THE STYLE MANAGER: LARGE CAP FUND
THE TREASURY MONEY MARKET FUND
(PORTFOLIOS OF THE VIRTUS FUNDS)
ADDENDUM TO THE COMBINED ANNUAL REPORT DATED SEPTEMBER 30, 1996
VIRTUS STYLE MANAGER: LARGE CAP FUND
Addendum to the Annual Report for the period ended September 30, 1996
Omitted from the most recent Combined Annual Report for The Virtus Funds,
were the results of the last Special Meeting of Shareholders of Virtus
Style Manager: Large Cap Fund.
The Shareholders of The Style Manager: Large Cap Fund (`Large Cap''), a
portfolio of The Virtus Funds, approved the proposed Agreement and Plan of
Reorganization between Large Cap and Blanchard American Equity Fund
(`American Equity''), whereby American Equity would transfer all of its
assets to Large Cap in exchange for Investment Shares of Large Cap.
American Equity would then distribute the shares of Large Cap so received
pro rata by Large Cap to its shareholders in complete liquidation and
dissolution of American Equity.
The motion was duly adopted with 426,469 shares having voted to approve the
proposed Agreement, 16,777 having voted negatively and 27,498 shares having
abstained from voting.
VIRTUS TREASURY MONEY MARKET FUND
Addendum to the Annual Report for the period ended September 30, 1996
Omitted from the most recent Combined Annual Report for The Virtus Funds,
were the results of the last Special Meeting of Shareholders of the Virtus
Treasury Money Market Fund.
The Shareholders of The Virtus Treasury Money Market Fund (`Virtus
Treasury'), a portfolio of The Virtus Funds, approved the proposed
Agreement and Plan of Reorganization between Virtus Treasury and Blanchard
100% Treasury Money Market Fund (`Blanchard Treasury''), whereby Blanchard
Treasury would transfer all of its assets to Virtus Treasury in exchange
for Investment Shares of Virtus Treasury. Blanchard Treasury would then
distribute the shares of Virtus Treasury so received pro rata by Virtus
Treasury to its shareholders in complete liquidation and dissolution of
Blanchard Treasury.
The motion was duly adopted with 68,387,493 shares having voted to approve
the proposed Agreement, 8,990,377 having voted negatively and 3,709,782
shares having abstained from voting.
March 4, 1997
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the Funds
and is a subsidiary of Federated Investors.
Cusip 927913848
Cusip 927913509
G02038-01(3/97)
Combined
Annual Report
to Shareholders
September 30, 1996
. The U.S. Government Securities Fund
. The Style Manager: Large Cap Fund
. The Style Manager Fund
. The Virginia Municipal Bond Fund
. The Maryland Municipal Bond Fund
. The Treasury Money Market Fund
. The Money Market Fund
. The Tax-Free Money Market Fund
Funds Managed by
[LOGO OF VIRTUS FUNDS]
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 OF VIRTUS FUNDS]
MESSAGE TO SHAREHOLDERS
- -------------------------------------------------------------------------------
Dear Investor:
Here is your Annual Report for The Virtus Funds, which covers the twelve-month
period from October 1, 1995 through September 30, 1996.
On the following pages, you'll find complete financial information for every
fund in the Virtus family. Each fund's section begins with a management
discussion and analysis by the portfolio manager, followed by a long-term
performance graph, a complete list of holdings, and the financial statements.
The performance of the bond market was adversely impacted by rising rates in
the first quarter of 1996. While stocks continued to climb, the first
quarter's rise in rate and reports of a stronger-than-expected economy
combined to introduce a degree of volatility to stock performance. With that
in mind, I'm pleased to present the following performance summary:
. THE U.S. GOVERNMENT SECURITIES FUND paid a dividend stream totaling $0.62
per share for Investment Shares ($0.64 for Trust Shares). These dividends
helped the fund produce a total return of 3.79% for Investment Shares (4.05%
for Trust Shares) in what was generally a difficult bond market. Due to
fluctuations in bond prices, the fund's net asset value decreased slightly
from $10.13 on the first day of the period to $9.89 on the last day of the
period.* At the end of the report period, net assets stood at more than
$195.4 million.
. THE VIRTUS STYLE MANAGER: LARGE CAP FUND, formerly known as The Stock Fund,
produced a total return of 11.28% for Investment Shares (11.55% for Trust
Shares). The fund's high-quality stock portfolio paid dividends of $0.27 per
share and capital gains of $1.20 per share for Investment Shares (and
dividends of $0.30 per share and capital gains of $1.20 per share for Trust
Shares). The fund's net asset value decreased by a minimal 0.02 per share
from the first day of the period.* At the end of the report period, net
assets stood at more than $93.5 million.
. THE VIRTUS STYLE MANAGER FUND, formerly known as The Strategic Stock Fund,
produced a total return of 10.19% through dividends totaling $0.29 per share
and capital gains totaling $1.35 per share. The fund's net asset value
decreased from $12.03 on the first day of the period to $11.47 on the last
day, reflecting price volatility that impacted the stock market.* Net assets
stood at more than $62.7 million on the last day of the period.
. THE VIRGINIA MUNICIPAL BOND FUND paid double-tax-free dividends** of $0.41
per share for Investment Shares ($0.44 for Trust Shares) through a portfolio
that included 35 Virginia municipal bonds. This income stream helped the
fund produce a total return of 2.60% for Investment Shares (2.86% for Trust
Shares) in a difficult bond market. Bond market volatility resulted in a
decrease in the fund's net asset value from $10.81 on the first day of the
period to $10.68 on the last day of the period.* Net assets totaled more
than $94 million on the last day of the report period.
. THE MARYLAND MUNICIPAL BOND FUND paid double-tax-free dividends** of $0.38
per share for Investment Shares ($0.41 in dividends for Trust Shares). This
income stream helped the fund produce a total return of 2.36% for Investment
Shares (2.61% for Trust Shares) in a difficult bond market. The fund's net
asset value decreased slightly from $10.69 on the first day of the period to
$10.56 on the last day of the period.* At the end of the report period, net
assets stood at more than $40.1 million.
. THE TREASURY MONEY MARKET FUND, a portfolio of U.S. Treasury money market
securities, paid dividends totaling $0.05 per share for Trust Shares and
$0.05 per share for Investment Shares. Assets grew from $248 million at the
beginning of the period to reach more than $373 million at the period's
end.+
. 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 report period with more than $244
million in net assets--an increase of more than $28 million over the first
day of the period.+
. 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 report period, net assets stood at more than $52 million.+
Thank you for your confidence in The Virtus Funds. You have our ongoing pledge
to deliver the highest level of professional management and clear, timely
information about your investment progress.
Sincerely,
/s/ Garry M. Allen
Garry M. Allen
Chief Investment Officer
Virtus Capital Management
Investment Adviser to The Virtus Funds
November 15, 1996
- --------
* Performance quoted reflects past performance. 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):
1.70%; The Style Manager Fund: 7.98%; The Style Manager: Large Cap Fund
(Investment Shares): 9.08%; The Virginia Municipal Bond Fund (Investment
Shares): 0.59%; and The Maryland Municipal Bond Fund (Investment Shares):
0.33%.
** Income may be subject to the federal alternative minimum tax.
+ Although money market funds seek to maintain a stable net asset value of $1
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
----------------------------------------------------------------------------
During the last six months, one word can best describe the U.S. Fixed
Income Market, STABLE. The 30 year Treasury has traded within the 6.60% to
7.15% yield range since March of this year. We believe this pattern is
indicative of the stable interest rate environment that has been adeptly
engineered by Federal Reserve Chairman, Alan Greenspan. It is our view that
this pattern can continue for some time. The Federal Reserve and Chairman
Greenspan, should be given much credit for achieving their twin goals of
high employment and stable economic growth.
Returns in the U.S. fixed income markets have been modest at best for the
year. At the five year maturity and longer, returns have actually been
negative. The Virtus U.S. Government Securities Fund Trust Shares and
Investment Shares showed total returns of 4.05% and 3.79%*, respectively,
for the year ended September 30, 1996. The rate of return was the result of
being invested at long duration during the first quarter of the year, when
the market traded down and having little opportunity to make back lost
return during the 2nd and 3rd quarters.
The duration of the Virtus U.S. Government Securities Fund was extended
in June from 2.80 years to 3.90 years. This change in strategy was due to
our belief that the economy will continue to slow during the second half of
1996. The rise in interest rates during the first quarter of the year may
eventually restrict the pace of consumer activity. By doing so, interest
rates should begin to decline once again. We extended portfolio duration to
pursue higher returns for the balance of the year.
* The Investment Shares total return reflecting the 2% contingent deferred
sales charge is 1.70%.
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, 1996, compared to the Lehman Brothers
Intermediate Government Bond Index ("LBIGB").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year.....................................................................1.70%
5 Year.....................................................................5.76%
Start of Performance (10/16/90)............................................7.14%
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 9/30/96, 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.
+ 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, 1996, compared to the Lehman Brothers
Intermediate Government Bond Index ("LBIGB").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year.....................................................................4.05%
5 Year.....................................................................5.94%
Start of Performance (10/16/90)............................................7.30%
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 9/30/96; 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, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------------------------------------------- ------------
<C> <S> <C>
LONG-TERM INVESTMENTS--98.0%
---------------------------------------------------------------
U.S. TREASURY NOTES--93.4%
---------------------------------------------------
$ 5,000,000 5.00%, 2/15/1999 $ 4,871,750
---------------------------------------------------
23,000,000 6.875%, 5/15/2006 23,271,630
---------------------------------------------------
6,000,000 7.125%, 2/29/2000 6,142,500
---------------------------------------------------
2,000,000 7.50%, 11/15/2001 2,087,740
---------------------------------------------------
80,000,000 7.50%, 5/15/2002 83,803,200
---------------------------------------------------
5,000,000 7.875%, 4/15/1998 5,136,500
---------------------------------------------------
2,225,000 7.875%, 11/15/1999 2,322,811
---------------------------------------------------
7,000,000 8.00%, 1/15/1997 7,053,900
---------------------------------------------------
5,000,000 8.125%, 2/15/1998 5,140,600
---------------------------------------------------
6,250,000 8.25%, 7/15/1998 6,477,875
---------------------------------------------------
6,000,000 8.50%, 5/15/1997 6,107,160
---------------------------------------------------
10,750,000 8.75%, 10/15/1997 11,065,405
---------------------------------------------------
15,000,000 8.875%, 11/15/1998 15,805,350
---------------------------------------------------
3,000,000 8.875%, 2/15/1999 3,175,350
---------------------------------------------------
------------
Total U.S. Treasury Notes 182,461,771
--------------------------------------------------- ------------
------------
GOVERNMENT OBLIGATIONS--4.6%
---------------------------------------------------
993,000 Federal Agricultural Mortgage Corp., 7.37%,
8/1/2006 1,001,103
---------------------------------------------------
90,732 Federal Home Loan Bank, 7.62%, 8/1/2019 93,655
---------------------------------------------------
42,552 Federal Home Loan Bank, 8.494%, 12/1/2020 43,931
---------------------------------------------------
5,000,000 Federal Home Loan Mortgage Corp., 7.974%, 4/20/2005 5,064,350
---------------------------------------------------
1,742,520 Federal Home Loan Mortgage Corp., PC, REMIC, 7.80%,
5/15/2012 1,761,932
---------------------------------------------------
484,346 Federal National Mortgage Association, 8.50%,
12/1/2001 502,804
---------------------------------------------------
73,200 Federal National Mortgage Association, 8.713%,
6/1/2019 75,181
---------------------------------------------------
171,063 Government National Mortgage Association, 8.00%,
3/15/2017 174,643
---------------------------------------------------
366,507 Government National Mortgage Association, 9.00%,
9/15/2021 387,211
---------------------------------------------------
------------
Total Government Obligations 9,104,810
--------------------------------------------------- ------------
------------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST
$195,082,295) 191,566,581
--------------------------------------------------- ------------
</TABLE>
THE U.S. GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------------------------------------------------- ------------
<C> <S> <C>
(A) REPURCHASE AGREEMENTS--0.2%
---------------------------------------------------------------
$331,359 Nikko Securities Co. International, Inc., 5.70%,
dated 9/30/1996,
due 10/1/1996 (AT AMORTIZED COST) $ 331,359
-----------------------------------------------------
------------
TOTAL INVESTMENTS (IDENTIFIED COST $195,413,654) (B) $191,897,940
----------------------------------------------------- ------------
</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 $195,413,654.
The net unrealized depreciation of investments on a federal tax basis
amounts to $3,515,714 which is comprised of $663,398 appreciation and
$4,179,112 depreciation at September 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($195,416,246) at September 30, 1996.
The following acronyms are used throughout this portfolio:
PC--Participation Certificate
REMIC--Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
THE STYLE MANAGER FUND: LARGE CAP
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
Under the direction of Garry M. Allen, Chief Investment Officer, Virtus
Capital Management Inc. has implemented a new style of equity management.
The new method of investment is called "Style Management". Style Management
is a unique method of investing.
Academic research shows that style determines 80-90% of investment
return. Virtus seeks to capture the predominant investment style to take
greater advantage of market trends. This involves opportunistic positioning
defined by style and size. "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. "Size" refers to the division between large and small
companies based upon market value.
Style movements typically occur every one to three years (there have been
sixteen intermediate style changes since 1968), while size movements
generally occur every five to seven years (there have been four size
changes since 1968). This type of shifting between style and size has been
occuring ever since the stock market has existed.
Style management identifies and pursues greater rewards from active
management. Style (value vs. growth) and size (small vs. large-cap)
represent the two major components of systematic risk and return in the
market. Style dominates even the most skillful manager's returns. Active
style management reduces the level of risk in a portfolio and thus improves
the risk/reward trade-off.
The market for U.S. large company stocks is represented by the total
return on the S&P 500*. For the twelve months ended September 30, 1996, the
S&P 500 returned 20.3%. On a long-term "calendar" year basis, the S&P 500
has managed a return of 10.5% from 1926 - 1995. Therefore, the twelve month
period ended September 30, 1996, represents substantial above-average
performance relative to the long-term history of the U.S. Large Cap Equity
market.
This twelve month period favored growth stocks largely due to the strong
growth stock performance over the last six months. In general a stronger
than expected economy created an environment favorable to growth stocks at
the large cap end of the U.S. Equity market.
Virtus Capital Management anticipates that 1997 will increasingly reward
value stock investors as the overall market climate could shift to a theme
of capital preservation and safety. Value stocks are well positioned to
benefit from a slow-down in business cycle conditions in 1997.
*The S&P 500 is an unmanaged index comprised of common stocks in industry,
transportation, and financial and public utility companies. Investments
cannot be made in an index.
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, 1996, compared to the Standard & Poor's 500 Index
("S&P 500").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year.....................................................................9.08%
5 Year.....................................................................8.21%
Start of Performance (10/16/90)...........................................10.57%
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
9/30/96, 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.
+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, 1996, compared to the Standard & Poor's 500 Index
("S&P 500").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year....................................................................11.55%
5 Year.....................................................................8.39%
Start of Performance (10/16/90)...........................................10.73%
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
9/30/96, 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.
VIRTUS STYLE MANAGER: LARGE CAP FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--98.5%
------------------------------------------------
BANKING-FINANCE--1.1%
-------------------------------------
17,200 First Chicago NBD Corp. $ 778,300
-------------------------------------
12,400 P P & L Resources, Inc. 271,250
-------------------------------------
-----------
Total 1,049,550
-------------------------------------
-----------
COMMERCIAL SERVICES--0.3%
-------------------------------------
4,100 Grainger (W.W.), Inc. 288,025
-------------------------------------
-----------
CONSUMER DURABLES--3.5%
-------------------------------------
31,500 Chrysler Corp. 901,687
-------------------------------------
49,000 Ford Motor Co. 1,531,250
-------------------------------------
12,200 Goodyear Tire & Rubber Co. 562,725
-------------------------------------
6,300 Whirlpool Corp. 318,938
-------------------------------------
-----------
Total 3,314,600
-------------------------------------
-----------
CONSUMER NON-DURABLES--1.4%
-------------------------------------
10,900 American Brands, Inc. 460,525
-------------------------------------
12,800 Seagram Co. Ltd. 478,400
-------------------------------------
5,800 V.F. Corp. 348,725
-------------------------------------
-----------
Total 1,287,650
-------------------------------------
-----------
CONSUMER SERVICES--1.9%
-------------------------------------
12,800 Service Corp. International 387,200
-------------------------------------
8,000 Times Mirror Co., Class A 356,000
-------------------------------------
22,100 (a)U.S. West Media Group 372,938
-------------------------------------
18,800 (a)Viacom, Inc., Class B 667,400
-------------------------------------
-----------
Total 1,783,538
-------------------------------------
-----------
ELECTRONIC TECHNOLOGY--11.8%
-------------------------------------
11,100 AMP, Inc. 430,125
-------------------------------------
11,700 (a)Applied Materials, Inc. 323,212
-------------------------------------
13,100 Boeing Co. 1,237,950
-------------------------------------
12,300 (a)Compaq Computer Corp. 788,738
-------------------------------------
9,700 (a)Digital Equipment Corp. 346,775
-------------------------------------
2,200 General Dynamics Corp. 151,525
-------------------------------------
1,500 Hewlett-Packard Co. 73,125
-------------------------------------
21,200 International Business Machines Corp. 2,639,400
-------------------------------------
8,700 Lockheed Martin Corp. 784,087
-------------------------------------
9,000 McDonnell-Douglas Corp. 472,500
-------------------------------------
25,500 Motorola, Inc. 1,316,437
-------------------------------------
9,700 Raytheon Co. 539,563
-------------------------------------
9,600 Rockwell International Corp. 541,200
-------------------------------------
11,300 (a)Silicon Graphics, Inc. 250,013
-------------------------------------
</TABLE>
VIRTUS STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
------------------------------------------------
10,900 Texas Instruments, Inc. $ 600,863
-------------------------------------
4,400 United Technologies Corp. 528,550
-------------------------------------
-----------
Total 11,024,063
-------------------------------------
-----------
ENERGY MINERALS--16.7%
-------------------------------------
8,300 Amerada-Hess Corp. 438,863
-------------------------------------
17,700 Amoco Corp. 1,247,850
-------------------------------------
5,400 Atlantic Richfield Co. 688,500
-------------------------------------
9,200 Burlington Resources, Inc. 408,250
-------------------------------------
24,700 Chevron Corp. 1,546,837
-------------------------------------
45,900 Exxon Corp. 3,821,175
-------------------------------------
14,000 Mobil Corp. 1,620,500
-------------------------------------
25,500 Occidental Petroleum Corp. 596,062
-------------------------------------
11,100 Phillips Petroleum Co. 474,525
-------------------------------------
16,900 Royal Dutch Petroleum Co., ADR 2,638,513
-------------------------------------
12,800 Texaco, Inc. 1,177,600
-------------------------------------
26,000 USX Marathon Corp. 562,250
-------------------------------------
11,500 Unocal Corp. 414,000
-------------------------------------
-----------
Total 15,634,925
-------------------------------------
-----------
FINANCE--24.4%
-------------------------------------
8,600 AON Corp. 466,550
-------------------------------------
9,100 Aetna Services Inc. 640,412
-------------------------------------
16,100 Allstate Corp. 792,925
-------------------------------------
17,900 American Express Co. 827,875
-------------------------------------
14,600 American General Corp. 551,150
-------------------------------------
20,400 Banc One Corp. 836,400
-------------------------------------
7,600 Bank of Boston Corp. 439,850
-------------------------------------
21,400 Bank of New York Co., Inc. 628,625
-------------------------------------
15,200 BankAmerica Corp. 1,248,300
-------------------------------------
11,600 Barnett Banks, Inc. 391,500
-------------------------------------
8,900 Boatmen's Bancshares, Inc. 497,287
-------------------------------------
2,100 CIGNA Corp. 251,737
-------------------------------------
17,100 Chase Manhattan Corp. 1,370,137
-------------------------------------
17,600 Citicorp 1,595,000
-------------------------------------
9,400 Comerica, Inc. 484,100
-------------------------------------
8,400 Dean Witter, Discover & Co. 462,000
-------------------------------------
8,800 Federal Home Loan Mortgage Corp. 861,300
-------------------------------------
39,000 Federal National Mortgage Association 1,360,125
-------------------------------------
11,400 First Union Corp. 760,950
-------------------------------------
12,400 Great Western Financial Corp. 328,600
-------------------------------------
4,800 Household International, Inc. 394,800
-------------------------------------
</TABLE>
VIRTUS STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------
5,700 J.P. Morgan & Co., Inc. $ 506,588
--------------------------------
6,000 Jefferson-Pilot Corp. 310,500
--------------------------------
12,000 KeyCorp 528,000
--------------------------------
7,900 Lincoln National Corp. 346,612
--------------------------------
6,400 Mellon Bank Corp. 379,200
--------------------------------
6,800 Merrill Lynch & Co., Inc. 446,250
--------------------------------
6,800 Morgan Stanley Group, Inc. 338,300
--------------------------------
11,200 National City Corp. 471,800
--------------------------------
10,500 NationsBank Corp. 912,187
--------------------------------
18,500 PNC Financial Corp. 617,437
--------------------------------
5,100 Republic New York Corp. 352,538
--------------------------------
11,300 SAFECO Corp. 395,500
--------------------------------
5,400 St. Paul Cos., Inc. 299,700
--------------------------------
5,100 Transamerica Corp. 356,363
--------------------------------
18,300 Travelers Group, Inc. 898,988
--------------------------------
10,500 Wachovia Corp. 519,750
--------------------------------
-----------
Total 22,869,336
--------------------------------
-----------
HEALTH SERVICES--1.6%
--------------------------------
19,300 Columbia/HCA Healthcare Corp. 1,097,687
--------------------------------
10,700 United Healthcare Corp. 445,388
--------------------------------
-----------
Total 1,543,075
--------------------------------
-----------
HEALTH TECHNOLOGY--1.5%
--------------------------------
12,600 Baxter International, Inc. 589,050
--------------------------------
19,500 Pharmacia & Upjohn, Inc. 804,375
--------------------------------
-----------
Total 1,393,425
--------------------------------
-----------
INDUSTRIAL SERVICES--1.1%
--------------------------------
16,200 Browning-Ferris Industries, Inc. 405,000
--------------------------------
19,800 WMX Technologies, Inc. 650,925
--------------------------------
-----------
Total 1,055,925
--------------------------------
-----------
NON-ENERGY MINERALS--2.7%
--------------------------------
9,300 Aluminum Co. of America 548,700
--------------------------------
5,700 Georgia-Pacific Corp. 451,012
--------------------------------
6,300 Phelps Dodge Corp. 403,988
--------------------------------
8,700 Reynolds Metals Co. 444,788
--------------------------------
13,700 Weyerhaeuser Co. 631,913
--------------------------------
-----------
Total 2,480,401
--------------------------------
-----------
PROCESS INDUSTRIES--4.2%
--------------------------------
7,200 Air Products & Chemicals, Inc. 419,400
--------------------------------
12,900 Dow Chemical Co. 1,035,225
--------------------------------
5,700 Great Lakes Chemical Corp. 324,900
--------------------------------
</TABLE>
VIRTUS STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------ -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-----------------------------------------------
18,400 International Paper Co. $ 782,000
------------------------------------
8,000 Morton International, Inc. 318,000
------------------------------------
8,000 Sherwin-Williams Co. 371,000
------------------------------------
6,400 Union Camp Corp. 312,800
------------------------------------
7,600 Union Carbide Corp. 346,750
------------------------------------
-----------
Total 3,910,075
------------------------------------
-----------
PRODUCER MANUFACTURING--6.3%
------------------------------------
12,100 Allied-Signal, Inc. 797,087
------------------------------------
6,600 Case Corp. 321,750
------------------------------------
9,000 Caterpillar, Inc. 678,375
------------------------------------
9,800 Cooper Industries, Inc. 423,850
------------------------------------
12,100 Deere & Co. 508,200
------------------------------------
7,800 Honeywell, Inc. 492,375
------------------------------------
7,500 (a)ITT Corp. 327,187
------------------------------------
7,800 Ingersoll-Rand Co. 370,500
------------------------------------
4,400 Johnson Controls, Inc. 330,000
------------------------------------
4,100 Loews Corp. 317,237
------------------------------------
5,000 TRW, Inc. 465,000
------------------------------------
8,500 Tenneco, Inc. 426,063
------------------------------------
5,000 Textron, Inc. 425,000
------------------------------------
-----------
Total 5,882,624
------------------------------------
-----------
RETAIL TRADE--4.0%
------------------------------------
6,500 Dayton-Hudson Corp. 214,500
------------------------------------
13,000 (a)Federated Department Stores, Inc. 435,500
------------------------------------
18,078 Limited, Inc. 345,742
------------------------------------
9,400 Lowe's Cos., Inc. 384,225
------------------------------------
10,800 May Department Stores Co. 525,150
------------------------------------
9,500 Melville Corp. 419,187
------------------------------------
12,000 J. C. Penney Co., Inc. 649,500
------------------------------------
7,600 Sears, Roebuck & Co. 340,100
------------------------------------
14,000 (a)Toys R Us, Inc. 407,750
------------------------------------
-----------
Total 3,721,654
------------------------------------
-----------
TECHNOLOGY SERVICES--2.0%
------------------------------------
4,060 First Data Corp., 331,397
------------------------------------
31,500 General Motors Corp. 1,512,000
------------------------------------
-----------
Total 1,843,397
------------------------------------
-----------
</TABLE>
VIRTUS STYLE MANAGER: LARGE CAP FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------
TRANSPORTATION--3.4%
--------------------------------------------------
4,800 (a)AMR Corp. $ 382,200
--------------------------------------------------
6,800 Burlington Northern Santa Fe 573,750
--------------------------------------------------
8,500 CSX Corp. 429,250
--------------------------------------------------
6,200 Consolidated Rail Corp. 448,725
--------------------------------------------------
4,200 Delta Air Lines, Inc. 302,400
--------------------------------------------------
6,200 Norfolk Southern Corp. 566,525
--------------------------------------------------
6,500 Union Pacific Corp. 476,125
--------------------------------------------------
-----------
Total 3,178,975
--------------------------------------------------
-----------
UTILITIES--10.6%
--------------------------------------------------
12,200 Bell Atlantic Corp. 730,475
--------------------------------------------------
40,600 BellSouth Corp. 1,502,200
--------------------------------------------------
6,800 Carolina Power & Light Co. 234,600
--------------------------------------------------
10,800 Consolidated Edison Co. 299,700
--------------------------------------------------
5,800 Duke Power Co. 270,425
--------------------------------------------------
29,700 Edison International 530,887
--------------------------------------------------
7,900 Enron Corp. 321,925
--------------------------------------------------
13,600 Entergy Corp. 367,200
--------------------------------------------------
13,000 Houston Industries, Inc. 287,625
--------------------------------------------------
28,200 MCI Communications Corp. 722,625
--------------------------------------------------
19,500 NYNEX Corp. 848,250
--------------------------------------------------
9,800 Ohio Edison Co. 189,875
--------------------------------------------------
28,400 Pacific Gas & Electric Co. 617,700
--------------------------------------------------
12,900 Pacificorp 266,063
--------------------------------------------------
12,400 Panenergy Corp. 429,350
--------------------------------------------------
15,500 PECO Energy Co. 368,125
--------------------------------------------------
24,200 Southern Co. 547,525
--------------------------------------------------
6,500 Texas Utilities Co. 257,563
--------------------------------------------------
27,300 U.S. West, Inc. 812,175
--------------------------------------------------
13,900 Unicom Corp. 349,238
--------------------------------------------------
-----------
Total 9,953,526
--------------------------------------------------
-----------
TOTAL COMMON STOCKS (IDENTIFIED COST $86,073,687) 92,214,764
-------------------------------------------------- -----------
</TABLE>
VIRTUS STYLE MANAGER: LARGE CAP FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- --------------------------------------------------- -----------
<C> <S> <C>
(B) REPURCHASE AGREEMENT--1.3%
--------------------------------------------------------------
$1,231,984 Nikko Securities Co. International, Inc., 5.70%,
dated 9/30/1996,
due 10/1/1996 (AT AMORTIZED COST) $ 1,231,984
---------------------------------------------------
-----------
TOTAL INVESTMENTS (IDENTIFIED COST $87,305,671)(C) $93,446,748
--------------------------------------------------- -----------
</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 $87,310,058.
The net unrealized appreciation of investments on a federal tax basis
amounts to $6,136,690 which is comprised of $7,627,433 appreciation and
$1,490,743 depreciation at September 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($93,573,999) at September 30, 1996.
The following acronym is used throughout this portfolio:
ADR--American Depositary Receipt
(See Notes which are an integral part of the Financial Statements)
THE STYLE MANAGER FUND
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
The twelve-month period ended September 30, 1996, was highlighted by
significant directional movement in smaller cap stocks*. Driven by investor
cash flow, small cap growth stocks in particular moved upward to
unsustainable valuation levels in early 1996. At mid-year 1996, valuation
concerns led to significant downward price movements in small growth
stocks. We expect this to continue through 1996 with small growth stocks
ending the year significantly below set alternative styles. In contrast,
our focus has been on small value stocks which have demonstrated greater
stability in an investment environment characterized by excessive risk
measures.
*Small capitalization stocks have historically experienced greater
volatility than average.
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, 1996, compared to the Standard & Poor's 500 Index ("S&P 500").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year.....................................................................7.98%
Start of Performance (3/7/95).............................................18.48%
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 March 7, 1995
through September 30, 1996, 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 5 years from the purchase date. 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 500
has been adjusted to reflect reinvestment of dividends on securities in the
index. This index is unmanaged.
VIRTUS STYLE MANAGER FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ---------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--96.7%
---------------------------------------------
COMMERCIAL SERVICES--3.5%
----------------------------------
11,800 ABM Industries, Inc. $ 199,125
----------------------------------
9,000 American Business Products, Inc. 200,250
----------------------------------
6,900 Nash Finch Co. 110,400
----------------------------------
14,247 Ogden Corp. 286,721
----------------------------------
37,000 Safety-Kleen Corp. 610,500
----------------------------------
18,300 Standard Register 505,538
----------------------------------
2,700 True North Communications, Inc. 62,438
----------------------------------
7,818 Wallace Computer, Inc. 220,859
---------------------------------- -----------
-----------
Total 2,195,831
---------------------------------- -----------
-----------
CONSUMER DURABLES--3.8%
----------------------------------
8,500 Bassett Furniture Industries, Inc. 201,875
----------------------------------
15,093 Fleetwood Enterprises, Inc. 464,110
----------------------------------
12,200 Kaufman & Broad Homes Corp. 158,600
----------------------------------
10,800 La-Z Boy Chair Co. 325,350
----------------------------------
4,700 National Presto Industries, Inc. 176,838
----------------------------------
4,300 Oneida Ltd. 64,500
----------------------------------
5,800 Skyline Corp. 159,500
----------------------------------
10,400 Stanhome, Inc. 300,300
----------------------------------
2,500 Starrett (L.S.) Co., Class A 59,688
----------------------------------
17,200 Sturm Ruger & Co., Inc. 337,550
----------------------------------
16,200 Winnebago Industries, Inc. 129,600
----------------------------------
-----------
Total 2,377,911
----------------------------------
-----------
CONSUMER NON-DURABLES--5.6%
----------------------------------
12,992 Block Drug, Inc., Class A 583,016
----------------------------------
22,500 Coors Adolph Co., Class B 493,594
----------------------------------
29,103 Dean Foods Co. 822,160
----------------------------------
36,750 Flowers Industries, Inc. 748,781
----------------------------------
11,200 International Multifoods Corp. 182,000
----------------------------------
5,500 Oxford Industries, Inc. 94,875
----------------------------------
22,300 Universal Corp. 568,650
---------------------------------- -----------
-----------
Total 3,493,076
---------------------------------- -----------
-----------
CONSUMER SERVICES--0.9%
----------------------------------
9,000 Luby's Cafeterias, Inc. 216,000
----------------------------------
12,900 Sbarro, Inc. 333,788
---------------------------------- -----------
-----------
Total 549,788
---------------------------------- -----------
-----------
ELECTRONIC TECHNOLOGY--0.6%
----------------------------------
2,500 Curtiss Wright Corp. 136,250
----------------------------------
</TABLE>
VIRTUS STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
----------------------------------------------
5,600 Thiokol Corp. $ 262,500
----------------------------------- -----------
-----------
Total 398,750
----------------------------------- -----------
-----------
FINANCE--36.1%
-----------------------------------
12,900 Alfa Corp. 153,187
-----------------------------------
6,600 Associated Banc Corp. 266,475
-----------------------------------
12,200 Bancorpsouth, Inc. 286,700
-----------------------------------
8,200 Bankers Corp. 149,650
-----------------------------------
4,800 CCB Financial Corp. 262,800
-----------------------------------
9,907 CNB Bancshares, Inc. 291,011
-----------------------------------
39,393 Central Fidelity Banks, Inc. 955,280
-----------------------------------
14,300 Centura Banks, Inc. 552,337
-----------------------------------
4,625 Chittenden Corp. 116,781
-----------------------------------
9,600 Citizens Bancorp 460,800
-----------------------------------
9,100 Citizens Banking Corp. 260,487
-----------------------------------
9,345 Commerce Bancorp, Inc. 246,474
-----------------------------------
24,941 Compass Bancshares, Inc. 857,347
-----------------------------------
10,600 Cullen Frost Bankers, Inc. 319,325
-----------------------------------
19,600 Dauphin Deposit Corp. 607,600
-----------------------------------
14,800 Deposit Guaranty Corp. 714,100
-----------------------------------
7,300 F & M National Corp. 134,137
-----------------------------------
18,356 First American Corp. 881,088
-----------------------------------
24,885 First Commerce Corp. 867,864
-----------------------------------
12,300 First Commmonwealth Financial Corp. 226,012
-----------------------------------
15,600 First Financial Corp. Wisconsin 374,400
-----------------------------------
17,400 First Hawaiian, Inc. 539,400
-----------------------------------
16,240 First Michigan Bank Corp. 401,940
-----------------------------------
6,200 Firstbank Illinois Co. 197,625
-----------------------------------
6,500 Foremost Corp. 357,500
-----------------------------------
6,700 Fort Wayne National Corp. 216,075
-----------------------------------
8,100 Fremont General Corp. 238,950
-----------------------------------
18,810 Fulton Financial Corp. 376,200
-----------------------------------
12,800 GATX Corp. 598,400
-----------------------------------
11,100 Home Beneficial Corp., Class B 274,725
-----------------------------------
6,700 JSB Financial, Inc. 242,037
-----------------------------------
9,700 Jefferson Bankshares, Inc. 263,719
-----------------------------------
22,650 Keystone Financial, Inc. 566,250
-----------------------------------
4,300 Liberty Bancorp, Inc.-Oklahoma 163,400
-----------------------------------
17,800 Magna Group, Inc. 498,400
-----------------------------------
8,000 Mark Twain Bancshares, Inc. 337,000
-----------------------------------
33,571 Mercantile Bankshares Corp. 994,541
-----------------------------------
</TABLE>
VIRTUS STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------
13,310 Mid Am, Inc. $ 232,925
--------------------------------------
6,700 National Golf Properties, Inc. 186,763
--------------------------------------
3,900 New York Bancorp, Inc. 123,337
--------------------------------------
24,547 Ohio Casualty Corp. 834,598
--------------------------------------
9,400 Omega Healthcare Investors 282,000
--------------------------------------
9,100 One Valley Bancorp West Virginia, Inc. 359,450
--------------------------------------
21,800 PHH Corp. 648,550
--------------------------------------
5,500 PXRE Corp. 125,812
--------------------------------------
15,000 Provident Bancorp, Inc. 658,125
--------------------------------------
53,200 Reliance Group Holdings, Inc. 412,300
--------------------------------------
7,970 Republic Bancorp, Inc. 96,636
--------------------------------------
3,100 S & T Bancorp, Inc. 97,650
--------------------------------------
9,100 Selective Insurance Group, Inc. 304,850
--------------------------------------
7,400 Susquehanna Bankshares, Inc. 220,150
--------------------------------------
2,100 Trenwick Group, Inc. 108,675
--------------------------------------
22,000 USLIFE Corp. 660,000
--------------------------------------
7,600 United Bankshares, Inc. 223,250
--------------------------------------
17,700 United Carolina Bancshares 411,525
--------------------------------------
3,800 Washington National Corp. 109,725
--------------------------------------
5,700 Whitney Holding Corp. 186,675
--------------------------------------
11,300 Zenith National Insurance Corp. 307,925
--------------------------------------
9,200 Zions Bancorp 814,200
-------------------------------------- -----------
-----------
Total 22,655,138
-------------------------------------- -----------
-----------
HEALTH TECHNOLOGY--0.2%
--------------------------------------
8,100 ADAC Laboratories 163,012
-------------------------------------- -----------
-----------
NON-ENERGY MINERALS--2.8%
--------------------------------------
10,500 Carpenter Technology Corp. 367,500
--------------------------------------
10,800 Chaparral Steel Co. 151,200
--------------------------------------
5,100 Cleveland Cliffs, Inc. 204,000
--------------------------------------
8,600 Lukens, Inc. 156,950
--------------------------------------
4,200 Quanex Corp. 112,875
--------------------------------------
18,900 Rayonier, Inc. 751,275
-------------------------------------- -----------
-----------
Total 1,743,800
-------------------------------------- -----------
-----------
PROCESS INDUSTRIES--4.9%
--------------------------------------
6,200 Chemed Corp. 235,600
--------------------------------------
700 Chesapeake Corp. 19,250
--------------------------------------
15,600 Dexter Corp. 466,050
--------------------------------------
9,000 Guilford Mills, Inc. 202,500
--------------------------------------
5,600 Learonal 123,900
--------------------------------------
33,100 Longview Fibre Co. 521,325
--------------------------------------
</TABLE>
VIRTUS STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------------------------------ -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-----------------------------------------------
10,000 O'Sullivan Corp. $ 106,250
------------------------------------
8,500 Pope & Talbot, Inc. 130,687
------------------------------------
20,980 Potlatch Corp. 812,975
------------------------------------
8,300 Springs Industries, Inc., Class A 369,350
------------------------------------
6,400 Stepen Chemical Co. 114,400
------------------------------------ -----------
-----------
Total 3,102,287
------------------------------------ -----------
-----------
PRODUCER MANUFACTURING--4.5%
------------------------------------
7,600 Cascade Corp. 91,200
------------------------------------
4,900 Commercial Intertech Corp. 56,350
------------------------------------
4,900 Cuno, Inc. 75,950
------------------------------------
5,000 Hunt Manufacturers Co. 84,375
------------------------------------
8,400 K2, Inc. 219,450
------------------------------------
9,800 Kaman Corp., Class A 104,125
------------------------------------
13,400 Kimball International, Inc., Class B 490,775
------------------------------------
7,350 Manitowoc, Inc. 236,119
------------------------------------
15,200 Herman Miller, Inc. 615,600
------------------------------------
7,900 Simpson Industries, Inc. 79,988
------------------------------------
13,300 Smith (A.O.) Corp. 330,838
------------------------------------
7,800 Standard Products Co. 196,950
------------------------------------
3,700 Thomas Industries, Inc. 71,688
------------------------------------
19,800 UNR Industries, Inc. 131,175
------------------------------------
5,000 Zero Corp. 95,000
------------------------------------ -----------
-----------
Total 2,879,583
------------------------------------ -----------
-----------
RETAIL TRADE--3.7%
------------------------------------
4,000 Blair Corp. 86,000
------------------------------------
8,100 CPI Corp. 151,875
------------------------------------
9,900 Cato Corp., Class A 54,450
------------------------------------
36,200 Family Dollar Stores, Inc. 628,975
------------------------------------
13,200 Ingles Markets, Inc., Class A 212,850
------------------------------------
11,300 Longs Drug Stores Corp. 491,550
------------------------------------
26,400 Ruddick Corp. 363,000
------------------------------------
20,400 Shopko Stores, Inc. 323,850
------------------------------------ -----------
-----------
Total 2,312,550
------------------------------------ -----------
-----------
TRANSPORTATION--0.9%
------------------------------------
22,900 Alexander and Baldwin, Inc. 561,050
------------------------------------ -----------
-----------
UTILITIES--29.2%
------------------------------------
46,028 American Water Works Co., Inc. 995,355
------------------------------------
33,500 Atlantic Energy, Inc. NJ 586,250
------------------------------------
8,500 Bay State Gas Co. 227,375
------------------------------------
9,200 Black Hills Corp. 238,050
------------------------------------
</TABLE>
VIRTUS STYLE MANAGER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- --------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------
4,000 California Water Service Corp. $ 152,500
---------------------------------------
11,100 Central Hudson Gas & Electric Service 330,225
---------------------------------------
7,400 Central VT Public Service Corp. 92,500
---------------------------------------
8,400 Cilcorp, Inc. 333,900
---------------------------------------
23,176 Cipsco, Inc. 825,645
---------------------------------------
5,600 Connecticut Energy Corp. 112,000
---------------------------------------
6,300 Connecticut Natural Gas Corp. 152,775
---------------------------------------
2,700 ETOWN 78,975
---------------------------------------
9,800 Eastern Enterprises 369,950
---------------------------------------
13,000 Eastern Utilities Association 219,375
---------------------------------------
13,577 El Paso Natural Gas 597,388
---------------------------------------
5,000 Empire Distribution Electric Co. 93,750
---------------------------------------
6,900 Energen Corp. 165,600
---------------------------------------
21,114 Hawaiian Electric Industries, Inc. 720,515
---------------------------------------
18,800 IES Industries, Inc. 571,050
---------------------------------------
22,600 Idaho Power Co. 709,075
---------------------------------------
3,300 Interstate Power Co. 95,700
---------------------------------------
11,100 Laclede Gas Co. 269,175
---------------------------------------
18,200 MDU Resources Group, Inc. 391,300
---------------------------------------
10,200 Madison Gas & Electric Co. 228,225
---------------------------------------
37,179 MidAmerican Energy Co. 590,217
---------------------------------------
19,900 Minnesota Power And Light Co. 529,837
---------------------------------------
29,700 Nevada Power Co. 605,138
---------------------------------------
7,500 New Jersey Resources Corp. 210,000
---------------------------------------
14,100 Northwest Natural Gas Co. 324,300
---------------------------------------
5,600 Northwestern Public Service Co. 167,300
---------------------------------------
17,200 Oneok, Inc. 473,000
---------------------------------------
8,700 Orange & Rockland Utilities, Inc. 304,500
---------------------------------------
2,800 Pennsylvania Enterprises 116,200
---------------------------------------
22,000 Peoples Energy Corp. 748,000
---------------------------------------
11,250 Philadelphia Suburban Corp. 185,625
---------------------------------------
18,300 Piedmont Natural Gas, Inc. 441,488
---------------------------------------
14,112 Portland General Corp. 541,548
---------------------------------------
11,900 Public Service Co. North Carolina, Inc. 218,662
---------------------------------------
24,500 Rochester Gas & Electric Corp 447,125
---------------------------------------
9,300 SIG Corp., Inc. 317,363
---------------------------------------
19,000 Sierra Pacific Resources 491,625
---------------------------------------
6,300 South Jersey Industries, Inc. 148,050
---------------------------------------
3,900 United Cities Gas Co. 87,506
---------------------------------------
9,000 United Illuminating Co. 309,375
---------------------------------------
</TABLE>
VIRTUS STYLE MANAGER FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
---------- --------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
--------------------------------------------------------------
20,500 United Water Resources, Inc. $ 338,250
---------------------------------------------------
17,900 WPL Holdings, Inc. 521,338
---------------------------------------------------
12,200 WPS Resources Corp. 370,575
---------------------------------------------------
27,300 Washington Gas Light Co. 600,600
---------------------------------------------------
35,600 Washington Water Power Co. 671,950
---------------------------------------------------
-----------
Total 18,316,225
---------------------------------------------------
-----------
TOTAL COMMON STOCKS (IDENTIFIED COST $55,658,695) 60,749,001
--------------------------------------------------- -----------
(A) REPURCHASE AGREEMENTS--3.1%
--------------------------------------------------------------
$1,965,010 Nikko Securities Co. International, Inc., 5.70%,
dated 9/30/1996,
due 10/1/1996 (AT AMORTIZED COST) 1,965,010
---------------------------------------------------
-----------
TOTAL INVESTMENTS (IDENTIFIED COST $57,680,055)(B) $62,714,011
--------------------------------------------------- -----------
</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 $57,822,007.
The net unrealized appreciation of investments on a federal tax basis
amounts to $4,892,004 which is comprised of $6,181,687 appreciation and
$1,289,683 depreciation at September 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($62,782,579) at September 30, 1996.
(See Notes which are an integral part of the Financial Statements)
VIRGINIA MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
Stronger than expected economic growth and inflation fears led to sharply
higher interest rates in the first half of 1996. These higher rates have
put a brake on the economy that caused a slowdown in the third quarter. We
believe that this slower growth should lead to lower rates for the
remainder of 1996 and into 1997. In order to lock in higher yields and
capture price appreciation as rates fall we have extended the average
maturity and duration of the Virtus Virginia Municipal Bond Fund. The
target average weighted maturity for the fund is currently 11 years.
Municipals outperformed treasuries as yields rose by preserving more of
their value. This has caused municipals to be slightly expensive versus
treasuries on a historical basis. This relationship should move closer to
historical averages if interest rates continue to fall.
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, 1996, compared to the Lehman Brothers 10 Year
Municipal Bond Index ("LBMBI").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year.....................................................................0.59%
5 Year.....................................................................5.88%
Start of Performance (10/24/90)............................................6.24%
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
9/30/96; 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.
+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, 1996, compared to the Lehman Brothers 10 Year
Municipal Bond Index ("LBMBI").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year.....................................................................2.86%
5 Year.....................................................................6.06%
Start of Performance (10/24/90)............................................6.40%
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
9/30/96; 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, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- ------------------------------------------ ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--96.1%
-----------------------------------------------------
VIRGINIA--96.1%
------------------------------------------
$1,000,000 Albemarle County, VA IDA, Hospital Revenue
Refunding Bonds, 5.75% (Martha Jefferson
Hospital), 10/1/2008 A $ 1,016,850
------------------------------------------
1,000,000 Arlington County, VA, GO UT Bonds, 5.30%
(Original Issue Yield: 5.40%), 6/1/2011 AAA 993,780
------------------------------------------
3,675,000 Big Stone Gap, VA Redevelopment & Housing
Authority, Correctional Facility Lease
Revenue Bonds, 6.00% (Wallens Ridge
Development Project), 9/1/2007 AA 3,896,970
------------------------------------------
3,000,000 Chesapeake Bay Bridge & Tunnel District,
VA, Revenue Bonds, 5.50% (FGIC
INS)/(Original Issue Yield: 5.65%),
7/1/2006 AAA 3,082,920
------------------------------------------
7,890,000 Chesapeake Bay Bridge & Tunnel District,
VA, Revenue Bonds, 5.875% (FGIC
INS)/(Original Issue Yield: 5.95%),
7/1/2010 AAA 8,130,251
------------------------------------------
3,500,000 Chesapeake, VA, GO UT Bonds, 5.375%
(Commonwealth of Virginia GTD)/(Original
Issue Yield: 5.45%), 5/1/2010 AA 3,486,490
------------------------------------------
2,980,000 Chesterfield County, VA, GO UT Bonds,
5.25%, 3/1/2010 AA+ 2,964,266
------------------------------------------
1,500,000 Chesterfield County, VA, GO UT Refunding
Bonds, 5.00%, 3/1/2006 AA+ 1,504,545
------------------------------------------
5,860,000 Commonwealth of Virginia, GO UT Bonds,
5.375%, 6/1/2009 AAA 5,905,708
------------------------------------------
4,000,000 Commonwealth of Virginia, GO UT Public
Facilities Bonds (Series A), 5.70%
(Original Issue Yield: 5.75%), 6/1/2008 AAA 4,142,080
------------------------------------------
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 2,676,424
------------------------------------------
2,605,000 Fairfax County, VA Sewer Revenue, Revenue
Bonds, 5.625%, 7/15/2011 AA 2,631,623
------------------------------------------
1,140,000 Fairfax County, VA Sewer Revenue, Sewer
Refunding Revenue Bonds, 5.30% (AMBAC
INS), 11/15/2006 AAA 1,155,983
------------------------------------------
1,505,000 Fairfax County, VA Sewer Revenue, Sewer
Refunding Revenue Bonds, 5.40% (AMBAC
INS), 11/15/2007 AAA 1,523,165
------------------------------------------
4,000,000 Fairfax County, VA, (Series A), 5.25%
(State Aid Withholding LOC)/(Original
Issue Yield: 5.35%), 6/1/2009 AAA 3,986,880
------------------------------------------
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 1,986,140
------------------------------------------
1,000,000 Henrico County, VA, GO UT Refunding Bonds,
5.20% (Original Issue Yield: 5.30%),
1/15/2007 AAA 1,008,570
------------------------------------------
1,000,000 Henrico County, VA, GO UT Refunding Bonds,
5.20% (Original Issue Yield: 5.35%),
1/15/2008 AAA 1,001,590
------------------------------------------
600,000 Loudoun County, VA IDA, Lease Revenue
Bonds, 5.50% (Northern Virginia Criminal
Justice)/(Original Issue Yield: 5.829%),
6/1/2008 AA- 612,594
------------------------------------------
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- 1,019,550
------------------------------------------
</TABLE>
THE VIRGINIA MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- ------------------------------------------ ------- -----------
<C> <S> <C> <C>
$1,000,000 Lynchburg, VA, GO UT Refunding Bonds,
5.00% (Original Issue Yield: 5.15%),
4/1/2004 AA $ 1,009,030
------------------------------------------
1,850,000 Lynchburg, VA, GO UT Refunding Bonds,
5.25% (Original Issue Yield: 5.45%),
4/1/2007 AA 1,859,435
------------------------------------------
1,835,000 Newport News, VA, GO UT Bonds (Series A),
6.10%, 6/1/2008 AA- 1,929,613
------------------------------------------
1,500,000 Newport News, VA, GO UT Refunding Bonds
(Series C), 5.20%, 6/1/2008 AA- 1,487,850
------------------------------------------
3,000,000 Norfolk, VA, GO UT Bonds, 5.25%
(Commonwealth of Virginia GTD)/(Original
Issue Yield: 5.55%), 6/1/2011 AA 2,935,260
------------------------------------------
2,000,000 Norfolk, VA, GO UT Bonds, 5.70% (MBIA
INS), 6/1/2008 AAA 2,065,720
------------------------------------------
2,535,000 Portsmouth, VA, GO UT Bonds, 5.00% (FGIC
INS), 8/1/2011 AAA 2,413,574
------------------------------------------
5,145,000 Richmond, VA, Metropolitan Authority,
Refunding Revenue Bonds (Series A), 6.00%
(FGIC INS)/(Original Issue Yield: 6.249%),
7/15/2008 AAA 5,393,709
------------------------------------------
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 3,491,708
------------------------------------------
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 A+ 1,221,119
------------------------------------------
1,000,000 Roanoke, VA, GO UT Bonds, 4.70%, 8/1/2005 AA 975,580
------------------------------------------
8,255,000 Virginia State Public Building Authority,
Revenue Bonds, 5.20% (Original Issue
Yield: 5.40%), 8/1/2010 AA 8,045,488
------------------------------------------
2,030,000 Virginia State Transportation Board,
Revenue Bonds, 6.00% (Northern Virginia
Transportation District )/(Original Issue
Yield: 6.10%), 5/15/2008 AA 2,134,931
------------------------------------------
1,500,000 Virginia State Transportation Board,
Transportation Contract Revenue Bonds
(Series C), 5.10% (Northern Virginia
Transportation District ), 5/15/2007 AA 1,481,160
------------------------------------------
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 1,010,589
------------------------------------------
-----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $89,586,325) 90,181,145
------------------------------------------
-----------
MUTUAL FUND ISSUES--1.5%
-----------------------------------------------------
1,357,387 Goldman Sachs & Co. ILA Tax Exempt 1,357,387
------------------------------------------
54,624 Municipal Fund for Temporary Investment 54,624
------------------------------------------
-----------
TOTAL MUTUAL FUND ISSUES (AT AMORTIZED
COST) 1,412,011
------------------------------------------
-----------
TOTAL INVESTMENTS (IDENTIFIED COST
$90,998,338)(A) $91,593,156
------------------------------------------
-----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $90,998,338.
The unrealized appreciation of investments on a federal tax basis amounts
to $594,818 which is comprised of $1,010,121 appreciation and $415,303
depreciation at September 30, 1996
* 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
($93,809,925) at September 30, 1996.
THE VIRGINIA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
The following acronym(s) 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)
MARYLAND MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------------------------------------------------
Stronger than expected economic growth and inflation fears led to sharply
higher interest rates in the first half of 1996. These higher rates have
put a brake on the economy that caused a slowdown in the third quarter. We
believe that this slower growth should lead to lower rates for the
remainder of 1996 and into 1997. In order to lock in higher yields and
capture price appreciation as rates fall we have extended the average
maturity and duration of the Virtus Maryland Municipal Bond Fund. The
target average weighted maturity for the fund is currently 11 years.
Municipals outperformed treasuries as yields rose by preserving more of
their value. This has caused municipals to be slightly expensive versus
treasuries on a historical basis. This relationship should move closer to
historical averages if interest rates continue to fall.
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, 1996, compared to the Lehman Brothers 10 Year
Municipal Bond Index ("LBMBI").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year.....................................................................0.33%
5 Year.....................................................................5.60%
Start of Performance (10/30/90)............................................5.86%
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 9/30/96; 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.
+The LBMBI is not adjusted to reflect sales loads, 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, 1996, compared to the Lehman Brothers 10 Year
Municipal Bond Index ("LBMBI").+
[INSERT CHART HERE]
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED SEPTEMBER 30, 1996
1 Year.....................................................................2.61%
5 Year.....................................................................5.78%
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 9/30/96; 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, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- ------------------------------------------ ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--95.5%
-----------------------------------------------------
$1,000,000 Baltimore County, MD Revenue Authority,
Revenue Refunding Bonds, 5.25% (Original
Issue Yield: 5.40%), 7/1/2008 A $ 1,036,480
------------------------------------------
4,000,000 Baltimore County, MD, UT GO Refunding
Bonds, 5.50% (Pension Funding), 8/1/2005 AA+ 4,177,480
------------------------------------------
1,000,000 Baltimore, MD, UT GO Bonds (Series A),
5.375% (AMBAC INS), 10/15/2008 AAA 1,001,420
------------------------------------------
1,350,000 Howard County, MD, UT GO Refunding Bonds
(Series A), 5.25% (Original Issue Yield:
5.45%), 8/15/2007 AA+ 1,363,743
------------------------------------------
1,930,000 Howard County, MD, UT GO Refunding Bonds
(Series A), 5.25% (Original Issue Yield:
5.60%), 8/15/2011 AA+ 1,903,443
------------------------------------------
1,740,000 Maryland National Capital Park & Planning
Commission, UT GO Bonds, 5.125% (Park
Aquisition & Development S-2)/ (Original
Issue Yield: 5.25%), 7/1/2010 AA 1,694,812
------------------------------------------
2,000,000 Maryland National Capital Park & Planning
Commission, Park Aquisition & Development
Refunding UT GO Bonds Series S-2, 5.125%
(Original Issue Yield: 5.20%), 7/1/2009 AA 1,959,700
------------------------------------------
1,720,000 Maryland State Community Development
Administration, Revenue Bonds (Single
Family Program-Fifth Series), 5.40%,
4/1/2008 Aa 1,736,736
------------------------------------------
1,000,000 Maryland State 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 996,370
------------------------------------------
500,000 Maryland State Health & Higher Educational
Facilities, Refunding Revenue Bonds, 5.30%
(Northwest Hospital Center, Inc.)/(AMBAC
INS)/(Original Issue Yield: 5.45%),
7/1/2006 AAA 505,715
------------------------------------------
1,500,000 Maryland State Health & Higher Educational
Facilities Authority, Revenue Bonds, 5.20%
(Frederick Memorial Hospital)/(FGIC
INS)/(Original Issue Yield: 5.30%),
7/1/2008 AAA 1,491,675
------------------------------------------
2,000,000 Maryland State & Local Facilities, UT GO
Bonds, 5.25%, 6/15/2007 AAA 2,023,360
------------------------------------------
2,500,000 Maryland State & Local Facilities, UT GO
Bonds, 5.70% (Original Issue Yield:
5.75%), 3/15/2010 AAA 2,577,600
------------------------------------------
1,800,000 Maryland State Stadium Authority, Lease
Revenue Bonds, 5.875% (AMBAC INS),
12/15/2011 AAA 1,845,648
------------------------------------------
500,000 Maryland State Transportation Authority,
Refunding Revenue Bonds, 5.70% (Original
Issue Yield: 5.80%), 7/1/2005 A+ 524,340
------------------------------------------
850,000 Maryland State Transportation Authority,
Refunding Revenue Bonds, 5.80% (Original
Issue Yield: 5.90%), 7/1/2006 A+ 894,999
------------------------------------------
820,000 Montgomery County, MD, UT GO Refunding
Bonds (Series A), 5.75% (Original Issue
Yield: 5.85%), 7/1/2006 AAA 868,569
------------------------------------------
1,000,000 Ocean City, MD, UT GO Refunding Bonds,
5.50% (MBIA INS), 3/15/2009 AAA 1,005,460
------------------------------------------
</TABLE>
THE MARYLAND MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
--------- ------------------------------------------- ------- -----------
<C> <S> <C> <C>
$ 500,000 Prince George's County, MD, UT GO Bonds,
5.50% (Stormwater Management)/(Original
Issue Yield: 5.55%), 3/15/2008 AA $ 505,545
-------------------------------------------
1,435,000 Prince George's County, MD IDA, Lease
Revenue Bonds, 6.00% (Hyattsville District
Court Facility)/(Original Issue Yield:
6.10%), 7/1/2009 AA 1,548,595
-------------------------------------------
1,425,000 Rockville, MD, UT GO Revenue Refunding
Bonds, 4.90% (Original Issue Yield: 5.00%),
4/15/2007 AA+ 1,390,942
-------------------------------------------
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+ 1,506,795
-------------------------------------------
500,000 University of Maryland, System Auxiliary
Facility & Tuition Revenue Bonds (Series
A), 5.30%, 4/1/2007 AA+ 505,215
-------------------------------------------
1,000,000 Washington County, MD, Sanitation District
UT GO Refunding Revenue Bonds (Series F),
5.25% (FGIC INS), 1/1/2007 AAA 1,006,910
-------------------------------------------
2,600,000 Washington Suburban Sanitation District,
MD, UT GO Bonds, 5.375% (Original Issue
Yield: 5.50%), 6/1/2011 AA 2,578,966
-------------------------------------------
1,700,000 Washington Suburban Sanitation District,
MD, UT GO Bonds, 5.50% (Original Issue
Yield: 5.60%), 6/1/2010 AA 1,709,350
-------------------------------------------
-----------
TOTAL LONG-TERM MUNICIPALS (IDENTIFIED
COST $38,153,160) 38,359,868
-------------------------------------------
-----------
MUTUAL FUND SHARES--0.8%
-----------------------------------------------------
237,792 Goldman Sachs Institutional Tax Exempt 237,792
-------------------------------------------
71,194 Municipal Fund for Temporary Investment 71,194
-------------------------------------------
-----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET
VALUE) 308,986
-------------------------------------------
-----------
TOTAL INVESTMENTS (IDENTIFIED COST
$38,462,146)(A) $38,668,854
-------------------------------------------
-----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $38,462,146.
The net unrealized appreciation of investments on a federal tax basis
amounts to $206,708 which is comprised of $398,351 appreciation and
$191,643 depreciation at September 30, 1996.
* 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
($40,172,819) at September 30, 1996.
The following acronyms 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, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--51.2%
---------------------------------------------------------------
U.S. TREASURY BILL--4.8%
---------------------------------------------------
$18,000,000 10/10/1996 $ 17,978,490
---------------------------------------------------
------------
------------
U.S. TREASURY NOTES--46.4%
---------------------------------------------------
18,000,000 4.375%, 11/15/1996 17,980,717
---------------------------------------------------
2,000,000 5.875%, 7/31/1997 2,003,441
---------------------------------------------------
2,000,000 6.500%, 4/30/1997 2,008,127
---------------------------------------------------
8,000,000 6.500%, 5/15/1997 8,030,777
---------------------------------------------------
5,000,000 6.500%, 8/15/1997 5,019,983
---------------------------------------------------
5,000,000 6.625%, 3/31/1997 5,022,705
---------------------------------------------------
5,000,000 6.750%, 2/28/1997 5,024,633
---------------------------------------------------
40,000,000 6.875%, 10/31/1996 40,049,554
---------------------------------------------------
5,000,000 6.875%, 3/31/1997 5,031,106
---------------------------------------------------
2,000,000 6.875%, 4/30/1997 2,013,358
---------------------------------------------------
23,000,000 7.250%, 11/15/1996 23,051,783
---------------------------------------------------
21,000,000 7.500%, 1/31/1997 21,137,259
---------------------------------------------------
4,000,000 8.000%, 1/15/1997 4,032,099
---------------------------------------------------
5,000,000 8.000%, 10/15/1996 5,005,423
---------------------------------------------------
6,000,000 8.500%, 4/15/1997 6,090,178
---------------------------------------------------
3,000,000 8.500%, 5/15/1997 3,051,045
---------------------------------------------------
18,000,000 8.500%, 7/15/1997 18,363,624
---------------------------------------------------
------------
Total 172,915,812
---------------------------------------------------
------------
TOTAL U.S. TREASURY OBLIGATIONS 190,894,302
--------------------------------------------------- ------------
(A) REPURCHASE AGREEMENTS--48.2%
---------------------------------------------------------------
50,000,000 CS First Boston, Inc., 5.600%, dated 9/30/1996, due
10/1/1996 50,000,000
---------------------------------------------------
30,000,000 Merrill Lynch, Pierce, Fenner and Smith, 5.600%,
dated 9/30/1996,
due 10/1/1996 30,000,000
---------------------------------------------------
30,000,000 Nikko Securities Co. International, Inc., 5.700%,
dated 9/30/1996,
due 10/1/1996 30,000,000
---------------------------------------------------
69,640,376 Prudential Securities, Inc., 5.680%, dated
9/30/1996, due 10/1/1996 69,640,376
---------------------------------------------------
------------
TOTAL REPURCHASE AGREEMENTS 179,640,376
--------------------------------------------------- ------------
------------
TOTAL INVESTMENTS AT AMORTIZED COST (B) $370,534,678
--------------------------------------------------- ------------
</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
($373,139,045) at September 30, 1996.
(See Notes which are an integral part of the Financial Statements)
THE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ---------------------------------------------------- -----------
<C> <S> <C>
(A) COMMERCIAL PAPER--43.5%
----------------------------------------------------------------
BANKING--FINANCE--9.3%
----------------------------------------------------
$10,000,000 Banc One Corp., 5.332%-5.553%, 10/18/1996-11/22/1996 $ 9,948,172
----------------------------------------------------
5,000,000 Bank of America FSB, 5.476%, 2/12/1997 4,900,803
----------------------------------------------------
5,000,000 CS First Boston, Inc., 5.483%, 10/7/1996 4,995,483
----------------------------------------------------
3,000,000 NationsBank Corp., 5.783%, 1/13/1997 2,951,293
----------------------------------------------------
-----------
Total 22,795,751
----------------------------------------------------
-----------
FINANCE--AUTOMOTIVE--3.2%
----------------------------------------------------
8,000,000 Ford Motor Credit Corp., 5.506%, 1/28/1997 7,857,993
----------------------------------------------------
-----------
FINANCE--LEASING--3.6%
----------------------------------------------------
4,000,000 International Lease Finance Corp., 5.761%, 3/10/1997 3,900,444
----------------------------------------------------
5,000,000 Pitney Bowes Credit Corp., 5.669%, 3/3/1997 4,882,700
----------------------------------------------------
-----------
Total 8,783,144
----------------------------------------------------
-----------
FINANCIAL SERVICES--19.7%
----------------------------------------------------
12,000,000 Bear Stearns & Co., Inc., 5.392%-5.533%,
10/17/1996 - 11/14/1996 11,946,143
----------------------------------------------------
5,350,000 Briarcliff Capital Corp., 5.394%, 10/16/1996 5,338,052
----------------------------------------------------
5,000,000 General Electric Capital Corp., 5.499%, 10/30/1996 4,978,250
----------------------------------------------------
11,000,000 Marsh & McLennan Co., Inc., 5.195%-5.798%,
10/25/1996 - 2/25/1997 10,866,075
----------------------------------------------------
5,000,000 Merrill Lynch & Co., Inc., 5.426%, 10/10/1996 4,993,388
----------------------------------------------------
3,000,000 Morgan Stanley Group, Inc., 5.742%, 1/27/1997 2,945,130
----------------------------------------------------
2,000,000 Smith Barney, Inc., 5.457%, 10/2/1996 1,999,697
----------------------------------------------------
5,000,000 Transamerica Finance Corp., 5.551%, 2/13/1997 4,898,750
----------------------------------------------------
-----------
Total 47,965,485
----------------------------------------------------
-----------
INSURANCE--0.5%
----------------------------------------------------
1,300,000 Transamerica Corp., 5.435%, 10/15/1996 1,297,321
----------------------------------------------------
-----------
OIL/GAS--2.3%
----------------------------------------------------
5,600,000 Texaco, Inc., 5.001%-5.085%, 11/1/1996 - 11/15/1996 5,572,808
----------------------------------------------------
-----------
PHARMACEUTICALS--3.7%
----------------------------------------------------
9,000,000 Schering Corp., 5.478%-5.528%, 11/19/1996 -
2/11/1997 8,908,881
----------------------------------------------------
-----------
RESTAURANT/FOOD SERVICE--1.2%
----------------------------------------------------
3,000,000 Philip Morris Cos., Inc., 5.406%, 11/5/1996 2,984,454
----------------------------------------------------
-----------
TOTAL COMMERCIAL PAPER 106,165,837
----------------------------------------------------
-----------
CORPORATE BONDS--23.2%
----------------------------------------------------------------
BANKING-FINANCE--7.4%
----------------------------------------------------
800,000 Associates Corp. of North America, 7.500%,
10/15/1996 800,454
----------------------------------------------------
2,490,000 Associates Corp. of North America, 8.675%, 6/15/1997 2,533,387
----------------------------------------------------
3,810,000 BankAmerica Corp., 7.500%, 3/15/1997 3,837,058
----------------------------------------------------
1,685,000 NCNB Corp., 8.500%, 11/1/1996 1,688,926
----------------------------------------------------
</TABLE>
THE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
$2,300,000 NationsBank Corp., 7.500%, 2/15/1997 $ 2,315,941
----------------------------------------------------
2,500,000 Norwest Corp., 7.875%, 1/30/1997 2,516,277
----------------------------------------------------
1,000,000 Norwest Corp., 9.250%, 5/1/1997 1,018,338
----------------------------------------------------
2,395,000 Security Pacific Corporation, 7.750%, 12/1/1996 2,404,433
----------------------------------------------------
1,000,000 Wachovia Bank of NC, NA, Winston-Salem, 6.050%,
4/14/1997 1,001,901
----------------------------------------------------
------------
Total 18,116,715
----------------------------------------------------
------------
FINANCE-AUTOMOTIVE--0.2%
----------------------------------------------------
500,000 Ford Motor Credit Corp., 5.625%, 3/3/1997 499,413
----------------------------------------------------
------------
FINANCE-LEASING--3.3%
----------------------------------------------------
1,250,000 International Lease Finance Corp., 5.500%, 4/1/1997 1,247,559
----------------------------------------------------
5,890,000 International Lease Finance Corp., 6.375%, 11/1/1996 5,895,780
----------------------------------------------------
900,000 International Lease Finance Corp., 7.900%, 10/1/1996 900,000
----------------------------------------------------
------------
Total 8,043,339
----------------------------------------------------
------------
FINANCIAL SERVICES--5.7%
----------------------------------------------------
2,000,000 American General Finance Corp., 5.800%, 4/1/1997 1,999,380
----------------------------------------------------
1,600,000 General Electric Financial Services, Inc., 8.750%,
11/26/1996 1,607,397
----------------------------------------------------
2,400,000 J.P. Morgan & Co., Inc., 6.500%, 6/30/1997 2,411,800
----------------------------------------------------
4,000,000 Merrill Lynch & Co., Inc., 5.000%, 12/15/1996 3,995,766
----------------------------------------------------
2,650,000 Norwest Financial, Inc., 6.250%, 2/15/1997 2,656,088
----------------------------------------------------
1,290,000 Transamerica Finance Corp., 8.125%, 10/15/1996 1,291,408
----------------------------------------------------
------------
Total 13,961,839
----------------------------------------------------
------------
OIL/GAS--2.7%
----------------------------------------------------
1,000,000 Mobil Corp., 6.500%, 12/17/1996 1,001,418
----------------------------------------------------
5,500,000 Texaco Capital, Inc., 9.000%, 11/15/1996 5,521,428
----------------------------------------------------
------------
Total 6,522,846
----------------------------------------------------
------------
PROCESS INDUSTRIES--1.0%
----------------------------------------------------
2,500,000 Du Pont (E.I.) de Nemours & Co., 8.450%, 10/15/1996 2,502,903
----------------------------------------------------
------------
RESTAURANT/FOOD SERVICE--2.1%
----------------------------------------------------
3,000,000 PepsiCo, Inc., 7.000%, 11/15/1996 3,005,866
----------------------------------------------------
2,000,000 Philip Morris Cos., Inc., 9.750%, 5/1/1997 2,040,864
----------------------------------------------------
------------
Total 5,046,730
----------------------------------------------------
------------
UTILITIES--0.8%
----------------------------------------------------
2,000,000 Virginia Electric Power Co., 7.250%, 3/1/1997 2,011,073
----------------------------------------------------
------------
TOTAL CORPORATE BONDS 56,704,858
----------------------------------------------------
------------
CORPORATE NOTES--5.1%
---------------------------------------------------------------
FINANCE--CONSUMER LOAN--1.0%
----------------------------------------------------
2,370,000 Commercial Credit Co., 8.125%, 3/1/1997 2,391,953
----------------------------------------------------
------------
FINANCIAL SERVICES--2.9%
----------------------------------------------------
1,200,000 American Express Credit Corp., 7.750%, 3/1/1997 1,209,243
----------------------------------------------------
1,000,000 American General Finance Corp., 6.625%, 6/1/1997 1,003,689
----------------------------------------------------
</TABLE>
THE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ---------------------------------------------------- ------------
<C> <S> <C>
$ 275,000 Avco Financial Services, Inc., 7.500%, 11/15/1996 $ 275,579
----------------------------------------------------
2,461,000 Ford Capital BV, 9.750%, 6/5/1997 2,520,362
----------------------------------------------------
1,978,000 John Deere Capital Corp., 7.200%, 5/15/1997 1,991,172
---------------------------------------------------- ------------
Total 7,000,045
---------------------------------------------------- ------------
SECURITIES--1.2%
----------------------------------------------------
3,000,000 Smith Barney Holdings, Inc., 6.000%, 3/15/1997 3,002,083
---------------------------------------------------- ------------
TOTAL CORPORATE NOTES 12,394,081
---------------------------------------------------- ------------
GOVERNMENT AGENCIES--24.0%
---------------------------------------------------------------
950,000 (b)Federal Home Loan Bank System, 5.560%, 10/25/1996 950,069
----------------------------------------------------
2,000,000 (a)Federal National Mortgage Association, 5.530%,
12/14/1996 2,000,700
----------------------------------------------------
55,250,000 (b)Student Loan Marketing Association, 5.510%-
5.670%, 11/29/96 55,280,573
---------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES 58,231,342
----------------------------------------------------
------------
(C) REPURCHASE AGREEMENT--3.9%
---------------------------------------------------------------
9,582,401 Prudential Securities, Inc., 5.680%, dated
9/30/1996, due 10/1/1996 9,582,401
----------------------------------------------------
------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(D) $243,078,519
----------------------------------------------------
------------
</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
($244,199,833) at September 30, 1996.
(See Notes which are an integral part of the Financial Statements)
THE TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--91.6%
--------------------------------------------------------
ALABAMA--1.9%
---------------------------------------------
$1,000,000 Columbia, AL IDB , PCR (Series C) Daily VRDNs
(Alabama Power Co.) A $ 1,000,000
---------------------------------------------
-----------
ALASKA--7.6%
---------------------------------------------
4,000,000 Alaska State Housing Finance Corp., Revenue
Bonds (Series 1991C) Weekly VRDNs (Swiss Bank
Capital Markets LOC) A+ 4,000,000
---------------------------------------------
-----------
ARIZONA--7.8%
---------------------------------------------
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
---------------------------------------------
2,000,000 Phoenix, AZ, Revenue Bonds, 7.375% Bonds
(United States Treasury PRF), 7/1/1997 (@102) AAA 2,091,390
---------------------------------------------
-----------
Total 4,091,390
---------------------------------------------
-----------
FLORIDA--11.1%
---------------------------------------------
2,500,000 Manatee County, FL, Water & Sewer Revenue
Bonds, 7.625% Bonds (MBIA INS)/(United States
Treasury PRF), 10/1/1996 (@102) AAA 2,550,000
---------------------------------------------
3,300,000 Putnam County, FL Development Authority, PCR
Bonds (Series 1984H) Weekly VRDNs (Seminole
Electric Cooperative, Inc. (FL))/(National
Rural Utilities Cooperative Finance Corp.) AA- 3,300,000
---------------------------------------------
-----------
Total 5,850,000
---------------------------------------------
-----------
GEORGIA--1.9%
---------------------------------------------
1,000,000 Monroe County, GA Development Authority IDRB,
Second Series Daily VRDNs (Georgia Power Co.) A+ 1,000,000
---------------------------------------------
-----------
ILLINOIS--7.2%
---------------------------------------------
3,800,000 Illinois Health Facilities Authority, Revenue
Bonds (Series E) Weekly VRDNs (Hospital
Sisters Service, Inc.)/(MBIA INS)/(Morgan
Guaranty Trust Co., New York LIQ) AAA 3,800,000
---------------------------------------------
-----------
MARYLAND--3.8%
---------------------------------------------
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
---------------------------------------------
-----------
NEW YORK--9.5%
---------------------------------------------
2,000,000 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 2,000,000
---------------------------------------------
3,000,000 New York City, NY, Subseries B-3 Daily VRDNs
(Morgan Guaranty Trust Co., New York LOC) AAA 3,000,000
---------------------------------------------
-----------
Total 5,000,000
---------------------------------------------
-----------
NORTH CAROLINA--6.2%
---------------------------------------------
1,250,000 Mecklenburg County, NC, Public Improvement UT
GO Bonds, 6.20% Bonds (United States Treasury
COL), 1/1/1997 AAA 1,258,880
---------------------------------------------
</TABLE>
THE TAX-FREE MONEY MARKET FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
--------------------------------------------------------
$2,000,000 Winston-Salem, NC, SFM Refunding Revenue
Bonds Weekly VRDNs A1 $ 2,000,000
---------------------------------------------
-----------
Total 3,258,880
---------------------------------------------
-----------
OHIO--5.7%
---------------------------------------------
2,000,000 Clermont County, OH Hospital Facilities,
Revenue Bonds (Series B) Weekly VRDNs (Mercy
Health Systems) A+ 2,000,000
---------------------------------------------
1,000,000 Ohio State Air Quality Development Authority,
Revenue Bonds (Series B) Daily VRDNs
(Cincinnati Gas and Electric Co.)/(J.P.
Morgan Delaware, Wilmington LOC) AAA 1,000,000
---------------------------------------------
-----------
Total 3,000,000
---------------------------------------------
-----------
TEXAS--10.1%
---------------------------------------------
2,500,000 Lower Neches Valley, TX, Refunding Revenue
Bonds, 3.65% TOBs (Chevron U.S.A., Inc.),
Optional Tender 2/18/1997 AA 2,500,000
---------------------------------------------
800,000 Sabine River Authority, TX , PCR Bonds
(Series B) Daily VRDNs (Texas Utilities
Electric Co.)/(Union Bank of Switzerland,
Zurich LOC) AAA 800,000
---------------------------------------------
2,000,000 Texas State, 4.75% TRANs, 8/29/1997 SP-1+ 2,013,991
---------------------------------------------
-----------
Total 5,313,991
---------------------------------------------
-----------
UTAH--3.8%
---------------------------------------------
2,000,000 Intermountain Power Agency, UT, Series B ,
5.00% Bonds, 7/1/1997 AA- 2,018,154
---------------------------------------------
-----------
VIRGINIA--15.0%
---------------------------------------------
2,300,000 Fairfax County, VA IDA, Refunding Revenue
Bonds (Series A) Weekly VRDNs (Fairfax
Hospital System LOC) AA- 2,300,000
---------------------------------------------
1,400,000 Virginia College Building Authority Weekly
VRDNs (University of Richmond)/(Crestar Bank
of Virginia, Richmond SA) Aa 1,400,000
---------------------------------------------
2,000,000 Virginia State Public School Authority,
Refunding Revenue Bonds (Series B), 4.00%
Bonds, 1/1/1997 AA 2,003,421
---------------------------------------------
2,100,000 Virginia State Public School Authority,
Revenue Bonds (Series B), 7.15% Bonds (United
States Treasury COL), 1/1/1997 (@102) AAA 2,161,472
---------------------------------------------
-----------
Total 7,864,893
---------------------------------------------
-----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 48,197,308
---------------------------------------------
-----------
MUTUAL FUND SHARES--7.7%
--------------------------------------------------------
2,017,565 Goldman Sachs Institutional Tax Exempt 2,017,565
---------------------------------------------
2,017,565 Municipal Fund for Temporary Investment 2,017,565
---------------------------------------------
-----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET
VALUE) 4,035,130
---------------------------------------------
-----------
TOTAL INVESTMENTS (AT AMORTIZED COST)(A) $52,232,438
---------------------------------------------
-----------
</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
($52,498,907) at September 30, 1996.
THE TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
COL--Collateralized
FGIC--Financial Guaranty Insurance Company
GO--General Obligation
IDB--Industrial Development Bond
INS--Insured
LIQ--Liquidity Agreement
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance
PCR--Pollution Control Revenue
PRF--Prerefunded
SFM--Single Family Mortgage
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, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE U.S. VIRTUS STYLE THE
GOVERNMENT VIRTUS STYLE MANAGER: THE VIRGINIA MARYLAND
SECURITIES MANAGER LARGE CAP MUNICIPAL MUNICIPAL
FUND FUND FUND BOND FUND BOND FUND
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in
repurchase agreements $ 331,359 $ 1,965,010 $ 1,231,984 $ -- $ --
Investments in
securities 191,566,581 60,749,001 92,214,764 91,593,156 38,668,854
- --------------------------------------------------------------------------------------------
Total investments in
securities, at value 191,897,940 62,714,011 93,446,748 91,593,156 38,668,854
- --------------------------------------------------------------------------------------------
Cash -- -- 7,186 -- 11,319
Income receivable 4,892,291 196,660 166,357 1,454,665 502,791
Receivable for
investments sold -- -- -- 1,010,520 1,102,437
Receivable for shares
sold 242,023 24,609 41,520 113,308 22,050
Deferred expenses -- 9,569 -- -- --
- --------------------------------------------------------------------------------------------
Total assets 197,032,254 62,944,849 93,661,811 94,171,649 40,307,451
- --------------------------------------------------------------------------------------------
LIABILITIES:
Payable for shares
redeemed 910,834 71,109 48,007 100,975 8,381
Income distribution
payable 536,648 -- -- 143,456 53,061
Payable to Bank 3,949 -- -- 998 --
Accrued expenses 164,577 91,161 39,805 116,295 73,190
- --------------------------------------------------------------------------------------------
Total liabilities 1,616,008 162,270 87,812 361,724 134,632
- --------------------------------------------------------------------------------------------
TOTAL NET ASSETS $195,416,246 $62,782,579 $93,573,999 $93,809,925 $40,172,819
- --------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in capital 213,210,414 54,501,890 75,107,211 93,972,010 40,480,253
Net unrealized
appreciation
(depreciation) of
investments (3,515,714) 5,033,956 6,141,077 594,818 206,708
Accumulated net realized
gain (loss) on
investments (11,426,916) 3,133,273 12,175,370 (756,903) (515,168)
Accumulated
distributions in excess
of net realized gain
on investments (2,897,104) -- -- -- --
Accumulated
undistributed net
investment income 45,566 113,460 150,341 -- 1,026
- --------------------------------------------------------------------------------------------
TOTAL NET ASSETS $195,416,246 $62,782,579 $93,573,999 $93,809,925 $40,172,819
- --------------------------------------------------------------------------------------------
NET ASSETS:
Trust Shares 78,998,138 -- 33,683,129 28,109,760 8,889,019
Investment Shares 116,418,108 62,782,579 59,890,870 65,700,165 31,283,800
- --------------------------------------------------------------------------------------------
Total 195,416,246 $62,782,579 $93,573,999 $93,809,925 $40,172,819
- --------------------------------------------------------------------------------------------
NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Trust Shares $9.89 -- $13.68 $10.68 $10.56
Investment Shares $9.89 $11.47 $13.69 $10.68 $10.56
- --------------------------------------------------------------------------------------------
REDEMPTION PROCEEDS PER
SHARE*
Trust Shares $9.89 -- $13.68 $10.68 $10.56
Investment Shares** $9.69 11.24 $13.41 $10.47 $10.35
- --------------------------------------------------------------------------------------------
SHARES OUTSTANDING
Trust Shares 7,985,183 -- 2,462,538 2,632,254 841,704
Investment Shares 11,767,652 5,474,398 4,376,411 6,152,326 2,962,234
- --------------------------------------------------------------------------------------------
Total Shares Outstanding 19,752,835 5,474,398 6,838,949 8,784,580 3,803,938
- --------------------------------------------------------------------------------------------
Investments, at
identified cost $195,413,654 $57,680,055 $87,305,671 $90,998,338 $38,462,146
- --------------------------------------------------------------------------------------------
Investments, at tax cost $195,413,654 $57,822,007 $87,310,058 $90,998,338 $38,462,146
- --------------------------------------------------------------------------------------------
</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, 1996
- --------------------------------------------------------------------------------
<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
at amortized cost $179,640,376 $ 9,582,401 $ --
Investments in securities at value 190,894,302 233,496,118 52,232,438
- -------------------------------------------------------------------------------
Total investments in securities,
at value 370,534,678 243,078,519 52,232,438
- -------------------------------------------------------------------------------
Income receivable 4,018,192 1,980,097 380,506
Receivable for shares sold 365,568 244,904 --
Deferred expenses -- -- 5,955
- -------------------------------------------------------------------------------
Total assets 374,918,438 245,303,520 52,618,899
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for shares redeemed 229,088 347,315 --
Income distribution payable 966,859 650,500 98,024
Payable to Bank 344,978 5,269 1,639
Accrued expenses 238,468 100,603 20,329
- -------------------------------------------------------------------------------
Total liabilities 1,779,393 1,103,687 119,992
- -------------------------------------------------------------------------------
TOTAL NET ASSETS $373,139,045 $244,199,833 $52,498,907
- -------------------------------------------------------------------------------
NET ASSETS:
Trust Shares 226,977,985 160,675,174 --
Investment Shares 146, 161,060 83,524,659 52,498,907
- -------------------------------------------------------------------------------
TOTAL NET ASSETS $373,139,045 $244,199,833 $52,498,907
- -------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PROCEEDS
PER SHARE
Trust Shares $1.00 $1.00 $1.00
Investment Shares $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------
SHARES OUTSTANDING
Trust Shares 226,977,985 160,675,174 --
Investment Shares 146,327,992 83,524,659 52,498,907
- -------------------------------------------------------------------------------
Total Shares Outstanding 373,305,977 244,199,833 52,498,907
- -------------------------------------------------------------------------------
Investments, at identified cost $370,534,678 $243,078,519 $52,232,438
- -------------------------------------------------------------------------------
Investments, at tax cost $370,534,678 $243,078,519 $52,232,438
- -------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE U.S. VIRTUS STYLE THE
GOVERNMENT VIRTUS STYLE MANAGER: THE VIRGINIA MARYLAND
SECURITIES MANAGER LARGE CAP MUNICIPAL MUNICIPAL
FUND FUND FUND BOND FUND BOND FUND
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $2,316,889 $ 3,013,526 $ -- $ --
Interest 15,587,162 60,970 147,633 5,175,791 2,107,325
- --------------------------------------------------------------------------------------------
Total income 15,587,162 2,377,859 3,161,159 5,175,791 2,107,325
- --------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 1,612,364 657,611 704,007 762,051 315,941
Administrative personnel
and services fee 211,649 93,853 92,298 100,059 67,667
Custodian fees 63,182 52,462 35,014 35,694 23,922
Transfer and dividend
disbursing agent fees
and expenses 164,267 43,069 118,044 97,312 82,362
Directors'/Trustees'
fees 2,456 -- 1,084 3,827 2,825
Auditing fees 16,237 8,344 12,638 15,657 14,897
Legal fees 2,252 -- 2,272 2,700 2,549
Portfolio accounting fees 74,849 60,755 52,690 61,653 59,963
Distribution services fee--
Investment Shares 297,511 -- 128,090 174,114 82,278
Share registration costs 18,764 14,856 11,838 15,314 17,736
Printing and postage 7,283 4,312 5,213 759 9,660
Insurance premiums 5,556 268 2,194 2,814 2,581
Miscellaneous 5,447 5,077 527 4,916 3,183
- --------------------------------------------------------------------------------------------
Total expenses 2,481,817 940,607 1,165,909 1,276,870 685,564
Waivers--
Waiver of investment
advisory fee (276,121) (290,966) -- (20,993) (106,102)
- --------------------------------------------------------------------------------------------
Net expenses 2,205,696 649,641 1,165,909 1,255,877 579,462
- --------------------------------------------------------------------------------------------
Net investment income 13,381,466 1,728,218 1,995,250 3,919,914 1,527,863
- --------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss)
on investments (3,219,621) 4,542,510 12,982,465 780,289 186,173
Change in unrealized
appreciation
(depreciation) of
investments (2,011,452) (119,759) (2,926,184) (2,101,082) (739,639)
- --------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments (5,231,073) 4,422,750 10,056,281 (1,320,793) (553,466)
- --------------------------------------------------------------------------------------------
Change in net assets
resulting from
operations $ 8,150,393 $6,150,969 $12,051,531 $ 2,599,121 $ 974,397
- --------------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE TREASURY THE TAX FREE
MONEY THE MONEY MONEY
MARKET FUND MARKET FUND MARKET FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $18,723,393 $13,789,080 $3,257,124
- -------------------------------------------------------------------------------
Total income 18,723,393 13,789,080 3,257,124
- -------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 1,721,497 1,249,811 462,900
Administrative personnel and
services fee 336,951 245,134 95,363
Custodian fees 110,384 66,242 33,648
Transfer and dividend disbursing
agent fees and expenses 148,043 104,504 27,783
Directors'/Trustees' fees 5,167 2,737 621
Auditing fees 22,933 17,864 14,623
Legal fees 5,600 2,135 977
Portfolio accounting fees 87,926 64,122 42,055
Distribution services fee--
Investment Shares 270,001 198,913 --
Share registration costs 20,011 21,657 13,772
Printing and postage 12,480 10,007 8,811
Insurance premiums 10,500 2,101 2,461
Miscellaneous 7,991 3,191 4,463
- -------------------------------------------------------------------------------
Total expenses 2,759,484 1,988,418 707,477
Waivers--
Waiver of investment advisory fee (209,248) (299,129) (184,473)
Waiver of distribution services fee (36,321) (91,889) --
- -------------------------------------------------------------------------------
Total waivers (245,569) (391,018) (184,473)
- -------------------------------------------------------------------------------
Net expenses 2,513,915 1,597,400 523,004
- -------------------------------------------------------------------------------
Net investment income 16,209,478 12,191,680 2,734,120
- -------------------------------------------------------------------------------
Change in net assets resulting
from operations $16,209,478 $12,191,680 $2,734,120
- -------------------------------------------------------------------------------
</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 VIRTUS
SECURITIES FUND STYLE MANAGER
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995*
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income $ 13,381,466 $ 13,822,093 $ 1,728,218 $ 172,547
Net realized gain (loss)
on investments (3,219,621) (1,378,821) 4,542,510 6,734,053
Net change in unrealized
appreciation
(depreciation) of
investments (2,011,452) 7,562,122 (119,759) 5,153,715
- -------------------------------------------------------------------------------------
Change in net assets
resulting from
operations 8,150,393 20,005,394 6,150,969 12,060,315
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net
investment income:
Trust Shares (6,107,288) (6,886,095) -- --
Investment Shares (7,274,178) (6,892,250) (1,638,472) (148,833)
Distributions from net
realized gains:
Trust Shares -- -- -- --
Investment Shares -- -- (8,143,290) --
- -------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (13,381,466) (13,778,345) (9,781,762) (148,833)
- -------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of
shares 46,455,480 43,561,722 16,506,045 90,552,400
Net asset value of
shares issued to
shareholders in payment
of distributions
declared 6,142,681 4,775,252 9,243,789 144,980
Cost of shares redeemed (68,163,717) (57,893,362) (37,724,499) (24,220,825)
- -------------------------------------------------------------------------------------
Change in net assets
resulting from
share transactions (15,565,556) (9,556,388) (11,974,665) 66,476,555
- -------------------------------------------------------------------------------------
Change in net assets (20,796,629) (3,329,339) (15,605,458) 78,388,037
NET ASSETS:
Beginning of period 216,212,875 219,542,214 78,388,037 --
- -------------------------------------------------------------------------------------
End of period $195,416,246 $216,212,875 $ 62,782,579 $ 78,388,037
- -------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period $ 45,566 $ 45,566 $ 113,460 $ 23,714
- -------------------------------------------------------------------------------------
</TABLE>
*For the period from March 7, 1995 (date of initial public investment) to
September 30, 1995.
(See Notes which are an integral part of the Financial Statements)
THE VIRTUS FUNDS STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VIRTUS STYLE MANAGER: THE VIRGINIA MUNICIPAL
LARGE CAP BOND FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income $ 1,995,250 $ 753,353 $ 3,919,914 $ 4,548,644
Net realized gain
(loss) on investments 12,982,465 7,288,596 780,289 (1,364,455)
Net change in
unrealized
appreciation
(depreciation) of
investments (2,926,184) 8,056,089 (2,101,082) 6,633,292
- -------------------------------------------------------------------------------------
Change in net assets
resulting
from operations 12,051,531 16,098,038 2,599,121 9,817,481
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net
investment income:
Trust Shares (926,390) (531,337) (1,287,834) (1,532,726)
Investment Shares (1,026,148) (259,454) (2,632,080) (3,014,821)
Distributions from net
realized gains:
Trust Shares (3,898,915) (1,709,248) -- (329)
Investment Shares (3,989,082) (680,158) -- (675)
- -------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (9,840,535) (3,180,197) (3,919,914) (4,548,551)
- -------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of
shares 18,263,662 30,860,399 16,125,700 16,219,903
Shares issued in
connection with the
acquisition 9,245,450 -- -- --
Net asset value of
shares issued to
shareholders in
payment of
distributions declared 5,478,249 1,924,491 1,997,026 2,307,635
Cost of shares redeemed (31,477,651) (52,962,431) (27,234,673) (28,424,457)
- -------------------------------------------------------------------------------------
Change in net assets
resulting
from share
transactions 1,509,710 (20,177,541) (9,111,947) (9,896,919)
- -------------------------------------------------------------------------------------
Change in net assets 3,720,706 (7,259,700) (10,432,740) (4,627,989)
NET ASSETS:
Beginning of period 89,853,293 97,112,993 104,242,665 108,870,654
- -------------------------------------------------------------------------------------
End of period $ 93,573,999 $ 89,853,293 $ 93,809,925 $104,242,665
- -------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period $ 150,341 $ 107,629 $ -- $ --
- -------------------------------------------------------------------------------------
</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,
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income $ 1,527,863 $ 1,811,966 $ 16,209,478 $ 24,186,655
Net realized gain
(loss) on investments 186,173 (681,620) -- --
Net change in
unrealized
appreciation
(depreciation) of
investments (739,639) 2,620,698 -- --
- ----------------------------------------------------------------------------------------
Change in net assets
resulting
from operations 974,397 3,751,044 16,209,478 24,186,655
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net
investment income:
Trust Shares (352,284) (453,315) (11,356,506) (22,613,622)
Investment Shares (1,175,552) (1,357,652) (4,852,972) (1,573,033)
Distributions from net
realized gains:
Trust Shares -- (14,470) -- --
Investment Shares -- (46,949) -- --
- ----------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (1,527,836) (1,872,386) (16,209,478) (24,186,655)
- ----------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of
shares 8,364,014 5,252,293 659,743,838 3,244,300,655
Shares issued in
connection with the
acquisition -- -- 122,108,127 --
Net asset value of
shares issued to
shareholders in
payment of
distributions declared 989,879 1,017,506 4,898,441 1,565,341
Cost of shares redeemed (10,247,633) (12,408,999) (661,630,604) (3,324,014,237)
- ----------------------------------------------------------------------------------------
Change in net assets
resulting from
share transactions (893,740) (6,139,200) 125,119,802 (78,148,241)
- ----------------------------------------------------------------------------------------
Change in net assets (1,447,179) (4,260,542) 125,119,802 (78,148,241)
NET ASSETS:
Beginning of period 41,619,998 45,880,540 248,019,243 326,167,484
- ----------------------------------------------------------------------------------------
End of period $ 40,172,819 $ 41,619,998 $ 373,139,045 $ 248,019,243
- ----------------------------------------------------------------------------------------
Undistributed net
investment income
included in net assets
at end of period $ 1,026 $ 999 $ -- $ --
- ----------------------------------------------------------------------------------------
</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,
1996 1995 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income $ 12,191,680 $ 9,107,794 $ 2,734,120 $ 1,866,271
- --------------------------------------------------------------------------------------
Change in net assets
resulting
from operations 12,191,680 9,107,794 2,734,120 1,866,271
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net
investment income:
Trust Shares (8,395,610) (7,487,164) -- --
Investment Shares (3,796,070) (1,620,630) (2,734,120) (1,866,271)
- --------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (12,191,680) (9,107,794) (2,734,120) (1,866,271)
- --------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of
shares 576,928,235 554,922,789 389,800,080 244,825,710
Net asset value of
shares issued to
shareholders in
payment of
distributions declared 3,626,658 1,563,964 459,305 369,306
Cost of shares redeemed (551,929,373) (488,593,012) (419,737,938) (185,184,196)
- --------------------------------------------------------------------------------------
Change in net assets
resulting from
share transactions 28,625,520 67,893,741 (29,478,553) 60,010,820
- --------------------------------------------------------------------------------------
Change in net assets 28,625,520 67,893,741 (29,478,553) 60,010,820
NET ASSETS:
Beginning of period 215,574,313 147,680,572 81,977,460 21,966,640
- --------------------------------------------------------------------------------------
End of period $ 244,199,833 $ 215,574,313 $ 52,498,907 $ 81,977,460
- --------------------------------------------------------------------------------------
</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 1996 1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.13 $ 9.83 $10.90 $10.95 $10.54 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.62 0.64 0.61 0.66 0.75 0.78
Net realized and
unrealized gain (loss)
on investments (0.24) 0.30 (0.94) 0.03 0.50 0.54
- ------------------------------------------------------------------------------------------
Total from investment
operations 0.38 0.94 (0.33) 0.69 1.25 1.32
- ------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.62) (0.64) (0.61) (0.66)(e) (0.75) (0.78)
Distributions from net
realized gain on
investments -- -- -- (0.08) (0.09) --
Distributions in excess
of net realized gain on
investments (b) -- -- (0.13) -- -- --
- ------------------------------------------------------------------------------------------
Total distributions (0.62) (0.64) (0.74) (0.74) (0.84) (0.78)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.89 $10.13 $ 9.83 $10.90 $10.95 $10.54
- ------------------------------------------------------------------------------------------
TOTAL RETURN (D) 3.79% 9.84% (3.36)% 6.82% 12.42% 14.00%
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.14% 1.01% 0.99% 0.77% 0.52% 0.64%(c)
Net investment income 6.11% 6.41% 5.94% 5.91% 7.01% 8.03%(c)
Expense waiver/
reimbursement (e) 0.13% 0.28% 0.32% 0.43% 0.65% 0.93%(c)
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $116,418 $114,803 $112,439 $119,187 $40,274 $ 10
Portfolio turnover 118% 82% 227% 154% 201% 101%
- ------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------
TRUST SHARES 1996 1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.13 $ 9.83 $10.90 $10.95 $10.54 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.64 0.66 0.63 0.67 0.75 0.78
Net realized and
unrealized gain (loss)
on investments (0.24) 0.30 (0.94) 0.03 0.50 0.54
- ------------------------------------------------------------------------------------------
Total from investment
operations 0.40 0.96 (0.31) 0.70 1.25 1.32
- ------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.64) (0.66) (0.63) (0.67)(e) (0.75) (0.78)
Distributions from net
realized gain on
investments -- -- -- (0.08) (0.09) --
Distributions in excess
of net realized gain on
investments (b) -- -- (0.13) -- -- --
- ------------------------------------------------------------------------------------------
Total distributions (0.64) (0.66) (0.76) (0.75) (0.84) (0.78)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.89 $10.13 $ 9.83 $10.90 $10.95 $10.54
- ------------------------------------------------------------------------------------------
TOTAL RETURN (D) 4.05% 10.11% (3.12)% 6.94% 12.42% 14.00%
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.89% 0.76% 0.74% 0.63% 0.52% 0.64%(c)
Net investment income 6.36% 6.66% 6.19% 6.17% 7.01% 8.03%(c)
Expense waiver/
reimbursement (e) 0.13% 0.28% 0.32% 0.43% 0.65% 0.93%(c)
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $ 78,998 $101,410 $107,103 $112,334 $95,610 $27,565
Portfolio turnover 118% 82% 227% 154% 201% 101%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal tax
purposes.
(c) Computed on an annualized basis.
(d) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(e) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
VIRTUS STYLE MANAGER: LARGE CAP FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
TRUST SHARES 1996 1995(E) 1994 1993 1992 1991(A)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $13.70 $11.80 $12.39 $12.02 $11.86 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.33 0.12 0.20 0.28 0.26 0.32
Net realized and
unrealized gain (loss)
on investments 1.15 2.20 (0.40) 0.51 0.46 1.85
- -----------------------------------------------------------------------------------
Total from investment
operations 1.48 2.32 (0.20) 0.79 0.72 2.17
- -----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.30) (0.12) (0.19) (0.26) (0.25) (0.31)
Distributions from net
realized gain on
investments (1.20) (0.30) (0.20) (0.16) (0.31) --
- -----------------------------------------------------------------------------------
Total distributions (1.50) (0.42) (0.39) (0.42) (0.56) (0.31)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $13.68 $13.70 $11.80 $12.39 $12.02 $11.86
- -----------------------------------------------------------------------------------
TOTAL RETURN (B) 11.55% 20.33% (1.50%) 6.42% 6.31% 22.68%
- -----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.11% 0.96% 0.95% 0.66% 0.95% 0.80%(c)
Net investment income 2.26% 0.92% 1.68% 2.09% 2.25% 3.05%(c)
Expense waiver/
reimbursement (d) -- 0.21% 0.23% 0.55% 0.34% 0.38%(c)
- -----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $33,683 $45,345 $70,374 $65,841 $49,581 $37,032
Average commission
rate paid $0.0616 -- -- -- -- --
Portfolio turnover 151% 208% 205% 67% 38% 84%
- -----------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
INVESTMENT SHARES 1996 1995(E) 1994 1993 1992 1991(A)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $13.70 $11.80 $12.39 $12.02 $11.86 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.27 0.09 0.17 0.24 0.26 0.32
Net realized and
unrealized gain (loss)
on investments 1.18 2.20 (0.39) 0.54 0.46 1.85
- -----------------------------------------------------------------------------------
Total from investment
operations 1.45 2.29 (0.22) 0.78 0.72 2.17
- -----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.27) (0.09) (0.17) (0.25) (0.25) (0.31)
Distributions from net
realized gain on
investments (1.20) (0.30) (0.20) (0.16) (0.31) --
- -----------------------------------------------------------------------------------
Total distributions (1.47) (0.39) (0.37) (0.41) (0.56) (0.31)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $13.68 $13.70 $11.80 $12.39 $12.02 $11.86
- -----------------------------------------------------------------------------------
TOTAL RETURN (B) 11.28% 20.02% (1.72%) 6.31% 6.31% 22.68%
- -----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.36% 1.21% 1.20% 0.87% 0.95% 0.80%(c)
Net investment income 2.01% 0.67% 1.40% 1.81% 2.25% 3.05%(c)
Expense waiver/
reimbursement (d) -- 0.21% 0.23% 0.55% 0.34% 0.38%(c)
- -----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $59,891 $44,509 $26,739 $18,691 $2,290 $488
Average commission
rate paid $0.0616 -- -- -- -- --
Portfolio turnover 151% 208% 205% 67% 38% 84%
- -----------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Per share information presented is based on the monthly number of shares
outstanding due to large fluctuations in the number of shares outstanding
during the period.
(See Notes which are an integral part of the Financial Statements)
VIRTUS STYLE MANAGER FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
INVESTMENT SHARES 1996 1995(A)
- -------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.03 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.31 0.03
Net realized and unrealized gain (loss) on
investments 0.77 2.03
- -------------------------------------------------------------------------
Total from investment operations 1.08 2.06
- -------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.29) (0.03)
Distributions from net realized gain on
investments (1.35) --
- -------------------------------------------------------------------------
Total distributions (1.64) (0.03)
- -------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.47 $12.03
- -------------------------------------------------------------------------
TOTAL RETURN (B) 10.19% 20.59%
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.99% 0.44%(c)
Net investment income 2.63% 0.46%(c)
Expense waiver/reimbursement (d) 0.44% 1.03%(c)
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $62,783 $78,388
Average commission rate paid $0.0514 --
Portfolio turnover 112% 92%
- -------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from March 7, 1995 (date of initial
public investment) to September 30, 1995.
(b) Based on net asset value, which does not reflect the sales 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 VIRGINIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
INVESTMENT SHARES 1996 1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.81 $10.26 $11.26 $10.46 $10.18 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.41 0.45 0.45 0.51 0.54 0.57
Net realized and
unrealized gain (loss)
on investments (0.13) 0.55 (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------------------
Total from investment
operations 0.28 1.00 (0.47) 1.40 0.83 0.75
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.41) (0.45) (0.45)(g) (0.51) (0.54) (0.57)
Distributions from net
realized gain on
investments -- -- (0.06) (0.09) (0.01) --
Distributions in excess
of net realized gain on
investments (b) -- -- (0.02) -- -- --
- ------------------------------------------------------------------------------------
Total distributions (0.41) (0.45) (0.53) (0.60) (0.55) (0.57)
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $10.68 $10.81 $10.26 $11.26 $10.46 $10.18
- ------------------------------------------------------------------------------------
TOTAL RETURN (D) 2.60% 10.00% (4.25)% 13.49% 8.51% 7.64%
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.32% 1.17% 1.15% 0.90% 0.83% 0.47%(c)
Net investment income 3.78% 4.32% 4.22% 4.68% 5.14% 6.08%(c)
Expense waiver/
reimbursement (e) 0.02% 0.22% 0.27% 0.50% 0.86% 1.70%(c)
- ------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $65,700 $70,572 $74,706 $63,492 $20,883 $6,031
Portfolio turnover 129% 26% 29% 17% 51% 27%
- ------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
TRUST SHARES 1996 1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.81 $10.26 $11.26 $10.46 $10.18 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.44 0.48 0.48 0.53 0.54 0.57
Net realized and
unrealized gain (loss)
on investments (0.13) 0.55 (0.92) 0.89 0.29 0.18
- ------------------------------------------------------------------------------------
Total from investment
operations 0.31 1.03 (0.44) 1.42 0.83 0.75
- ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.44) (0.48) (0.48)(f) (0.53) (0.54) (0.57)
Distributions from net
realized gain on
investments -- -- (0.06) (0.09) (0.01) --
Distributions in excess
of net realized gain on
investments (b) -- -- (0.02) -- -- --
- ------------------------------------------------------------------------------------
Total distributions (0.44) (0.48) (0.56) (0.62) (0.55) (0.57)
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $10.68 $10.81 $10.26 $11.26 $10.46 $10.18
- ------------------------------------------------------------------------------------
TOTAL RETURN (D) 2.86% 10.27% (4.01%) 13.62% 8.51% 7.64%
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.06% 0.92% 0.90% 0.75% 0.83% 0.47%(c)
Net investment income 4.03% 4.57% 4.47% 4.85% 5.14% 6.08%(c)
Expense waiver/
reimbursement (e) 0.02% 0.22% 0.27% 0.50% 0.86% 1.70%(c)
- ------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $28,110 $33,670 $34,165 $41,204 $20,852 $8,546
Portfolio turnover 129% 26% 29% 17% 51% 27%
- ------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Computed on an annualized basis.
(d) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(e) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(f) Amount includes distributions to shareholders in excess of net investment
income of $0.0002 per share.
(g) Amount includes distributions to shareholder 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 1996 1995 1994 1993 1992 1991(A)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.69 $10.17 $11.24 $10.39 $10.10 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.38 0.40 0.45 0.49 0.54 0.53
Net realized and
unrealized gain (loss)
on investments (0.13) 0.54 (0.97) 0.85 0.29 0.10
- --------------------------------------------------------------------------------
Total from investment
operations 0.25 0.94 (0.52) 1.34 0.83 0.63
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.38) (0.40) (0.45) (0.49) (0.54) (0.53)
Distributions from net
realized gain on
investments -- (0.02) (0.10) -- -- --
- --------------------------------------------------------------------------------
Total distributions (0.38) (0.42) (0.55) (0.49) (0.54) (0.53)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $10.56 $10.69 $10.17 $11.24 $10.39 $10.10
- --------------------------------------------------------------------------------
TOTAL RETURN (B) 2.36% 9.81% (4.74%) 13.24% 8.31% 6.64%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.43% 1.24% 1.17% 1.00% 0.59% 0.60%(c)
Net investment income 3.57% 4.24% 4.22% 4.50% 5.11% 5.66%(c)
Expense waiver/
reimbursement (d) 0.25% 0.44% 0.51% 0.77% 1.91% 1.05%(c)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $31,284 $32,172 $34,580 $33,907 $4,053 $2,940
Portfolio turnover 138% 21% 27% 23% 34% 35%
- --------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
TRUST SHARES 1996 1995 1994 1993 1992 1991(A)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.69 $10.17 $11.24 $10.39 $10.10 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.41 0.42 0.48 0.50 0.54 0.53
Net realized and
unrealized
gain (loss) on
investments (0.13) 0.54 (0.97) 0.85 0.29 0.10
- --------------------------------------------------------------------------------
Total from investment
operations 0.28 0.96 (0.49) 1.35 0.83 0.63
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.41) (0.42) (0.48) (0.50) (0.54) (0.53)
Distributions from net
realized gain on
investments -- (0.02) (0.10) -- -- --
- --------------------------------------------------------------------------------
Total distributions (0.41) (0.44) (0.58) (0.50) (0.54) (0.53)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $10.56 $10.69 $10.17 $11.24 $10.39 $10.10
- --------------------------------------------------------------------------------
TOTAL RETURN (B) 2.61% 10.09% (4.50%) 13.37% 8.31% 6.64%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.18% 0.99% 0.92% 0.86% 0.59% 0.60%(c)
Net investment income 3.82% 4.49% 4.46% 4.64% 5.11% 5.66%(c)
Expense waiver/
reimbursement (d) 0.25% 0.44% 0.51% 0.77% 1.91% 1.05%(c)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $8,889 $9,447 $11,301 $12,014 $6,004 $556
Portfolio turnover 138% 21% 27% 23% 34% 35%
- --------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(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 1996 1995 1994 1993 1992 1991(A)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.03 0.02 0.04 0.06
- ---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.03) (0.02) (0.04) (0.06)
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.67% 4.98% 2.90% 2.52% 3.61% 5.90%
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.90% 0.85% 0.84% 0.70% 0.70% 0.51%(c)
Net investment income 4.49% 4.92% 3.05% 2.47% 3.49% 5.65%(c)
Expense waiver/
reimbursement (c) 0.09% 0.10% 0.18% 0.20% 0.11% 0.27%(c)
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $146,161 $39,363 $21,883 $20,382 $12,960 $548
- ---------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------
TRUST SHARES 1996 1995 1994 1993 1992 1991(A)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.03 0.03 0.04 0.06
- ---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.03) (0.03) (0.04) (0.06)
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.89% 5.24% 3.16% 2.64% 3.61% 5.90%
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.65% 0.60% 0.59% 0.58% 0.70% 0.51%(c)
Net investment income 4.81% 5.17% 3.30% 2.60% 3.49% 5.65%(c)
Expense waiver/
reimbursement (c) 0.06% 0.10% 0.18% 0.20% 0.11% 0.27%(c)
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $226,978 $208,656 $304,285 $152,921 $163,451 $129,959
- ---------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------
INVESTMENT SHARES 1996 1995 1994 1993 1992 1991(A)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.03 0.03 0.04 0.06
- --------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.03) (0.03) (0.04) (0.06)
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------
TOTAL RETURN (B) 4.91% 5.11% 3.10% 2.77% 3.79% 5.92%
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.73% 0.80% 0.80% 0.64% 0.64% 0.51%(c)
Net investment income 4.77% 5.04% 3.07% 2.68% 3.64% 5.99%(c)
Expense waiver/
reimbursement (d) 0.23% 0.21% 0.25% 0.30% 0.29% 0.36%(c)
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $83,525 $41,813 $15,236 $9,905 $5,803 $1
- --------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------
TRUST SHARES 1996 1995 1994 1993 1992 1991(A)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.05 0.05 0.03 0.03 0.04 0.06
- --------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.03) (0.03) (0.04) (0.06)
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.04% 5.36% 3.35% 2.89% 3.79% 5.92%
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.60% 0.57% 0.55% 0.50% 0.64% 0.51%(c)
Net investment income 4.93% 5.27% 3.25% 2.83% 3.64% 5.99%(c)
Expense waiver/
reimbursement (d) 0.12% 0.19% 0.25% 0.30% 0.29% 0.36%(c)
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $160,675 $173,761 $132,445 $134,397 $136,616 $57,432
- --------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 16, 1990 (date of initial
public investment) to September 30, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
THE TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1996 1995 1994(A)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.01
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.03) (0.01)
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------
TOTAL RETURN (B) 3.01% 3.53% 0.45%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.56% 0.39% 0.36%(c)
Net investment income 2.95% 3.55% 2.65%(c)
Expense waiver/reimbursement (d) 0.20% 0.56% 0.70%(c)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $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, 1996
- -------------------------------------------------------------------------------
(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 Virtus Style
Manager Fund (formerly The Strategic Stock Fund) and The Tax-Free Money Market
Fund, are offered in two classes of shares: Trust Shares and Investment
Shares. The Virtus 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)
- ----------------------------------------------------------------------------------------
Virtus Style Manager: Large Cap Fund Growth of capital and income
(formerly, The Stock Fund) ("Large Cap
Fund") (d)
- ----------------------------------------------------------------------------------------
Virtus Style Manager Fund: Growth of capital
(formerly, The Strategic Stock Fund)
("Style Manager 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.
Effective March 15, 1996, the Board of Trustees (the "Trustees") changed the
name of Virtus Style Manager: Large Cap Fund from The Stock Fund to Virtus
Style Manager: Large Cap Fund.
Effective January 19, 1996 the Trustees changed the name of Virtus Style
Manager Fund from The Strategic Stock Fund to Virtus Style Manager Fund.
On September 30, 1995, Virtus Treasury Money Market Fund acquired all the net
assets of the Blanchard 100% Treasury Money Market Fund pursuant to a plan of
reorganization approved by Blanchard 100% Treasury Money Market Fund's
Shareholders. This was accomplished by a tax-free exchange of shares of Virtus
Treasury Money Market Fund for Shares of the Blanchard 100% Treasury Money
Market Fund.
On June 24, 1996, Large Cap Fund acquired all the net assets of the Blanchard
American Equity Fund pursuant to a plan of reorganization approved by
Blanchard American Equity Fund Shareholders. This acquisition was accomplished
by a tax-free exchange of shares of Large Cap Fund for shares of the Blanchard
American Equity Fund.
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 Fund's use
of the amortized cost method to value portfolio securities is 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
including accrued interest 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").
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.
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, 1996, Government Securities Fund, Virginia Municipal Bond
Fund, Maryland Municipal Bond Fund and Money Market Fund, for federal tax
purposes, each had a capital loss carryforward, as noted below. This 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.
THE VIRTUS FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUNDS TOTAL TAX LOSS CARRYFORWARD
---------------------------
<S> <C>
Government Securities Fund $11,120,666
Virginia Municipal Bond Fund 756,721
Maryland Municipal Bond Fund $515,234
Money Market Fund $76,711
</TABLE>
Pursuant to the Code, such capital loss carryforwards will expire as
follows:
<TABLE>
<CAPTION>
MONEY MARKET FUND VIRGINIA MUNICIPAL BOND FUND
------------------------------------- ------------------------------------
EXPIRATION YEAR EXPIRATION AMOUNT EXPIRATION YEAR EXPIRATION AMOUNT
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C>
2002 $34,522 2003 $219,533
2003 $42,189 2004 $537,188
<CAPTION>
GOVERNMENT SECURITIES FUND MARYLAND MUNICIPAL BOND FUND
------------------------------------- ------------------------------------
EXPIRATION YEAR EXPIRATION AMOUNT EXPIRATION YEAR EXPIRATION AMOUNT
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C>
2003 $9,742,636 2004 $515,234
2004 1,378,030
</TABLE>
Additionally, net capital losses, as noted below, attributable to security
transactions incurred after September 30, 1995 are treated as arising on
October 1, 1996 the first day of the Funds' next taxable year.
<TABLE>
<CAPTION>
FUND TOTAL TAX LOSS PUSHFORWARD
--------------------------
<S> <C>
Government Securities Fund $(3,215,438)
Virginia Municipal Bond Fund $(1,317,477)
</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 using the straight-line method not to exceed a period of 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.
(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, 1996, Treasury Money Market Fund, Money Market Fund, and Tax-
Free Money Market Fund, capital paid-in aggregated $373,139,045, $244,199,833,
and $52,498,907, respectively. Transactions in shares were as follows:
THE VIRTUS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT STYLE MANAGER
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
- ------------------------- ---------- ------------ ---------- ------------
<CAPTION>
U.S. GOVERNMENT STYLE MANAGER
SECURITIES FUND LARGE CAP FUND
FOR THE YEAR ENDED ------------------------ ------------------------
SEPTEMBER 30, 1995: SHARES DOLLARS SHARES DOLLARS
- ------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
INVESTMENT SHARES:
- -------------------------
Shares sold 2,229,961 $ 22,386,800 1,471,204 $ 18,328,914
- -------------------------
Shares issued to
shareholders in payment
of distributions declared 481,441 4,775,252 79,983 932,476
- -------------------------
Shares redeemed (2,817,774) (27,866,476) (566,888) (6,950,345)
- ------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Investment Share
transactions (106,372) $ (704,424) 984,299 $ 12,311,045
- ------------------------- ---------- ------------ ---------- ------------
TRUST SHARES:
- -------------------------
Shares sold 2,129,377 $ 21,174,922 1,027,794 $ 12,531,485
- -------------------------
Shares issued to
shareholders in payment
of distributions declared -- -- 87,096 992,015
- -------------------------
Shares redeemed (3,014,663) (30,026,886) (3,766,090) (46,012,086)
- ------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Trust Share transactions (885,286) $ (8,851,964) (2,651,200) $(32,488,586)
- ------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Fund share transactions (991,658) $ (9,556,388) (1,666,901) $(20,177,541)
- ------------------------- ---------- ------------ ---------- ------------
</TABLE>
THE VIRTUS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STYLE MANAGER FUND
------------------------
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)
- --------------------------------------------------------- ---------- ------------
<CAPTION>
STYLE MANAGER FUND*
------------------------
FOR THE YEAR ENDED SEPTEMBER 30, 1995: SHARES DOLLARS
- --------------------------------------------------------- ---------- ------------
<S> <C> <C>
INVESTMENT SHARES:
- ---------------------------------------------------------
Shares sold 8,728,162 $ 90,552,400
- ---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 13,541 144,980
- ---------------------------------------------------------
Shares redeemed (2,222,973) (24,220,825)
- --------------------------------------------------------- ---------- ------------
Net change resulting from Fund Share transactions 6,518,730 $ 66,476,555
- --------------------------------------------------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
VIRGINIA MUNICIPAL MARYLAND MUNICIPAL
BOND FUND BOND FUND
------------------------ ---------------------
FOR THE YEAR ENDED SEPTEMBER 30, 1996: SHARES DOLLARS SHARES DOLLARS
- -------------------------------------- ---------- ------------ -------- -----------
<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)
- -------------------------------------- ---------- ------------ -------- -----------
<CAPTION>
VIRGINIA MUNICIPAL MARYLAND MUNICIPAL
BOND FUND BOND FUND
------------------------ ---------------------
FOR THE YEAR ENDED SEPTEMBER 30, 1996: SHARES DOLLARS SHARES DOLLARS
- -------------------------------------- ---------- ------------ -------- -----------
<S> <C> <C> <C> <C>
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>
*For the period from March 7, 1995 (date of initial public investment) to
September 30, 1995.
THE VIRTUS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VIRGINIA MUNICIPAL MARYLAND MUNICIPAL
BOND FUND BOND FUND
------------------------ ---------------------
FOR THE YEAR ENDED SEPTEMBER 30, 1995: SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------------- ---------- ------------ -------- -----------
<S> <C> <C> <C> <C>
INVESTMENT SHARES:
- -------------------------------------------------
Shares sold 939,334 $ 9,896,216 358,009 $ 3,741,410
- -------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 221,723 2,307,635 99,186 1,017,506
- -------------------------------------------------
Shares redeemed (1,918,280) (19,864,255) (848,026) (8,637,907)
- ------------------------------------------------- ---------- ------------ -------- -----------
Net change resulting from Investment Share
transactions (757,223) $ (7,660,404) (390,831) $(3,878,991)
- ------------------------------------------------- ---------- ------------ -------- -----------
TRUST SHARES:
- -------------------------------------------------
Shares sold 599,178 $6,323,687 145,854 $1,510,883
- -------------------------------------------------
Shares issued to shareholders in payment of
distributions declared -- -- -- --
- -------------------------------------------------
Shares redeemed (815,168) (8,560,202) (370,963) (3,771,092)
- ------------------------------------------------- ---------- ------------ -------- -----------
Net change resulting from Trust Share
transactions (215,990) $ (2,236,515) (225,109) $(2,260,209)
- ------------------------------------------------- ---------- ------------ -------- -----------
Net change resulting from Fund Share transactions (973,213) $ (9,896,919) (615,940) $(6,139,200)
- ------------------------------------------------- ---------- ------------ -------- -----------
</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,
1996 1995 1996 1995
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT SHARES:
- -----------------------
Shares sold 92,237,108 44,802,002 144,072,045 66,743,936
- -----------------------
Shares issued in
connection with the
Acquisition 122,108,127 -- -- --
- -----------------------
Shares issued to
shareholders declared 4,898,438 1,521,559 3,626,655 1,539,099
- -----------------------
Shares redeemed (112,278,779) (28,843,368) (105,987,535) (41,705,072)
- ----------------------- ------------ -------------- ------------ ------------
Net changes resulting
from Investment Share
transactions 106,964,894 17,480,193 41,711,165 26,577,963
- ----------------------- ------------ -------------- ------------ ------------
TRUST SHARES:
- -----------------------
Shares sold 567,506,731 3,199,498,653 432,856,190 488,178,853
- -----------------------
Shares issued to
shareholders in payment
of distributions
declared 3 43,782 3 24,865
- -----------------------
Shares redeemed (549,184,891) (3,295,170,869) (445,941,838) (446,887,940)
- ----------------------- ------------ -------------- ------------ ------------
Net changes resulting
from Trust Share
transactions 18,321,843 (95,628,434) (13,085,645) 41,315,778
- ----------------------- ------------ -------------- ------------ ------------
Net change resulting
from Fund Share
transactions 125,286,737 (78,148,241) 28,625,520 67,893,741
- ----------------------- ------------ -------------- ------------ ------------
</TABLE>
THE VIRTUS FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET FUND
----------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
INVESTMENT SHARES:
- -------------------------------------------------
Shares sold 389,800,080 244,825,710
- -------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 459,305 369,306
- -------------------------------------------------
Shares redeemed (419,737,938) (185,184,196)
- ------------------------------------------------- ------------ ------------
Net change resulting from Fund Share transactions (29,478,553) 60,010,820
- ------------------------------------------------- ------------ ------------
</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 1.00%
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 has increased its annual fee to 1.25%
on the Style Manager Fund.
Effective October 22, 1996 the Adviser has 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 Style Manager Fund, the Adviser
will pay Trend an annual fee as follows: (a) an amount equal to .10% of the
first $60 million of the Fund's average daily net assets; and (b) with respect
to average daily net assets of the Fund in excess of $60 million, an amount
equal to (i) one-third of the Adviser's advisory fee to the extent that such
advisory fee is less than or equals 1% of the Fund's average daily net assets
(but not to exceed .25% of the Fund's average daily net assets); plus (ii) to
the extent that the annual advisory fee exceeds 1% of the Fund's average daily
net assets, an additional amount equal to two-thirds of such excess. With
respect to The Style Manage: 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. In addition, Trend may voluntarily choose to reduce its compensation.
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 the period of the Administrative Services
Agreement shall be at least $75,000 per Portfolio. FAS may voluntarily choose
to waive a portion of its fee. FAS can modify or terminate this voluntary
waiver at any time at its sole discretion.
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 Fund to finance activities intended to
result in the sale of the Fund's Investment Shares. The Plan provides that the
Funds may incur
THE VIRTUS FUNDS
- -------------------------------------------------------------------------------
distribution expenses up to 0.25% of the average daily net assets of the
Investment Shares of the Fund's annually, to reimburse FSC.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-- 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, 1996, 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, 1996
-------------------------- ------------------- ------------------
<S> <C> <C>
Style Manager Fund 28,773 2,183
Tax-Free Money Market Fund 17,883 2,828
</TABLE>
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, 1996, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
------------ ------------
<S> <C> <C>
Government Securities Fund $242,478,025 $255,092,181
Style Manager Fund 72,563,730 87,561,385
Style Manager: Large Cap Fund 148,567,238 138,115,682
Virginia Municipal Bond Fund 125,742,995 132,873,038
Maryland Municipal Bond Fund 55,520,564 55,892,492
</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, 1996, 47% 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 24% of total investments. At
September 30, 1996, 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 instution or agency did not exceed 9% of total investments.
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
Fund, The Style Manager: Large Cap Fund, The Virginia Municipal Bond Fund, The
Maryland Municipal Bond Fund, The Treasury Money Market Fund, The Money Market
Fund, and The Tax-Free Money Market Fund) as of September 30, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for the years ended September 30, 1996 and 1995, and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust'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, 1996 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, 1996, 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.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
November 8, 1996
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
Gregor F. Meyer Joseph S. Machi
John E. Murray, Jr. Vice President and Assistant
Wesley W. Posvar Treasurer
Marjorie P. Smuts 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 (11/96)
