest in securities within certain statutory limits; and

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

SHAREHOLDERS' TAX STATUS

CAPITAL GAINS

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.

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.

<PAGE>

TOTAL RETURN

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

<PAGE>

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.

EFFECTIVE YIELD

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.

<PAGE>

TAX-EQUIVALENCY TABLES

TAXABLE YIELD EQUIVALENT FOR 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:

15.00% 28.00% 31.00% 36.00% 39.60%

JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050

SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050

Tax-Exempt
Yield Taxable Yield Equivalent

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.

<PAGE>

TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
20.75% 33.75% 36.75% 41.75% 45.35%

JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050

SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050

Tax-Exempt
Yield Taxable Yield Equivalent

<PAGE>

TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF MARYLAND
INCLUDING LOCAL INCOME TAX
COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
22.50% 35.50% 38.50% 43.50% 47.10%

JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN: 41,200 99,600 151,750 271,050 $271,050

SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN: 24,650 59,750 124,650 271,050 $271,050

TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT

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.

<PAGE>

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 limited to:

THE U.S. GOVERNMENT SECURITIES FUND

o 3 YEAR TREASURY NOTES Source: Wall Street Journal, Bloomberg Financial
Markets, and Telerate.

<PAGE>

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.

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.

THE TREASURY MONEY MARKET FUND

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.

<PAGE>

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

ECONOMIC AND MARKET INFORMATION

<PAGE>

FINANCIAL STATEMENTS

<PAGE>

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.

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

<PAGE>

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

NR NR indicates that Fitch does not the specific issue.

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

MIG2/VMIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.