TAX-FREE MONEY MARKET FUND
(A PORTFOLIO OF SIGNET SELECT FUNDS)
PROSPECTUS
The shares of Tax-Free Money Market Fund (the "Fund") offered by this prospectus
represent interests in a non-diversified portfolio of Signet Select Funds (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in municipal securities to achieve current income exempt from federal
income tax consistent with stability of principal and liquidity.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF SIGNET
TRUST COMPANY OR SIGNET BANK, ARE NOT ENDORSED OR GUARANTEED BY SIGNET TRUST
COMPANY OR SIGNET BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND ATTEMPTS TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE
THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated June 20,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing to the Fund or calling toll-free 1-800-723-9512.
Signet Asset Management, a division of Signet Trust Company, is the investment
adviser to the Fund. The Fund is distributed by Federated Securities Corp.,
which is not affiliated with Signet Trust Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated June 20, 1994
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------
GENERAL INFORMATION 2
- --------------------------------------------------
INVESTMENT INFORMATION 2
- --------------------------------------------------
Investment Objective 2
Investment Policies 2
Municipal Securities 5
Investment Risks 5
Non-Diversification 6
Investment Limitations 6
Regulatory Compliance 6
SIGNET SELECT FUNDS INFORMATION 6
- --------------------------------------------------
Management of the Trust 6
Distribution of the Fund 7
Administration of the Fund 8
Expenses of the Fund 9
NET ASSET VALUE 9
- --------------------------------------------------
INVESTING IN THE FUND 9
- --------------------------------------------------
Share Purchases 9
Systematic Investment Program 10
Minimum Investment Required 10
What Shares Cost 10
Certificates and Confirmations 10
Dividends 11
Capital Gains 11
EXCHANGE PRIVILEGE 11
- --------------------------------------------------
REDEEMING SHARES 12
- --------------------------------------------------
Contingent Deferred Sales Charge 13
Systematic Withdrawal Program 14
Accounts with Low Balances 14
SHAREHOLDER INFORMATION 15
- --------------------------------------------------
Voting Rights 15
Massachusetts Partnership Law 15
EFFECT OF BANKING LAWS 15
- --------------------------------------------------
TAX INFORMATION 16
- --------------------------------------------------
Federal Income Tax 16
State and Local Taxes 17
PERFORMANCE INFORMATION 17
- --------------------------------------------------
ADDRESSES 18
- --------------------------------------------------
</TABLE>
I
<PAGE>
SUMMARY OF FUND EXPENSES
- ---------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S>
<C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).............................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering
price).............................................................. None
Contingent Deferred Sales Charge+ (as a percentage of original purchase price or
redemption proceeds, as
applicable)......................................................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable)........................................................ None
Exchange
Fee................................................................ None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF PROJECTED AVERAGE NET ASSETS)
<TABLE>
<S>
<C>
Management
Fee................................................................ 0.50%
12b-1 Fees (after waiver)
(1)................................................................ 0.00%
Total Other
Expenses........................................................... 0.39%
Total Operating
Expenses*.......................................................... 0.89%
</TABLE>
(1) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund will not accrue or pay 12b-1 fees until a separate class of
shares has been created for certain institutional investors. The Fund can
pay up to 0.35% as a 12b-1 fee to the distributor.
*Total Operating Expenses are based on average expenses expected to be incurred
during the fiscal year ending September 30, 1994. During the course of this
period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT A SHAREHOLDER OF SHARES OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND" AND "SIGNET SELECT FUNDS INFORMATION."
<TABLE>
<S> <C> <C>
EXAMPLE 1 YEAR 3 YEARS
--------- ---------
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period+.............. $9 $28
</TABLE>
+ A contingent deferred sales charge of 2.00% will be imposed only in limited
circumstances in which the shares being redeemed were acquired in exchange
for Investment Shares in those Signet Select Funds which charge a
contingent deferred sales charge. The contingent deferred sales charge is
2.00% of the lesser of the original purchase price or the net asset value
of the shares redeemed within five years of the purchase date. For a more
complete description, see "Redeeming Shares."
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING SEPTEMBER 30, 1994.
1
<PAGE>
GENERAL INFORMATION
- ---------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated June 20, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. With respect to this Fund, as of the date of this
prospectus, the Board of Trustees (the "Board" or the "Trustees") has not
established separate classes of shares. The Fund is designed for institutional
and retail customers of Signet Bank and its affiliates as a convenient means of
accumulating an interest in a professionally managed, non-diversified portfolio
investing primarily in short-term municipal securities. The Trust may not be a
suitable investment for retirement plans because it invests in municipal
securities. A minimum initial investment of $1,000 is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ---------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
income tax consistent with stability of principal and liquidity. This investment
objective cannot be changed without shareholder approval. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal income tax (including alternative minimum tax). The average maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be 90 days or less. Unless indicated otherwise, investment policies may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of states, territories, and possessions of the United States,
including the District of Columbia, and any political subdivision or financing
authority of any of these, the income from which is, in the opinion of qualified
legal counsel, exempt from federal income tax ("Municipal Securities"). Examples
of Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
2
<PAGE>
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases;
- construction loan notes insured by the Federal Housing Administration and
financed by the Federal or Government National Mortgage Associations; and
- participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging
from daily to annually), and is normally based on an interest index or a
stated percentage of a prime rate or another published rate. Most variable
rate demand notes allow the Fund to demand the repurchase of the security on
not more than seven days prior notice. Other notes only permit the Fund to
tender the security at the time of each interest rate adjustment or at other
fixed intervals. See "Demand Features." The Fund treats variable rate demand
notes as maturing on the later of the date of the next interest rate
adjustment or the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Municipal
Securities from financial institutions such as commercial and investment
banks, savings and loan associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above.
RATINGS. The municipal securities in which the Fund invests must be rated in
one of the two highest short-term rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs"). An NRSRO's two highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by Standard &
Poor's Corporation ("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
("Moody's"), or FIN-1+, FIN-1, and FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term rating
categories. The Fund will follow applicable regulations in determining whether a
security rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be rated
by two NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
3
<PAGE>
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be credit
enhanced by a guaranty, letter of credit, or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. However, credit
enhanced securities will not be treated as having been issued by the credit
enhancer for diversification purposes, unless the Fund has invested more than
10% of its assets in securities issued, guaranteed or otherwise credit enhanced
by the credit enhancer, in which case the securities will be treated as having
been issued by both the issuer and the credit enhancer. The bankruptcy,
receivership, or default of the credit enhancer will adversely affect the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities, or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are determined to be
liquid. To the extent that restricted securities are not determined to be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive posture, the
Fund may invest in tax-exempt or taxable securities such as: obligations issued
by or on behalf of municipal or corporate issuers having the same quality
characteristics as described above; obligations issued or guaranteed by the U.S.
government, its agencies, or instrumentalities; instruments issued by a U.S.
branch of a domestic bank or other deposit institutions having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment; and
repurchase agreements (arrangements in which the organization selling the Fund a
temporary investment agrees at the time of sale to repurchase it at a mutually
agreed upon time and price).
4
<PAGE>
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Municipal
Securities is subject to the federal alternative minimum tax, and up to 20% of
the Fund's income may be derived from such securities.
MUNICIPAL SECURITIES
Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
Municipal Securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Municipal Securities depend on a variety of factors, including: the
general conditions of the short-term municipal note market and of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to achieve its
investment objective also depends on the continuing ability of the issuers of
Municipal Securities and participation interests, or the credit enhancers of
either, to meet their obligations for the payment of interest and principal when
due. In addition, from time to time, the supply of Municipal Securities
acceptable for purchase by the Fund could become limited.
The Fund may invest in Municipal Securities which are repayable out of revenue
streams generated from economically related projects or facilities and/or whose
issuers are located in the same state. Sizable investments in these Municipal
Securities could involve an increased risk to the Fund should any of these
related projects or facilities experience financial difficulties.
Obligations of issuers of Municipal Securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislators, or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the ability of states
or municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any issuer to pay,
when due, the principal of and interest on its municipal securities may be
materially affected.
5
<PAGE>
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge assets to secure such borrowings. This investment limitation
cannot be changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
SIGNET SELECT FUNDS INFORMATION
- ---------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Board is responsible for managing the business affairs
of the Trust and for exercising all of the powers of the Trust except those
reserved for the shareholders. The Executive Committee of the Board of Trustees
handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Signet Asset
Management, the Trust's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the assets of
the Fund.
6
<PAGE>
ADVISORY FEES. The Adviser receives an annual investment advisory fee at of
.50 of 1% of the Fund's average net assets. The investment advisory contract
provides for the voluntary waiver of expenses by the Adviser from time to
time. The Adviser can terminate this voluntary waiver of expenses at any
time with respect to the Fund at its sole discretion. The Adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Signet Asset Management is a division of Signet Trust
Company, a wholly-owned subsidiary of Signet Banking Corporation. Signet
Banking Corporation is a multi-state, multi-bank holding company which has
provided investment management services since 1956. Signet Trust Company,
established in 1975, provides trust and fiduciary services to individuals,
corporations and tax-exempt organizations throughout Virginia and
neighboring states. As of September 30, 1993, Signet Trust Company had $2.6
billion in total trust assets. Signet Asset Management has investment
authority over $1.6 billion of the $2.6 billion. The Adviser has managed
Signet Select Funds since their inception in 1990. The Adviser manages three
equity common trust funds with $47.5 million in assets and three fixed
income common trust funds with $204.7 million in assets.
As part of their regular banking operations, Signet Asset Management may
make loans to public companies. Thus, it may be possible, from time to time,
for the Fund to hold or acquire the securities of issuers which are also
lending clients of Signet Asset Management. The lending relationship will
not be a factor in the selection of securities.
DISTRIBUTION OF THE FUND
Federated Securities Corp. is the principal distributor for the Fund. It is a
Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan adopted in accordance with
Investment Company Act Rule 12b-1 (the "Plan"), the distributor may select
financial institutions such as fiduciaries, custodians for public funds,
investment advisers and brokers/dealers to provide distribution and/or
administrative services as agents for their clients or customers. Administrative
services may include, but are not limited to, the following functions: providing
office space, equipment, telephone facilities, and various personnel including
clerical, supervisory, and computer as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Fund; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests for its shares.
The distributor will pay financial institutions a fee based upon shares subject
to the Plan and owned by their clients or customers. The schedules of such fees
and the basis upon which such fees will be paid will be determined from time to
time by the Trustees, provided that for any period the total amount of these
fees shall not exceed an annual rate of .35 of 1% of the average net asset value
of shares subject to the Plan held during the period by clients or customers of
financial institutions. Any fees paid by the distributor under the Plan will be
reimbursed from the assets of the Fund. The Plan
7
<PAGE>
will not be activated unless and until a second class of shares of the Fund,
which will not have a Rule 12b-1 Plan, is created.
The distributor, in its sole discretion, may uniformly offer to pay all brokers
or dealers selling shares of the Fund additional amounts predicated upon the
amount of shares of the Fund or certain other Funds of Signet Select Funds sold
by the broker or dealer. Such payments, if made, will be in addition to amounts
paid under the distribution plan and will not be an expense of the Fund.
ADMINISTRATIVE ARRANGEMENTS. The distributor may pay financial institutions a
fee based upon the average net asset value of shares of their customers invested
in the Trust for providing administrative services. This fee, if paid, will be
reimbursed by the Adviser and not the Trust.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository institution
(such as a commercial bank or a savings and loan association) from being an
underwriter or distributor of most securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax current
restrictions on depository institutions, the Board of Trustees will consider
appropriate changes in the administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with certain administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- ------------------ --------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750
million
</TABLE>
The administrative fee received by the Fund during any fiscal year shall be at
least $50,000. Federated Administrative Services may voluntarily waive a portion
of its fee.
CUSTODIAN. Signet Trust Company, Richmond, Virginia, is custodian for the
securities and cash of the Fund. Under the Custodian Agreement, Signet Trust
Company holds the Fund's portfolio securities in safekeeping and keeps all
necessary records and documents relating to its duties.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the Fund and dividend disbursing
agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
8
<PAGE>
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust expenses.
These expenses include, but are not limited to the cost of: organizing the Trust
and continuing its existence; Trustees' fees; investment advisory and
administrative services; printing prospectuses and other documents for
shareholders; registering the Trust, the Fund, and shares of the Fund; taxes and
commissions; issuing, purchasing, repurchasing and redeeming shares; fees for
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing, mailing, auditing, accounting, and legal
expenses; reports to shareholders and government agencies; meetings of Trustees
and shareholders and proxy solicitations therefor; insurance premiums;
association membership dues; and such non-recurring and extraordinary items as
may arise.
NET ASSET VALUE
- ---------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing its portfolio securities using the amortized cost method. The net asset
value for shares is determined by adding the interest of the shares in the value
of all securities and other assets of the Fund, subtracting the interest of the
shares in the liabilities of the Fund and those attributable to shares and
dividing the remainder by the total number of shares outstanding. Of course, the
Fund cannot guarantee that the net asset value will always remain at $1.00 per
share.
INVESTING IN THE FUND
- ---------------------------------------------------------
SHARE PURCHASES
Shares of the Fund are sold on days on which the New York Stock Exchange is open
for business except on Lee-Jackson-King Day, Columbus Day and Veterans' Day.
Shares of the Fund may be purchased through Signet Financial Services, Inc. or
Signet Trust Company. In connection with the sale of shares of the Fund, the
distributor may from time to time offer certain items of nominal value to any
shareholder or investor. Purchase orders must be received by Signet Financial
Services, Inc. or Signet Trust Company before 4:00 p.m. (Eastern time). Payment
for shares of the Fund may be made by check or by wire. Orders are considered
received after payment by check is converted into federal funds and received by
Signet Financial Services, Inc. or Signet Trust Company. Payment must be
received by Signet Financial Services, Inc. or Signet Trust Company on the next
business day after placing the order. For orders received by 11:00 a.m. (Eastern
time), shareholders will begin earning dividends on that day provided payment by
wire is received by Signet Financial Services, Inc. or Signet Trust Company by
2:00 p.m. (Eastern time) on that day.
The Fund reserves the right to reject any purchase request.
To purchase shares of the Fund through Signet Financial Services, Inc., call
toll-free 1-800-723-9512. Trust and institutional investors should contact their
account officer to make purchase requests through Signet Trust Company.
9
<PAGE>
Payment for orders may be made:
BY MAIL. To purchase shares of the Fund by mail, send a check made payable to
Tax-Free Money Market Fund to Signet Financial Services, Inc., P.O. Box 26301,
Richmond, VA 23260. Orders by mail should be accompanied by an account
application.
Orders by mail are considered received after payment by check is converted by
Signet Financial Services, Inc. into federal funds. This is generally the next
business day after Signet Financial Services, Inc. receives the check.
BY WIRE. Payment by wire must be received by Signet Trust Company before 2:00
p.m. (Eastern time). Shares of the Fund cannot be purchased by Federal Reserve
Wire on Columbus Day, Veterans' Day or Lee-Jackson-King Day. To purchase shares
by wire, trust and institutional investors should contact their trust investment
adviser. All other shareholders should contact Signet Financial Services, Inc.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, holders of shares may add to their investment
on a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in shares at the net asset value next determined after an order is
received by Signet Financial Services, Inc. A Shareholder may apply for
participation in this program through Signet Financial Services, Inc..
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
must be in amounts of at least $100. No minimum investment is required for
officers, directors and employees (and their spouses and immediate family
members) of Signet Banking Corporation or its subsidiaries.
WHAT SHARES COST
Shares of the Fund are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Fund.
The net asset value is determined at 1:00 p.m. (Eastern time) and 4:00 p.m.
(Eastern time), Monday through Friday, except on: (i) days on which there are
not sufficient changes in the value of a Fund's portfolio securities that its
net asset value might be materially affected; (ii) days during which no shares
of a Fund are tendered for redemption and no orders to purchase shares are
received; or (iii) the following holidays: New Year's Day, Lee-Jackson-King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued unless
requested by contacting Signet Financial Services, Inc. in writing. Monthly
confirmations are sent to report transactions such as purchases and redemptions
as well as dividends paid during the month.
10
<PAGE>
DIVIDENDS
Dividends are declared daily and paid monthly.
Shares purchased by wire before 2:00 p.m. (Eastern time) begin earning dividends
that day. Shares purchased by check begin earning dividends on the day after the
check is converted by Signet Trust Company into federal funds.
Unless cash payments are requested by shareholders in writing to the Fund,
dividends are automatically reinvested in additional shares of the Fund on
payment dates at the ex-dividend date net asset value without a sales charge.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If, for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months.
EXCHANGE PRIVILEGE
- ---------------------------------------------------------
All holders of the Fund are shareholders of the Trust. Shareholders have easy
access to Investment Shares of the other funds comprising the Trust
("participating funds") through an exchange program.
Shares of the Fund may be exchanged for shares of participating funds at net
asset value without paying a redemption fee or sales charge upon such exchange.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the participating fund into which an
exchange is to be made.
Upon receipt by Signet Financial Services, Inc. of proper instructions and all
necessary supporting documents, shares submitted for exchange will be redeemed
at the next-determined net asset value and invested in shares of the other
participating fund. If the exchanging shareholder does not have an account in
the participating fund whose shares are being acquired, a new account will be
established with the same registration and reinvestment options for dividends
and capital gains as the account from which shares are exchanged, unless
otherwise specified by the shareholder. In the case where the new account
registration is not identical to that of the existing account, a signature
guarantee is required. (See "Redeeming Shares By Mail".) Exercise of this
privilege is treated as a sale for federal income tax purposes and, depending on
the circumstances, a short-or long-term capital gain or loss may be realized.
The Fund reserves the right to modify or terminate the exchange privilege at any
time. Shareholders will be notified prior to any modification or termination of
this privilege. Shareholders may obtain further information on the exchange
privilege by calling Signet Financial Services, Inc. This privilege is available
to shareholders resident in any state in which the Fund shares being acquired
may be sold.
BY TELEPHONE. Shareholders may provide instructions for exchanges between
participating funds by calling Signet Financial Services, Inc. toll-free at
1-800-723-9512. It is recommended that investors request this privilege at the
time of their initial application. Information on this service can be
11
<PAGE>
obtained through Signet Financial Services, Inc. Shares may be exchanged by
telephone only between fund accounts having identical shareholder registrations.
Exchange instructions given by telephone may be electronically recorded. If
reasonable procedures are not followed by a Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Signet Financial Services, Inc. and deposited to the shareholder's
mutual fund account before being exchanged.
Telephone exchange instructions must be received by Signet Financial Services,
Inc. before 3:00 p.m. (Eastern time) for shares to be exchanged the same day.
The telephone exchange privilege may be modified or terminated at any time.
Shareholders will be notified of such modification or termination. Shareholders
of a Fund may have difficulty in making exchanges by telephone through banks,
brokers, and other financial institutions during times of drastic economic or
market changes. If a shareholder cannot contact his bank, broker, or financial
institution by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail to Signet Financial Services, Inc.
REDEEMING SHARES
- ---------------------------------------------------------
The Fund redeems shares at their net asset value next determined after Signet
Financial Services, Inc. receives the redemption request. Redemptions will be
made on days on which the Fund computes its net asset value. Telephone or
written requests for redemption must be received in proper form by Signet
Financial Services, Inc.
BY TELEPHONE. To redeem shares of the Fund through Signet Financial Services,
Inc., call toll-free 1-800-444-7123. Trust and institutional investors should
contact their account officer to make redemption requests through Signet Trust
Company. Shares will be redeemed at the net asset value next determined after
the Fund receives the redemption request from Signet Financial Services, Inc.
Redemption requests received before 11:00 a.m. (Eastern time) will be wired the
same day, but will not be entitled to that day's dividend. A redemption request
must be received by the Fund before 4:00 p.m. (Eastern time). Redemption
requests through registered broker/dealers must be received by the Fund before
3:00 p.m. (Eastern time). Signet Financial Services, Inc. is responsible for
promptly submitting redemption requests and providing proper written redemption
instructions to the Fund. Other registered broker/dealers may charge customary
fees and commissions for this service.
If, at any time, the Fund should determine it necessary to terminate or modify
this method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service can
be obtained through Signet Financial Services, Inc. Telephone redemption
instructions may be recorded. If reasonable procedures are not followed by the
Fund, it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
12
<PAGE>
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered.
BY MAIL. Shareholders may redeem shares of the Fund by sending a written
request to Signet Financial Services, Inc. The written request should include
the shareholder's name, the Fund name, the account number, and the share or
dollar amount requested. If share certificates have been issued, they must be
properly endorsed and should be sent by registered or certified mail with the
written request to Signet Financial Services, Inc. P.O. Box 26301, Richmond, VA
23260.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, which is administered by the
FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge will be imposed only in certain instances in
which the Fund shares being redeemed ("Exchange Shares") were acquired in
exchange for Shares of those other Signet Select Funds which charge a contingent
deferred sales charge ("CDSC Shares"). If Shares of the Fund were acquired in
exchange for CDSC Shares, redemption of such Exchange Shares, within five years
of the purchase of the CDSC Shares, will be charged a contingent deferred sales
charge by the Fund's distributor. The fee will be based upon the lesser of the
original purchase price or the net asset value of the CDSC Shares, as follows:
<TABLE>
<CAPTION>
AMOUNT CONTINGENT DEFERRED
OF PURCHASE SALES CHARGE
- -------------------- --------------------
<S> <C>
Under $100,000 2.00%
$100,000 - $249,999 1.50%
$250,000 - $399,999 1.00%
$400,000 - $499,999 0.50%
$500,000 or more None
</TABLE>
13
<PAGE>
Separate purchases will not be aggregated for purposes of determining the
applicable contingent deferred sales charge. The contingent deferred sales
charge will not be imposed on Exchange Shares where the CDSC Shares were
acquired (i) through the reinvestment of dividends or distribution of capital
gains, (ii) prior to October 1, 1992, or (iii) in exchange for shares acquired
prior to October 1, 1992. In computing the contingent deferred sales charge, if
any, redemptions are deemed to have occurred in the following order: 1) Exchange
Shares representing CDSC Shares acquired through the reinvestment of dividends
and long-term capital gains, 2) Exchange Shares representing CDSC Shares
purchased prior to October 1, 1992 (including shares acquired in exchange for
shares purchased prior to October 1, 1992), 3) Exchange Shares representing CDSC
Shares purchased more than five years before the date of redemption, and 4)
Exchange Shares representing CDSC Shares purchased after October 1, 1992 and
redeemed within five years of the date of purchase, determined on a first-in,
first-out basis.
The contingent deferred sales charge will not be imposed on redemption of shares
(i) following the death or disability (as defined in the Internal Revenue Code)
of a shareholder; (ii) to the extent that the redemption represents a minimum
required distribution from an IRA or other retirement plan to a shareholder who
has attained the age of 70 1/2; (iii) owned by the Trust Division of Signet
Trust Company or other affiliates of Signet Banking Corporation representing
funds which are held in a fiduciary, agency, custodial, or similar capacity, or
owned by directors and employees of the Fund, Signet Banking Corporation or
Federated Securities Corp. or their affiliates, or any bank or investment dealer
who has a sales agreement with Federated Securities Corp. with regard to the
Fund, and their spouses and children under 21; or (iv) if the proceeds from the
redemption are used to purchase a Signet Select variable annuity within 10 days
of the redemption.
There is no contingent deferred sales charge when Fund shares are exchanged for
shares of any other portfolio of the Signet Select Funds or when redemptions are
made by the Fund to liquidate accounts with low balances.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, shares are
redeemed to provide for periodic withdrawal payments in an amount directed by
the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to shares,
and the fluctuation of the net asset value of shares redeemed under this
program, redemptions may reduce, and eventually deplete, the shareholder's
investment in shares of a Fund. For this reason, payments under this program
should not be considered as yield or income on the shareholder's investment in
shares of a Fund. To be eligible to participate in this program, a shareholder
must have an account value of at least $10,000. A shareholder may apply for
participation in this program through Signet Financial Services, Inc.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, a Fund may
redeem shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,000 due to shareholder redemptions. This requirement does not apply, however,
if the balance falls below $1,000 because of changes in the Fund's net asset
value.
14
<PAGE>
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- ---------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only shareholders of that Fund or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the operation of the Trust or the Fund and
for the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign.
In the unlikely event a shareholder is held personally liable for obligations of
the Trust, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust cannot meet its obligations to indemnify shareholders and pay
judgments against them from its assets.
EFFECT OF BANKING LAWS
- ---------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, or distributing securities. However, such banking
laws and regulations do not prohibit such a holding company affiliate or banks
generally from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of such a customer. Signet Trust Company is subject to such
banking laws and regulations.
15
<PAGE>
Signet Trust Company believes, based on the advice of its counsel, that Signet
Asset Management may perform the services for any Fund contemplated by its
advisory agreement with the Trust without violation of the Glass-Steagall Act or
other applicable banking laws or regulations. Changes in either federal or state
statutes and regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of such or future statutes and regulations, could
prevent Signet Asset Management from continuing to perform all or a part of the
above services for its customers and/or a Fund. If it were prohibited from
engaging in these customer-related activities, the Trustees would consider
alternative advisers and means of continuing available investment services. In
such event, changes in the operation of a Fund may occur, including possible
termination of any automatic or other Fund share investment and redemption
services then being provided by Signet Asset Management. It is not expected that
existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Signet Asset Management is found)
as a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
TAX INFORMATION
- ---------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 17, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
16
<PAGE>
STATE AND LOCAL TAXES
Because interest received by the Fund may not be exempt from all state and local
income taxes, shareholders may be required to pay state and local taxes on
dividend received from the Fund. Shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- ---------------------------------------------------------
From time to time, the Fund may advertise its yield, effective yield, and
tax-equivalent yield.
The yield represents the annualized rate of income earned on an investment in
the Fund over a seven-day period. It is the annualized dividends earned during
the period on the investment, shown as a percentage of the investment. The
effective yield is calculated similarly to the yield, but, when annualized, the
income earned on an investment in the Fund is assumed to be reinvested daily.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The tax equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a specific tax rate.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage,
From time to time, the Fund may advertise its performance using certain
reporting services and compare its performances to certain indices.
17
<PAGE>
ADDRESSES
- ---------------------------------------------------------
<TABLE>
<S> <C>
Signet Select Funds
Tax-Free Money Market Fund Federated Investors
Tower
Pittsburgh,
Pennsylvania
15222-3779
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Distributor
Federated Securities Corp. Federated Investors
Tower
Pittsburgh, PA
15222
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Adviser
Signet Asset Management 7 North Eighth
Street
Richmond, VA 23219
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Custodian
Signet Trust Company 7 North Eighth
Street
Richmond, VA 23219
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors
Tower
Pittsburgh, PA
15222
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street NW
Washington, DC
20037
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Legal Counsel
Houston, Houston and Donnelly 2510 Center City
Tower
Pittsburgh, PA
15222
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Independent Public Accountants
Deloitte & Touche 2500 One PPG Place
Pittsburgh, PA
15222
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
TAX-FREE MONEY MARKET FUND
PROSPECTUS
A non-diversified Portfolio of Signet
Select Funds,
an Open-End Management Investment
Company
Prospectus dated June 20, 1994
[LOGO]
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
[LOGO]
RECYCLED
G00136-01A(6/93) PAPER
TAX-FREE MONEY MARKET FUND
(A PORTFOLIO OF SIGNET SELECT FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Tax-Free Money Market Fund (the "Fund") dated June 20,
1994. This Statement is not a prospectus. To receive a copy of a
prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated June 20, 1994
[LOGO]
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------
<TABLE>
<S> <C>
GENERAL INFORMATION ABOUT THE TRUST 1
- ---------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------
Acceptable Investments 1
When-Issued And Delayed Delivery
Transactions 2
Reverse Repurchase Agreements 2
INVESTMENT LIMITATIONS 2
- ---------------------------------------------------------
Selling Short and Buying on Margin 2
Issuing Senior Securities and Borrowing
Money 2
Pledging Assets 2
Lending Cash or Securities 2
Concentration of Investments 2
Investing in Commodities 2
Investing in Real Estate 3
Underwriting 3
Investing in Restricted Securities 3
Investing in Illiquid Securities 3
Investing in New Issuers 3
Investing for Control 3
Investing in Issuers Whose Securities Are
Owned by Officers of the Trust 3
Investing in Options 3
Investing in Minerals 3
Brokerage Transactions 3
SIGNET SELECT FUNDS MANAGEMENT 4
- ---------------------------------------------------------
The Funds 6
Fund Ownership 6
Trustee Liability 6
Investment Advisory Services 7
Adviser to the Trust 7
Advisory Fees 7
FUND ADMINISTRATION 7
- ---------------------------------------------------------
DISTRIBUTION PLAN 7
- ---------------------------------------------------------
DETERMINING NET ASSET VALUE 8
- ---------------------------------------------------------
Redemption in Kind 8
The Fund's Tax Status 8
PERFORMANCE INFORMATION 8
- ---------------------------------------------------------
YIELD 9
- ---------------------------------------------------------
EFFECTIVE YIELD 9
- ---------------------------------------------------------
TAX-EQUIVALENT YIELD 9
- ---------------------------------------------------------
Tax-Equivalency Table 9
Total Return 9
Performance Comparisons 10
APPENDIX 11
- ---------------------------------------------------------
</TABLE>
I
<PAGE>
GENERAL INFORMATION ABOUT THE TRUST
- ------------------------------------------------------------------
Signet Select Funds (the "Trust") was established as a Massachusetts business
trust under a Declaration of Trust dated June 20, 1990. As of the date of the
Statement, the Trust consists of seven separate portfolios of securities
(collectively, the "Funds", individually, a "Fund") which are as follows:
Maryland Municipal Bond Fund, Money Market Fund, Tax-Free Money Market Fund,
Treasury Money Market Fund, U.S. Government Income Fund, Value Equity Fund, and
Virginia Municipal Bond Fund.
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------
The Fund's investment objective is current income exempt from federal income tax
consistent with stability of principal and liquidity.
ACCEPTABLE INVESTMENTS
The Fund invests in a portfolio of municipal securities maturing in 13 months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income will be
exempt from federal income tax. The average maturity of the securities in the
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees (the "Trustees") without shareholder approval. Shareholders
will be notified before any material change in these policies becomes effective.
MUNICIPAL LEASES
The Fund may purchase Municipal Securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments, the entity cannot be
compelled to make such payments. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation intertests are credit-enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days). The
municipal securities subject to the participation include the right to
demand payment from the issuers of those interests. These financial
institutions may charge certain fees in connection with their repurchase
commitments, including a fee equal to the excess of the interest paid on
the municipal securities over the negotiated yield at which the
participation interests were purchased by the Fund. By purchasing
participation interests having a seven day feature, the Fund is buying a
security meeting the maturity and quality requirements of the Fund and
also is receiving the tax-free benefits of the underlying securities.
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate municipal
securities than for fixed income obligations.
Many municipal securities with variable interest rates purchased by the Fund are
subject to repayment of principal (usually within seven days) on the Fund's
demand. For purposes of determining the Fund's average maturity, the maturities
of these variable rate demand municipal securities (including participation
interests) are the longer of the periods remaining until the next readjustment
of their interest rates or the periods remaining until their principal amounts
can be recovered by exercising the right to demand payment. The terms of these
variable rate demand instruments require the participation interests, or a
guarantor of either issuer.
1
<PAGE>
- --------------------------------------------------------------------------------
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument in return for a percentage of the
instrument's market value in cash and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but does not ensure
this result. When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
purchased, are: segregated on the Fund's records at the trade date; marked to
market daily; and maintained until the transaction is settled.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to
one-third of the value of its total assets, including the amounts
borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold portfolio securities permitted by its investment objective, policies,
and limitations, or Declaration of Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry, except that it may invest more than 25% of its total
assets in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities and industrial development bonds as long as
they are not from the same facility or similar types of facilities. The
Fund does not intend to purchase securities that would increase the
percentage of its assets invested in the securities of governmental
subdivisions located in any one state, territory, or U.S. possession to
25% or more.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
2
<PAGE>
- --------------------------------------------------------------------------------
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in securities of issuers
whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law, except for
restricted securities determined to be liquid under criteria established
by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser owning
individually more than .50 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
INVESTING IN MINERALS
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase
the securities of issuers which invest in or sponsor such programs.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
The Fund does not intend to borrow money or pledge securities in excess of 5% of
the value of its net assets during the coming fiscal year.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly
to the Fund or to the adviser and may include: advice as to the
advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers
and dealers may be used
3
<PAGE>
- --------------------------------------------------------------------------------
by the adviser or its affiliates in advising the Fund and other accounts.
To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would
tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in
good faith that commissions charged by such persons are reasonable in
relationship to the value of the brokerage and research services provided.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
SIGNET SELECT FUNDS MANAGEMENT
- ------------------------------------------------------------------
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Signet Asset Management,
Signet Trust Company, Federated Investors, Federated Securities Corp., Federated
Services Company, and Federated Administrative Services or the Funds (as defined
below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
<S> <C> <C>
- --------------------------------------------------------------------------------
- ----------------------------
John F. Donahue+* Chairman and Chairman and Trustee, Federated
Federated Investors Trustee Investors; Chairman and
Tower Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and
Federated Research; Director,
AEtna Life and Casualty
Company; Chief Executive Officer
and Director, Trustee, or
Managing General Partner of the
Funds; formerly, Director,
The Standard Fire Insurance
Company. Mr. Donahue is the
father of J. Christopher
Donahue, Vice President of the
Fund.
- --------------------------------------------------------------------------------
- ----------------------------
John T. Conroy, Jr. Trustee President, Investment Properties
Wood/IPC Commercial Corporation; Senior
Department Vice-President, John R. Wood and
John R. Wood and Associates, Inc., Realtors;
Associates, Inc., President, Northgate Village
Realtors Development Corporation;
3255 Tamiami Trail North General Partner or Trustee in
Naples, FL private real estate ventures
in Southwest Florida; Director,
Trustee, or Managing General
Partner of the Funds; formerly,
President, Naples Property
Management, Inc.
- --------------------------------------------------------------------------------
- ----------------------------
William J. Copeland Trustee Director and Member of the
One PNC Plaza - 23rd Executive Committee, Michael
Floor Baker, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner
of the Funds; formerly, Vice
Chairman and Director, PNC
Bank, N.A., and PNC Bank Corp.
and Director, Ryan Homes,
Inc.
- --------------------------------------------------------------------------------
- ----------------------------
James E. Dowd Trustee Attorney-at-law; Director, The
571 Hayward Mill Road Emerging Germany Fund, Inc.;
Concord, MA Director, Trustee, or Managing
General Partner of the Funds;
formerly, Director, Blue Cross
of Massachusetts, Inc.
- --------------------------------------------------------------------------------
- ----------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and
3471 Fifth Avenue Internist, Presbyterian and
Suite 1111 Montefiore Hospitals; Clinical
Pittsburgh, PA Professor of Medicine and
Trustee, University of
Pittsburgh; Director, Trustee, or
Managing General Partner of the
Funds.
- --------------------------------------------------------------------------------
- ----------------------------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
- ----------------------------
<S> <C> <C>
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer
5916 Penn Mall and Flaherty; Director,
Pittsburgh, PA Eat'N Park Restaurants, Inc.,
and Statewide Settlement
Agency, Inc.; Director, Trustee,
or Managing General Partner
of the Funds; formerly, Counsel,
Horizon Financial, F.A.,
Western Region.
- --------------------------------------------------------------------------------
- ----------------------------
Edward C. Gonzales* President, Vice President, Treasurer, and
Federated Investors Treasurer, and Trustee, Federated Investors;
Tower Trustee Vice President and Treasurer,
Pittsburgh, PA Federated Advisers, Federated
Management, and Federated
Research; Executive Vice
President, Treasurer, and
Director, Federated Securities
Corp.; Trustee, Federated
Services Company; Chairman,
Treasurer, and Director,
Federated Administrative Services;
Trustee or Director of some of
the Funds; Vice President and
Treasurer of the Funds.
- --------------------------------------------------------------------------------
- ----------------------------
Peter E. Madden Trustee Consultant; State
225 Franklin Street Representative, Commonwealth of
Boston, MA Massachusetts; Director,
Trustee, or Managing General
Partner of the Funds; formerly,
President, State Street Bank
and Trust Company and State
Street Boston Corporation and
Trustee, Lahey Clinic
Foundation, Inc.
- --------------------------------------------------------------------------------
- ----------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer
5916 Penn Mall and Flaherty; Chairman,
Pittsburgh, PA Meritcare, Inc.; Director, Eat'N
Park Restaurants, Inc.;
Director, Trustee, or Managing
General Partner of the Funds;
formerly, Vice Chairman, Horizon
Financial, F.A.
- --------------------------------------------------------------------------------
- ----------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and
1202 Cathedral of Management Consultant;
Learning Trustee, Carnegie Endowment for
University of Pittsburgh International Peace, RAND
Pittsburgh, PA Corporation, Online Computer
Library Center, Inc., and U.S.
Space Foundation; Chairman,
Czecho Slovak Management Center;
Director, Trustee, or Managing
General Partner of the Funds;
President Emeritus, University
of Pittsburgh; formerly,
Chairman, National Advisory
Council for Environmental Policy
and Technology.
- --------------------------------------------------------------------------------
- ----------------------------
Marjorie P. Smuts Trustee Public relations/marketing
4905 Bayard Street consultant; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
- ----------------------------
Craig P. Churman Vice President Vice President, Federated
Federated Investors and Assistant Administrative Services; Vice
Tower Treasurer President and Assistant
Pittsburgh, PA Treasurer of some of the Funds.
- --------------------------------------------------------------------------------
- ----------------------------
J. Christopher Donahue Vice President President and Trustee, Federated
Federated Investors Investors; Trustee,
Tower Federated Advisers, Federated
Pittsburgh, PA Management, and Federated
Research; President and
Director, Federated Administrative
Services; Trustee, Federated
Services Company; President or
Vice President of the Funds;
Director, Trustee, or Managing
General Partner of some of the
Funds. Mr. Donahue is the son
of John F. Donahue, Chairman and
Trustee of the Trust.
- --------------------------------------------------------------------------------
- ----------------------------
Richard B. Fisher Vice President Executive Vice President and
Federated Investors Trustee, Federated Investors;
Tower Chairman and Director, Federated
Pittsburgh, PA Securities Corp.; President
or Vice President of the Funds;
Director or Trustee of some
of the Funds.
- --------------------------------------------------------------------------------
- ----------------------------
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
- ----------------------------
<S> <C> <C>
John W. McGonigle Vice President Vice President, Secretary,
Federated Investors and Secretary General Counsel, and Trustee,
Tower Federated Investors; Vice
Pittsburgh, PA President, Secretary, and Trustee,
Federated Advisers, Federated
Management, and Federated
Research; Trustee, Federated
Services Company; Executive
Vice President, Secretary, and
Director, Federated
Administrative Services;
Director and Executive Vice
President, Federated Securities
Corp.; Vice President and
Secretary of the Funds.
- --------------------------------------------------------------------------------
- ----------------------------
John A. Staley, IV Vice President Vice President and Trustee,
Federated Investors Federated Investors; Executive
Tower Vice President, Federated
Pittsburgh, PA Securities Corp.; President and
Trustee, Federated Advisers,
Federated Management, and
Federated Research; Vice
President of the Funds; Director,
Trustee, or Managing General
Partner of some of the Funds;
formerly, Vice President, The
Standard Fire Insurance
Company and President of its
Federated Research Division. of
the Funds.
- --------------------------------------------------------------------------------
- ----------------------------
<FN>
* This Trustee is deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
+ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
</TABLE>
THE FUNDS
A. T. Ohio Municipal Money Fund; American Leaders Fund, Inc.; Annuity Management
Series; Automated Cash Management Trust; Automated Government Money Trust; The
Boulevard Funds; California Municipal Cash Trust; Cash Trust Series II; Cash
Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust; Federated Stock Trust; Federated
Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain Funds;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; New York Municipal Cash Trust; 111
Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust For Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes or fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
6
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------
ADVISER TO THE TRUST
The Trust's investment adviser is Signet Asset Management (the "Adviser"), which
is a division of Signet Trust Company, a wholly-owned subsidiary of Signet
Banking Corporation.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except for acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the Trust.
Because of the internal controls maintained by Signet Asset Management to
restrict the flow of non-public information, Fund investments are typically made
without any knowledge of Signet Asset Management's or its affiliates' lending
relationships with an issuer.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2 1/2% per year of the first $30 million of average net assets, 2% per
year of the next $70 million of average net assets, and 1 1/2% per year of
the remaining average net assets, the Adviser will reimburse the Fund for
its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the Adviser will be limited, in
any single fiscal year, by the amount of the investment advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
FUND ADMINISTRATION
- ------------------------------------------------------------------
Federated Administrative Services, which is a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. John A. Staley, IV, an officer of the Trust, holds
approximately 15% of the outstanding common stock and serves as a director of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
DISTRIBUTION PLAN
- ------------------------------------------------------------------
The Fund has adopted a Plan pursuant to Rule 12b-1 which was promulgated by the
Securities and Exchange Commission pursuant to the Investment Company Act of
1940. The Plan permits the payment of fees to brokers for distribution and
administrative services and to administrators for administrative services. The
Plan is designed to (i) stimulate brokers to provide distribution and
administrative support services to shareholders and (ii) stimulate
administrators to render administrative support services to shareholders. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals. By adopting the Plan, the
Board of Trustees expects that the Fund will be able to achieve a more
predictable flow of cash for investment purposes and to meet redemptions. This
will facilitate more efficient portfolio management and assist the Fund in
seeking to achieve its investment objectives. By identifying potential investors
whose needs are served by the Fund's objectives, and properly servicing these
accounts, the Fund may be able to curb sharp fluctuations in rates of
redemptions and sales. Other benefits may include: (1) an efficient and
effective administrative system; (2) a more efficient use of shareholder assets
by having them rapidly invested with a minimum of delay and administrative
detail; and (3) an efficient and reliable shareholder records system and prompt
responses to shareholder requests and inquiries concerning their accounts.
7
<PAGE>
- --------------------------------------------------------------------------------
CUSTODIAN AND PORTFOLIO RECORDKEEPER. Signet Trust Company, Richmond, VA is
custodian for the securities and cash of the Fund. Federated Services Company,
Pittsburgh, PA provides certain accounting and recordkeeping services with
respect to the Fund's portfolio investments.
As custodian, Signet Trust Company holds the Fund's portfolio securities in
safekeeping and keeps all necessary records and documents relating to its
duties. For its services, the custodian receives a fee at an annual rate of .05
of 1% on the first $10 million of average net assets of each of the seven
respective portfolios and .025 of 1% on average net assets in excess of $10
million. There is a $20 fee imposed on each transaction. The custodian fee
received during any fiscal year shall be at least $1,000 per Fund.
DETERMINING NET ASSET VALUE
- ------------------------------------------------------------------
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Fund computed by dividing the annualized daily income on the Fund's portfolio by
the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Fund's investment objective. The procedures
include monitoring the relationship between the amortized cost value per share
and the net asset value per share based upon available indications of market
value. The Trustees will decide what, if any, steps should be taken if there is
a difference of more than 0.5 of 1% between the two values. The Trustees will
take any steps they consider appropriate (such as redemption in kind or
shortening the average portfolio maturity) to minimize any material dilution or
other unfair results arising from differences between the two methods of
determining net asset value.
REDEMPTION IN KIND
The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless the
Trustees determine that further payments should be in kind. In such cases, the
Fund will pay all or a portion of the remainder of the redemption in portfolio
instruments valued in the same way as the Fund determines net asset value. The
portfolio instruments will be selected in a manner that the Trustees deem fair
and equitable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell these securities could receive
less than the redemption value and could incur certain transaction costs.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------
Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.
8
<PAGE>
- --------------------------------------------------------------------------------
YIELD
- ------------------------------------------------------------------
The Fund calculates its yield based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
EFFECTIVE YIELD
- ------------------------------------------------------------------
The Fund calculates its effective yield by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to the
365/7th power; and subtracting 1 from the result.
TAX-EQUIVALENT YIELD
- ------------------------------------------------------------------
The Fund's tax-equivalent yield is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 31% tax rate (the maximum effective federal
rate for individuals) and assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's
portfolio generally remain free from federal regular income tax,* and is
often free from state and local taxes as well. As the table below
indicates, a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable
yields.
<TABLE>
<CAPTION>
TAX-FREE YIELD* VS. TAXABLE YIELD
FEDERAL INCOME TAX BRACKET
- -----------------------------------------------------------------------
<S> <C> <C> <C>
15.00% 28.00% 31.00%
- -----------------------------------------------------------------------
JOINT RETURN $1-38,000 $38,001-91,850 $91,851-140,000
SINGLE RETURN $1-22,750 $22,751-55,100 $55,101-115,000
- -----------------------------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
- -----------------------------------------------------------------------
2.50% 2.94% 3.47% 3.62%
3.00 3.53 4.17 4.35
3.50 4.12 4.86 5.07
4.00 4.71 5.56 5.80
4.50 5.29 6.25 6.52
5.00 5.88 6.94 7.25
</TABLE>
NOTE: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent.
The chart above if for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is compounded by
multiplying the number of shares owned at the end of the period by the net asset
value per share at the end of the period. The number of shares owned at the end
of the period is based on the number of shares purchased at the beginning of the
period with $1,000, adjusted over the period by any additional shares, assuming
the monthly reinvestment of all dividends and distributions.
9
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute net asset value. The financial
publications and/or indices which the Fund uses in advertising may include:
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "Tax-Free
Money Market Funds" category in advertising and sales literature.
- - IBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of hundreds of
money market funds on a weekly basis, and through its Money Market Insight
publication, reports monthly and 12-month-to-date investment results for the
same money funds.
- - MONEY, A MONTHLY MAGAZINE, regularly ranks money market funds in various
categories based on the latest available seven-day compound effective yield.
From time to time, the Fund will quote its Money ranking in advertising and
sales literature.
- - SALOMON BROTHERS SIX-MONTH PRIME MUNI NOTES is an index of selected municipal
notes, maturing in six months, whose yields are chosen as representative of
this market. Calculations are made weekly and monthly.
- - SALOMON BROTHERS ONE-MONTH TAX-EXEMPT COMMERCIAL PAPER is an index of selected
tax-exempt commercial paper issues, maturing in one month, whose yields are
chosen as representative of this particular market. It is a weekly quote of
the most representative yields for selected securities, issued by the U.S.
Treasury, maturing in 30 days. Calculations are made weekly and monthly.
Ehrlich-Bober & Co., Inc. also tracks this Salomon Brothers Index.
10
<PAGE>
APPENDIX
- ------------------------------------------------------------------
STANDARD & POOR'S CORPORATION, MUNICIPAL BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings of AA may be modified by the addition of a
plus or minus sign to show relative standing within the rating category.
MOODY'S INVESTORS SERVICE, MUNICIPAL BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
NR--Not rated by Moody's Moody's applies numerical modifiers, 1, 2, and 3 in the
generic rating classification of "Aa" in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
NR--NR indicates that Fitch does not the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in AAA category.
STANDARD & POOR'S CORPORATION, MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, SHORT-TERM LOAN RATINGS
MIG1/VMIG1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
11
<PAGE>
- --------------------------------------------------------------------------------
FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATINGS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
F-1 and F-1+ categories.
G00136-02-B(6/93)
12
