COMBINED
ANNUAL REPORT
SHAREHOLDERS
September 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.
The Investment Adviser to The Virtus Funds is Virtus Capital Management, Inc., a
subsidiary of Signet Banking corporation. The Virtus Funds are administered by
subsidiaries of Federated Investors, independent of Signet.
Investment products are not deposits, obligations of, or guaranteed by any bank.
They are not insured by FDIC. They involve risk, including the possible loss of
principal invested.
Virtus Capital Management, Inc. is the investment adviser for The Virtus
Funds. Federated Securities Corp. is the distributor of The Funds.
Federated Securities Corp., Distributor, is independent of Signet Bank.
[LOGO] VIRTUS
FUNDS
MESSAGE TO SHAREHOLDERS
- -------------------------------------------------------------------------------
Dear Investor:
Here is your Annual Report for The Virtus Funds, which covers the 12-month
period from October 1, 1996 through September 30, 1997.
On the following pages, you will find complete financial information for every
fund in the Virtus family. The sections 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 begin with a management
discussion and analysis by the portfolio manager, followed by a long-term
performance graph. Each fund also contains a complete list of holdings, and the
financial statements.
As the following fund-by-fund summary indicates, the reporting period was very
strong for stocks and improved for bonds:
. THE U.S. GOVERNMENT SECURITIES FUND paid a dividend stream totaling $0.60 per
share for Investment Shares ($0.63 for Trust Shares). These dividends helped
the fund produce a total return of 6.89% for Investment Shares (7.16% for
Trust Shares) in an improved bond market.* The net asset value of both share
classes increased slightly from $9.89 on the first day of the period to $9.95
on the last day of the period. At the end of the reporting period, net assets
amounted to more than $157 million.
. THE STYLE MANAGER: LARGE CAP FUND produced a strong total return of 37.02% for
Investment Shares (37.37% for Trust Shares) in a highly favorable environment
for stocks.* The fund's high-quality stock portfolio paid dividends of $0.14
per share and capital gains of $1.83 per share for Investment Shares (and
dividends of $0.18 per share and capital gains of $1.83 per share for Trust
Shares). The net asset value of each share class rose 19% from the first day
of the period to the last day of the period. At the end of the reporting
period, net assets amounted to more than $106 million.
. THE STYLE MANAGER FUND produced an extremely strong total return of 44.01%*
through dividends totaling $0.24 per share and capital gains totaling $0.63
per share. In a highly favorable stock market environment, the fund's net
asset value soared from $11.47 on the first day of the period to $15.37 on the
last day. Net assets exceeded $76 million on the last day of the reporting
period.
. THE VIRGINIA MUNICIPAL BOND FUND paid double-tax-free dividends** of $0.42 per
share for Investment Shares ($0.45 for Trust Shares) through a portfolio that
included 29 Virginia municipal bonds. This income stream helped the fund
produce a total return of 7.74% for Investment Shares (8.00% for Trust Shares)
in a difficult bond market.* The net asset value for both share classes
increased from $10.68 on the first day of the period to $11.07 on the last day
of the period. Net assets totaled more than $78 million on the last day of the
reporting period.
. THE MARYLAND MUNICIPAL BOND FUND paid double-tax-free dividends** totaling
$0.37 per share for Investment Shares ($0.40 for Trust Shares). This income
stream helped the fund produce a total return of 6.92% for Investment Shares
(7.19% for Trust Shares) in a difficult bond market.* The net asset value for
both share classes increased from $10.56 on the first day of the period to
$10.91 on the last day of the period. At the end of the reporting period, net
assets totaled more than $33 million.
. THE TREASURY MONEY MARKET FUND, a portfolio of U.S. Treasury money market
securities, paid dividends totaling $0.05 per share for both Trust Shares
and Investment Shares. Assets totaled more than $317 million on the last day
of the reporting period.+
. THE MONEY MARKET FUND paid dividends totaling $0.05 per share for both Trust
Shares and Investment Shares through its portfolio of high-quality money
market securities. The fund ended the reporting period with more than $241
million in net assets.+
. THE TAX-FREE MONEY MARKET FUND, a portfolio of municipal money market
securities, paid tax-free dividends totaling $0.03 per share.++ At the end of
the reporting period, net assets reached more than $57 million.+
Thank you for pursuing your financial goals through The Virtus Funds. We hope
you are pleased with your progress.
Sincerely,
/s/ John S. Hall
John S. Hall
Chief Investment Officer
Virtus Capital Management, Inc.
Investment Adviser to The Virtus Funds
November 15, 1997
- --------
* Performance quoted reflects past performance and is not indicative of
future results. Investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. Reflecting the fund's contingent deferred sales
charge, the total returns of The Virtus Funds were as follows: The U.S.
Government Securities Fund (Investment Shares): 4.75%; The Style Manager
Fund: 41.85%; The Style Manager: Large Cap Fund (Investment Shares):
34.75%; The Virginia Municipal Bond Fund (Investment Shares): 5.70%; and
The Maryland Municipal Bond Fund (Investment Shares): 4.87%.
**Income may be subject to the federal alternative minimum tax.
+Although money market funds seek to maintain a stable net asset value of
$1.00 a share, there is no guarantee that they will be able to do so. An
investment in the fund is neither insured nor guaranteed by the U.S.
government.
++Income may be subject to the federal alternative minimum tax and state and
local taxes.
THE U.S. GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
Overall, during the last year, we have experienced a relatively calm U.S. fixed
income market. While interest rates on maturities longer than two years declined
by roughly .50% during the year, that was reasonably mild compared to yield
changes observed over the last 20 years. Even the extreme yields observed on
five-year Treasuries remained in a fairly narrow range by historical standards.
The five-year Treasury saw a low yield of about 5.80% and a high yield of about
6.80% during the 12-month period ended September 30, 1997. One recent study
indicated that a year in which interest rates moved by less than 2.00% is
reasonably uncommon.
Our overall average maturity position has remained neutral since November 1996.
We felt that interest rates would not move by large amounts, and shifted our
investment focus from direct Treasuries to mortgage-backed securities and a few
callable agencies, which seek to provide a better total return through a higher
income component during periods when interest rates are reasonably quiet. Thus,
we were able to provide a good total return despite not actively making changes
to the average maturity of the portfolio in anticipation of changes in interest
rates. For the fiscal year ended September 30, 1997, the fund produced average
annual total returns of 6.89% and 7.16% for Investment Shares and Trust Shares,
respectively.*
Most of the additional mortgage-backed securities were purchased in the
earlier part of the year. After the first quarter of 1997, the yield advantage
of buying mortgage-backed securities fell to near historical lows and
subsequent additional investments have been postponed. Only recently have
yields become slightly more attractive on mortgage-backed securities. For the
time being, the fund will maintain an average maturity similar to that of the
Lehman Brothers Intermediate Government Bond Index**, and will consider buying
additional mortgage-backed securities to help improve the income and total
return characteristics when we believe the additional yield received will
compensate us for the additional risk of pre-payments associated with
mortgage-backed securities.
- --------
* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
** Lehman Brothers Intermediate Government Bond Index is 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. This index is unmanaged and investments
cannot be made in an index.
THE U.S. GOVERNMENT SECURITIES FUND--Investment Shares
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE U.S. GOVERNMENT SECURITIES FUND--INVESTMENT
SHARES.
The graph below illustrates the hypothetical investment of $10,000** in The
U.S. Government Securities Fund (the "Fund") from October 16, 1990 (start of
performance) to September 30, 1997, compared to the Lehman Brothers Intermediate
Government Bond Index ("LBIGB").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX A
AVERAGE ANNUAL TOTAL RETURN*** FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 4.75%
5 Year 4.70%
Start of Performance (10/16/90) 7.10%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 10/16/90 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. Certain investors
are subject to a 2.00% contingent deferred sales charge on shares redeemed
within five years of purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions.
***Total return quoted reflects all applicable contingent deferred sales
charges.
+The LBIGB is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LBIGB has
been adjusted to reflect reinvestment of dividends on securities in the index.
This index is unmanaged.
THE U.S. GOVERNMENT SECURITIES FUND--Trust Shares
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE U.S. GOVERNMENT SECURITIES FUND--TRUST
SHARES.
The graph below illustrates the hypothetical investment of $10,000** in The
U.S. Government Securities Fund (the "Fund") from October 16, 1990 (start of
performance) to September 30, 1997, compared to the Lehman Brothers Intermediate
Government Bond Index ("LBIGB").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX B
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 7.16%
5 Year 4.93%
Start of Performance (10/16/90) 7.27%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 10/16/90 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
+The LBIGB is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LBIGB has
been adjusted to reflect reinvestment of dividends on securities in the index.
This index is unmanaged.
THE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------------------------------------------- ------------
<C> <S> <C>
LONG-TERM INVESTMENTS--98.9%
---------------------------------------------------------------
U.S. TREASURY BONDS--12.9%
---------------------------------------------------
$ 4,500,000 United States Treasury Bond, 11.75%, 11/15/2014 $ 6,534,225
---------------------------------------------------
13,000,000 United States Treasury Bond, 7.50%, 5/15/2002 13,785,590
--------------------------------------------------- ------------
Total U.S. Treasury Bonds 20,319,815
--------------------------------------------------- ------------
U.S. TREASURY NOTES--30.3%
---------------------------------------------------
22,000,000 United States Treasury Note, 7.125%, 2/29/2000 22,623,920
---------------------------------------------------
2,000,000 United States Treasury Note, 7.50%, 11/15/2001 2,109,080
---------------------------------------------------
22,000,000 United States Treasury Note, 8.875%, 2/15/1999 22,902,220
--------------------------------------------------- ------------
Total U.S. Treasury Notes 47,635,220
--------------------------------------------------- ------------
GOVERNMENT OBLIGATIONS--55.7%
---------------------------------------------------
993,000 Federal Agricultural Mortgage Association, 7.37%,
8/1/2006 1,036,771
---------------------------------------------------
11,350,428 Federal Home Loan Bank, 6.50%, 9/1/2008 11,330,667
---------------------------------------------------
7,801,431 Federal Home Loan Bank, 6.50%, 11/1/2009 7,818,516
---------------------------------------------------
81,255 Federal Home Loan Bank, 7.968%, 8/1/2019 85,404
---------------------------------------------------
29,676 Federal Home Loan Bank, 8.342%, 12/1/2020 30,979
---------------------------------------------------
8,500,000 Federal Home Loan Mortgage Corp., 7.36%, 6/5/2007 8,825,525
---------------------------------------------------
541,561 Federal Home Loan Mortgage Corp., REMIC, 7.80%,
5/15/2012 542,514
---------------------------------------------------
5,000,000 Federal Home Loan Mortgage Corp., 7.974%, 4/20/2005 5,062,750
---------------------------------------------------
4,480,000 Federal National Mortgage Association, 6.16%,
4/3/2001 4,496,486
---------------------------------------------------
4,500,547 Federal National Mortgage Association, 7.00%,
12/1/1999 4,543,933
---------------------------------------------------
3,705,860 Federal National Mortgage Association, 7.00%,
8/1/2001 3,756,816
---------------------------------------------------
15,418,905 Federal National Mortgage Association, 7.00%,
4/1/2011 15,597,148
---------------------------------------------------
23,204,872 Federal National Mortgage Association, 7.50%,
8/1/2026 23,618,151
---------------------------------------------------
341,912 Federal National Mortgage Association, 8.50%,
12/1/2001 354,200
---------------------------------------------------
64,350 Federal National Mortgage Association, 8.83%,
6/1/2019 66,987
---------------------------------------------------
167,619 Government National Mortgage Association, 8.00%,
3/15/2017 175,948
---------------------------------------------------
320,648 Government National Mortgage Association, 9.00%,
9/15/2021 345,196
--------------------------------------------------- ------------
Total Government Obligations 87,687,991
--------------------------------------------------- ------------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST
$154,447,718) 155,643,026
--------------------------------------------------- ------------
</TABLE>
THE U.S. GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- ------------
<C> <S> <C>
(A) REPURCHASE AGREEMENT--0.3%
--------------------------------------------------------------
$ 460,430 CS First Boston Corp., 6.05%, dated 9/30/1997, due
10/1/1997
(AT AMORTIZED COST) $ 460,430
-------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST
$154,908,148)(B) $156,103,456
-------------------------------------------------- ------------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $154,908,148.
The net unrealized appreciation of investments on a federal tax basis
amounts to $1,195,308 which is comprised of $1,747,639 appreciation and
$552,331 depreciation at September 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($157,425,080) at September 30, 1997.
The following acronym is used throughout this portfolio:
REMIC--Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
THE STYLE MANAGER: LARGE CAP FUND
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
While small cap value stocks had a very successful year relative to small cap
growth stocks*, large cap growth and value stocks remained neck and neck. In
August 1997, we transitioned the fund to a more neutral position and now are
roughly 50% value and 50% growth oriented.
Virtus Capital Management, Inc. continues to implement the "Style" approach to
managing the fund. We seek to capture the predominant investment style to take
greater advantage of market trends. This involves opportunistic positioning
defined by investment style. "Style" refers to two widely accepted
descriptions of stocks known as growth and value. Growth stocks are those
companies with above-average earnings expectations. Value stocks are those
companies selling at a low price relative to the actual value of their
underlying assets. During the 12-month period ended September 30, 1997, the
Standard & Poor's ("S&P") 500 Value Index+ produced a total return of 39.22%,
and the S&P 500 Growth Index+ returned 41.48%, again neck and neck performance
in a very strong year. During the same period, S&P 500 Index+ returned 40.7%.
For the 12-month period ended September 30, 1997, the fund produced average
annual total returns of 37.02% and 37.37% for Investment Shares and Trust
Shares, respectively.++
- --------
* Small cap stocks have historically experienced greater volatility than
average.
+ The S&P 500 is an unmanaged index comprised of common stocks in industry,
transportation and financial and public utility companies. The S&P 500 Value
Index and the S&P 500 Growth Index are sub-indices of the S&P 500 Index.
Investments cannot be made in an index.
++ Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
THE STYLE MANAGER: LARGE CAP FUND--Investment Shares
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE STYLE MANAGER: LARGE CAP FUND--INVESTMENT
SHARES.
The graph below illustrates the hypothetical investment of $10,000** in The
Style Manager: Large Cap Fund (the "Fund") from October 16, 1990 (start of
performance) to September 30, 1997, compared to the Standard & Poor's 500 Index
("S&P 500").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX C
AVERAGE ANNUAL TOTAL RETURN*** FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 34.75%
5 Year 13.84%
Start of Performance (10/16/90) 14.03%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 10/16/90 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. Certain investors
are subject to a 2.00% contingent deferred sales charge on shares redeemed
within five years of purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions.
***Total return quoted reflects all applicable contingent deferred sales
charges.
+The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The S&P 500
has been adjusted to reflect reinvestment of dividends on securities in the
index. This index is unmanaged.
THE STYLE MANAGER: LARGE CAP FUND--Trust Shares
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE STYLE MANAGER: LARGE CAP FUND--TRUST SHARES
The graph below illustrates the hypothetical investment of $10,000** in The
Style Manager: Large Cap Fund (the "Fund") from October 16, 1990 (start of
performance) to September 30, 1997, compared to the Standard & Poor's 500 Index
("S&P 500").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX D
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 37.37%
5 Year 14.09%
Start of Performance (10/16/90) 14.21%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 10/16/90 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
+The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The S&P has
been adjusted to reflect reinvestment of dividends on securities in the index.
This index is unmanaged.
THE STYLE MANAGER: LARGE CAP FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------------------------- ------------
<C> <S> <C>
COMMON STOCKS--97.6%
--------------------------------------
AEROSPACE & DEFENSE--1.7%
----------------------------
25,600 Boeing Co. $ 1,393,600
----------------------------
3,600 Lockheed Martin Corp. 383,850
---------------------------- ------------
Total 1,777,450
---------------------------- ------------
AIRLINES--0.4%
----------------------------
1,500 (a)AMR Corp. 166,031
----------------------------
2,400 Delta Air Lines, Inc. 226,050
---------------------------- ------------
Total 392,081
---------------------------- ------------
ALUMINUM--0.5%
----------------------------
17,000 Alcan Aluminum, Ltd. 590,750
---------------------------- ------------
AUTO PARTS & EQUIPMENT--0.5%
----------------------------
5,200 Goodyear Tire & Rubber Co. 357,500
----------------------------
3,100 TRW, Inc. 170,113
---------------------------- ------------
Total 527,613
---------------------------- ------------
AUTOMOBILES--1.8%
----------------------------
22,600 Chrysler Corp. 831,962
----------------------------
23,400 Ford Motor Co. 1,058,850
---------------------------- ------------
Total 1,890,812
---------------------------- ------------
BANKS MAJOR REGIONAL--7.0%
----------------------------
16,400 Banc One Corp. 915,325
----------------------------
18,100 Bank of New York Co., Inc. 868,800
----------------------------
8,300 Barnett Banks, Inc. 587,225
----------------------------
19,800 First Union Corp. 991,237
----------------------------
4,100 Fleet Financial Group, Inc. 268,806
----------------------------
4,300 KeyCorp 273,588
----------------------------
10,600 Mellon Bank Corp. 580,350
----------------------------
5,500 National City Corp. 338,594
----------------------------
16,200 NationsBank Corp. 1,002,375
----------------------------
10,900 Norwest Corp. 667,625
----------------------------
12,600 PNC Financial Corp. 615,038
----------------------------
5,200 SunTrust Banks, Inc. 353,275
---------------------------- ------------
Total 7,462,238
---------------------------- ------------
BANKS-MONEY CENTER--2.3%
----------------------------
15,600 BankAmerica Corp. 1,143,675
----------------------------
6,600 Citicorp 883,987
----------------------------
6,000 First Chicago NBD Corp. 451,500
---------------------------- ------------
Total 2,479,162
---------------------------- ------------
</TABLE>
THE STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-----------------------------------------------
BEVERAGE-ALCOHOLIC--0.5%
-------------------------------------
15,000 Seagram Co. Ltd. $ 528,750
------------------------------------- ------------
BEVERAGE-SOFT DRINK--2.2%
-------------------------------------
38,700 Coca-Cola Co. 2,358,281
------------------------------------- ------------
BIOTECHNOLOGY--0.1%
-------------------------------------
2,900 (a)Amgen, Inc. 139,019
------------------------------------- ------------
BROADCAST MEDIA--1.1%
-------------------------------------
27,900 (a)Tele-Communications, Inc., Class A 571,950
-------------------------------------
28,900 (a)U.S. West Media Group 644,831
------------------------------------- ------------
Total 1,216,781
------------------------------------- ------------
BUILDING MATERIALS--0.4%
-------------------------------------
9,500 Masco Corp. 435,219
------------------------------------- ------------
BUILDING SUPPLIES--0.5%
-------------------------------------
4,400 Home Depot, Inc. 229,350
-------------------------------------
10,800 Sherwin-Williams Co. 317,925
------------------------------------- ------------
Total 547,275
------------------------------------- ------------
CHEMICALS--1.6%
-------------------------------------
7,200 Air Products & Chemicals, Inc. 597,150
-------------------------------------
7,600 Dow Chemical Co. 689,225
-------------------------------------
8,700 Union Carbide Corp. 423,581
------------------------------------- ------------
Total 1,709,956
------------------------------------- ------------
CHEMICALS-DIVERSE--0.6%
-------------------------------------
6,100 Du Pont (E.I.) de Nemours & Co. 375,531
-------------------------------------
8,600 Morton International, Inc. 305,300
------------------------------------- ------------
Total 680,831
------------------------------------- ------------
CHEMICALS-SPECIALTY--0.7%
-------------------------------------
5,900 Grace (W.R.) & Co. 434,388
-------------------------------------
7,000 Great Lakes Chemical Corp. 345,188
------------------------------------- ------------
Total 779,576
------------------------------------- ------------
COMMUNICATION EQUIPMENT--0.3%
-------------------------------------
6,400 Harris Corp. 292,800
------------------------------------- ------------
COMPUTER HARDWARE--4.7%
-------------------------------------
11,900 (a)Compaq Computer Corp. 889,525
-------------------------------------
6,700 (a)Dell Computer Corp. 649,062
-------------------------------------
9,800 (a)Digital Equipment Corp. 424,462
-------------------------------------
3,700 (a)EMC Corp. Mass 215,987
-------------------------------------
22,700 International Business Machines Corp. 2,404,781
-------------------------------------
4,700 (a)Seagate Technology, Inc. 169,788
-------------------------------------
11,300 (a)Silicon Graphics, Inc. 296,625
------------------------------------- ------------
Total 5,050,230
------------------------------------- ------------
</TABLE>
THE STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- --------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------
COMPUTER SERVICES--2.3%
---------------------------------------
5,300 (a)3Com Corp. $ 271,625
---------------------------------------
12,200 (a)Cisco Systems, Inc. 891,362
---------------------------------------
8,800 Computer Associates International, Inc. 631,950
---------------------------------------
18,600 (a)Oracle Corp. 677,738
--------------------------------------- ------------
Total 2,472,675
--------------------------------------- ------------
COMPUTER SOFTWARE--0.2%
---------------------------------------
4,300 (a)Parametric Technology Corp. 189,738
--------------------------------------- ------------
CONTAINERS & PACKAGING--0.1%
---------------------------------------
1,700 Union Camp Corp. 104,869
--------------------------------------- ------------
COSMETICS & TOILETRIES--2.5%
---------------------------------------
1,800 Colgate-Palmolive Co. 125,437
---------------------------------------
9,100 Gillette Co. 785,444
---------------------------------------
24,800 Procter & Gamble Co. 1,712,750
--------------------------------------- ------------
Total 2,623,631
--------------------------------------- ------------
ELECTRIC COMPANIES--3.6%
---------------------------------------
6,800 Carolina Power & Light Co. 244,375
---------------------------------------
10,800 Consolidated Edison Co. 367,200
---------------------------------------
11,600 Duke Power Co. 573,475
---------------------------------------
29,700 Edison International 749,925
---------------------------------------
13,600 Entergy Corp. 354,450
---------------------------------------
28,400 P G & E Corp. 658,525
---------------------------------------
15,500 Peco Energy Co. 363,281
---------------------------------------
24,200 Southern Co. 546,013
--------------------------------------- ------------
Total 3,857,244
--------------------------------------- ------------
ELECTRICAL EQUIPMENT--3.3%
---------------------------------------
13,100 AMP, Inc. 701,669
---------------------------------------
41,400 General Electric Co. 2,817,788
--------------------------------------- ------------
Total 3,519,457
--------------------------------------- ------------
ELECTRONICS-DEFENSE--0.4%
---------------------------------------
7,000 Raytheon Co. 413,875
--------------------------------------- ------------
ELECTRONICS-DISTRIBUTORS--0.3%
---------------------------------------
3,900 (W.W.) Grainger Inc. 347,100
--------------------------------------- ------------
ELECTRONICS-SEMICONDUCTORS--3.5%
---------------------------------------
3,400 (a)Applied Materials, Inc. 323,850
---------------------------------------
26,200 Intel Corp. 2,418,588
---------------------------------------
10,200 (a)LSI Logic Corp. 327,675
---------------------------------------
4,900 Micron Technology, Inc. 169,969
---------------------------------------
3,800 Texas Instruments, Inc. 513,475
--------------------------------------- ------------
Total 3,753,557
--------------------------------------- ------------
</TABLE>
THE STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-----------------------------------------------------
ENTERTAINMENT--1.3%
-------------------------------------------
17,200 (a)Viacom, Inc., Class B $ 543,950
-------------------------------------------
10,200 Disney (Walt) Co. 822,375
------------------------------------------- ------------
Total 1,366,325
------------------------------------------- ------------
FINANCIAL--3.7%
-------------------------------------------
5,500 American Express Co. 450,312
-------------------------------------------
13,100 American General Corp. 679,562
-------------------------------------------
30,200 Federal Home Loan Mortgage Corp. 1,064,550
-------------------------------------------
21,200 Morgan Stanley, Dean Witter, Discover & Co. 1,146,125
-------------------------------------------
9,300 Washington Mutual, Inc. 648,675
------------------------------------------- ------------
Total 3,989,224
------------------------------------------- ------------
FOODS--0.2%
-------------------------------------------
4,400 Kellogg Co. 185,350
------------------------------------------- ------------
GOLD & PRECIOUS METAL MINES--0.4%
-------------------------------------------
15,100 Barrick Gold Corp. 373,725
------------------------------------------- ------------
HEALTHCARE--2.7%
-------------------------------------------
10,000 Abbott Laboratories 639,375
-------------------------------------------
10,600 American Home Products Corp. 773,800
-------------------------------------------
18,000 Bristol-Myers Squibb Co. 1,489,500
------------------------------------------- ------------
Total 2,902,675
------------------------------------------- ------------
HEALTHCARE-DRUGS MAJOR--3.9%
-------------------------------------------
12,900 Eli Lilly & Co. 1,553,644
-------------------------------------------
21,100 Pfizer, Inc. 1,267,319
-------------------------------------------
19,500 Pharmacia & Upjohn, Inc. 711,750
-------------------------------------------
11,400 Schering Plough Corp. 587,100
------------------------------------------- ------------
Total 4,119,813
------------------------------------------- ------------
HEALTHCARE-HOSPITAL MANAGEMENT--0.7%
-------------------------------------------
27,700 Columbia/HCA Healthcare Corp. 796,375
------------------------------------------- ------------
HEALTHCARE-MEDICAL PRODUCTS & SUPPLY--2.5%
-------------------------------------------
14,400 Baxter International, Inc. 752,400
-------------------------------------------
3,800 (a)Boston Scientific Corp. 209,712
-------------------------------------------
2,800 Guidant Corp. 156,800
-------------------------------------------
18,200 Johnson & Johnson 1,048,775
-------------------------------------------
10,600 Medtronic, Inc. 498,200
------------------------------------------- ------------
Total 2,665,887
------------------------------------------- ------------
HOUSEHOLD FURNITURE & APPLIANCES--0.1%
-------------------------------------------
2,100 Whirlpool Corp. 139,256
------------------------------------------- ------------
INSURANCE-BROKERS--0.5%
-------------------------------------------
9,300 AON Corp. 491,737
------------------------------------------- ------------
</TABLE>
THE STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
----------------------------------------------
INSURANCE-LIFE/HEALTH--0.9%
------------------------------------
3,900 Aetna Services, Inc. $ 317,606
------------------------------------
8,200 Conseco, Inc. 400,262
------------------------------------
3,000 Jefferson-Pilot Corp. 237,000
------------------------------------ ------------
Total 954,868
------------------------------------ ------------
INSURANCE-MULTILINE--2.1%
------------------------------------
6,200 American International Group, Inc. 639,762
------------------------------------
2,600 Lincoln National Corp. 181,025
------------------------------------
20,100 Travelers Group, Inc. 1,371,825
------------------------------------ ------------
Total 2,192,612
------------------------------------ ------------
INSURANCE-PROPERTY--0.9%
------------------------------------
8,000 Chubb Corp. 568,500
------------------------------------
7,800 SAFECO Corp. 413,400
------------------------------------ ------------
Total 981,900
------------------------------------ ------------
INVESTMENT BANK-BROKERAGE--0.7%
------------------------------------
10,600 Merrill Lynch & Co., Inc. 786,388
------------------------------------ ------------
IRON & STEEL--0.1%
------------------------------------
3,000 USX-U.S. Steel Group, Inc. 104,250
------------------------------------ ------------
LODGING-HOTELS--0.4%
------------------------------------
5,600 (a)ITT Corp. 379,400
------------------------------------ ------------
MACHINERY--1.0%
------------------------------------
9,800 Cooper Industries, Inc. 529,812
------------------------------------
11,700 Ingersoll-Rand Co. 503,831
------------------------------------ ------------
Total 1,033,643
------------------------------------ ------------
MANUFACTURER-SPECIAL--0.4%
------------------------------------
9,600 Parker-Hannifin Corp. 432,000
------------------------------------ ------------
MANUFACTURING-DIVERSE--2.1%
------------------------------------
7,800 Allied-Signal, Inc. 331,500
------------------------------------
2,000 Minnesota Mining & Manufacturing Co. 185,000
------------------------------------
8,000 Tenneco, Inc. 383,000
------------------------------------
4,200 Textron, Inc. 273,000
------------------------------------
3,300 Unilever N.V., ADR 701,663
------------------------------------
4,600 United Technologies Corp. 372,600
------------------------------------ ------------
Total 2,246,763
------------------------------------ ------------
METALS & MINING--0.3%
------------------------------------
11,900 Inco Ltd. 298,244
------------------------------------ ------------
NATURAL GAS--0.3%
------------------------------------
6,900 Williams Cos., Inc. (The) 323,006
------------------------------------ ------------
</TABLE>
THE STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
----------------------------------------------
OIL & GAS-DRILL & EQUIPMENT--0.7%
------------------------------------
8,800 Baker Hughes, Inc. $ 385,000
------------------------------------
3,800 Schlumberger Ltd. 319,913
------------------------------------ ------------
Total 704,913
------------------------------------ ------------
OIL-DOMESTIC--1.1%
------------------------------------
8,900 Phillips Petroleum Co. 459,463
------------------------------------
19,200 USX Corp. 714,000
------------------------------------ ------------
Total 1,173,463
------------------------------------ ------------
OIL-INTERNATIONAL--7.4%
------------------------------------
6,300 Amoco Corp. 607,162
------------------------------------
9,900 Chevron Corp. 823,556
------------------------------------
46,700 Exxon Corp. 2,991,719
------------------------------------
12,600 Mobil Corp. 932,400
------------------------------------
45,700 Royal Dutch Petroleum Co., ADR 2,536,350
------------------------------------ ------------
Total 7,891,187
------------------------------------ ------------
PAPER & FOREST PRODUCTS--1.3%
------------------------------------
3,300 Champion International Corp. 201,094
------------------------------------
13,100 International Paper Co. 721,319
------------------------------------
8,600 Weyerhaeuser Co. 510,625
------------------------------------ ------------
Total 1,433,038
------------------------------------ ------------
PHOTOGRAPH/IMAGING--0.9%
------------------------------------
11,600 Xerox Corp. 976,575
------------------------------------ ------------
RAILROADS--1.1%
------------------------------------
2,800 Burlington Northern Santa Fe 270,550
------------------------------------
7,900 CSX Corp. 462,150
------------------------------------
1,100 Norfolk Southern Corp. 113,575
------------------------------------
5,500 Union Pacific Corp. 344,438
------------------------------------ ------------
Total 1,190,713
------------------------------------ ------------
RETAIL-DEPARTMENT STORES--2.2%
------------------------------------
13,600 (a)Federated Department Stores, Inc. 586,500
------------------------------------
11,200 May Department Stores Co. 610,400
------------------------------------
7,700 Nordstrom, Inc. 490,875
------------------------------------
11,400 J.C. Penney Co., Inc. 664,050
------------------------------------ ------------
Total 2,351,825
------------------------------------ ------------
RETAIL-DRUG STORES--0.5%
------------------------------------
9,500 CVS Corp. 540,312
------------------------------------ ------------
RETAIL-GENERAL MERCHANDISE--1.6%
------------------------------------
10,100 (a)Costco Cos., Inc. 380,012
------------------------------------
16,800 Sears, Roebuck & Co. 956,550
------------------------------------
</TABLE>
THE STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------
RETAIL-GENERAL MERCHANDISE--CONTINUED
--------------------------------------
8,800 Wal-Mart Stores, Inc. $ 322,300
-------------------------------------- ------------
Total 1,658,862
-------------------------------------- ------------
RETAIL-SPECIALTY--0.5%
--------------------------------------
15,100 (a)Toys 'R' Us, Inc. 536,050
-------------------------------------- ------------
SERVICES-COMMERCIAL & CONSUMER--0.4%
--------------------------------------
12,800 Service Corp. International 412,000
-------------------------------------- ------------
SERVICES-DATA PROCESSING--0.3%
--------------------------------------
8,120 First Data Corp., Class 305,007
-------------------------------------- ------------
SPECIALTY PRINTING--0.4%
--------------------------------------
10,900 Donnelley (R.R.) & Sons Co. 388,994
-------------------------------------- ------------
TELECOMMUNICATIONS-CELLULAR--0.7%
--------------------------------------
20,900 (a)Airtouch Communications, Inc. 740,644
-------------------------------------- ------------
TELECOMMUNICATIONS-EQUIPMENT--1.3%
--------------------------------------
10,600 Lucent Technologies, Inc. 862,575
--------------------------------------
3,500 Northern Telecom Ltd. 363,781
--------------------------------------
3,000 (a)Tellabs, Inc. 154,500
-------------------------------------- ------------
Total 1,380,856
-------------------------------------- ------------
TELECOMMUNICATIONS-LONG DISTANCE--3.3%
--------------------------------------
40,800 AT&T Corp. 1,807,950
--------------------------------------
25,500 MCI Communications Corp. 749,063
--------------------------------------
13,700 Sprint Corp. 685,000
--------------------------------------
7,000 (a)WorldCom, Inc. 247,625
-------------------------------------- ------------
Total 3,489,638
-------------------------------------- ------------
TELEPHONE--2.8%
--------------------------------------
10,398 Bell Atlantic Corp. 836,421
--------------------------------------
30,300 BellSouth Corp. 1,401,375
--------------------------------------
20,200 U.S. West, Inc. 777,700
-------------------------------------- ------------
Total 3,015,496
-------------------------------------- ------------
TEXTILES-APPAREL--0.4%
--------------------------------------
5,100 V.F. Corp. 472,388
-------------------------------------- ------------
TOBACCO--1.4%
--------------------------------------
9,200 Fortune Brands, Inc. 309,925
--------------------------------------
9,200 (a)Gallaher Group PLC, ADR 176,525
--------------------------------------
23,600 Philip Morris Cos., Inc. 980,875
-------------------------------------- ------------
Total 1,467,325
-------------------------------------- ------------
TRUCKS & PARTS--0.1%
--------------------------------------
1,900 Cummins Engine Co., Inc. 148,319
-------------------------------------- ------------
</TABLE>
THE STYLE MANAGER: LARGE CAP FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
---------- --------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
--------------------------------------------------------------
WASTE MANAGEMENT--0.9%
---------------------------------------------------
24,300 Browning-Ferris Industries, Inc. $ 924,919
--------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $83,618,762) 104,106,935
--------------------------------------------------- ------------
(B) REPURCHASE AGREEMENT--2.4%
--------------------------------------------------------------
$2,576,249 Credit Suisse First Boston, 6.05%, dated 9/30/1997,
due 10/1/1997 (AT AMORTIZED COST) 2,576,249
--------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $86,195,011)(C) $106,683,184
--------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $86,195,011. The
net unrealized appreciation of investments on a federal tax basis amounts to
$20,488,173 which is comprised of $22,202,146 appreciation and $1,713,973
depreciation at September 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($106,684,527) at September 30, 1997.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
THE STYLE MANAGER FUND
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
The 12-month period ended September 30, 1997 was highlighted by significant
growth in small cap stocks*. Feeling that small cap growth stocks were
particularly overvalued, the fund focused on small cap value stocks for the
majority of 1997. During the 12-month period ended September 30, 1997, small cap
value stocks recorded a total return of 48.9% as measured by the S&P 600 Value
Index**, whereas small cap growth stocks returned only 25.2% as measured by the
S&P 600 Growth Index**. The S&P 600 Index** recorded a total return 37.0% and
the S&P 500 Index returned 40.7% for the 12-month period ended September 30,
1997. During the 12-month period ended September 30, 1997, the fund produced an
average annual total return of 44.01%.***
We continue to focus on small cap value stocks which have demonstrated greater
stability in an investment environment characterized by excessive risk
measures. In general, we believe that small cap value stocks will remain less
volatile than small cap growth stocks over time. Due to our value orientation,
the fund remains positioned in a defensive mode.
- --------
* Small capitalization stocks have historically experienced greater volatility
than average.
** The S&P 600 Index is an unmanaged capitalization weighted index representing
all major industries in the mid-range of the U.S. stock market. The S&P 600
Growth Index and the S&P 600 Value Index are sub- indices of the S&P 600
Index. Investments cannot be made in an index.
*** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
THE STYLE MANAGER FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE STYLE MANAGER FUND.
The graph below illustrates the hypothetical investment of $10,000** in The
Style Manager Fund (the "Fund") from March 7, 1995 (start of performance) to
September 30, 1997, compared to the Standard & Poor's 500 Index ("S&P 500").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX E
AVERAGE ANNUAL TOTAL RETURN*** FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 41.85%
Start of Performance (3/7/95) 28.04
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 3/7/95 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 2.00% contingent deferred sales charge on any
redemption less than five years from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions.
***Total return quoted reflects all applicable contingent deferred sales
charges.
+The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The S&P 500
has been adjusted to reflect reinvestment of dividends on securities in the
index. The index is unmanaged.
THE STYLE MANAGER FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------------------------- -----------
<C> <S> <C>
COMMON STOCKS--98.2%
----------------------------------------
AEROSPACE & DEFENSE--1.2%
-----------------------------
22,200 Orbital Sciences Corp. $ 543,900
-----------------------------
20,100 Trimble Navigation Ltd. 394,463
----------------------------- -----------
Total 938,363
----------------------------- -----------
AIR FREIGHT--0.5%
-----------------------------
27,500 Fritz Companies, Inc. 405,625
----------------------------- -----------
APPAREL--0.7%
-----------------------------
15,500 Kellwood Co. 549,281
----------------------------- -----------
AUTO PARTS & EQUIPMENT--1.3%
-----------------------------
6,700 SPX Corp. 392,788
-----------------------------
15,400 Smith (A.O.) Corp. 610,225
----------------------------- -----------
Total 1,003,013
----------------------------- -----------
BANKING-MAJOR REGIONAL--13.3%
-----------------------------
7,920 Associated Banc Corp. 356,895
-----------------------------
10,043 Bankers Trust New York Corp. 1,230,267
-----------------------------
6,400 CCB Financial Corp. 516,000
-----------------------------
11,900 Central Fidelity Banks, Inc. 526,575
-----------------------------
14,300 Centura Banks, Inc. 787,394
-----------------------------
9,812 Commerce Bancorp, Inc. 381,441
-----------------------------
9,600 Commercial Federal Corp. 452,400
-----------------------------
10,600 Cullen Frost Bankers, Inc. 502,175
-----------------------------
27,200 Deposit Guaranty Corp. 906,100
-----------------------------
11,100 First Commercial Corp. 532,800
-----------------------------
15,500 First Michigan Bank Corp. 641,312
-----------------------------
23,600 Firstmerit Corp. 637,200
-----------------------------
22,650 Keystone Financial, Inc. 855,038
-----------------------------
13,200 Magna Group, Inc. 520,575
-----------------------------
15,400 Riggs National Corp. 362,863
-----------------------------
15,975 Summit Bancorp 709,889
-----------------------------
11,100 Susquehanna Bankshares, Inc. 341,325
----------------------------- -----------
Total 10,260,249
----------------------------- -----------
BUILDING MATERIALS--1.5%
-----------------------------
14,700 Lone Star Industries, Inc. 793,800
-----------------------------
13,400 TJ International, Inc. 342,538
----------------------------- -----------
Total 1,136,338
----------------------------- -----------
CHEMICALS--2.2%
-----------------------------
10,000 Cambrex Corp. 466,250
-----------------------------
12,800 ChemFirst, Inc. 321,600
-----------------------------
14,600 Dexter Corp. 584,912
-----------------------------
</TABLE>
THE STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------ -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-----------------------------------------------
CHEMICALS--CONTINUED
------------------------------------
15,400 Mississippi Chemical Corp. $ 300,300
------------------------------------ -----------
Total 1,673,062
------------------------------------ -----------
COMMERCIAL SERVICES--0.4%
------------------------------------
9,300 Primark Corp. 274,931
------------------------------------ -----------
COMMUNICATION EQUIPMENT--0.7%
------------------------------------
18,800 Allen Telecom, Inc. 535,800
------------------------------------ -----------
COMPUTER SOFTWARE--1.0%
------------------------------------
34,700 Platinum Technology, Inc. 746,050
------------------------------------ -----------
COMPUTERS-PERIPHERAL--1.4%
------------------------------------
31,000 Komag, Inc. 631,625
------------------------------------
17,700 Telxon Corp. 433,650
------------------------------------ -----------
Total 1,065,275
------------------------------------ -----------
COMPUTERS-NETWORKING--0.7%
------------------------------------
28,700 Network Equipment Technologies, Inc. 500,456
------------------------------------ -----------
DEPARTMENT STORES--2.4%
------------------------------------
14,000 Carson Pirie Scott & Co. 552,125
------------------------------------
13,400 Proffitts, Inc. 793,950
------------------------------------
20,400 Shopko Stores, Inc. 530,400
------------------------------------ -----------
Total 1,876,475
------------------------------------ -----------
DISTRIBUTORS-FOOD & HEALTH--0.7%
------------------------------------
20,100 Rykoff Sexton, Inc. 520,088
------------------------------------ -----------
DRUG STORES--0.8%
------------------------------------
22,600 Longs Drug Stores Corp. 603,138
------------------------------------ -----------
ELECTRIC COMPANIES--2.8%
------------------------------------
33,500 Atlantic Energy, Inc. NJ 600,906
------------------------------------
37,179 MidAmerican Energy Holdings Co. 641,338
------------------------------------
13,500 United Illuminating Co. 491,906
------------------------------------
20,500 United Water Resources, Inc. 381,813
------------------------------------ -----------
Total 2,115,963
------------------------------------ -----------
ELECTRICAL EQUIPMENT--0.7%
------------------------------------
29,700 Anixter International, Inc. 510,469
------------------------------------ -----------
ELECTRONICS-DISTRIBUTORS--1.9%
------------------------------------
23,100 Kent Electronics Corp. 912,450
------------------------------------
13,900 Marshall Industries 538,625
------------------------------------ -----------
Total 1,451,075
------------------------------------ -----------
ELECTRONICS-INSTRUMENTS--0.5%
------------------------------------
7,600 John Fluke Manufacturing, Co. 410,400
------------------------------------ -----------
ELECTRONICS-SEMICONDUCTORS--3.0%
------------------------------------
17,500 Cyrix Corp. 586,250
------------------------------------
14,500 Dallas Semiconductor Corp. 648,875
------------------------------------
</TABLE>
THE STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
------------------------------------------------
ELECTRONICS-SEMICONDUCTORS--CONTINUED
-------------------------------------
11,300 Photronic Labs, Inc. $ 684,356
-------------------------------------
16,700 Zilog, Inc. 364,269
------------------------------------- -----------
Total 2,283,750
------------------------------------- -----------
ENTERTAINMENT--0.9%
-------------------------------------
9,900 Carmike Cinemas, Inc., Class A 297,000
-------------------------------------
9,800 GC Cos., Inc. 421,400
------------------------------------- -----------
Total 718,400
------------------------------------- -----------
FOOD CHAINS--0.6%
-------------------------------------
26,400 Ruddick Corp. 425,700
------------------------------------- -----------
FOODS--1.3%
-------------------------------------
33,400 Chiquita Brands International 538,575
-------------------------------------
16,400 Smithfield Foods, Inc. 492,000
------------------------------------- -----------
Total 1,030,575
------------------------------------- -----------
FOOTWEAR--0.8%
-------------------------------------
8,200 Timberland Co., Class A 653,950
------------------------------------- -----------
GAMING & LOTTERY--1.0%
-------------------------------------
28,100 Grand Casinos, Inc. 430,281
-------------------------------------
16,800 Showboat, Inc. 342,300
------------------------------------- -----------
Total 772,581
------------------------------------- -----------
GOLD & PRECIOUS METAL MINES--1.1%
-------------------------------------
32,100 Coeur d'Alene Mines Corp. 523,631
-------------------------------------
16,300 Stillwater Mining Co. 347,394
------------------------------------- -----------
Total 871,025
------------------------------------- -----------
HARDWARE & TOOLS--0.5%
-------------------------------------
9,800 Toro Co. 388,325
------------------------------------- -----------
HEALTHCARE-DIVERSIFIED--0.6%
-------------------------------------
12,700 Sierra Health Services, Inc. 465,138
------------------------------------- -----------
HEALTHCARE-LONG TERM CARE--2.7%
-------------------------------------
18,800 Genesis Health Ventures, Inc. 732,025
-------------------------------------
14,200 Integrated Health Services, Inc. 474,812
-------------------------------------
13,600 Living Centers of America, Inc. 554,200
-------------------------------------
20,700 Mariner Health Group, Inc. 326,025
------------------------------------- -----------
Total 2,087,062
------------------------------------- -----------
HEALTHCARE-MANAGED CARE--0.4%
-------------------------------------
19,500 Coventry Corp. 321,750
------------------------------------- -----------
HOMEBUILDING--1.4%
-------------------------------------
15,093 Fleetwood Enterprises, Inc. 506,559
-------------------------------------
14,800 U.S. Home Corp. 571,650
------------------------------------- -----------
Total 1,078,209
------------------------------------- -----------
</TABLE>
THE STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ---------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------
HOMEFURNISHINGS--1.4%
----------------------------------------
18,800 Fieldcrest Cannon, Inc. $ 648,600
----------------------------------------
8,300 Springs Industries, Inc., Class A 435,750
---------------------------------------- -----------
Total 1,084,350
---------------------------------------- -----------
HOSPITAL MANAGEMENT--1.0%
----------------------------------------
17,000 Universal Health Services, Inc., Class B 735,250
---------------------------------------- -----------
HOTELS--1.4%
----------------------------------------
22,700 Prime Hospitality Corp. 512,169
----------------------------------------
19,300 Marcus Corp. 562,113
---------------------------------------- -----------
Total 1,074,282
---------------------------------------- -----------
HOUSEHOLD FURNITURE & APPLIANCES--1.9%
----------------------------------------
12,900 Bassett Furniture Industries, Inc. 367,650
----------------------------------------
21,400 Ethan Allen Interiors, Inc. 663,400
----------------------------------------
11,100 Kimball International, Inc., Class B 466,200
---------------------------------------- -----------
Total 1,497,250
---------------------------------------- -----------
INSURANCE-LIFE/HEALTH--1.4%
----------------------------------------
9,100 Life Re Corp. 480,025
----------------------------------------
12,500 Protective Life Corp. 631,250
---------------------------------------- -----------
Total 1,111,275
---------------------------------------- -----------
INSURANCE-MULTILINE--0.8%
----------------------------------------
17,800 American Bankers Insurance Group, Inc. 649,700
---------------------------------------- -----------
INSURANCE-PROPERTY--3.9%
----------------------------------------
9,000 Allied Group, Inc. 457,312
----------------------------------------
7,900 Capital Re Corp. 481,900
----------------------------------------
9,200 Enhance Financial Services Group, Inc. 503,700
----------------------------------------
9,500 First American Financial Corp. 570,000
----------------------------------------
13,400 Frontier Insurance Group, Inc. 509,200
----------------------------------------
10,000 Orion Capital Corp. 453,125
---------------------------------------- -----------
Total 2,975,237
---------------------------------------- -----------
INVESTMENT BANKING/BROKERAGE--3.6%
----------------------------------------
7,100 Interra Financial, Inc. 426,444
----------------------------------------
13,467 Legg Mason, Inc. 710,367
----------------------------------------
14,100 Piper Jaffray Cos., Inc. 430,931
----------------------------------------
17,300 Quick & Reilly Group, Inc. 647,669
----------------------------------------
14,800 Raymond James Financial, Inc. 532,800
---------------------------------------- -----------
Total 2,748,211
---------------------------------------- -----------
IRON & STEEL--0.6%
----------------------------------------
12,500 Quanex Corp. 438,281
---------------------------------------- -----------
LEISURE TIME--0.5%
----------------------------------------
14,700 K2, Inc. 369,337
---------------------------------------- -----------
</TABLE>
THE STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- -------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
------------------------------------------------------
MACHINERY & EQUIPMENT--0.4%
--------------------------------------------
16,700 Global Industrial Technologies, Inc. $ 345,481
-------------------------------------------- -----------
MANUFACTURING-DIVERSIFIED--1.6%
--------------------------------------------
21,000 Figgie International Holdings, Inc., Class A 309,750
--------------------------------------------
28,200 Premark International, Inc. 902,400
-------------------------------------------- -----------
Total 1,212,150
-------------------------------------------- -----------
MANUFACTURING-SPECIALIZED--3.9%
--------------------------------------------
11,100 Aptargroup, Inc. 620,906
--------------------------------------------
11,218 Flowserve Corp. 335,138
--------------------------------------------
13,000 Greenfield Industries, Inc. 373,750
--------------------------------------------
14,600 Halter Marine Group, Inc. 706,275
--------------------------------------------
12,300 Ionics, Inc. 545,044
--------------------------------------------
13,300 Regal Beloit Corp. 408,975
-------------------------------------------- -----------
Total 2,990,088
-------------------------------------------- -----------
NATURAL GAS--2.7%
--------------------------------------------
9,800 Eastern Enterprises 365,662
--------------------------------------------
17,300 K N Energy, Inc. 791,475
--------------------------------------------
16,400 Northwest Natural Gas Co. 422,300
--------------------------------------------
18,300 Piedmont Natural Gas, Inc. 532,988
-------------------------------------------- -----------
Total 2,112,425
-------------------------------------------- -----------
OFFICE EQUIPMENT & SUPPLIES--0.5%
--------------------------------------------
11,300 Standard Register 376,431
-------------------------------------------- -----------
OIL & GAS--2.8%
--------------------------------------------
22,300 Camco International, Inc. 1,555,425
--------------------------------------------
25,400 Snyder Oil Corp. 576,263
-------------------------------------------- -----------
Total 2,131,688
-------------------------------------------- -----------
PAPER & FOREST PRODUCTS--1.4%
--------------------------------------------
28,600 Longview Fibre Co. 568,425
--------------------------------------------
10,700 Rayonier, Inc. 517,613
-------------------------------------------- -----------
Total 1,086,038
-------------------------------------------- -----------
PHARMACEUTICALS--0.5%
--------------------------------------------
16,900 Alpharma, Inc., Class A 378,137
--------------------------------------------
2,817 Alpharma, Inc., Rights 15,844
-------------------------------------------- -----------
Total 393,981
-------------------------------------------- -----------
PRINTING & PUBLISHING--0.5%
--------------------------------------------
11,700 Bowne & Co., Inc. 410,962
-------------------------------------------- -----------
PROPERTY--1.7%
--------------------------------------------
10,600 Fremont General Corp. 506,150
--------------------------------------------
9,100 Selective Insurance Group, Inc. 468,650
--------------------------------------------
11,300 Zenith National Insurance Corp. 322,756
-------------------------------------------- -----------
Total 1,297,556
-------------------------------------------- -----------
</TABLE>
THE STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------------------
RESTAURANTS--2.2%
--------------------------------------------------
11,900 IHOP Corp. $ 425,425
--------------------------------------------------
20,300 Landrys Seafood Restaurants, Inc. 596,313
--------------------------------------------------
13,800 Ruby Tuesday, Inc. 351,900
--------------------------------------------------
13,300 ShowBiz Pizza Time, Inc. 305,900
-------------------------------------------------- -----------
Total 1,679,538
-------------------------------------------------- -----------
RETAIL--0.9%
--------------------------------------------------
13,100 Fabri-Centers of America, Class A 302,937
--------------------------------------------------
12,750 Hughes Supply, Inc. 384,891
-------------------------------------------------- -----------
Total 687,828
-------------------------------------------------- -----------
RETAIL-SPECIALTY--2.4%
--------------------------------------------------
14,600 Michaels Stores, Inc. 446,213
--------------------------------------------------
22,200 O'Reilly Automotive, Inc. 505,050
--------------------------------------------------
31,050 Pier 1 Imports, Inc. 556,959
--------------------------------------------------
17,000 Sports Authority, Inc. 316,625
-------------------------------------------------- -----------
Total 1,824,847
-------------------------------------------------- -----------
SAVINGS & LOAN--5.6%
--------------------------------------------------
15,600 Astoria Financial Corp. 784,875
--------------------------------------------------
18,100 Charter One Financial, Inc. 1,070,162
--------------------------------------------------
18,600 Downey Financial Corp. 453,375
--------------------------------------------------
15,100 JSB Financial, Inc. 738,956
--------------------------------------------------
10,900 RCSB Financial, Inc. 594,050
--------------------------------------------------
27,900 St. Paul Bancorp, Inc. 697,500
-------------------------------------------------- -----------
Total 4,338,918
-------------------------------------------------- -----------
SERVICES-COMMERCIAL & CONSUMER--1.7%
--------------------------------------------------
21,700 Cerner Corp. 519,444
--------------------------------------------------
17,000 Franklin Covey Co. 474,937
--------------------------------------------------
14,247 Ogden Corp. 336,585
-------------------------------------------------- -----------
Total 1,330,966
-------------------------------------------------- -----------
SERVICES-COMPUTER SYSTEMS--0.5%
--------------------------------------------------
13,600 BancTec, Inc. 362,100
-------------------------------------------------- -----------
TRUCKERS--2.8%
--------------------------------------------------
22,900 Alexander and Baldwin, Inc. 592,537
--------------------------------------------------
18,100 American Freightways Corp. 343,900
--------------------------------------------------
16,700 Werner Enterprises, Inc. 404,975
--------------------------------------------------
24,000 Yellow Corp. 781,500
-------------------------------------------------- -----------
Total 2,122,912
-------------------------------------------------- -----------
TRUCKS & PARTS--0.6%
--------------------------------------------------
15,600 Wabash National Corp. 451,425
-------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $60,491,069) 75,511,023
-------------------------------------------------- -----------
</TABLE>
THE STYLE MANAGER FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- --------------------------------------------------- -----------
<C> <S> <C>
(A) REPURCHASE AGREEMENT--1.6%
--------------------------------------------------------------
$1,219,266 C.S. First Boston, 6.05%, dated 9/30/1997, due
10/1/1997
(AT AMORTIZED COST) $ 1,219,266
--------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $61,710,335)(B) $76,730,289
--------------------------------------------------- -----------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $61,750,880. The
net unrealized appreciation of investments on a federal tax basis amounts to
$14,979,409 which is comprised of $15,597,054 appreciation and $617,645
depreciation at September 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($76,873,948) at September 30, 1997.
(See Notes which are an integral part of the Financial Statements)
THE VIRGINIA MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
During the last year, interest rates have been relatively calm, but the year
ended with lower yields than were seen at the beginning of the year. Municipal
bonds, in general, outperformed Treasuries during the same period as a lack of
supply and a quieting of tax reform allowed the municipal bond market to gain
strength.
Towards the end of the year, yields on municipal bonds were at their most
attractive level relative to Treasuries at any time in the last three months.
This shift created a buying opportunity especially in the 10 to 15 year maturity
range desirable for this fund. We expect that the supply of municipal bonds will
remain relatively weak through the end of this calendar year and we would expect
municipal bonds to continue to outperform Treasuries during the same period.
Going forward, we expect overall interest rates to remain relatively calm with a
gradual bias toward lower interest rates. We will continue to maintain an
average maturity of about 15 years in an attempt to maximize yield while keeping
risk to changes in interest rates somewhat lower than the average fund.
THE VIRGINIA MUNICIPAL BOND FUND--Investment Shares
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE VIRGINIA MUNICIPAL BOND FUND--INVESTMENT
SHARES.
The graph below illustrates the hypothetical investment of $10,000** in The
Virginia Municipal Bond Fund (the "Fund") from October 24, 1990 (start of
performance) to September 30, 1997, compared to the Lehman Brothers 10 Year
Municipal Bond Index ("LBMBI").+
GRAPHIC REPRESENTATION OMITTED. SEE APPEDIX F
AVERAGE ANNUAL TOTAL RETURN*** FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 5.70%
5 Year 5.73%
Start of Performance (10/24/90) 6.45%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 10/24/90 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. Certain investors
are subject to a 2.00% contingent deferred sales charge on shares redeemed
within five years of purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions.
***Total return quoted reflects all applicable contingent deferred sales
charges.
+The LBMBI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LBMBI has
been adjusted to reflect reinvestment of dividends on securities in the index.
This index is unmanaged.
THE VIRGINIA MUNICIPAL BOND FUND--Trust Shares
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE VIRGINIA MUNICIPAL BOND FUND--TRUST SHARES.
The graph below illustrates the hypothetical investment of $10,000** in The
Virginia Municipal Bond Fund (the "Fund") from October 24, 1990 (start of
performance) to September 30, 1997, compared to the Lehman Brothers 10 Year
Municipal Bond Index ("LBMBI").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX G
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 8.00%
5 Year 5.96%
Start of Performance (10/24/90) 6.62%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 10/24/90 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
+The LBMBI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LBMBI has
been adjusted to reflect reinvestment of dividends on securities in the index.
This index is unmanaged.
THE VIRGINIA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--95.6%
--------------------------------------------------------
VIRGINIA--95.6%
---------------------------------------------
$1,000,000 Albemarle County, VA IDA, Hospital Revenue
Refunding Bonds, 5.75% (Martha Jefferson
Hospital), 10/1/2008 A $ 1,056,730
---------------------------------------------
1,000,000 Arlington County, VA, GO UT Bonds, 5.30%
(Original Issue Yield: 5.40%), 6/1/2011 AAA 1,030,440
---------------------------------------------
3,175,000 Big Stone Gap, VA Redevelopment & Housing
Authority, Correctional Facility Lease
Revenue Bonds, 6.00% (Wallens Ridge
Development Project), 9/1/2007 AA 3,500,247
---------------------------------------------
2,890,000 Chesapeake Bay Bridge & Tunnel District, VA,
Revenue Bonds, 5.875% (FGIC INS)/(Original
Issue Yield: 5.95%), 7/1/2010 AAA 3,116,605
---------------------------------------------
3,500,000 Chesapeake, VA, GO UT Bonds, 5.375% (Commonwealth of Virginia
GTD)/(Original
Issue Yield: 5.45%), 5/1/2010 AA 3,635,870
---------------------------------------------
2,980,000 Chesterfield County, VA, GO UT Bonds, 5.25%,
3/1/2010 AA+ 3,051,550
---------------------------------------------
2,860,000 Commonwealth of Virginia, GO UT Bonds,
5.375%, 6/1/2009 AAA 2,993,905
---------------------------------------------
4,000,000 Commonwealth of Virginia, GO UT Public
Facilities Bonds (Series A), 5.70% (Original
Issue Yield: 5.75%), 6/1/2008 AAA 4,289,720
---------------------------------------------
2,545,000 Danville, VA IDA, Hospital Refunding Revenue Bonds, 6.20% (Danville
Regional Medical Center)/(FGIC INS)/(Original Issue Yield:
6.30%), 10/1/2009 AAA 2,779,395
---------------------------------------------
2,605,000 Fairfax County, VA Sewer Revenue, Revenue
Bonds, 5.625%, 7/15/2011 AA 2,748,197
---------------------------------------------
1,140,000 Fairfax County, VA Sewer Revenue, Sewer
Refunding Revenue Bonds, 5.30% (AMBAC INS),
11/15/2006 AAA 1,197,467
---------------------------------------------
1,505,000 Fairfax County, VA Sewer Revenue, Sewer
Refunding Revenue Bonds, 5.40% (AMBAC INS),
11/15/2007 AAA 1,583,681
---------------------------------------------
Fairfax County, VA Water Authority, 6.00%,
2,000,000 4/1/2022 AA 2,167,290
---------------------------------------------
1,000,000 Fairfax County, VA Water Authority, Revenue
Refunding Bonds, 4.65% (Original Issue Yield:
4.85%), 4/1/2010 AA 977,750
---------------------------------------------
3,500,000 Fairfax County, VA, (Series A), 5.25% (State Aid Withholding
LOC)/(Original Issue Yield:
5.35%), 6/1/2009 AAA 3,627,960
---------------------------------------------
2,000,000 Henrico County, VA IDA, Refunding Revenue Bonds, 5.60% (Bon Secours
Health System)/(MBIA INS)/(Original Issue Yield:
5.65%), 8/15/2010 AAA 2,090,720
---------------------------------------------
600,000 Loudoun County, VA IDA, Lease Revenue Bonds,
5.50% (Northern Virginia Criminal
Justice)/(Original Issue Yield: 5.829%),
6/1/2008 AA- 623,910
---------------------------------------------
1,000,000 Loudoun County, VA, GO UT Refunding Bonds
(Series A), 5.50% (Commonwealth of Virginia
GTD)/(Original Issue Yield: 5.649%),
10/1/2007 AA- 1,061,750
---------------------------------------------
4,440,000 Newport News, VA, GO UT, 5.75%, 1/15/2017 AA- 4,607,743
---------------------------------------------
3,000,000 Norfolk, VA, GO UT Bonds, 5.25% (Commonwealth of Virginia
GTD)/(Original Issue Yield:
5.55%), 6/1/2011 AA 3,052,140
---------------------------------------------
</TABLE>
THE VIRGINIA MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
---------- -------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------------
$2,000,000 Norfolk, VA, GO UT Bonds, 5.70% (MBIA INS), AAA
6/1/2008 $ 2,152,380
--------------------------------------------
2,535,000 Portsmouth, VA, GO UT Bonds, 5.00% (FGIC
INS), 8/1/2011 AAA 2,532,313
--------------------------------------------
3,375,000 Riverside, VA Regional Jail Authority, Jail
Facility Revenue Bonds, 5.625% (MBIA
INS)/(Original Issue Yield: 5.75%), 7/1/2007 AAA 3,638,655
--------------------------------------------
1,185,000 Roanoke, VA IDA, Hospital Revenue Refunding
Bonds (Series B), 6.00% (Roanoke Memorial
Hospital)/(Original Issue Yield: 6.10%),
7/1/2007 AA- 1,260,212
--------------------------------------------
3,510,000 Virginia College Building Authority, Revenue
Bonds, 5.40% (21ST Century College Program),
8/1/2015 AA 3,555,700
--------------------------------------------
7,255,000 Virginia State Public Building Authority,
Revenue Bonds, 5.20% (Original Issue Yield:
5.40%), 8/1/2010 AA 7,366,146
--------------------------------------------
2,030,000 Virginia State Transportation Board, Revenue
Bonds, 6.00% (Northern Virginia
Transportation District)/(Original Issue
Yield: 6.10%), 5/15/2008 AA 2,198,348
--------------------------------------------
1,000,000 Virginia State Transportation Board,
Transportation Contract Revenue Refunding
Bonds, 5.375% (U.S. Route 58 Corridor
PG-A), 5/15/2007 AA 1,048,000
--------------------------------------------
2,325,000 Virginia State University-Virginia
Commonwealth, Revenue Bonds, 5.75% (Original
Issue Yield: 5.827%), 5/1/2021 AA- 2,386,055
-------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $72,293,301) 75,330,879
-------------------------------------------- -----------
MUTUAL FUND ISSUES--3.5%
-------------------------------------------------------
928,302 Goldman Sachs & Co. ILA Tax Exempt 928,302
--------------------------------------------
1,793,570 Municipal Fund for Temporary Investment 1,793,570
-------------------------------------------- -----------
TOTAL MUTUAL FUND ISSUES (AT NET ASSET
VALUE) 2,721,872
-------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST
$75,015,173)(A) $78,052,751
-------------------------------------------- -----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $75,015,173. The
net unrealized appreciation of investments on a federal tax basis amounts to
$3,037,578 which is comprised of $3,041,196 appreciation and $3,618
depreciation at September 30, 1997.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($78,772,564) at September 30, 1997.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation FGIC--Financial Guaranty
Insurance Company GO--General Obligation GTD--Guaranty IDA--Industrial
Development Authority INS--Insured LOC--Letter of Credit MBIA--Municipal Bond
Investors Assurance UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
THE MARYLAND MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
During the last year, interest rates have been relatively calm, but the year
ended with lower yields than were seen at the beginning of the year. Municipal
bonds, in general, outperformed Treasuries during the same period as a lack of
supply and a quieting of tax reform allowed the municipal bond market to gain
strength.
Towards the end of the year, yields on municipal bonds were at their most
attractive level relative to Treasuries at any time in the last three months.
This shift created a buying opportunity especially in the 10 to 15 year maturity
range desirable for this fund. We expect that the supply of municipal bonds will
remain relatively weak through the end of this calendar year and we would expect
municipal bonds to continue to outperform Treasuries during the same period.
Bonds for the Maryland area continue to enjoy good demand, and typically yield 5
to 10 basis points less than similar bonds nationwide.
Going forward, we expect overall interest rates to remain relatively calm with a
gradual bias toward lower interest rates. We will continue to maintain an
average maturity of about 15 years in an attempt to maximize yield while keeping
risk to changes in interest rates somewhat lower than the average fund.
THE MARYLAND MUNICIPAL BOND FUND--Investment Shares
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE MARYLAND MUNICIPAL BOND FUND--INVESTMENT
SHARES.
The graph below illustrates the hypothetical investment of $10,000** in The
Maryland Municipal Bond Fund (the "Fund") from October 30, 1990 (start of
performance) to September 30, 1997, compared to the Lehman Brothers 10 Year
Municipal Bond Index ("LBMBI").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX H
AVERAGE ANNUAL TOTAL RETURN*** FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 4.87%
5 Year 5.33%
Start of Performance (10/30/90) 6.01%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 10/30/90 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. Certain investors
are subject to a 2.00% contingent deferred sales charge on shares redeemed
within five years of purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions.
***Total return quoted reflects all applicable contingent deferred sales
charges.
+The LBMBI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LBMBI has
been adjusted to reflect reinvestment of dividends on securities in the index.
This index is unmanaged.
THE MARYLAND MUNICIPAL BOND FUND--Trust Shares
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN THE MARYLAND MUNICIPAL BOND FUND--TRUST SHARES.
The graph below illustrates the hypothetical investment of $10,000** in The
Maryland Municipal Bond Fund (the "Fund") from October 30, 1990 (start of
performance) to September 30, 1997, compared to the Lehman Brothers 10 Year
Municipal Bond Index ("LBMBI").+
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX I
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1997
1 Year 7.19%
5 Year 5.56%
Start of Performance (10/30/90) 6.18%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Reflects operations of the Fund from the start of performance 10/30/90 through
9/30/97 on a cumulative basis.
**Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
+The LBMBI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LBMBI has
been adjusted to reflect reinvestment of dividends on securities in the index.
This index is unmanaged.
THE MARYLAND MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--91.0%
--------------------------------------------------------
MARYLAND--91.0%
---------------------------------------------
$1,000,000 Baltimore County, MD Revenue Authority,
Revenue Refunding Bonds, 5.25% (Original
Issue Yield: 5.40%), 7/1/2008 A $ 1,038,610
---------------------------------------------
1,000,000 Baltimore, MD, GO UT Bonds (Series A), 5.375%
(AMBAC INS), 10/15/2008 AAA 1,035,650
---------------------------------------------
1,500,000 Calvert County, MD, Pollution Control Revenue
Bonds, 5.55% (Baltimore Gas & Electric
Co.)/(Original Issue Yield: 5.601%),
7/15/2014 A 1,528,065
---------------------------------------------
1,400,000 Carroll County, MD, GO UT, 5.35%, 12/1/2016 AA 1,411,144
---------------------------------------------
1,000,000 Harford County, MD, GO UT, 4.65%, 12/1/2006 AA- 1,012,150
---------------------------------------------
1,430,000 Howard County, MD, GO Refunding Bonds (Series
A), 5.25% (Original Issue Yield: 5.60%),
8/15/2011 AA+ 1,460,416
---------------------------------------------
1,000,000 Maryland Health & Higher Educational Facilities Authority, Refunding
Revenue Bonds, 5.30% (Francis Scott Key Medical Center)/(FGIC
INS)/(Original Issue Yield:
5.40%), 7/1/2008 AAA 1,037,220
---------------------------------------------
1,500,000 Maryland Health & Higher Educational
Facilities Authority, Revenue Bonds, 5.20%
(Frederick Memorial Hospital)/(FGIC
INS)/(Original Issue Yield: 5.30%), 7/1/2008 AAA 1,565,205
---------------------------------------------
1,740,000 Maryland National Capital Park & Planning
Commission, GO UT Bonds, 5.125% (Park
Aquisition & Development-S-2)/
(Original Issue Yield: 5.25%), 7/1/2010 AA 1,773,982
---------------------------------------------
1,470,000 Maryland State Community Development
Administration, Revenue Bonds (Single Family
Program-Fifth Series), 5.40%, 4/1/2008 Aa 1,508,279
---------------------------------------------
1,800,000 Maryland State Stadium Authority, Revenue
Bonds, 5.875% (AMBAC INS), 12/15/2011 AAA 1,927,980
---------------------------------------------
850,000 Maryland State Transportation Authority,
Refunding Revenue Bonds, 5.80% (Original
Issue Yield: 5.90%), 7/1/2006 A+ 927,223
---------------------------------------------
1,000,000 Maryland State, GO UT Bonds, 5.25%, 6/15/2007 AAA 1,054,210
---------------------------------------------
2,500,000 Maryland State, GO UT Bonds, 5.70% (Original
Issue Yield: 5.75%), 3/15/2010 AAA 2,682,875
---------------------------------------------
820,000 Montgomery County, MD, GO UT Refunding Bonds (Series A), 5.75%
(Original Issue Yield:
5.85%), 7/1/2006 AAA 897,146
---------------------------------------------
1,000,000 Ocean City, MD, GO UT Refunding Bonds, 5.50%
(MBIA Insurance Corporation INS), 3/15/2009 AAA 1,046,760
---------------------------------------------
500,000 Prince Georges County, MD, GO UT Bonds, 5.50% (Stormwater
Management)/(Original Issue
Yield: 5.55%), 3/15/2008 AA 524,910
---------------------------------------------
1,435,000 Prince Georges County, MD IDA, Lease Revenue
Bonds, 6.00% (Hyattsville District Court
Facility)/(Original Issue Yield: 6.10%),
7/1/2009 AA 1,590,941
---------------------------------------------
1,425,000 Rockville, MD, GO UT Revenue Refunding Bonds,
4.90% (Original Issue Yield: 5.00%),
4/15/2007 AA+ 1,449,995
---------------------------------------------
</TABLE>
THE MARYLAND MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR CREDIT
SHARES RATING* VALUE
---------- -------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------------
$1,500,000 University of Maryland, System Auxiliary
Facilities & Tuition Revenue Bonds (Series
A), 5.40% (Original Issue Yield: 5.45%),
4/1/2009 AA+ $ 1,573,170
--------------------------------------------
1,600,000 Washington Suburban Sanitation District, MD,
GO UT Bonds, 5.375%, 6/1/2011 AA 1,627,520
--------------------------------------------
1,700,000 Washington Suburban Sanitation District, MD,
GO UT Bonds, 5.50%, 6/1/2010 AA 1,768,781
-------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $29,252,821) 30,442,232
-------------------------------------------- -----------
MUTUAL FUND ISSUES--8.0%
-------------------------------------------------------
1,430,264 Goldman Sachs & Co. 1,430,264
--------------------------------------------
1,243,349 Municipal Fund for Temporary Investment 1,243,349
-------------------------------------------- -----------
TOTAL MUTUAL FUND ISSUES (AT NET ASSET 2,673,613
VALUE) -----------
--------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $33,115,845
$31,926,434)(A) -----------
--------------------------------------------
</TABLE>
At September 30, 1997, 4.7% of the total investments at market value were
subject to alternative minimum tax.
(a) The cost of investments for federal tax purposes amounts to $31,926,434. The
unrealized appreciation of investments on a federal tax basis amounts to
$1,189,411 at September 30, 1997.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($33,468,781) at September 30, 1997.
The following acronym(s) are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
FGIC--Financial Guaranty Insurance Company
GO--General Obligation
IDA--Industrial Development Authority
INS--Insured
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
THE TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------------------------------------------ ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--52.6%
------------------------------------------------------------
U.S. TREASURY BILL--15.7%
------------------------------------------------
$50,000,000 10/16/1997 $ 49,906,604
------------------------------------------------
------------
------------
U.S. TREASURY NOTES--36.9%
------------------------------------------------
12,000,000 5/125%, 4/30/1998 11,935,655
------------------------------------------------
31,000,000 5.625% - 5.750%, 10/31/1997 31,002,067
------------------------------------------------
15,000,000 6.125%, 5/15/1998 15,031,852
------------------------------------------------
8,000,000 6.125%, 8/31/1998 8,024,535
------------------------------------------------
3,000,000 6.250%, 7/31/1998 3,014,931
------------------------------------------------
27,000,000 7.875%, 1/15/1998 27,168,155
------------------------------------------------
7,000,000 8.250%, 7/15/1998 7,135,850
------------------------------------------------
14,000,000 8.750%, 10/15/1997 14,016,352
------------------------------------------------
------------
Total 117,329,397
------------------------------------------------
------------
TOTAL U.S. TREASURY OBLIGATIONS 167,236,001
------------------------------------------------ ------------
(A) REPURCHASE AGREEMENTS--47.0%
------------------------------------------------------------
40,000,000 CS First Boston, 6.050%, dated 9/30/1997, due
10/1/1997 40,000,000
------------------------------------------------
40,000,000 Merrill Lynch, Pierce, Fenner and Smith, 6.050%,
dated
9/30/1997, due 10/1/1997 40,000,000
------------------------------------------------
29,310,947 Prudential Securities, Inc., 6.050%, dated
9/30/1997, due 10/1/1997 29,310,947
------------------------------------------------
40,000,000 Smith Barney, Inc., 6.000%, dated 9/30/1997, due
10/1/1997 40,000,000
------------------------------------------------
------------
TOTAL REPURCHASE AGREEMENTS 149,310,947
------------------------------------------------ ------------
------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $316,546,948
------------------------------------------------ ------------
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S. Treasury and/or
agency obligations based on market prices at the date of the portfolio.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($317,749,268) at September 30, 1997.
(See Notes which are an integral part of the Financial Statements)
THE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------------------------------------------- ------------
<C> <S> <C>
(A) COMMERCIAL PAPER--55.0%
---------------------------------------------------------------
ASSET BACKED--12.7%
---------------------------------------------------
$ 7,000,000 Ascot Capital Corp., 5.621%, 12/5/1997 $ 6,929,981
---------------------------------------------------
10,000,000 Centre Square Funding, 5.574%, 10/20/1997 9,970,708
---------------------------------------------------
Fleet Funding Corp., 5.557%-5.578%, 10/6/1997-
6,000,000 10/10/1997 5,994,168
---------------------------------------------------
8,000,000 Sigma Finance, 5.697%-5.716%, 2/2/1998-2/27/1998 7,827,485
--------------------------------------------------- ------------
Total 30,722,342
--------------------------------------------------- ------------
BANKING-FINANCE--2.5%
---------------------------------------------------
3,000,000 Banc One Funding Corp., 5.605%, 12/12/1997 2,966,820
---------------------------------------------------
3,000,000 Credit Suisse First Boston, 5.691%, 1/16/1998 2,950,691
--------------------------------------------------- ------------
Total 5,917,511
--------------------------------------------------- ------------
COMMERCIAL SERVICES--1.5%
---------------------------------------------------
3,600,000 McGraw-Hill Cos., Inc., 5.565%, 10/7/1997 3,596,700
--------------------------------------------------- ------------
CONSUMER NON-DURABLES--2.9%
---------------------------------------------------
Campbell Soup Co., 5.476%-5.688%, 11/18/1997-
7,000,000 4/17/1998 6,904,653
--------------------------------------------------- ------------
FINANCE-AUTOMOTIVE--1.2%
---------------------------------------------------
Ford Motor Credit Corp., 5.725%-5.857%, 10/27/1997-
3,000,000 4/13/1998 2,962,196
--------------------------------------------------- ------------
FINANCE-RETAIL--2.9%
---------------------------------------------------
7,000,000 Xerox Credit Corp., 5.493%-5.495%, 11/5/1997 6,964,067
--------------------------------------------------- ------------
FINANCE-LEASING--3.3%
---------------------------------------------------
Pitney Bowes Credit Corp., 5.679%-5.837%,
8,000,000 10/2/1997-1/9/1998 7,922,860
--------------------------------------------------- ------------
FINANCIAL SERVICES--14.8%
---------------------------------------------------
2,000,000 American General Finance Corp., 5.780%, 6/9/1998 1,922,748
---------------------------------------------------
General Electric Capital Corp., 5.761%-5.813%,
8,000,000 5/6/1998-6/9/1998 7,700,036
---------------------------------------------------
2,000,000 Marsh & McLennan Cos., Inc., 5.597%, 12/18/1997 1,976,167
---------------------------------------------------
Merrill Lynch & Co., Inc., 5.741%-5.981%, 1/5/1998-
11,640,000 4/13/1998 11,379,917
---------------------------------------------------
5,000,000 Republic New York Corp., 5.654%, 3/27/1998 4,864,792
---------------------------------------------------
Smith Barney, Inc., 5.560%-5.564%, 10/10/1997-
8,000,000 11/17/1997 7,960,030
--------------------------------------------------- ------------
Total 35,803,690
--------------------------------------------------- ------------
HEALTH SERVICES--4.1%
---------------------------------------------------
10,000,000 Schering Corp., 5.813%-5.822%, 10/7/1997-12/2/1997 9,946,639
--------------------------------------------------- ------------
PROCESS INDUSTRIES--2.5%
---------------------------------------------------
Du Pont (E.I.) de Nemours & Co., 5.847%-5.890%,
6,000,000 10/28/1997 5,974,350
--------------------------------------------------- ------------
PRODUCER MANUFACTURING--1.2%
---------------------------------------------------
3,000,000 Xerox Corp., 5.579%, 10/15/1997 2,993,583
--------------------------------------------------- ------------
</TABLE>
THE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
----------- --------------------------------------------------- ------------
<C> <S> <C>
(A) COMMERCIAL PAPER--CONTINUED
---------------------------------------------------------------
UTILITIES--5.4%
---------------------------------------------------
Southern California Edison Co., 5.604%-5.665%,
$ 8,000,000 10/17/1997-11/14/1997 $ 7,967,456
---------------------------------------------------
5,000,000 Virginia Electric Power Co., 9.375%, 6/1/1998 5,105,256
--------------------------------------------------- ------------
Total 13,072,712
--------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 132,781,303
--------------------------------------------------- ------------
CORPORATE BONDS--12.2%
---------------------------------------------------------------
BANKING-FINANCE--4.5%
---------------------------------------------------
Associates Corp. of North America, 8.375%,
4,000,000 1/15/1998 4,026,490
---------------------------------------------------
900,000 CIT Group Holdings, Inc., 6.750%, 4/30/1998 901,848
---------------------------------------------------
4,000,000 NationsBank Corp., 6.625%, 1/15/1998 4,007,304
---------------------------------------------------
2,000,000 Norwest Financial, Inc., 8.500%, 8/15/1998 2,042,512
--------------------------------------------------- ------------
Total 10,978,154
--------------------------------------------------- ------------
FINANCE-LEASING--3.2%
---------------------------------------------------
3,000,000 International Lease Finance Corp., 5.609%, 1/5/1998 2,956,160
---------------------------------------------------
International Lease Finance Corp., 8.125%,
4,760,000 1/15/1998 4,789,290
--------------------------------------------------- ------------
Total 7,745,450
--------------------------------------------------- ------------
FINANCIAL SERVICES--2.1%
---------------------------------------------------
5,000,000 American General Finance Corp., 8.250%, 1/15/1998 5,032,656
--------------------------------------------------- ------------
OIL/GAS--0.2%
---------------------------------------------------
500,000 Texaco Capital, Inc., 9.000%, 11/15/1997 501,886
--------------------------------------------------- ------------
PROCESS INDUSTRIES--0.8%
---------------------------------------------------
1,925,000 Du Pont (E.I.) de Nemours & Co., 8.650%, 12/1/1997 1,933,167
--------------------------------------------------- ------------
RESTAURANT/FOOD SERVICE--1.4%
---------------------------------------------------
3,238,000 PepsiCo, Inc., 6.125%, 1/15/1998 3,241,451
--------------------------------------------------- ------------
TOTAL CORPORATE BONDS 29,432,764
--------------------------------------------------- ------------
CORPORATE NOTES--2.2%
---------------------------------------------------------------
BANKING-FINANCE--1.3%
---------------------------------------------------
3,000,000 CIT Group Holdings, Inc., 6.500%, 7/13/1998 3,016,257
--------------------------------------------------- ------------
ELECTRONIC TECHNOLOGY--0.9%
---------------------------------------------------
2,250,000 Rockwell International Corp., 7.625%, 2/17/1998 2,264,006
--------------------------------------------------- ------------
TOTAL CORPORATE NOTES 5,280,263
--------------------------------------------------- ------------
GOVERNMENT AGENCIES--23.7%
---------------------------------------------------------------
(b)Federal National Mortgage Association, 5.360%,
2,000,000 12/14/1998 2,000,382
---------------------------------------------------
55,250,000 (b)Student Loan Marketing Association, 5.220%-
5.410%, 10/30/1997-3/7/2001 55,262,286
--------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES 57,262,668
--------------------------------------------------- ------------
</TABLE>
THE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------------------------------------ ------------
<C> <S> <C>
(C) REPURCHASE AGREEMENT--6.8%
------------------------------------------------------
Prudential Securities, Inc., 6.050%, dated
$16,490,289 9/30/1997, due 10/1/1997 $ 16,490,289
------------------------------------------ ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(D) $241,247,287
------------------------------------------ ------------
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
(b) Current rate and next reset date shown.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($241,510,750) at September 30, 1997.
(See Notes which are an integral part of the Financial Statements)
THE TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.2%
--------------------------------------------------------
ALABAMA--4.4%
---------------------------------------------
$2,500,000 Columbia, AL IDB , PCR (Series C) Daily VRDNs
(Alabama Power Co.) A $ 2,500,000
--------------------------------------------- -----------
ALASKA--5.2%
---------------------------------------------
3,000,000 Alaska State Housing Finance Corp., Revenue
Bonds (Series 1991C) Weekly VRDNs (Swiss Bank
Capital Markets SPA) AAA 3,000,000
--------------------------------------------- -----------
ARIZONA--3.5%
---------------------------------------------
2,000,000 Arizona Health Facilities Authority, Pooled
Loan Program Revenue Bonds (Series 1985B)
Weekly VRDNs (FGIC INS)/(Chase Manhattan Bank
N.A., New York LIQ) AAA 2,000,000
--------------------------------------------- -----------
FLORIDA--5.7%
---------------------------------------------
3,290,000 Putnam County, FL Development Authority, PCR Bonds (Series 1984H)
Weekly VRDNs (Seminole Electric Cooperative, Inc (FL))/(National
Rural Utilities Cooperative Finance Corp.
LOC) AA- 3,290,000
--------------------------------------------- -----------
GEORGIA--12.6%
---------------------------------------------
2,000,000 Burke County, GA Development Authority, PCR
Bonds Daily VRDNs (Georgia Power Company
Plant Vogtle) A+ 2,000,000
---------------------------------------------
2,700,000 Gwinnett County, GA School District, GO UT
Refunding Bonds, 4.40% Bonds, 2/1/1998 AA+ 2,707,489
---------------------------------------------
1,500,000 Monroe County, GA Development Authority IDRB,
PCR Refunding Bonds (Series 2) Daily VRDNs
(Gulf Power Co.) A+ 1,500,000
---------------------------------------------
1,000,000 Putnam County, GA Development Authority Daily
VRDNs (Georgia Power Co.) A+ 1,000,000
--------------------------------------------- -----------
Total 7,207,489
--------------------------------------------- -----------
MARYLAND--8.3%
---------------------------------------------
1,000,000 Anne Arundel County, MD, GO UT, 4.00% Bonds,
4/1/1998 AA+ 1,001,229
---------------------------------------------
1,750,000 Baltimore County, MD Metropolitan District,
GO UT (65th Series), 5.00% Bonds, 6/1/1998 AAA 1,764,110
---------------------------------------------
2,000,000 Maryland Health & Higher Educational
Facilities Authority, Revenue Bonds Weekly
VRDNs (Greater Baltimore Medical
Center)/(First National Bank of Maryland,
Baltimore LOC) A1 2,000,000
--------------------------------------------- -----------
Total 4,765,339
--------------------------------------------- -----------
MASSACHUSETTS--4.4%
---------------------------------------------
2,500,000 Massachusetts IFA, (Series 1992A) Weekly
VRDNs (Ogden Haverhill)/(Union Bank of
Switzerland, Zurich LOC) AA+ 2,500,000
--------------------------------------------- -----------
MINNESOTA--0.7%
---------------------------------------------
400,000 Beltrami County, MN, Environmental Control
Authority Daily VRDNs (Northwood Panelboard
Co.)/(Union Bank of Switzerland, Zurich LOC) AA+ 400,000
--------------------------------------------- -----------
</TABLE>
THE TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
--------------------------------------------------------
NEW YORK--10.3%
---------------------------------------------
$1,000,000 New York City Municipal Water Finance
Authority, Water and Sewer System Revenue
Bonds (Series 1995 A) Daily VRDNs (FGIC
INS)/(FGIC Securities Purchase, Inc. LIQ) AAA $ 1,000,000
---------------------------------------------
1,000,000 New York City, NY Daily VRDNs (AMBAC INS) AAA 1,000,000
---------------------------------------------
900,000 New York City, NY Daily VRDNs (Morgan
Guaranty Trust Co., New York LOC) AAA 900,000
---------------------------------------------
100,000 New York City, NY, (Subseries B-4) Daily
VRDNs AA+ 100,000
---------------------------------------------
400,000 New York City, NY, GO Bonds Series-B Daily
VRDNs (FGIC INS)/(FGIC Securities Purchase,
Inc. LIQ) AAA 400,000
---------------------------------------------
500,000 New York City, NY, Series B Daily VRDNs (FGIC
INS)/(FGIC Securities Purchase, Inc. LIQ) AAA 500,000
---------------------------------------------
2,000,000 New York City, NY, Subseries A-10 Daily VRDNs AAA 2,000,000
--------------------------------------------- -----------
Total 5,900,000
--------------------------------------------- -----------
OHIO--6.8%
---------------------------------------------
1,900,000 Clermont County, OH , Revenue Bonds (Series
B) Weekly VRDNs (Mercy Health Systems) AA- 1,900,000
---------------------------------------------
2,000,000 Ohio State Air Quality Development Authority, Revenue Bonds (Series
B) Daily VRDNs (Cincinnati Gas and Electric Co.)/(J.P.
Morgan Delaware, Wilmington LOC) AAA 2,000,000
--------------------------------------------- -----------
Total 3,900,000
--------------------------------------------- -----------
PENNSYLVANIA--3.5%
---------------------------------------------
2,000,000 Allegheny County, PA HDA, (Series 1990 A)
Daily VRDNs (Presbyterian University
Hospital)/(MBIA Insurance Corporation
INS)/(PNC Bank, N.A. LIQ) AAA 2,000,000
--------------------------------------------- -----------
TEXAS--6.1%
---------------------------------------------
1,500,000 Lower Neches Valley, TX, Refunding Revenue Bonds, 3.75% TOBs
(Chevron U.S.A., Inc.)
2/16/1998 AA 1,500,000
---------------------------------------------
2,000,000 Sabine River Authority, TX , PCR Bonds
(Series B) Daily VRDNs (Texas Utilities
Electric Co.)/(Union Bank of Switzerland,
Zurich LOC) AA+ 2,000,000
--------------------------------------------- -----------
Total 3,500,000
--------------------------------------------- -----------
VIRGINIA--26.0%
---------------------------------------------
2,200,000 Fairfax County, VA IDA, Refunding Revenue
Bonds (Series A) Weekly VRDNs (Fairfax
Hospital System) AA 2,200,000
---------------------------------------------
2,000,000 Fairfax County, VA, GO UT (Series A), 5.50%
Bonds, 6/1/1998 AAA 2,022,729
---------------------------------------------
2,215,000 Loudoun County, VA, GO UT (Series A), 4.375%
Bonds, 8/1/1998 AA- 2,226,345
---------------------------------------------
965,000 Richmond, VA Public Utility, Series A, 8.00%
Bonds (United States Treasury PRF), 1/15/1998
(@102) AAA 996,204
---------------------------------------------
1,400,000 Virginia College Building Authority Weekly
VRDNs (University of Richmond)/(Crestar Bank
of Virginia, Richmond SA) Aa2 1,400,000
---------------------------------------------
</TABLE>
THE TAX-FREE MONEY MARKET FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
--------------------------------------------------------
$2,000,000 Virginia State Housing Development Authority,
(Series C), 3.80% TOBs, Mandatory Tender
6/10/1998 AA+ $ 1,999,173
---------------------------------------------
500,000 Virginia State Public Building Authority,
(Series A), 3.90% Bonds, 8/1/1998 AA 500,192
---------------------------------------------
1,500,000 Virginia State Public School Authority,
Series A, 6.00% Bonds, 1/1/1998 AA 1,508,956
---------------------------------------------
2,000,000 Virginia State Transportation Board, 7.70%
Bonds (Route 28 Project)/(United States
Treasury PRF), 3/1/1998 (@102) AAA 2,072,480
--------------------------------------------- -----------
Total 14,926,079
--------------------------------------------- -----------
WYOMING--1.7%
---------------------------------------------
1,000,000 Lincoln County, WY, Revenue Bonds Daily VRDNs
(Exxon Corp.) AA 1,000,000
--------------------------------------------- -----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 56,888,907
--------------------------------------------- -----------
MUTUAL FUND ISSUES--0.4%
--------------------------------------------------------
247,772 Goldman Sachs & Co. (AT NET ASSET VALUE) 247,772
--------------------------------------------- -----------
TOTAL INVESTMENTS (AT AMORTIZED COST AND NET
ASSET VALUE)(A) $57,136,679
--------------------------------------------- -----------
</TABLE>
(a) Also represents cost for federal tax purposes.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($57,369,580) at September 30, 1997.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation FGIC--Financial Guaranty
Insurance Company GO--General Obligation HDA--Hospital Development Authority
IDA--Industrial Development Authority IDB--Industrial Development Bond
IDRB--Industrial Development Revenue Bond IFA--Industrial Finance Authority
INS--Insured LIQ--Liquidity Agreement LOC--Letter of Credit MBIA--Municipal Bond
Investors Assurance PCR--Pollution Control Revenue PRF--Prerefunded SA--Support
Agreement SPA--Standby Purchase Agreement TOBs--Tender Option Bonds
UT--Unlimited Tax VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE U.S. THE STYLE THE THE
GOVERNMENT MANAGER: THE STYLE VIRGINIA MARYLAND
SECURITIES LARGE CAP MANAGER MUNICIPAL MUNICIPAL
FUND FUND FUND BOND FUND BOND FUND
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in
repurchase agreements $ 460,430 $ 2,576,249 $ 1,219,266 $ -- $ --
Investments in
securities 155,643,026 104,106,935 75,511,023 78,052,751 33,115,845
- ------------------------------------------------------------------------------------------
Total investments in
securities, at value $156,103,456 $106,683,184 $76,730,289 $78,052,751 $33,115,845
- ------------------------------------------------------------------------------------------
Cash -- 446 -- -- --
Income receivable 1,935,302 128,141 96,421 1,121,169 438,320
Receivable for shares
sold 117,229 57,067 275,041 37,019 200
Deferred expenses -- -- 9,103 -- --
- ------------------------------------------------------------------------------------------
Total assets 158,155,987 106,868,838 77,110,854 79,210,939 33,554,365
- ------------------------------------------------------------------------------------------
LIABILITIES:
Payable for shares
redeemed 249,193 87,484 187,792 238,933 13,519
Income distribution
payable 362,543 -- -- 105,709 33,929
Payable to Bank 3,989 -- -- -- --
Accrued expenses 115,182 96,827 49,114 93,733 38,136
- ------------------------------------------------------------------------------------------
Total liabilities 730,907 184,311 236,906 438,375 85,584
- ------------------------------------------------------------------------------------------
TOTAL NET ASSETS $157,425,080 $106,684,527 $76,873,948 $78,772,564 $33,468,781
- ------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in capital $174,339,274 $ 69,922,418 $48,156,564 $75,912,084 $32,631,102
Net unrealized
appreciation of
investments 1,195,308 20,488,173 15,019,954 3,037,578 1,189,411
Accumulated net realized
gain (loss) on
investments (18,155,068) 16,158,724 13,635,635 (177,098) (351,732)
Accumulated
undistributed net
investment income 45,566 115,212 61,795 -- --
- ------------------------------------------------------------------------------------------
TOTAL NET ASSETS $157,425,080 $106,684,527 $76,873,948 $78,772,564 $33,468,781
- ------------------------------------------------------------------------------------------
NET ASSETS:
Trust Shares $ 52,177,289 $ 26,611,481 $ -- $19,891,348 $ 5,682,750
Investment Shares 105,247,791 80,073,046 76,873,948 58,881,216 27,786,031
- ------------------------------------------------------------------------------------------
Total $157,425,080 $106,684,527 $76,873,948 $78,772,564 $33,468,781
- ------------------------------------------------------------------------------------------
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Trust Shares $9.95 $16.31 -- $11.07 $10.91
Investment Shares $9.95 $16.31 $15.37 $11.07 $10.91
- ------------------------------------------------------------------------------------------
REDEMPTION PROCEEDS PER
SHARE*
Trust Shares $9.95 $16.31 -- $11.07 $10.91
Investment Shares** $9.75 $15.98 $15.06 $10.85 $10.69
- ------------------------------------------------------------------------------------------
SHARES OUTSTANDING
Trust Shares 5,246,259 1,632,012 -- 1,797,148 521,087
Investment Shares 10,582,280 4,910,713 5,002,112 5,319,803 2,547,851
- ------------------------------------------------------------------------------------------
Total Shares Outstanding 15,828,539 6,542,725 5,002,112 7,116,951 3,068,938
- ------------------------------------------------------------------------------------------
Investments, at
identified cost $154,908,148 $ 86,195,011 $61,710,335 $75,015,173 $31,926,434
- ------------------------------------------------------------------------------------------
Investments, at tax cost $154,908,148 $ 86,195,011 $61,750,880 $75,015,173 $31,926,434
- ------------------------------------------------------------------------------------------
</TABLE>
*See "Redeeming Shares" in the Prospectus.
**Computation of redemption proceeds per share: 98/100 of net asset value.
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE TREASURY THE TAX-FREE
MONEY THE MONEY MONEY
MARKET FUND MARKET FUND MARKET FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in repurchase agreements $149,310,947 $ 16,490,289 $ --
Investments in securities 167,236,001 224,756,998 57,136,679
- -------------------------------------------------------------------------------
Total investments in securities, at
value 316,546,948 241,247,287 57,136,679
- -------------------------------------------------------------------------------
Income receivable 2,578,221 1,133,016 371,750
Receivable for shares sold 3,106 11,582 69,301
Deferred expenses -- -- 4,692
- -------------------------------------------------------------------------------
Total assets 319,128,275 242,391,885 57,582,422
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for shares redeemed 206,703 66,719 6,000
Income distribution payable 930,196 602,201 135,472
Payable to Bank -- 67,897 --
Accrued expenses 242,108 144,318 71,370
- -------------------------------------------------------------------------------
Total liabilities 1,379,007 881,135 212,842
- -------------------------------------------------------------------------------
TOTAL NET ASSETS $317,749,268 $241,510,750 $57,369,580
- -------------------------------------------------------------------------------
NET ASSETS:
Trust Shares $196,450,150 $164,290,280 $ --
Investment Shares 121,299,118 77,220,470 57,369,580
- -------------------------------------------------------------------------------
TOTAL NET ASSETS $317,749,268 $241,510,750 $57,369,580
- -------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PROCEEDS
PER SHARE
Trust Shares $1.00 $1.00 --
Investment Shares $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------
SHARES OUTSTANDING
Trust Shares 196,450,150 164,290,280 --
Investment Shares 121,466,050 77,220,470 57,369,580
- -------------------------------------------------------------------------------
Total Shares Outstanding 317,916,200 241,510,750 57,369,580
- -------------------------------------------------------------------------------
Investments, at amortized cost and net
asset value $316,546,948 $241,247,287 $57,136,679
- -------------------------------------------------------------------------------
Investments, at tax cost $316,546,948 $241,247,287 $57,136,679
- -------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE U.S. THE STYLE THE
GOVERNMENT MANAGER: THE STYLE THE VIRGINIA MARYLAND
SECURITIES LARGE CAP MANAGER MUNICIPAL MUNICIPAL
FUND FUND FUND BOND FUND BOND FUND
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ 2,280,851 $ 1,853,994 $ -- $ --
Interest 12,930,324 109,465 110,776 4,537,516 1,875,016
- --------------------------------------------------------------------------------------
Total income 12,930,324 2,390,316 1,964,770 4,537,516 1,875,016
- --------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 1,325,841 749,609 830,673 650,276 273,851
Administrative personnel
and services fee 172,113 97,360 75,125 84,421 75,000
Custodian fees 46,191 47,362 31,329 28,448 12,079
Transfer and dividend
disbursing agent fees
and expenses 132,824 198,044 64,733 80,614 60,084
Directors'/Trustees'
fees 3,071 3,593 2,496 2,754 2,202
Auditing fees 15,412 18,571 12,506 14,195 14,018
Legal fees 2,633 12,728 1,920 2,436 19
Portfolio accounting
fees 58,744 59,472 38,520 62,576 55,277
Distribution services
fee--
Investment Shares 279,386 175,775 -- 158,225 73,620
Share registration costs 15,210 26,705 11,764 15,011 9,626
Printing and postage 14,918 15,397 26,489 12,992 20,995
Insurance premiums 4,006 6,951 2,903 2,092 2,368
Miscellaneous 5,441 7,121 11,563 3,681 14
- --------------------------------------------------------------------------------------
Total expenses 2,075,790 1,418,688 1,110,021 1,117,721 599,153
Waivers--
Waiver of investment
advisory fee 37,709 -- 326,846 -- --
- --------------------------------------------------------------------------------------
Net expenses 2,038,081 1,418,688 783,175 1,117,721 599,153
- --------------------------------------------------------------------------------------
Net investment income 10,892,243 971,628 1,181,595 3,419,795 1,275,863
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss)
on investments (3,831,048) 16,227,730 13,831,352 579,805 163,436
Change in unrealized
appreciation
of investments 4,711,022 14,347,096 9,985,998 2,442,760 982,703
- --------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments 879,974 30,574,826 23,817,350 3,022,565 1,146,139
- --------------------------------------------------------------------------------------
Change in net assets
resulting from
operations $11,772,217 $31,546,454 $24,998,945 $ 6,442,360 $2,422,002
- --------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE TAX-
THE TREASURY FREE
MONEY THE MONEY MONEY
MARKET FUND MARKET FUND MARKET FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $20,757,671 $13,828,345 $2,158,617
- ------------------------------------------------------------------------------
Total income 20,757,671 13,828,345 2,158,617
- ------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 1,897,464 1,250,019 302,027
Administrative personnel and services
fee 369,581 243,450 75,171
Custodian fees 120,115 74,934 34,273
Transfer and dividend disbursing agent
fees and expenses 240,905 123,295 44,277
Directors'/Trustees' fees 5,057 3,656 3,408
Auditing fees 20,051 16,000 16,613
Legal fees 412 4,687 2,434
Portfolio accounting fees 109,149 75,599 46,105
Distribution services fee--Investment
Shares 331,053 206,038 --
Share registration costs 18,320 24,568 12,242
Printing and postage 26,923 28,499 23,513
Insurance premiums 4,988 6,662 2,870
Miscellaneous 2,993 8,156 6,815
- ------------------------------------------------------------------------------
Total expenses 3,147,011 2,065,563 569,748
Waivers and Reimbursements--
Waiver of investment advisory fee (46,840) (57,472) (94,455)
Reimbursements of other operating
expenses (4,897) -- --
- ------------------------------------------------------------------------------
Total waivers and reimbursements (51,737) (57,472) (94,455)
- ------------------------------------------------------------------------------
Net expenses 3,095,274 2,008,091 475,293
- ------------------------------------------------------------------------------
Net investment income 17,662,397 11,820,254 1,683,324
- ------------------------------------------------------------------------------
Change in net assets resulting
from operations $17,662,397 $11,820,254 $1,683,324
- ------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT THE STYLE MANAGER:
SECURITIES FUND LARGE CAP FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income $ 10,892,243 $ 13,381,466 $ 971,628 $ 1,995,250
Net realized gain (loss)
on investments (3,831,048) (3,219,621) 16,227,730 12,982,465
Net change in unrealized
appreciation
(depreciation) of
investments 4,711,022 (2,011,452) 14,347,096 (2,926,184)
- -------------------------------------------------------------------------------------
Change in net assets
resulting from operations 11,772,217 8,150,393 31,546,454 12,051,531
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS-- Distributions from net investment income:
Trust Shares (4,109,350) (6,107,288) (350,276) (926,390)
Investment Shares (6,782,893) (7,274,178) (656,481) (1,026,148)
Distributions from net realized gains:
Trust Shares -- -- (4,272,531) (3,898,915)
Investment Shares -- -- (7,971,845) (3,989,082)
- -------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (10,892,243) (13,381,466) (13,251,133) (9,840,535)
- -------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of
shares 22,960,997 46,455,480 17,201,667 18,263,662
Shares issued in
connection with the
acquisition -- -- 1,509,197 9,245,450
Net asset value of
shares issued to
shareholders in payment
of
distributions declared 5,396,173 6,142,681 9,353,220 5,478,249
Cost of shares redeemed (67,228,310) (68,163,717) (33,248,877) (31,477,651)
- -------------------------------------------------------------------------------------
Change in net assets
resulting from share
transactions (38,871,140) (15,565,556) (5,184,793) 1,509,710
- -------------------------------------------------------------------------------------
Change in net assets (37,991,166) (20,796,629) 13,110,528 3,720,706
NET ASSETS:
Beginning of period 195,416,246 216,212,875 93,573,999 89,853,293
- -------------------------------------------------------------------------------------
End of period $157,425,080 $195,416,246 $106,684,527 $ 93,573,999
- -------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period $ 45,566 $ 45,566 $ 115,212 $ 150,341
- -------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE VIRGINIA MUNICIPAL
THE STYLE MANAGER FUND BOND FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income $ 1,181,595 $ 1,728,218 $ 3,419,795 $ 3,919,914
Net realized gain (loss)
on investments 13,831,352 4,542,510 579,805 780,289
Net change in unrealized
appreciation
(depreciation) of
investments 9,985,998 (119,759) 2,442,760 (2,101,082)
- -------------------------------------------------------------------------------------
Change in net assets
resulting
from operations 24,998,945 6,150,969 6,442,360 2,599,121
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS-- Distributions from net investment income:
Trust Shares -- -- (965,706) (1,287,834)
Investment Shares (1,233,260) (1,638,472) (2,454,089) (2,632,080)
Distributions from net realized gains:
Trust Shares -- -- -- --
Investment Shares (3,328,990) (8,143,290) -- --
- -------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (4,562,250) (9,781,762) (3,419,795) (3,919,914)
- -------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of
shares 40,136,505 16,506,045 6,840,095 16,125,700
Net asset value of
shares issued to
shareholders in payment
of
distributions declared 4,503,897 9,243,789 1,888,518 1,997,026
Cost of shares redeemed (50,985,728) (37,724,499) (26,788,539) (27,234,673)
- -------------------------------------------------------------------------------------
Change in net assets
resulting
from share
transactions (6,345,326) (11,974,665) (18,059,926) (9,111,947)
- -------------------------------------------------------------------------------------
Change in net assets 14,091,369 (15,605,458) (15,037,361) (10,432,740)
NET ASSETS:
Beginning of period 62,782,579 78,388,037 93,809,925 104,242,665
- -------------------------------------------------------------------------------------
End of period $ 76,873,948 $ 62,782,579 $ 78,772,564 $ 93,809,925
- -------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period $ 61,795 $ 113,460 $ -- $ --
- -------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE MARYLAND MUNICIPAL THE TREASURY
BOND FUND MONEY MARKET FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income $ 1,275,863 $ 1,527,863 $ 17,662,397 $ 16,209,478
Net realized gain
(loss) on investments 163,436 186,173 -- --
Net change in
unrealized
appreciation
(depreciation) of
investments 982,703 (739,639) -- --
- --------------------------------------------------------------------------------------
Change in net assets
resulting
from operations 2,422,002 974,397 17,662,397 16,209,478
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net investment income:
Trust Shares (261,815) (352,284) (11,714,695) (11,356,506)
Investment Shares (1,015,074) (1,175,552) (5,947,702) (4,852,972)
- --------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (1,276,889) (1,527,836) (17,662,397) (16,209,478)
- --------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of
shares 2,708,043 8,364,014 723,861,521 659,743,838
Shares issued in
connection with the
acquisition -- -- -- 122,108,127
Net asset value of
shares issued to
shareholders in
payment of
distributions declared 770,265 989,879 5,621,031 4,898,441
Cost of shares redeemed (11,327,459) (10,247,633) (784,872,329) (661,630,604)
- --------------------------------------------------------------------------------------
Change in net assets
resulting
from share
transactions (7,849,151) (893,740) (55,389,777) 125,119,802
- --------------------------------------------------------------------------------------
Change in net assets (6,704,038) (1,447,179) (55,389,777) 125,119,802
NET ASSETS:
Beginning of period 40,172,819 41,619,998 373,139,045 248,019,243
- --------------------------------------------------------------------------------------
End of period $ 33,468,781 $ 40,172,819 $ 317,749,268 $ 373,139,045
- --------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period $ -- $ 1,026 $ -- $ --
- --------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE TAX-FREE MONEY
THE MONEY MARKET FUND MARKET FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income $ 11,820,254 $ 12,191,680 $ 1,683,324 $ 2,734,120
- --------------------------------------------------------------------------------------
Change in net assets
resulting
from operations 11,820,254 12,191,680 1,683,324 2,734,120
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net investment income:
Trust Shares (8,056,642) (8,395,610) -- --
Investment Shares (3,763,612) (3,796,070) (1,683,324) (2,734,120)
- --------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (11,820,254) (12,191,680) (1,683,324) (2,734,120)
- --------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of
shares 618,631,500 576,928,235 315,423,874 389,800,080
Net asset value of
shares issued to
shareholders in
payment of
distributions declared 3,617,170 3,626,658 417,624 459,305
Cost of shares redeemed (624,937,753) (551,929,373) (310,970,825) (419,737,938)
- --------------------------------------------------------------------------------------
Change in net assets
resulting
from share
transactions (2,689,083) 28,625,520 4,870,673 (29,478,553)
- --------------------------------------------------------------------------------------
Change in net assets (2,689,083) 28,625,520 4,870,673 (29,478,553)
NET ASSETS:
Beginning of period 244,199,833 215,574,313 52,498,907 81,977,460
- --------------------------------------------------------------------------------------
End of period $ 241,510,750 $ 244,199,833 $ 57,369,580 $ 52,498,907
- --------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.89 $10.13 $ 9.83 $10.90 $10.95
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.60 0.62 0.64 0.61 0.66
Net realized and
unrealized gain (loss) on
investments 0.06 (0.24) 0.30 (0.94) 0.03
- -------------------------------------------------------------------------------
Total from investment
operations 0.66 0.38 0.94 (0.33) 0.69
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.60) (0.62) (0.64) (0.61) (0.66)
Distributions from net
realized gain on
investments -- -- -- -- (0.08)
Distributions in excess of
net realized gain on
investments (a) -- -- -- (0.13) --
- -------------------------------------------------------------------------------
Total distributions (0.60) (0.62) (0.64) (0.74) (0.74)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.95 $ 9.89 $10.13 $ 9.83 $10.90
- -------------------------------------------------------------------------------
TOTAL RETURN (B) 6.89% 3.79% 9.84% (3.36)% 6.82%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.25% 1.14% 1.01% 0.99% 0.77%
Net investment income 6.07% 6.11% 6.41% 5.94% 5.91%
Expense
waiver/reimbursement (c) 0.02% 0.13% 0.28% 0.32% 0.43%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $105,248 $116,418 $114,803 $112,439 $119,187
Portfolio turnover 80% 118% 82% 227% 154%
- -------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.89 $10.13 $ 9.83 $10.90 $10.95
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.63 0.64 0.66 0.63 0.67
Net realized and
unrealized gain (loss) on
investments 0.06 (0.24) 0.30 (0.94) 0.03
- -------------------------------------------------------------------------------
Total from investment
operations 0.69 0.40 0.96 (0.31) 0.70
- -------------------------------------------------------------------------------
Less distributions
Distributions from net
investment income (0.63) (0.64) (0.66) (0.63) (0.67)
Distributions from net
realized gain on
investments -- -- -- -- (0.08)
Distributions in excess of
net realized gain on
investments (a) -- -- -- (0.13) --
- -------------------------------------------------------------------------------
Total distributions (0.63) (0.64) (0.66) (0.76) (0.75)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.95 $ 9.89 $10.13 $ 9.83 $10.90
- -------------------------------------------------------------------------------
TOTAL RETURN (B) 7.16% 4.05% 10.11% (3.12)% 6.94%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.00% 0.89% 0.76% 0.74% 0.63%
Net investment income 6.32% 6.36% 6.66% 6.19% 6.17%
Expense
waiver/reimbursement (c) 0.02% 0.13% 0.28% 0.32% 0.43%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $52,177 $78,998 $101,410 $107,103 $112,334
Portfolio turnover 80% 118% 82% 227% 154%
- -------------------------------------------------------------------------------
</TABLE>
(a) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principals. These
distributions do not represent a return of capital for federal income tax
purposes.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE STYLE MANAGER: LARGE CAP FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
INVESTMENT SHARES 1997(C) 1996 1995(C) 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.68 $13.70 $11.80 $12.39 $12.02
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.13 0.27 0.09 0.17 0.24
Net realized and unrealized
gain (loss) on investments 4.47 1.18 2.20 (0.39) 0.54
- -------------------------------------------------------------------------------
Total from investment operations 4.60 1.45 2.29 (0.22) 0.78
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.14) (0.27) (0.09) (0.17) (0.25)
Distributions from net realized
gain on investments (1.83) (1.20) (0.30) (0.20) (0.16)
- -------------------------------------------------------------------------------
Total distributions (1.97) (1.47) (0.39) (0.37) (0.41)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.31 $13.68 $13.70 $11.80 $12.39
- -------------------------------------------------------------------------------
TOTAL RETURN (A) 37.02% 11.28% 20.02% (1.72%) 6.31%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.49% 1.36% 1.21% 1.20% 0.87%
Net investment income 0.88% 2.01% 0.67% 1.40% 1.81%
Expense waiver/reimbursement
(b) -- -- 0.21% 0.23% 0.55%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $80,073 $59,891 $44,509 $26,739 $18,691
Average commission rate paid
(d) $0.0783 $0.0616 -- -- --
Portfolio turnover 56% 151% 208% 205% 67%
- -------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
TRUST SHARES 1997(C) 1996 1995(C) 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.68 $13.70 $11.80 $12.39 $12.02
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.18 0.33 0.12 0.20 0.28
Net realized and unrealized
gain (loss) on investments 4.46 1.15 2.20 (0.40) 0.51
- -------------------------------------------------------------------------------
Total from investment operations 4.64 1.48 2.32 (0.20) 0.79
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.18) (0.30) (0.12) (0.19) (0.26)
Distributions from net realized
gain on investments (1.83) (1.20) (0.30) (0.20) (0.16)
- -------------------------------------------------------------------------------
Total distributions (2.01) (1.50) (0.42) (0.39) (0.42)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.31 $13.68 $13.70 $11.80 $12.39
- -------------------------------------------------------------------------------
TOTAL RETURN (A) 37.37% 11.55% 20.33% (1.50%) 6.42%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.24% 1.11% 0.96% 0.95% 0.66%
Net investment income 1.17% 2.26% 0.92% 1.68% 2.09%
Expense waiver/reimbursement
(b) -- -- 0.21% 0.23% 0.55%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $26,611 $33,683 $45,345 $70,374 $65,841
Average commission rate paid
(d) $0.0783 $0.0616 -- -- --
Portfolio turnover 56% 151% 208% 205% 67%
- -------------------------------------------------------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) 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.
(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.
(See Notes which are an integral part of the Financial Statements)
THE STYLE MANAGER FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD
SEPTEMBER 30, ENDED
---------------- SEPTEMBER 30,
INVESTMENT SHARES 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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(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.
(See Notes which are an integral part of the Financial Statements)
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
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.68 $10.81 $10.26 $11.26 $10.46
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.42 0.41 0.45 0.45 0.51
Net realized and unrealized
gain (loss) on investments 0.39 (0.13) 0.55 (0.92) 0.89
- -------------------------------------------------------------------------------
Total from investment
operations 0.81 0.28 1.00 (0.47) 1.40
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.42) (0.41) (0.45) (0.45)(e) (0.51)
Distributions from net
realized gain on
investments -- -- -- (0.06) (0.09)
Distributions in excess of
net realized gain on
investments (a) -- -- -- (0.02) --
- -------------------------------------------------------------------------------
Total distributions (0.42) (0.41) (0.45) (0.53) (0.60)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.07 $10.68 $10.81 $10.26 $11.26
- -------------------------------------------------------------------------------
TOTAL RETURN (B) 7.74% 2.60% 10.00% (4.25)% 13.49%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.36% 1.32% 1.17% 1.15% 0.90%
Net investment income 3.87% 3.78% 4.32% 4.22% 4.68%
Expense waiver/reimbursement
(c) -- 0.02% 0.22% 0.27% 0.50%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $58,881 $65,700 $70,572 $74,706 $63,492
Portfolio turnover 19% 129% 26% 29% 17%
- -------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.68 $10.81 $10.26 $11.26 $10.46
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.45 0.44 0.48 0.48 0.53
Net realized and unrealized
gain (loss) on investments 0.39 (0.13) 0.55 (0.92) 0.89
- -------------------------------------------------------------------------------
Total from investment
operations 0.84 0.31 1.03 (0.44) 1.42
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.45) (0.44) (0.48) (0.48)(d) (0.53)
Distributions from net
realized gain on
investments -- -- -- (0.06) (0.09)
Distributions in excess of
net realized gain on
investments (a) -- -- -- (0.02) --
- -------------------------------------------------------------------------------
Total distributions (0.45) (0.44) (0.48) (0.56) (0.62)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.07 $10.68 $10.81 $10.26 $11.26
- -------------------------------------------------------------------------------
TOTAL RETURN (B) 8.00% 2.86% 10.27% (4.01%) 13.62%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.11% 1.06% 0.92% 0.90% 0.75%
Net investment income 4.12% 4.03% 4.57% 4.47% 4.85%
Expense waiver/reimbursement
(c) -- 0.02% 0.22% 0.27% 0.50%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $19,891 $28,110 $33,670 $34,165 $41,204
Portfolio turnover 19% 129% 26% 29% 17%
- -------------------------------------------------------------------------------
</TABLE>
(a) 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.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Amount includes distributions to shareholders in excess of net investment
income of $0.0002 per share.
(e) Amount includes distributions to shareholders in excess of net investment
income of $0.0001 per share.
(See Notes which are an integral part of the Financial Statements)
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
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.56 $10.69 $10.17 $11.24 $10.39
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.37 0.38 0.40 0.45 0.49
Net realized and unrealized
gain (loss) on investments 0.35 (0.13) 0.54 (0.97) 0.85
- -------------------------------------------------------------------------------
Total from investment operations 0.72 0.25 0.94 (0.52) 1.34
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.37) (0.38) (0.40) (0.45) (0.49)
Distributions from net realized
gain on investments -- -- (0.02) (0.10) --
- -------------------------------------------------------------------------------
Total distributions (0.37) (0.38) (0.42) (0.55) (0.49)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.91 $10.56 $10.69 $10.17 $11.24
- -------------------------------------------------------------------------------
TOTAL RETURN (A) 6.92% 2.36% 9.81% (4.74%) 13.24%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.69% 1.43% 1.24% 1.17% 1.00%
Net investment income 3.45% 3.57% 4.24% 4.22% 4.50%
Expense waiver/reimbursement
(b) -- 0.25% 0.44% 0.51% 0.77%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $27,786 $31,284 $32,172 $34,580 $33,907
Portfolio turnover 13% 138% 21% 27% 23%
- -------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.56 $10.69 $10.17 $11.24 $10.39
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.40 0.41 0.42 0.48 0.50
Net realized and unrealized
gain (loss)
on investments 0.35 (0.13) 0.54 (0.97) 0.85
- -------------------------------------------------------------------------------
Total from investment operations 0.75 0.28 0.96 (0.49) 1.35
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.40) (0.41) (0.42) (0.48) (0.50)
Distributions from net realized
gain on investments -- -- (0.02) (0.10) --
- -------------------------------------------------------------------------------
Total distributions (0.40) (0.41) (0.44) (0.58) (0.50)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.91 $10.56 $10.69 $10.17 $11.24
- -------------------------------------------------------------------------------
TOTAL RETURN (A) 7.19% 2.61% 10.09% (4.50%) 13.37%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.44% 1.18% 0.99% 0.92% 0.86%
Net investment income 3.70% 3.82% 4.49% 4.46% 4.64%
Expense waiver/reimbursement
(b) -- 0.25% 0.44% 0.51% 0.77%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $5,683 $8,889 $9,447 $11,301 $12,014
Portfolio turnover 13% 138% 21% 27% 23%
- -------------------------------------------------------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE 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
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.02
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.02)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
TOTAL RETURN (A) 4.58% 4.67% 4.98% 2.90% 2.52%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.98% 0.90% 0.85% 0.84% 0.70%
Net investment income 4.49% 4.49% 4.92% 3.05% 2.47%
Expense
waiver/reimbursement (b) 0.01% 0.09% 0.10% 0.18% 0.20%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $121,299 $146,161 $39,363 $21,883 $20,382
- -------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
TOTAL RETURN (A) 4.84% 4.89% 5.24% 3.16% 2.64%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.73% 0.65% 0.60% 0.59% 0.58%
Net investment income 4.74% 4.81% 5.17% 3.30% 2.60%
Expense
waiver/reimbursement (b) 0.01% 0.06% 0.10% 0.18% 0.20%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $196,450 $226,978 $208,656 $304,285 $152,921
- -------------------------------------------------------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
INVESTMENT SHARES 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
TOTAL RETURN (A) 4.67% 4.91% 5.11% 3.10% 2.77%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.97% 0.73% 0.80% 0.80% 0.64%
Net investment income 4.57% 4.77% 5.04% 3.07% 2.68%
Expense
waiver/reimbursement (b) 0.02% 0.23% 0.21% 0.25% 0.30%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $77,220 $83,525 $41,813 $15,236 $9,905
- -------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
TRUST SHARES 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.05 0.03 0.03
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.03) (0.03)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
TOTAL RETURN (A) 4.93% 5.04% 5.36% 3.35% 2.89%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.72% 0.60% 0.57% 0.55% 0.50%
Net investment income 4.81% 4.93% 5.27% 3.25% 2.83%
Expense
waiver/reimbursement (b) 0.02% 0.12% 0.19% 0.25% 0.30%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $164,290 $160,675 $173,761 $132,445 $134,397
- -------------------------------------------------------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
INVESTMENT SHARES 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.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
(1) ORGANIZATION
The Virtus Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company. The
Trust consists of eight portfolios (individually referred to as the "Fund", or
collectively as the "Funds"). All Funds, except The Style Manager Fund and The
Tax-Free Money Market Fund are offered in two classes of shares: Trust Shares
and Investment Shares. The Style Manager Fund and The Tax-Free Money Market Fund
are presented as Investment Shares for financial statement purposes. The
following portfolios comprise the Trust:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------------
<C> <S>
The U.S. Government Securities Fund Current Income
("Government Securities Fund") (d)
- ------------------------------------------------------------------------------------------
The Style Manager: Large Cap Fund Growth of capital and income
(" Large Cap Fund") (d)
- ------------------------------------------------------------------------------------------
The Style Manager Fund ("Style Manager Growth of capital
Fund") (d)
- ------------------------------------------------------------------------------------------
The Virginia Municipal Bond Fund Current income exempt from federal regular
("Virginia Municipal Bond Fund") (n) income tax and the personal income tax
imposed
by the Commonwealth of Virginia
- ------------------------------------------------------------------------------------------
The Maryland Municipal Bond Fund Current income exempt from federal regular
("Maryland Municipal Bond Fund") (n) income tax and the personal income tax
imposed
by the State of Maryland
- ------------------------------------------------------------------------------------------
The Treasury Money Market Fund Current income consistent with stability of
("Treasury Money Market Fund") (d) principal
- ------------------------------------------------------------------------------------------
The Money Market Fund Current income consistent with stability of
("Money Market Fund") (d) principal
- ------------------------------------------------------------------------------------------
The Tax-Free Money Market Fund Current income exempt from federal income tax
("Tax-Free Money Market Fund") (d) consistent with stability of principal
</TABLE>
(d) Diversified
(n) Non-diversified
The assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held.
On June 24, 1996, the Large Cap Fund acquired all the net assets of the
Blanchard American Equity Fund ("Acquired Fund") pursuant to a plan of
reorganization approved by the Acquired Fund's shareholders. The acquisition was
accomplished by a tax-free exchange of 695,476 shares of the Large Cap Fund
(valued at $9,245,652) for the 845,351 shares of the Acquired Fund outstanding
on June 21, 1996. The Acquired Fund's net assets of $9,245,652, which consisted
of $7,444,690 of Paid in Capital and $2,066,228 of unrealized appreciation, were
combined at that date with those of the Large Cap Fund. The aggregate net assets
of the Large Cap Fund and the Acquired Fund immediately before the acquisition
were $92,855,251 and $9,245,652, respectively.
On April 21, 1997, the Large Cap Fund acquired all the net assets of the
Blanchard Capital Growth Fund ("Acquired Fund") pursuant to a plan of
reorganization approved by the Acquired Fund's shareholders. The acquisition was
accomplished by a tax-free exchange of 113,473 shares of the Large Cap Fund
(valued at $1,509,197) for the 202,789 shares of the Acquired Fund outstanding
on April 18, 1997. The Acquired Fund's net assets of $1,509,197, which consisted
of $1,319,703 of Paid in Capital and $271,223 of unrealized appreciation, were
combined at that date with those of the Large Cap Fund. The aggregate net assets
of the Large Cap Fund and the Acquired Fund immediately before the acquisition
were $91,970,866 and $1,509,197, respectively.
THE VIRTUS FUNDS
- -------------------------------------------------------------------------------
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted
securities and private placement securities are generally valued at the mean
of the latest bid and asked price as furnished by an independent pricing
service. Listed equity securities are valued at the last sale price reported
on a national securities exchange. The Funds use the amortized cost method to
value portfolio securities in accordance with Rule 2a-7 under the Act. For
fluctuating net asset value Funds within the Trust, short-term securities are
valued at the prices provided by an independent pricing service. However,
short-term securities purchased with remaining maturities of sixty days or
less may be valued at amortized cost, which approximates fair market value.
Investments in other open-end investment companies are valued at net asset
value.
REPURCHASE AGREEMENTS--It is the policy of the Funds to require a custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Funds to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Funds' adviser to be creditworthy pursuant to guidelines and/or standards
reviewed or established by the Board of Trustees (the "Trustees"). Risks may
arise from the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Funds could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code").
FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
At September 30, 1997, Government Securities Fund, Virginia Municipal Bond
Fund, and Maryland Municipal Bond Fund, for federal tax purposes, each had a
capital loss carryforward, as noted below. These capital loss carryforwards
will reduce the Fund's taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Code, and thus will reduce
the amount of the distributions to shareholders which would otherwise be
necessary to relieve the Funds of any liability for federal tax.
<TABLE>
<CAPTION>
FUNDS TOTAL TAX LOSS CARRYFORWARD
---------------------------
<S> <C>
Government Securities Fund $14,431,018
Virginia Municipal Bond Fund $ 178,797
Maryland Municipal Bond Fund $ 351,799
</TABLE>
THE VIRTUS FUNDS
- -------------------------------------------------------------------------------
Pursuant to the Code, such capital loss carryforwards will expire as follows:
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND VIRGINIA MUNICIPAL BOND FUND
------------------------------------- ------------------------------------
EXPIRATION YEAR EXPIRATION AMOUNT EXPIRATION YEAR EXPIRATION AMOUNT
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C>
2003 9,742,636 2004 178,797
2004 1,378,030
2005 3,310,352
</TABLE>
<TABLE>
<CAPTION>
MARYLAND MUNICIPAL BOND FUND
----------------------------------------------
EXPIRATION YEAR EXPIRATION AMOUNT
--------------- -----------------
<S> <C>
2004 351,799
</TABLE>
Additionally, net capital losses, as noted below, attributable to security
transactions incurred after September 30, 1996 are treated as arising on
October 1, 1997 the first day of the Funds' next taxable year.
<TABLE>
<CAPTION>
FUND TOTAL TAX LOSS PUSHFORWARD
-------------------------- --------------------------
<S> <C>
Government Securities Fund $3,736,134
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
DEFERRED EXPENSES--The costs incurred by each Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being amortized
over a period not to exceed five years from each Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
THE VIRTUS FUNDS
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
September 30, 1997, Treasury Money Market Fund, Money Market Fund, and Tax-Free
Money Market Fund, capital paid-in aggregated $317,749,268, $241,510,750, and
$57,369,580, respectively. Transactions in shares were as follows:
<TABLE>
<CAPTION>
GOVERNMENT
SECURITIES FUND LARGE CAP FUND
------------------------ ------------------------
FOR THE YEAR ENDED
SEPTEMBER 30, 1997: SHARES DOLLARS SHARES DOLLARS
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
INVESTMENT SHARES:
- --------------------------
Shares sold 1,348,256 $ 13,371,271 878,296 $ 12,745,846
- --------------------------
Shares issued in
connection with the
acquisition -- -- 113,473 1,509,197
- --------------------------
Shares issued to
shareholders in payment of
distributions declared 544,149 5,396,169 640,836 8,496,790
- --------------------------
Shares redeemed (3,077,778) (30,479,752) (1,098,303) (16,038,717)
- -------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Investment Share
transactions (1,185,373) $(11,712,312) 534,302 $ 6,713,116
- -------------------------- ---------- ------------ ---------- ------------
TRUST SHARES:
- --------------------------
Shares sold 966,507 $ 9,589,726 64,549 $ 4,455,821
- --------------------------
Shares issued to
shareholders in payment of
distributions declared -- 4 324,411 856,430
- --------------------------
Shares redeemed (3,705,430) (36,748,558) (1,219,486) (17,210,160)
- -------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Trust Share transactions (2,738,923) (27,158,828) (830,526) (11,897,909)
- -------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Fund Share transactions (3,924,296) $(38,871,140) (296,224) $ (5,184,793)
- -------------------------- ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT
SECURITIES FUND LARGE CAP FUND
------------------------ ------------------------
FOR THE YEAR ENDED
SEPTEMBER 30, 1996: SHARES DOLLARS SHARES DOLLARS
- -------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
INVESTMENT SHARES:
- --------------------------
Shares sold 2,763,200 $ 27,838,858 965,024 $ 12,986,255
- --------------------------
Shares issued in
connection with the
acquisition -- -- 695,147 9,245,450
- --------------------------
Shares issued to
shareholders in payment of
distributions declared 611,870 6,142,678 379,876 4,969,161
- --------------------------
Shares redeemed (2,935,461) (29,411,819) (913,112) (13,464,743)
- -------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Investment Share
transactions 439,609 $ 4,569,717 1,126,935 $ 13,736,123
- -------------------------- ---------- ------------ ---------- ------------
TRUST SHARES:
- --------------------------
Shares sold 1,853,668 $ 18,616,622 395,754 $ 5,277,407
- --------------------------
Shares issued to
shareholders in payment of
distributions declared 1 3 38,987 509,088
- --------------------------
Shares redeemed (3,875,084) (38,751,898) (1,282,606) (18,012,908)
- -------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Trust Share transactions (2,021,415) (20,135,273) (847,865) (12,226,413)
- -------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Fund Share transactions (1,581,806) $(15,565,556) 279,070 $ (1,509,710)
- -------------------------- ---------- ------------ ---------- ------------
</TABLE>
THE VIRTUS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STYLE MANAGER FUND
------------------------
FOR THE YEAR ENDED SEPTEMBER 30, 1997: SHARES DOLLARS
- ------------------------------------------------- ---------- ------------
<S> <C> <C>
INVESTMENT SHARES:
- -------------------------------------------------
Shares sold 3,251,568 $ 40,136,505
- -------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 383,514 4,503,897
- -------------------------------------------------
Shares redeemed (4,107,368) (50,985,728)
- ------------------------------------------------- ---------- ------------
Net change resulting from Fund Share transactions (472,286) $ (6,345,326)
- ------------------------------------------------- ---------- ------------
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 1996: SHARES DOLLARS
- ------------------------------------------------- ---------- ------------
<S> <C> <C>
INVESTMENT SHARES:
- -------------------------------------------------
Shares sold 1,489,971 $16,506,045
- -------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 863,431 9,243,789
- -------------------------------------------------
Shares redeemed (3,397,734) (37,724,499)
- ------------------------------------------------- ---------- ------------
Net change resulting from Fund Share transactions (1,044,332) $(11,974,665)
- ------------------------------------------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
VIRGINIA MUNICIPAL MARYLAND MUNICIPAL
BOND FUND BOND FUND
------------------------ ---------------------
FOR THE YEAR ENDED SEPTEMBER SHARES DOLLARS SHARES DOLLARS
30, 1997: ---------- ------------ -------- -----------
- -----------------------------
<S> <C> <C> <C> <C>
INVESTMENT SHARES:
- -----------------------------
Shares sold 509,188 $ 5,533,656 192,865 $ 2,067,713
- -----------------------------
Shares issued to shareholders
in payment of distributions
declared 173,844 1,888,518 71,862 770,265
- -----------------------------
Shares redeemed (1,515,555) (16,472,000) (679,110) (7,269,728)
- ----------------------------- ---------- ------------ -------- -----------
Net change resulting from
Investment Share transactions (832,523) $ (9,049,826) (414,383) $(4,431,750)
- ----------------------------- ---------- ------------ -------- -----------
TRUST SHARES:
- -----------------------------
Shares sold 120,060 $ 1,306,439 59,419 $ 640,330
- -----------------------------
Shares issued to shareholders
in payment of distributions
declared -- -- -- --
- -----------------------------
Shares redeemed (955,166) (10,316,539) (380,036) (4,057,731)
- ----------------------------- ---------- ------------ -------- -----------
Net change resulting from
Trust Share transactions (835,106) (9,010,100) (320,617) (3,417,401)
- ----------------------------- ---------- ------------ -------- -----------
Net change resulting from
Fund Share transactions (1,667,629) $(18,059,926) (735,000) $(7,849,151)
- ----------------------------- ---------- ------------ -------- -----------
</TABLE>
THE VIRTUS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VIRGINIA MUNICIPAL MARYLAND MUNICIPAL
BOND FUND BOND FUND
------------------------ ---------------------
FOR THE YEAR ENDED SHARES DOLLARS SHARES DOLLARS
SEPTEMBER 30, 1996: ---------- ------------ -------- -----------
- -----------------------------
<S> <C> <C> <C> <C>
INVESTMENT SHARES:
- -----------------------------
Shares sold 1,022,563 $ 11,073,171 574,103 $ 6,142,806
- -----------------------------
Shares issued to shareholders
in payment of distributions
declared 184,796 1,997,026 92,527 989,879
- -----------------------------
Shares redeemed (1,580,634) (17,022,733) (712,478) (7,557,624)
- ----------------------------- ---------- ------------ -------- -----------
Net change resulting from
Investment Share transactions (373,275) $ (3,952,536) (45,848) $(424,939)
- ----------------------------- ---------- ------------ -------- -----------
TRUST SHARES:
- -----------------------------
Shares sold 468,285 $ 5,052,529 209,103 $ 2,221,208
- -----------------------------
Shares issued to shareholders
in payment of distributions
declared -- -- -- --
- -----------------------------
Shares redeemed (950,703) (10,211,940) (252,990) (2,690,009)
- ----------------------------- ---------- ------------ -------- -----------
Net change resulting from
Trust Share transactions (482,418) (5,159,411) (43,887) (468,801)
- ----------------------------- ---------- ------------ -------- -----------
Net change resulting from
Fund Share transactions (855,693) $ (9,111,947) (89,735) $ (893,740)
- ----------------------------- ---------- ------------ -------- -----------
</TABLE>
<TABLE>
<CAPTION>
TREASURY MONEY
MARKET FUND MONEY MARKET FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT SHARES:
- -----------------------
Shares sold 67,174,914 92,237,108 92,778,441 144,072,045
- -----------------------
Shares issued in
connection with the
Acquisition -- 122,108,127 -- --
- -----------------------
Shares issued to
shareholders in payment
of distributions
declared 5,621,028 4,898,438 3,617,167 3,626,655
- -----------------------
Shares redeemed (97,657,884) (112,278,779) (102,699,797) (105,987,535)
- ----------------------- ------------ ------------ ------------ ------------
Net change resulting
from Investment Share
transactions (24,861,942) 106,964,894 (6,304,189) 41,711,165
- ----------------------- ------------ ------------ ------------ ------------
TRUST SHARES:
- -----------------------
Shares sold 656,686,607 567,506,731 525,853,059 432,856,190
- -----------------------
Shares issued to
shareholders in payment
of distributions
declared 3 3 3 3
- -----------------------
Shares redeemed (687,214,445) (549,184,891) (522,237,956) (445,941,838)
- ----------------------- ------------ ------------ ------------ ------------
Net change resulting
from Trust Share
transactions (30,527,835) 18,321,843 3,615,106 (13,085,645)
- ----------------------- ------------ ------------ ------------ ------------
Net change resulting
from Fund Share
transactions (55,389,777) 125,286,737 (2,689,083) 28,625,520
- ----------------------- ------------ ------------ ------------ ------------
</TABLE>
THE VIRTUS FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET FUND
----------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
INVESTMENT SHARES:
- -------------------------------------------------
Shares sold 315,423,874 389,800,080
- -------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 417,624 459,305
- -------------------------------------------------
Shares redeemed (310,970,825) (419,737,938)
- ------------------------------------------------- ------------ ------------
Net change resulting from Fund Share transactions 4,870,673 (29,478,553)
- ------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Virtus Capital Management, Inc., the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee based on a percentage of each Fund's average daily net assets (see below).
<TABLE>
<CAPTION>
FUND ANNUAL RATE
---------------------------- -----------
<C> <S>
Government Securities Fund 0.75%
Large Cap Fund 0.75%
Style Manager Fund 1.25%
Virginia Municipal Bond Fund 0.75%
Maryland Municipal Bond Fund 0.75%
Treasury Money Market Fund 0.50%
Money Market Fund 0.50%
Tax-Free Money Market Fund 0.50%
</TABLE>
The Adviser may voluntarily choose to waive a portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
Effective October 22, 1996 the Adviser increased its annual fee to 1.25% on the
Style Manager Fund.
Effective October 22, 1996 the Adviser entered into a sub-advisory agreement
with Trend Capital Management ("Trend") on behalf of the Style Manager Fund and
Large Cap Fund. Under the terms of a sub-advisory agreement between the Adviser
and Trend, 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 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. Trend may voluntarily choose to reduce its
compensation. Trend can modify of terminate this voluntary reduction at any time
at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Funds with administrative
personnel and services. The fee paid to FAS is based on the level of average
aggregate daily net assets of the Trust, the Blanchard Precious Metals Fund,
Inc., and the Blanchard Funds, all of which are advised by the Adviser. The
administrative fee received during any fiscal year shall be at least $50,000 per
Fund. With respect to the Style Manager Fund and the Tax-Free Money Market Fund,
the fee shall be at least $75,000.
DISTRIBUTION SERVICES FEE--The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, each
Fund will reimburse Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Funds to finance activities intended to
result in the sale of the Funds' Investment Shares. The Plan provides that the
Funds may incur distribution expenses up to 0.25 % of the average daily net
assets of the Investment Shares, annually, to reimburse FSC. The Tax-Free Money
Market Fund and the Style Manager Fund will not accrue or pay any distribution
expenses pursuant to the Plan until a second class of shares has been created
for certain institutional investors.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the Funds.
The fee paid to FSSC is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Funds' accounting records
for which it receives a fee. The fee is based on the level of each Fund's
average net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Signet Trust Company is the Funds' custodian for which it
receives a fee. The fee is based on the level of each Fund's average net assets
for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.
The Funds have agreed to reimburse FAS for the organizational expenses during
the five year period following each Fund's effective date. For the year ended
September 30, 1997, the following amounts were paid pursuant to this agreement:
<TABLE>
<CAPTION>
AMOUNT REIMBURSED
TO FAS FOR THE
EXPENSES OF YEAR ENDED
FUND ORGANIZING THE FUND SEPTEMBER 30, 1997
-------------------------- ------------------- ------------------
<S> <C> <C>
Style Manager Fund $28,773 $4,620
Tax-Free Money Market Fund $17,883 $2,933
</TABLE>
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended September 30, 1997, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
------------ ------------
<S> <C> <C>
Government Securities Fund $138,698,434 $175,501,963
Large Cap Fund 55,144,492 73,658,378
Style Manager Fund 61,085,310 70,071,792
Virginia Municipal Bond Fund 15,978,372 33,799,963
Maryland Municipal Bond Fund 4,638,966 13,686,700
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
Since Virginia Municipal Bond Fund and Maryland Municipal Bond Fund invest a
substantial portion of their assets in issuers located in one state, they will
be more susceptible to factors adversely affecting issuers of those states than
would be a comparable general tax-exempt mutual fund. In order to reduce the
credit risk associated with such factors, at September 30, 1997, 39% of the
securities in Virginia Municipal Bond Fund's portfolio of investments were
backed by letters of credit or bond insurance of various financial institutions
and financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit from any one institution or agency
did not exceed 11% of total investments. At September 30, 1997, 20% of the
securities in Maryland Municipal Bond Fund's portfolio of investments were
backed by letters of credit or bond insurance of various financial institutions
and financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit from any one institution or agency
did not exceed 9% of total investments.
THE VIRTUS FUNDS
- -------------------------------------------------------------------------------
(7) PROPOSED FUND MERGER
On July 18, 1997, Signet Banking Corporation ("Signet") entered into a
definitive Agreement and Plan of Reorganization whereby Signet was acquired by
First Union Corporation ("First Union"). It is anticipated that the merger will
be consummated on or about November 28, 1997.
As a result of this merger, First Union will succeed to the investment advisory
and functions formerly performed for the funds by various units of Signet and
various unaffiliated parties.
The Board of Trustees of the Trust has approved an Agreement and Plan of
Reorganization pursuant to which, on or about February 27, 1998, all of the
assets, and certain liabilities of the Funds would be acquired in exchange for
shares of a similarly managed fund (the "Acquiring Fund") that is advised by
affiliates of First Union. The reorganizations would result in the liquidation
and termination of the Funds. Pursuant to the reorganizations, shareholders of
the Funds will receive, tax-free, the number of shares of the acquiring fund
having a value equal to the value of their shares immediately prior to the
reorganizations. Consummation of the reorganizations is subject to approval of
the shareholders of the Funds.
THE VIRTUS FUNDS
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
The Virtus Funds:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Virtus Funds (comprising the following
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) as of September 30, 1997, and the related
statements of operations for the year then ended, the statements of changes in
net assets for the years ended September 30, 1997 and 1996, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
September 30, 1997 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Virtus Funds as
of September 30, 1997, the results of its operations, the changes in its net
assets and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
As more fully described in Note 7, in November, 1997 the Funds are expected to
enter into an Agreement and Plan of Reorganization, pursuant to which (subject
to Fund shareholder approval) on or about February 27, 1998, all of the assets,
and certain liabilities of the Funds would be acquired in exchange for shares of
similarly managed funds that are advised by affiliates of First Union
Corporation. The reorganization would result in the liquidation and termination
of the Funds.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
November 7, 1997
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Executive Vice President and
Peter E. Madden Secretary
John E. Murray, Jr. Joseph S. Machi
Wesley W. Posvar Vice President and Assistant
Marjorie P. Smuts Treasurer
Richard B. Fisher
Vice President
C. Grant Anderson
Assistant Secretary
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objective and policies, management fees, expenses and other information.
Cusip 927913608 Cusip 927913855 Cusip 927913400
Cusip 927913707 Cusip 927913848 Cusip 927913301
Cusip 927913863 Cusip 927913830 Cusip 927913889
Cusip 927913871 Cusip 927913509 Cusip 927913103
Cusip 927913806 Cusip 927913202
G00716-01 (11/97)
THE VIRTUS FUNDS APPENDIX
A. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The U.S. Government Securities Fund-Investment
Shares (the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Lehman Brothers
Intermediate Government Bond Index is represented by a solid line. The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and The Lehman Brothers Intermediate
Government Bond Index. The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Fund's start of performance, 10/16/90
through 9/30/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to The Lehman Brothers Intermediate
Government Bond Index; the ending values are $16,120 and $16,983, respectively.
B. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The U.S. Government Securities Fund-Trust Shares
(the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Lehman Brothers
Intermediate Government Bond Index is represented by a solid line. The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and The Lehman Brothers Intermediate
Government Bond Index. The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Fund's start of performance, 10/16/90
through 9/30/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to The Lehman Brothers Intermediate
Government Bond Index; the ending values are $16,301 and $16,983, respectively.
C. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The Style Manager: Large Cap Fund-Investment
Shares (the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Standard & Poor's 500
Index is represented by a solid line. The line graph is a visual representation
of a comparison of change in value of a hypothetical $10,000 purchase in the
Fund and The Standard & Poor's 500 Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the Fund's start of
performance, 10/16/90 through 9/30/97. The right margin reflects the ending
value of the hypothetical investment in the Fund as compared to the Standard &
Poor's 500 Index; the ending values are $24,937 and $37,387, respectively.
D. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The Style Manager: Large Cap Fund-Trust Shares
(the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Standard & Poor's 500
Index is represented by a solid line. The line graph is a visual representation
of a comparison of change in value of a hypothetical $10,000 purchase in the
Fund and The Standard & Poor's 500 Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the Fund's start of
performance, 10/16/90 through 9/30/97. The right margin reflects the ending
value of the hypothetical investment in the Fund as compared to the Standard &
Poor's 500 Index; the ending values are $25,208 and $37,387, respectively.
E. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The Style Manager Fund (the "Fund"). The
corresponding components of the line graph are listed underneath. The Fund is
represented by a broken line. The Standard & Poor's 500 Index is represented by
a solid line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 purchase in the Fund and The Standard
& Poor's 500 Index. The "y" axis reflects the cost of the investment. The "x"
axis reflects computation periods from the Fund's start of performance, 3/7/95
through 9/30/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Standard & Poor's 500 Index; the
ending values are $18,536 and $20,576, respectively.
F. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The Virginia Municipal Bond Fund-Investment
Shares (the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Lehman Brothers 10
Year Municipal Bond Index is represented by a solid line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and The Lehman Brothers 10 Year Municipal Bond
Index. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 10/24/90 through
9/30/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Lehman Brothers 10 Year Municipal Bond
Index; the ending values are $15,433 and $17,493, respectively.
G. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The Virginia Municipal Bond Fund-Trust Shares
(the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Lehman Brothers 10
Year Municipal Bond Index is represented by a solid line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and The Lehman Brothers 10 Year Municipal Bond
Index. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 10/24/90 through
9/30/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Lehman Brothers 10 Year Municipal Bond
Index; the ending values are $15,605 and $17,493, respectively.
H. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The Maryland Municipal Bond Fund-Investment
Shares (the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Lehman Brothers 10
Year Municipal Bond Index is represented by a solid line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and The Lehman Brothers 10 Year Municipal Bond
Index. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 10/30/90 through
9/30/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Lehman Brothers 10 Year Municipal Bond
Index; the ending values are $14,974 and $17,493, respectively.
I. The graphic presentation here displayed consists of a line graph titled
"Growth of $10,000 Invested in The Maryland Municipal Bond Fund-Trust Shares
(the "Fund"). The corresponding components of the line graph are listed
underneath. The Fund is represented by a broken line. The Lehman Brothers 10
Year Municipal Bond Index is represented by a solid line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$10,000 purchase in the Fund and The Lehman Brothers 10 Year Municipal Bond
Index. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 10/30/90 through
9/30/97. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Lehman Brothers 10 Year Municipal Bond
Index; the ending values are $15,142 and $17,493, respectively.
