THE SHAWMUT FUNDS
EQUITY FUNDS
SHAWMUT GROWTH EQUITY FUND
SHAWMUT GROWTH AND INCOME EQUITY FUND
SHAWMUT QUANTITATIVE EQUITY FUND
SHAWMUT SMALL CAPITALIZATION EQUITY FUND
TRUST SHARES
COMBINED PROSPECTUS
The shares offered by this prospectus represent interests in Trust Shares of the
equity portfolios (collectively, the "Equity Funds" or individually, as
appropriate in context, the "Fund") of The Shawmut Funds (the "Trust"), an
open-end management investment company (a mutual fund). In addition to the
Equity Funds, the Trust consists of the following separate investment
portfolios, each having distinct investment objectives and policies:
INCOME FUNDS
Shawmut Connecticut Intermediate Municipal
Income Fund
Shawmut Fixed Income Fund
Shawmut Intermediate Government Income Fund
Shawmut Limited Term Income Fund
Shawmut Massachusetts Intermediate Municipal
Income Fund
MONEY MARKET FUNDS
Shawmut Connecticut Municipal Money
Market Fund
Shawmut Massachusetts Municipal Money
Market Fund
Shawmut Prime Money Market Fund
This combined prospectus contains the information you should read and know
before you invest in the Equity Funds. Keep this prospectus for future
reference. The Equity Funds have also filed a Combined Statement of Additional
Information for Trust Shares and Investment Shares dated June 21, 1994, with the
Securities and Exchange Commission. The information contained in the Combined
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge, obtain other information, or make inquiries about
the Equity Funds by writing or calling the Trust.
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.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF SHAWMUT
BANK, ARE NOT ENDORSED OR GUARANTEED BY SHAWMUT BANK, ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, NOR ARE THEY INSURED OR GUARANTEED BY THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. MUTUAL FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING FLUCTUATIONS IN VALUE AND EARNINGS, AND THE POSSIBLE
LOSS OF PRINCIPAL.
Prospectus dated June 21, 1994
TABLE OF CONTENTS
SYNOPSIS 3
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SUMMARY OF EQUITY FUND EXPENSES--
TRUST SHARES 4
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FINANCIAL HIGHLIGHTS 5
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GENERAL INFORMATION 8
- ------------------------------------------------------
THE SHAWMUT FUNDS 8
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OBJECTIVE AND POLICIES OF EACH FUND 8
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Growth Equity Fund 8
Investment Objective 8
Investment Policies 8
Acceptable Investments 9
Growth and Income Equity Fund 9
Investment Objective 9
Investment Policies 9
Acceptable Investments 9
Quantitative Equity Fund 9
Investment Objective 9
Investment Policies 9
Acceptable Investments 10
Small Capitalization Equity Fund 10
Investment Objective 10
Investment Policies 10
Acceptable Investments 10
EQUITY FUNDS INVESTMENTS, STRATEGIES, AND RISKS 11
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Common Stock 11
Convertible Securities 11
Securities of Foreign Issuers 12
Options and Futures Contracts 12
Stock Index Futures, Swap Agreements,
Indexed Securities, and Options 13
Restricted and Illiquid Securities 13
When-Issued and Delayed Delivery
Transactions 13
Lending of Portfolio Securities 13
Temporary Investments 14
Repurchase Agreements 14
Investing in Securities of Other
Investment Companies 14
Investment Limitations 15
THE SHAWMUT FUNDS INFORMATION 16
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Management of The Shawmut Funds 16
Board of Trustees 16
Investment Adviser 16
Advisory Fees 16
Adviser's Background 16
Sub-Adviser 17
Distribution of Equity Funds' Shares 17
Administration of the Equity Funds 18
Administrative Services 18
Custodian 18
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services 18
Legal Counsel 18
Independent Accountants 18
Expenses of the Equity Funds
and Trust Shares 18
NET ASSET VALUE 19
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INVESTING IN TRUST SHARES 19
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Through Shawmut Bank 19
Directly from the Distributor 19
Minimum Investment Required 20
What Shares Cost 20
Subaccounting Services 20
Certificates and Confirmations 20
Dividends 20
Capital Gains 20
EXCHANGE PRIVILEGE 20
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Exchanging Shares 20
Exchanging-by-Telephone 21
REDEEMING TRUST SHARES 21
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Through Shawmut Bank 21
Directly from the Equity Funds 22
By Mail 22
Signatures 22
Receiving Payment 22
By Check 22
By Wire 23
Accounts with Low Balances 23
Redemption in Kind 23
SHAREHOLDER INFORMATION 23
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Voting Rights 23
Massachusetts Partnership Law 23
EFFECT OF BANKING LAWS 24
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TAX INFORMATION 24
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Federal Income Tax 24
OTHER CLASSES OF SHARES 25
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PERFORMANCE INFORMATION 25
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SYNOPSIS
INVESTMENT OBJECTIVE
The Shawmut Funds offer you a convenient, affordable way to participate in
separate, professionally managed portfolios of securities. This prospectus
relates only to the Equity Funds of the Trust.
EQUITY FUNDS
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SHAWMUT GROWTH EQUITY FUND
("Growth Equity Fund") seeks long-term capital appreciation by investing in
a diversified portfolio of growth-oriented equity securities. The Fund
defines growth-oriented equity securities as securities of companies that
are projected by the investment adviser, based upon traditional research
techniques, to show earnings growth superior to the Standard & Poor's 500
Composite Stock Index.
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- ------------------------------------------------------
SHAWMUT GROWTH AND INCOME
EQUITY FUND
("Growth and Income Equity Fund") seeks a relatively high total return
through long-term capital appreciation and current income looking to
achieve a current dividend yield that exceeds the composite yield of
securities included in the Standard & Poor's 500 Composite Stock Index.
While there is no assurance that the Growth and Income Equity Fund will
achieve its objectives, it attempts to do so by investing in a
professionally managed, diversified portfolio consisting primarily of
common stocks that are selected by the investment adviser based upon
traditional research techniques.
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- ------------------------------------------------------
SHAWMUT QUANTITATIVE EQUITY FUND
("Quantitative Equity Fund") seeks growth of capital by investing in a
diversified portfolio consisting of publicly-traded common stocks listed on
North American stock exchanges or traded in the over-the-counter market.
The selection of investment securities is made by use of a quantitative
computer valuation model, as described in this prospectus.
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- ------------------------------------------------------
SHAWMUT SMALL CAPITALIZATION
EQUITY FUND
("Small Capitalization Equity Fund") seeks long-term capital appreciation
by investing primarily in a portfolio of equity securities comprising the
small capitalization sector of the United States equity market (companies
which have a market value capitalization up to $1 billion).
- ------------------------------------------------------
BUYING AND REDEEMING EQUITY FUND SHARES
A minimum initial investment of $1,000 is required. Subsequent investments must
be in amounts of at least $100, as described in this prospectus in the section
entitled "Minimum Investment Required." Trust Shares are currently sold at net
asset value and are redeemed at net asset value without a sales charge.
EQUITY FUND MANAGEMENT
The Equity Funds' investment adviser is Shawmut Bank, N.A., which makes
investment decisions for the Equity Funds. The sub-adviser to the Quantitative
Equity Fund is Marque Millennium Group Limited.
SHAREHOLDER SERVICES
When you become a shareholder, you can easily obtain information about your
account by calling your Shawmut Bank trust officer.
THE SHAWMUT EQUITY FUNDS
SUMMARY OF EQUITY FUND EXPENSES--TRUST SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GROWTH AND SMALL
GROWTH INCOME QUANTITATIVE CAPITALIZATION
EQUITY EQUITY EQUITY EQUITY
FUND FUND FUND* FUND
-------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price).......................................... None None None None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price)............................ None None None None
Deferred Sales Load (as a percentage of original purchase
price or redemption proceeds, as applicable)............. None None None None
Redemption Fee (as a percentage of amount redeemed, if
applicable).............................................. None None None None
Exchange Fee............................................... None None None None
ANNUAL TRUST SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)........................... 0.50% 0.80% 1.00% 0.75%
12b-1 Fees................................................. None None None None
Total Other Expenses(2).................................... 0.68% 0.27% 0.50% 0.33%
Total Trust Shares Operating Expenses (after waiver and
reimbursement)(3)........................................ 1.18% 1.07% 1.50% 1.08%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee is 1.00%.
(2) Estimated other expenses have been reduced to reflect the voluntary waiver
by the administrator for the Growth Equity Fund. Estimated other expenses
for the Quantitative Equity Fund have been reduced to reflect the voluntary
waiver by the administrator and reimbursement by the adviser.
(3) The Annual Trust Shares Operating Expenses for the fiscal year ended October
31, 1993, were 1.06% for the Growth Equity Fund; 0.98% for the Growth and
Income Equity Fund; and 1.01% for the Small Capitalization Equity Fund. The
Annual Trust Shares Operating Expenses in the table above are based on
expenses expected during the fiscal year ending October 31, 1994. Absent the
anticipated voluntary waivers and reimbursement explained in the above
footnotes, the Trust Shares Operating Expenses are estimated to be 2.01% for
Growth Equity Fund; 1.27% for Growth and Income Equity Fund; 2.75% for
Quantitative Equity Fund; and 1.33% for Small Capitalization Equity Fund.
* The Quantitative Equity Fund became effective with the Securities and Exchange
Commission on June 21, 1994. Therefore, this Fund does not have audited
financial statements and Financial Highlights have not been prepared or
included in this prospectus.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT A SHAREHOLDER OF TRUST SHARES WILL BEAR, EITHER DIRECTLY
OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES,
SEE "THE SHAWMUT FUNDS INFORMATION" AND "INVESTING IN TRUST SHARES."
WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL
FEES.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period. As noted in the
table above, the Equity Funds charge no redemption fee.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Equity Fund.................................... $12 $37 $65 $143
Growth and Income Equity Fund......................... $10 $32 $56 $125
Quantitative Equity Fund.............................. $15 $47 N/A N/A
Small Capitalization Equity Fund...................... $10 $32 $56 $125
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Trust Shares of the Equity Funds. The Equity Funds also offer another class of
shares called Investment Shares. Trust Shares and Investment Shares are subject
to certain of the same expenses; however, Investment Shares are subject to a
12b-1 fee of up to .50 of 1%. See "Other Classes of Shares."
SHAWMUT GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Price Waterhouse, the Fund's independent
public accountants. Their report dated December 17, 1993, on the Fund's
financial statements for the year ended October 31, 1993, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
TRUST SHARES OCTOBER 31, 1993*
- ---------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment income 0.023
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.487
- -------------------------------------------------------------------------------------------- -------
Total from investment operations 0.510
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.019)
- -------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $10.49
- -------------------------------------------------------------------------------------------- -------
TOTAL RETURN*** 5.09%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.06%(a)
- --------------------------------------------------------------------------------------------
Net investment income 0.26%(a)
- --------------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.47%(a)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $20,787
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(c) 71%
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
INVESTMENT SHARES OCTOBER 31, 1993**
- ---------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.01
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment income 0.004
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.480
- -------------------------------------------------------------------------------------------- -------
Total from investment operations 0.484
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.004)
- -------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $10.49
- -------------------------------------------------------------------------------------------- -------
TOTAL RETURN*** 4.84%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.37%(a)
- --------------------------------------------------------------------------------------------
Net investment income (0.10)%(a)
- --------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.72%(a)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,631
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(c) 71%
- --------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 14, 1992 (date of initial
public investment) to October 31, 1993.
** Reflects operations for the period from February 12, 1993 (date of initial
public offering) to October 31, 1993.
*** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses.
(c) Represents portfolio turnover rate for the entire Fund.
SHAWMUT GROWTH AND INCOME EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Price Waterhouse, the Fund's independent
public accountants. Their report dated December 17, 1993, on the Fund's
financial statements for the year ended October 31, 1993, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
TRUST SHARES OCTOBER 31, 1993*
- ---------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment income 0.18
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.69
- -------------------------------------------------------------------------------------------- ------
Total from investment operations 0.87
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.18)
- -------------------------------------------------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $10.69
- -------------------------------------------------------------------------------------------- ------
TOTAL RETURN*** 8.80%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 0.98%(a)
- --------------------------------------------------------------------------------------------
Net investment income 2.11%(a)
- --------------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.27%(a)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $147,090
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(c) 38%
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
INVESTMENT SHARES OCTOBER 31, 1993**
- ---------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.23
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment income 0.15
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.48
- -------------------------------------------------------------------------------------------- ------
Total from investment operations 0.63
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.17)
- -------------------------------------------------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $10.69
- -------------------------------------------------------------------------------------------- ------
TOTAL RETURN*** 6.20%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.25%(a)
- --------------------------------------------------------------------------------------------
Net investment income 1.77%(a)
- --------------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.53%(a)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $16,280
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(c) 38%
- --------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 14, 1992 (date of initial
public investment) to October 31, 1993.
** Reflects operations for the period from February 12, 1993 (date of initial
public offering) to October 31, 1993.
*** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) Increase/decrease in above expenses/income ratios due to waivers or
reimbursements of expenses.
(c) Represents portfolio turnover rate for the entire Fund.
SHAWMUT SMALL CAPITALIZATION EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Price Waterhouse, the Fund's independent
public accountants. Their report dated December 17, 1993, on the Fund's
financial statements for the year ended October 31, 1993, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
TRUST SHARES OCTOBER 31, 1993*
- ---------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment income 0.002
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.210
- -------------------------------------------------------------------------------------------- -------
Total from investment operations 1.212
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.002)
- -------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $11.21
- -------------------------------------------------------------------------------------------- -------
TOTAL RETURN*** 12.12%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.01%(a)
- --------------------------------------------------------------------------------------------
Net investment income 0.02%(a)
- --------------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.28%(a)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $100,382
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(c) 29%
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
INVESTMENT SHARES OCTOBER 31, 1993**
- ---------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.52
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment loss (0.008)
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.698
- -------------------------------------------------------------------------------------------- -------
Total from investment operations 0.690
- -------------------------------------------------------------------------------------------- -------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.000)
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.21
- -------------------------------------------------------------------------------------------- ------
TOTAL RETURN*** 6.56%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.33%(a)
- --------------------------------------------------------------------------------------------
Net investment loss (0.19)%(a)
- --------------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.54%(a)
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $15,014
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(c) 29%
- --------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 14, 1992 (date of initial
public investment) to October 31, 1993.
** Reflects operations for the period from February 12, 1993 (date of initial
public offering) to October 31, 1993.
*** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses.
(c) Represents portfolio turnover rate for the entire Fund.
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated July 16, 1992. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
As of the date of this prospectus, the Board of Trustees (the "Trustees") has
established two classes of shares of each of the Equity Funds, known as Trust
Shares and Investment Shares. This prospectus relates only to Trust Shares of
the Equity Funds. Trust Shares of each of the Equity Funds are sold primarily to
accounts for which Shawmut Bank, N.A., or its affiliates, act in a fiduciary or
agency capacity and, with respect to the Quantitative Equity Fund, to customers
of Marque Millenium Group Limited.
A minimum initial investment of $1,000 is required. Subsequent investments must
be in amounts of at least $100, as described in this prospectus in the section
entitled "Minimum Investment Required." Trust Shares are currently sold at net
asset value and are redeemed at net asset value without a sales charge imposed
by the Equity Funds.
THE SHAWMUT FUNDS
The shareholders of the Equity Funds are shareholders of The Shawmut Funds,
which currently consist of Shawmut Connecticut Intermediate Municipal Income
Fund, Shawmut Connecticut Municipal Money Market Fund, Shawmut Fixed Income
Fund, Shawmut Growth and Income Equity Fund, Shawmut Growth Equity Fund, Shawmut
Intermediate Government Income Fund, Shawmut Limited Term Income Fund, Shawmut
Massachusetts Intermediate Municipal Income Fund, Shawmut Massachusetts
Municipal Money Market Fund, Shawmut Prime Money Market Fund, Shawmut
Quantitative Equity Fund, and Shawmut Small Capitalization Equity Fund.
Shareholders in the Equity Funds have easy access to the other portfolios of The
Shawmut Funds through an exchange program. The Shawmut Funds are advised by
Shawmut Bank, N.A., and distributed by Federated Securities Corp. The
sub-adviser to the Quantitative Equity Fund is Marque Millennium Group Limited.
OBJECTIVE AND POLICIES OF EACH FUND
GROWTH EQUITY FUND
INVESTMENT OBJECTIVE
The investment objective of the Growth Equity Fund is to provide long-term
capital appreciation. The investment objective cannot be changed without
approval of shareholders. 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 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
- ------------------------------------------------------
UNDER NORMAL MARKET CIRCUMSTANCES, THE GROWTH EQUITY FUND WILL INVEST AT
LEAST 65% OF ITS ASSETS IN GROWTH-ORIENTED
EQUITY SECURITIES.
- ------------------------------------------------------
The Growth Equity Fund defines growth-oriented equity securities as securities
that are projected by the Growth Equity Fund's investment adviser, to show
earnings growth superior to the Standard & Poor's 500 Composite Stock Index.
The Growth Equity Fund invests primarily in equity securities of companies
selected by the investment adviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects and
of the risk and volatility of each company's business. The fundamental changes
which the investment adviser will seek to identify in companies include, for
example, restructuring of basic businesses or reallocations of assets which
present opportunities for significant share price appreciation. At times, the
Growth Equity Fund will invest in securities of companies which are deemed by
the investment adviser to be candidates for acquisition by other entities as
indicated by changes in ownership, changes in standard price-to-value ratios,
and an examination of other standard analytical indices.
GROWTH AND INCOME
EQUITY FUND
INVESTMENT OBJECTIVE
The investment objective of the Growth and Income Equity Fund is to provide a
relatively high total return through long-term capital appreciation and current
income. The investment objective cannot be changed without approval of
shareholders. The Growth and Income Equity Fund generally looks to achieve a
yield that exceeds the composite dividend yield of securities included in the
Standard & Poor's 500 Composite Stock Index. 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 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
- ------------------------------------------------------
UNDER NORMAL MARKET CIRCUMSTANCES, THE GROWTH AND INCOME EQUITY FUND WILL
INVEST AT LEAST 65% OF ITS ASSETS IN GROWTH AND INCOME EQUITY SECURITIES.
- ------------------------------------------------------
In addition, the Growth and Income Equity Fund may invest as described in this
prospectus.
QUANTITATIVE EQUITY FUND
INVESTMENT OBJECTIVE
The investment objective of the Quantitative Equity Fund is to provide growth of
capital. The investment objective of the Quantitative Equity Fund cannot be
changed without the approval of shareholders. While there is no assurance that
the Quantitative Equity Fund will achieve its investment objective, it endeavors
to do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS
- ------------------------------------------------------
UNDER NORMAL MARKET CIRCUMSTANCES, THE QUANTITATIVE EQUITY FUND WILL INVEST
AT LEAST 65% OF ITS ASSETS IN EQUITY SECURITIES.
- ------------------------------------------------------
The Quantitative Equity Fund will invest its assets in a diversified portfolio
of equity securities issued by companies with a market value capitalization in
excess of $250 million and a minimum daily average trading volume as established
by the Sub-Adviser from time to time. To select common stocks for the
Quantitative Equity Fund, the Sub-Adviser uses a quantitative computer valuation
model to evaluate the relative attractiveness of common stocks listed on North
American stock exchanges or traded in the over-the-counter market. Stocks are
selected based upon their price momentum, as measured by combining four
quantitative disciplines: price trend analysis, velocity of price movements (the
speed at which securities prices may change), analysis of price compared to
moving averages, and current price and volume activity (for valuation
judgments). Then, the selected stocks are reviewed based upon fundamental
characteristics, such as present and historical price-to-earnings and market
price-to-book ratios; changes in analysts' earnings forecasts; and positive or
negative earnings realized. Since the primary analysis is of price momentum
rather than these fundamentals, the Quantitative Equity Fund will include stocks
with not only capital growth potential, but also with prospects for growth in
earnings and dividends (value characteristics).
The Quantitative Equity Fund is comprised of stocks selected in accordance with
strict investment criteria. Stocks that are candidates for purchase may have
undergone persistent price deterioration and are deemed likely to reverse and
move up in price (a contrarian strategy). The Quantitative Equity Fund will also
purchase stocks that are in firmly established patterns of price appreciation.
Sales of portfolio securities also adhere to a strict discipline based upon
system analytics or price movement, similar to the selection process. In
addition, the Quantitative Equity Fund may invest as described in this
prospectus.
SMALL CAPITALIZATION
EQUITY FUND
INVESTMENT OBJECTIVE
The investment objective of the Small Capitalization Equity Fund is to provide
long-term capital appreciation. The investment objective of the Small
Capitalization Equity Fund cannot be changed without the approval of
shareholders. While there is no assurance that the Small Capitalization Equity
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The 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
- ------------------------------------------------------
UNDER NORMAL CIRCUMSTANCES, THE SMALL CAPITALIZATION EQUITY FUND WILL
INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN EQUITY SECURITIES OF COMPANIES
THAT HAVE A MARKET VALUE CAPITALIZATION OF UP TO $1 BILLION.
- ------------------------------------------------------
In addition, the Small Capitalization Equity Fund may invest as described in
this prospectus.
EQUITY FUNDS INVESTMENTS, STRATEGIES, AND RISKS
COMMON STOCK. As described above, the Equity Funds invest primarily in equity
securities. As with other mutual funds that invest primarily in equity
securities, the Equity Funds are subject to market risks. That is, the
possibility exists that common stocks will decline over short or even extended
periods of time, and the United States equity market tends to be cyclical,
experiencing both periods when stock prices generally increase and periods when
stock prices generally decrease. However, because the Equity Funds, other than
the Quantitative Equity Fund, invests primarily in growth-oriented equity
securities (Growth Equity Fund and Growth and Income Equity Fund) or in small
capitalization stocks (Small Capitalization Equity Fund), there are some
additional risk factors associated with investment in the Equity Funds.
Growth-oriented stocks may include issuers with smaller capitalization. Small
capitalization stocks have historically been more volatile in price than larger
capitalization stocks, such as those included in the Standard & Poor's 500
Index. This is because, among other things, smaller companies have a lower
degree of liquidity in the equity market and tend to have a greater sensitivity
to changing economic conditions. Further, in addition to exhibiting greater
volatility, these stocks may, to some degree, fluctuate independently of the
stocks of large companies. That is, the stock of small capitalization companies
may decline in price as the price of large company stocks rises or vice versa.
Therefore, investors should expect that the Equity Funds will be more volatile
than, and may fluctuate independently of, broad stock market indices such as the
Standard & Poor's 500 Index.
In the case of the Quantitative Equity Fund, stocks that show growth or value
characteristics may be included in the investment portfolio, even though those
characteristics do not drive the stock selection process. Because of its price
and volume oriented selection method, the Quantitative Equity Fund tends to be
less volatile than the market. Of course, there can be no assurance that this
will occur.
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities which
may be exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. The Equity
Funds invest in convertible bonds rated "BB" or higher by Standard & Poor's
Corporation or Fitch Investors Service, Inc., or "Ba" or higher by Moody's
Investors Service, Inc., at the time of investment. Securities rated "BB" by
Standard & Poor's Corporation or Fitch Investors Service, Inc., or "Ba" by
Moody's Investors Service, Inc., either have speculative characteristics or are
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. Debt obligations that
are not determined to be investment grade are high-yield, high-risk bonds,
typically subject to greater market fluctuations, and securities in the lowest
rating category may be in danger of loss of income and principal due to an
issuer's default. To a greater extent than investment-grade bonds, the value of
lower-rated bonds tends to reflect short-term corporate, economic, and market
developments, as well as investor perceptions of the issuer's credit quality. In
addition, lower-rated bonds may be more difficult to dispose of or to value than
high-rated, lower-yielding bonds. The investment adviser or sub-adviser, as
appropriate, attempts to reduce the risks described above through
diversification of the portfolio and by credit analysis of each issuer, as well
as by monitoring broad economic trends and corporate and legislative
developments. If a convertible bond is rated below "BB" or "Ba" according to the
characteristics set forth here after a Fund has purchased it, the Fund is not
required to drop
the convertible bond from the portfolio, but will consider appropriate action.
The investment characteristics of each convertible security vary widely, which
allows convertible securities to be employed for different investment
objectives. A description of the rating categories is contained in the Appendix
to the Statement of Additional Information.
Convertible bonds and convertible preferred stocks are fixed income securities
that generally retain the investment characteristics of fixed income securities
until they have been converted but also react to movements in the underlying
equity securities. The holder is entitled to receive the fixed income of a bond
or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Usable bonds are corporate bonds that can be
used in whole or in part, customarily at full face value, in lieu of cash to
purchase the issuer's common stock. When owned as part of a unit along with
warrants, which are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before the
bond's maturity. Convertible securities are senior to equity securities, and
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar nonconvertible securities of the same company.
The interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than non-convertible securities of similar quality. The Equity
Funds will exchange or convert the convertible securities held in their
respective portfolios into shares of the underlying common stock in instances in
which, in the investment adviser's opinion, the investment characteristics of
the underlying common shares will assist the particular Fund in achieving its
investment objectives. Otherwise, the Fund will hold or trade the convertible
securities. In selecting convertible securities for a Fund, the Fund's adviser
evaluates the investment characteristics of the convertible security as a fixed
income instrument, and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with respect to a
particular convertible security, the Fund's adviser considers numerous factors,
including the economic and political outlook, the value of the security relative
to other investment alternatives, trends in the determinants of the issuer's
profits, and the issuer's management capability and practices.
SECURITIES OF FOREIGN ISSUERS. The Equity Funds may invest in the securities of
foreign issuers which are freely traded on United States securities exchanges or
in the over-the-counter market in the form of depository receipts. Securities of
a foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions. As a matter of practice, the Equity Funds will not invest in the
securities of a foreign issuer if any such risk appears to the investment
adviser to be substantial.
OPTIONS AND FUTURES CONTRACTS. The Equity Funds may buy and sell options and
futures contracts to manage their respective individual exposure to changing
interest rates, security prices, and currency exchange rates. Some options and
futures strategies, including selling futures, buying puts, and writing calls,
tend to hedge the Equity Funds' respective investments against price
fluctuations. Other strategies, including buying futures, writing puts, and
buying calls, tend to increase market exposure. Options and futures may be
combined with each other or with forward contracts in order to adjust the risk
and return characteristics of the overall strategy. The Equity Funds may invest
in options and futures based on any type of security, index, or currency,
including options and futures traded on foreign exchanges and options not traded
on exchanges.
Options and futures can be volatile investments, and involve certain risks. If
the investment adviser applies a hedge at an inappropriate time or judges market
conditions incorrectly, options and futures may lower an Equity Fund's individ-
ual return. An Equity Fund could also experience losses if the prices of its
options and futures positions were poorly correlated with its other investments,
or if it could not close out its positions because of an illiquid secondary
market.
Each of the Equity Funds will not hedge more than 20% of their respective total
assets by selling futures, buying puts, and writing calls under normal
conditions. In addition, each of the Equity Funds will not buy futures or write
puts whose underlying value exceeds 20% of their respective total assets, and
the Equity Funds will not buy calls with a value exceeding 5% of their
respective total assets.
STOCK INDEX FUTURES, SWAP AGREEMENTS, INDEXED SECURITIES, AND OPTIONS. The
Equity Funds may utilize stock index futures contracts, options, swap
agreements, indexed securities, and options on futures contracts, subject to the
limitation that the value of these futures contracts, swap agreements, indexed
securities, and options will not exceed 20% of each of the Equity Funds' total
assets. Also, each Equity Fund will not purchase options to the extent that more
than 5% of the value of the Equity Fund's total assets would be invested in
premiums on open put option positions. In addition, each Fund does not intend to
invest more than 5% of the market value of its total assets in each of the
following: futures contracts, swap agreements, and indexed securities. When an
Equity Fund enters into a swap agreement, assets of the Fund equal to the value
of the swap agreement will be segregated by the Fund.
There are several risks accompanying the utilization of futures contracts.
First, positions in futures contracts may be closed only on an exchange or board
of trade that furnishes a secondary market for such contracts. While the Equity
Funds plan to utilize futures contracts only if there exists an active market
for such contracts, there is no guarantee that a liquid market will exist for
the contracts at a specified time. Furthermore, because, by definition, futures
contracts look to projected price levels in the future and not to current levels
of valuation, market circumstances may result in there being a discrepancy
between the price of the stock index future and the movement in the
corresponding stock index. The absence of a perfect price correlation between
the futures contract and its underlying stock index could stem from investors
choosing to close futures contracts by offsetting transactions, rather than
satisfying additional margin requirements. This could result in a distortion of
the relationship between the index and the futures market. In addition, because
the futures market imposes less burdensome margin requirements than the
securities market, an increased amount of participation by speculators in the
futures market could result in price fluctuations.
RESTRICTED AND ILLIQUID SECURITIES. The Equity Funds intend to invest in
restricted securities. Restricted securities are any securities in which each
Equity Fund may otherwise invest pursuant to its investment objective and
policies, but which are subject to restriction on resale under federal
securities law. However, each Equity Fund will limit investments in illiquid
securities, including certain restricted securities not determined by the
Trustees to be liquid, non-negotiable fixed time deposits with maturities over
seven days, over-the-counter options, and repurchase agreements providing for
settlement in more than seven days after notice, to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Equity Funds may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which each Equity Fund purchases securities with payment and
delivery scheduled for a future time. In when-issued and delayed delivery
transactions, the Equity Funds rely on the seller to complete the transaction.
The seller's failure to complete the transaction may cause the Equity Funds to
miss a price or yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, each
Equity Fund may lend portfolio securities on a short-term or
long-term basis, or both, up to one-third of the value of its total assets to
broker/dealers, banks, or other institutional borrowers of securities. The
Equity Funds will only enter into loan arrangements with broker/dealers, banks,
or other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Trustees and will receive
collateral in the form of cash or U.S. government securities equal to at least
100% of the value of the securities loaned.
TEMPORARY INVESTMENTS. In such proportions as, in the judgment of its investment
adviser, prevailing market conditions warrant, each Equity Fund may, for
temporary defensive purposes, invest in:
- - short-term money market instruments rated in one of the top two rating
categories by a nationally recognized statistical rating organization;
- - securities issued and/or guaranteed as to payment of principal and interest by
the U.S. government, its agencies, or instrumentalities; and
- - repurchase agreements.
REPURCHASE AGREEMENTS. The U.S. government securities and other securities in
which each Equity Fund invest may be purchased pursuant to repurchase
agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other securities to an Equity Fund and agree at the time of sale
to repurchase them at a mutually agreed upon time and price. To the extent that
the original seller does not repurchase the securities from an Equity Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Equity Funds may
invest in the securities of other investment companies, but they will not own
more than 3% of the total outstanding voting stock of any investment company,
invest more than 5% of its total assets in any one investment company, or invest
more than 10% of its total assets in investment companies in general. The Equity
Funds will invest in other investment companies primarily for the purpose of
investing its short-term cash which has not yet been invested in other portfolio
instruments. However, from time to time, on a temporary basis, each of the
Equity Funds may invest exclusively in one other investment company managed
similarly to the appropriate Fund. Shareholders should realize that, when one of
the Equity Funds invests in other investment companies, certain fund expenses,
such as custodian fees and administrative fees, may be duplicated. The adviser
will waive its investment advisory fee on assets invested in securities of other
investment companies.
INVESTMENT LIMITATIONS
- ------------------------------------------------------
THE EQUITY FUNDS FOLLOW A NUMBER OF GUIDELINES IN MANAGING THEIR PORTFOLIOS
IN ORDER TO LIMIT INVESTMENT RISKS.
- ------------------------------------------------------
Each Equity Fund will not:
- - borrow money directly or through reverse repurchase agreements (arrangements
in which an Equity Fund sells a portfolio instrument for a percentage of its
cash value with an arrangement to buy it back on a set date) or pledge
securities except, under certain circumstances, an Equity Fund may borrow up
to one-third of the value of its total assets and pledge up to 10% of the
value of its total assets to secure such borrowings; or
- - with respect to 75% of the value of its total assets, invest more than 5% in
securities of one issuer (other than cash, cash items, or securities issued or
guaranteed by the government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by such
securities), or acquire more than 10% of the outstanding voting securities of
any one issuer.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
Each Equity Fund will not:
- - invest more than 10% of its total assets in securities subject to restrictions
on resale under the Securities Act of 1933 (except for commercial paper issued
under Section 4(2) of the Securities Act of 1933 and certain other securities
which meet the criteria for liquidity as established by the Trustees).
THE SHAWMUT FUNDS INFORMATION
MANAGEMENT OF THE
SHAWMUT FUNDS
BOARD OF TRUSTEES
- ------------------------------------------------------
THE SHAWMUT FUNDS ARE MANAGED BY A BOARD OF TRUSTEES.
- ------------------------------------------------------
The Trustees are responsible for managing the Trust's business affairs and for
exercising all the Trust's powers 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
- ------------------------------------------------------
PURSUANT TO AN INVESTMENT ADVISORY CONTRACT WITH THE TRUST, INVESTMENT
DECISIONS FOR THE EQUITY FUNDS ARE MADE BY SHAWMUT BANK, N.A. (THE
"ADVISER"), SUBJECT TO DIRECTION BY THE TRUSTEES.
- ------------------------------------------------------
The Adviser continually conducts investment research and supervision for the
Equity Funds and is responsible for the purchase or sale of portfolio
instruments, for which it receives an annual fee from the respective assets of
the Equity Funds.
ADVISORY FEES
- ------------------------------------------------------
THE ADVISER MAY VOLUNTARILY WAIVE PART OF ITS ADVISORY FEES.
- ------------------------------------------------------
The adviser receives an annual investment advisory fee equal to 1.00% of each of
the Equity Funds' average daily net assets. The fee paid by the Equity Funds,
while higher than the advisory fee paid by other mutual funds in general, is,
with the anticipated advisory fee waivers, comparable to fees paid by mutual
funds with similar objectives and policies. The Adviser has undertaken to waive
a portion of its advisory fee, up to the amount of the advisory fee, to
reimburse
each of the Equity Funds for operating expenses in excess of limitations
established by certain states. The Adviser may further voluntarily waive a
portion of its fee or reimburse any of the Equity Funds for certain operating
expenses. The Adviser can terminate such voluntary waiver or reimbursement
policy at any time with any of the Equity Funds at its sole discretion.
ADVISER'S BACKGROUND
- ------------------------------------------------------
SHAWMUT BANK, N.A., A NATIONAL BANKING ASSOCIATION, AND ITS AFFILIATES HAVE
MANAGED COMMINGLED FUNDS FOR OVER FIFTY YEARS. AS OF DECEMBER 31, 1993,
SHAWMUT NATIONAL CORPORATION, THROUGH ITS SUBSIDIARIES INCLUDING SHAWMUT
BANK, N.A., MANAGED MORE THAN $15 BILLION IN DISCRETIONARY TRUST ASSETS.
SHAWMUT BANK, N.A., HAS SERVED AS AN ADVISER TO MUTUAL FUNDS SINCE THE
INCEPTION OF THE SHAWMUT FUNDS ON DECEMBER 1, 1992.
- ------------------------------------------------------
Shawmut Bank, N.A., a national banking association, along with Shawmut Bank
Connecticut, National Association, are the principal subsidiaries of Shawmut
National Corporation, a super-regional bank holding company formed on February
29, 1988, and based in southern New England. Shawmut National Corporation serves
consumers through its network of banking offices with a full range of deposit
and lending products, as well as investment services. Shawmut Bank's borrowers
may be issuers of certain securities in which The Shawmut Funds may invest. The
principal executive offices of the investment adviser are located at One Federal
Street, Boston, Massachusetts 02211.
E. Bradley Bruce II has been responsible for managing the Growth Equity Fund
since October 1993. Mr. Bruce joined Shawmut Bank as a portfolio manager in
February 1992. Prior to this,
he had been employed as a portfolio manager with a private investment management
firm since 1988. Mr. Bruce received his B.A. degree at Middlebury College and
his M.B.A. degree at Columbia University Graduate School of Business.
Brendan J. Henebry has been the portfolio manager of the Growth and Income
Equity Fund since its inception in December 1992. Mr. Henebry has been with
Shawmut Bank, the Fund's Adviser, and its predecessor since 1965, and has been a
Vice President of the Adviser since 1978. During the past five years, Mr.
Henebry has served as Manager of the Growth and Income Equity Management Group.
He is an honors graduate of St. Anselm's College, where he concentrated in
economics.
Kenneth J. Garvey is the portfolio manager of the Quantitative Equity Fund. Mr.
Garvey is the Managing Director and co-founder of Marque Millennium Group
Limited, which serves as the sub-adviser to the Quantitative Equity Fund. Mr.
Garvey has served as a senior investment executive at several major investment
firms.
Peter C. Larson has been the portfolio manager of the Small Capitalization
Equity Fund since its inception in December 1992. Mr. Larson joined Shawmut Bank
in 1963 as an investment officer and has been a Vice President in charge of
Shawmut's Small Cap Equity Management product since inception in 1980. He holds
a B.S. degree in finance from the University of Connecticut.
SUB-ADVISER
- ------------------------------------------------------
PURSUANT TO THE TERMS OF AN INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN THE
ADVISER AND MARQUE MILLENNIUM GROUP LIMITED ("MARQUE MILLENNIUM" OR THE
"SUB-ADVISER"), MARQUE MILLENNIUM FURNISHES CERTAIN INVESTMENT ADVISORY
SERVICES TO THE ADVISER ON BEHALF OF THE QUANTITATIVE EQUITY FUND.
- ------------------------------------------------------
Marque Millennium assists the Adviser in identifying securities for potential
purchase and/or sale through its quantitative analysis of common stocks, as
described in the "Acceptable Investment" section for the Quantitative Equity
Fund. For the services provided and the expenses incurred by the Sub-Adviser
pursuant to the sub-advisory agreement, Marque Millennium is entitled to receive
an annual fee of one-half of the total advisory fee being charged (up to .50 of
1.00% of the Quantitative Equity Fund's average daily net assets being paid to
the Sub-Adviser), payable by the Adviser. Marque Millennium may elect to waive
some or all of its fee. In no event shall the Quantitative Equity Fund be
responsible for any fees due to the Sub-Adviser for its services to the Adviser.
Marque Millennium, which is located at 126 East 56th Street, New York, New York
10022, provides investment counsel to both individuals and institutions. As of
March 31, 1994, Marque Millennium furnished services, substantially similar to
the services it provides to the Adviser, to other discretionary and
nondiscretionary investment accounts with assets of approximately $555 million.
Marque Millennium has not previously acted as an investment adviser or
sub-adviser to an investment company. The Sub-Adviser is a limited partnership
founded and controlled by
Wilfred J. Meckel II and Kenneth J. Garvey, Managing Directors.
DISTRIBUTION OF EQUITY FUNDS' SHARES
- ------------------------------------------------------
FEDERATED SECURITIES CORP. IS THE PRINCIPAL DISTRIBUTOR FOR TRUST SHARES.
- ------------------------------------------------------
Federated Securities Corp., Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, 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.
ADMINISTRATION OF THE EQUITY FUNDS
ADMINISTRATIVE SERVICES. Federated Administrative Services ("FAS"), Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779, a subsidiary of Federated
Investors, provides the Equity Funds with certain administrative personnel and
services necessary to operate the Equity Funds, such as legal and accounting
services. FAS provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATED DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<S> <C>
.150 of 1% First $250 million
.125 of 1% Next $250 million
.100 of 1% Next $250 million
.075 of 1% Over $750 million
</TABLE>
The administrative fee received by FAS during any fiscal year shall be at least
$50,000 for each of the Equity Funds individually. FAS may voluntarily choose to
waive a portion of its fee.
CUSTODIAN. Shawmut Bank, N.A., One Federal Street, Boston, Massachusetts 02211,
is custodian for the securities and cash of the Equity Funds. Under the
Custodian Agreement, Shawmut Bank, N.A., holds the Equity Funds' portfolio
securities in safekeeping and keeps all necessary records and documents relating
to its duties.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, is transfer agent and dividend disbursing agent for the Equity
Funds. It also provides certain accounting and recordkeeping services with
respect to each of the Equity Funds' portfolio investments.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin, L.L.P., 2101 L Street, N.W., Washington, DC 20037.
INDEPENDENT ACCOUNTANTS. The independent accountants for the Equity Funds are
Price Waterhouse, 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES OF THE EQUITY FUNDS AND TRUST SHARES
Holders of Trust Shares pay their allocable portion of the Equity Funds' and
Trust's expenses. The Trust expenses for which holders of Trust Shares pay their
allocable portion include, but are not limited to: the cost of organizing the
Trust and continuing its existence; registering the Trust with federal and state
securities authorities; Trustees' fees; auditors' fees; the cost of meetings of
Trustees; legal fees of the Trust; association membership dues; and such non-
recurring and extraordinary items as may arise.
The respective Equity Fund expenses for which holders of Trust Shares pay their
allocable portion include, but are not limited to: registering the Equity Funds
and shares of the Equity Funds; investment advisory services; taxes and
commissions; custodian fees; insurance premiums; auditors' fees; and such
non-recurring and extraordinary items as may arise.
At present, no expenses are allocated exclusively to the Trust Shares as a
class. However, the Trustees reserve the right to allocate certain other
expenses to holders of Trust Shares as they deem appropriate ("Class Expenses").
In any case, Class Expenses would be limited to: distribution fees; transfer
agent fees as identified by the transfer agent as attributable to holders of
Trust Shares; printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxies to
current shareholders; registration fees paid to the Securities and Exchange
Commission and registration fees paid to state securities commissions; expenses
related to administrative personnel and services as required to support holders
of Trust Shares; legal fees relating solely to Trust Shares; and Trustees' fees
incurred as a result of issues relating solely to Trust Shares.
NET ASSET VALUE
- ------------------------------------------------------
THE TERM "NET ASSET VALUE" REFERS TO THE VALUE OF ONE EQUITY FUND SHARE.
- ------------------------------------------------------
Each Equity Fund's net asset value per Trust Share fluctuates. The net asset
value for Trust Shares is determined by adding the interest of the Trust Shares
in the market value of all securities and other assets of an Equity Fund,
subtracting the interest of the Trust Shares in the liabilities of an Equity
Fund and those attributable to Trust Shares, and dividing the remainder by the
total number of Trust Shares outstanding. The net asset value for Trust Shares
of an Equity Fund may differ from that of Investment Shares due to the variance
in daily net income realized by each class. Such variance will reflect only
accrued net income to which the shareholders of a particular class are entitled.
INVESTING IN TRUST SHARES
- ------------------------------------------------------
YOU CAN BUY TRUST SHARES BY FEDERAL RESERVE WIRE, MAIL, OR TRANSFER, AS
EXPLAINED BELOW.
- ------------------------------------------------------
Shares of the Equity Funds are sold by the distributor on days on which the New
York Stock Exchange and Federal Reserve Wire System are open for business.
Shares of the Equity Funds may also be purchased through Shawmut Bank, N.A.,
Shawmut Bank Connecticut, National Association, or their affiliates
(collectively, "Shawmut Bank") on days on which both Shawmut Bank and the New
York Stock Exchange and Federal Reserve Wire System are open for business. Texas
residents must purchase, exchange, and redeem Trust Shares through Federated
Securities Corp. at 800-356-2805. The Equity Funds reserve the right to reject
any purchase request.
THROUGH SHAWMUT BANK. An investor may call their Shawmut Bank trust officer to
receive information and to place an order to purchase Shares. Shawmut Bank will
purchase Trust Shares on behalf of investors and maintain all records relating
to the Trust Shares. Through its trust accounting systems, Shawmut Bank provides
shareholders of Trust Shares with detailed periodic statements that integrate
information regarding investments in the Equity Funds with other Shawmut Bank
investment services.
Orders placed through Shawmut Bank are considered received when payment is
converted to federal funds and the applicable Equity Fund is notified of the
purchase order. The completion of the purchase transaction will generally occur
within one business day after Shawmut Bank receives a purchase order. Purchase
orders must be received by Shawmut Bank before 4:00 p.m. (Eastern time) and must
be transmitted by Shawmut Bank to the applicable Equity Fund before 5:00 p.m.
(Eastern time) in order for Trust Shares to be purchased at that day's public
offering price.
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase Trust
Shares directly from the distributor. To do so: complete and sign the new
account form available from the Equity Funds; complete an application for the
establishment of a trust account with Shawmut Bank; enclose a check made payable
to the full name of your desired portfolio (see the cover of the
prospectus)--Trust Shares; and mail both to the Equity Funds, Attention: Vice
President, Securities Operations, OF0501, One Federal Street, Boston,
Massachusetts 02211. The order is considered received after a trust account is
established and the check is converted by Shawmut Bank into federal funds. This
is generally the next business day after Shawmut Bank receives the check.
To purchase Trust Shares of the Equity Funds by wire, call 1-800-SHAWMUT. All
information needed will be taken over the telephone, and the order is considered
received when Shawmut Bank receives payment by wire. To request additional
information concerning purchases by wire, please contact Federated Securities
Corp., the Equity Funds' distributor, at 1-800-356-2805.
Shares cannot be purchased by wire on any day which both Shawmut Bank and the
New York Stock Exchange and Federal Reserve Wire System are not open for
business.
MINIMUM INVESTMENT REQUIRED
- ------------------------------------------------------
THE MINIMUM INITIAL INVESTMENT IS $1,000.
- ------------------------------------------------------
The minimum initial investment in Trust Shares by an investor is $1,000.
Subsequent investments must be in amounts of at least $100.
WHAT SHARES COST
- ------------------------------------------------------
SHARES ARE SOLD AT THEIR NET ASSET VALUE NEXT DETERMINED AFTER AN ORDER IS
RECEIVED. THERE IS NO SALES CHARGE IMPOSED BY THE EQUITY FUNDS UPON THE
PURCHASE OF TRUST SHARES.
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The net asset value is determined at the close of the New York Stock Exchange,
normally 4:00 p.m. (Eastern time), Monday through Friday, except on: (i) days on
which there are not sufficient changes in the value of an Equity Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; or (iii) on the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Certain institutions
holding Trust Shares in a fiduciary, agency, custodial, or similar capacity may
charge or pass through subaccounting fees as part of or in addition to normal
trust or agency account fees. They may also charge fees for other services
provided which may be related to the ownership of Trust Shares. This prospectus
should, therefore, be read together with any agreement between the customer and
the institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Equity Funds, Federated Services Company maintains a
share account for each shareholder of record. Share certificates are not issued
unless requested by contacting Shawmut Bank in writing.
Detailed confirmations of each purchase or redemption are sent to Shawmut Bank
or other shareholders of record. Monthly statements are sent by Shawmut Bank to
its trust customers to report account activity during the previous month,
including dividends paid during the period.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in each
Equity Fund on the record date.
CAPITAL GAINS
Capital gains realized by an Equity Fund, if any, will be distributed to that
Fund's shareholders at least once every 12 months.
EXCHANGE PRIVILEGE
EXCHANGING SHARES. Shareholders may exchange Trust Shares, with a minimum net
asset value of $1,000, for shares of the same designated class of other funds
advised by Shawmut Bank.
Exchanges are subject to the minimum initial purchase requirements of such fund
being acquired. Prior to any exchange, the shareholder must receive a copy of
the current prospectus of
the class of the fund into which an exchange is to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of proper
instructions and all necessary supporting documents, Trust Shares submitted for
exchange will be redeemed at the next-determined net asset value. Written
exchange instructions may require a signature guarantee. 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 exchange privilege may be modified or terminated at any time. Shareholders
will be notified of the modification or termination of the exchange privilege. A
shareholder may obtain further information on the exchange privilege by calling
their trust officer at Shawmut Bank.
EXCHANGE-BY-TELEPHONE. Instructions for exchanges between participating funds
which are part of the Trust may be given by telephone to their trust officer at
Shawmut Bank. To utilize the exchange-by-telephone service, an investor must
complete an authorization form permitting Shawmut Bank to instruct the Equity
Funds to honor telephone instructions. The authorization is included in Shawmut
Bank's trust account documentation. Shares may be exchanged by telephone only
between trust accounts having identical registrations. Exchange instructions
given by telephone may be electronically recorded.
Any Trust Shares held in certificate form cannot be exchanged by telephone, but
must be forwarded to the transfer agent and deposited to the shareholder's
mutual fund account before being exchanged.
Telephone exchange instructions must be received before 4:00 p.m. (Eastern time)
for Trust 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 may have difficulty in making
exchanges by telephone through Shawmut Bank during times of drastic economic or
market changes. If a shareholder cannot contact Shawmut Bank by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail to Shawmut Bank, Attention: Vice President, Securities Operation, OF0501,
One Federal Street, Boston, Massachusetts 02211.
If reasonable procedures are not followed by an Equity Fund, it may be liable
for losses
due to unauthorized or fraudulent telephone instructions.
REDEEMING TRUST SHARES
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YOU CAN REDEEM TRUST SHARES BY MAIL OR TELEPHONE. TO ENSURE YOUR SHARES ARE
REDEEMED EXPEDITIOUSLY, PLEASE FOLLOW THE PROCEDURES EXPLAINED BELOW.
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The Equity Funds redeem Trust Shares at their net asset value next determined
after Federated Services Company receives the redemption request. Redemptions
will be made on days on which the Equity Funds compute their net asset value.
Requests for redemptions can be made by telephone or in writing by contacting a
Shawmut Bank trust officer. Redemption requests received prior to 4:00 p.m.
(Eastern time) will be effected on the same business day.
THROUGH SHAWMUT BANK
Shareholders may redeem Trust Shares by calling their Shawmut Bank trust officer
to request the redemption. Trust Shares will be redeemed at the net asset value
next determined after Federated Services Company receives the redemption
request. Shawmut Bank is responsible for promptly submitting redemption requests
and for maintaining proper written records of redemption instructions received
from the Equity Funds' shareholders. In order to effect a redemption on the same
business day as a request, Shawmut Bank is responsible for the
timely transmission of the redemption request to the appropriate Equity Fund.
Before Shawmut Bank may request redemption by telephone on behalf of a
shareholder, an authorization form permitting the Equity Funds to accept
redemption requests by telephone must first be completed. This authorization is
included in Shawmut Bank's trust account documentation. Redemption instructions
given by telephone may be electronically recorded. In the event of drastic
economic or market changes, a shareholder may experience difficulty in redeeming
by telephone. If such a case should occur, it is recommended that a redemption
request be made in writing and sent by overnight mail to Shawmut Bank,
Attention: Vice President, Securities Operation, OF0501, One Federal Street,
Boston, Massachusetts 02211.
If reasonable procedures are not followed by an Equity Fund, it may be liable
for losses
due to unauthorized or fraudulent telephone instructions.
DIRECTLY FROM THE EQUITY FUNDS
BY MAIL. A shareholder may redeem Trust Shares by sending a written request to
Federated Services Company. If Shares are purchased by Shawmut Bank on behalf of
a trust customer, only Shawmut Bank, as the shareholder of record, can request a
redemption from Federated Services Company. The written request should include
the shareholder's name, the Equity Fund's name and class of shares 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. Shareholders should call
the Equity Funds for assistance in redeeming by mail.
SIGNATURES. 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 Equity Funds, 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 Equity Funds do not accept signatures guaranteed by a notary public.
The Equity Funds and their transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Equity Funds may elect in
the future to limit eligible signature guarantors to institutions that are
members of a signature guarantee program. The Equity Funds and their transfer
agent reserve the right to amend these standards at any time without notice.
RECEIVING PAYMENT
Redemption payments will generally be made directly to the trust account
maintained by an investor with Shawmut Bank. This deposit is normally made
within one business day, but in no event more than seven days, of the redemption
request, provided the transfer agent has received payment from the shareholder.
The net asset value of Trust Shares redeemed is determined, and dividends, if
any, are paid up to and including, the day prior to the day that a redemption
request is processed. Pursuant to instructions from Shawmut Bank, redemption
proceeds may be transferred from a shareholder account by check or by wire.
BY CHECK. Normally, a check for the proceeds is mailed within one business day
after receipt of a proper redemption request.
BY WIRE. Requests to wire proceeds from redemptions received before 4:00 p.m.
(Eastern time) will be honored the following business day after Shawmut Bank
receives proper instructions.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Equity Funds
may redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum of $1,000. This requirement does
not apply, however, if the balance falls below $1,000 because of changes in an
Equity Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
REDEMPTION IN KIND
The Equity Funds are obligated to redeem Trust Shares solely in cash up to
$250,000 or 1% of the net asset value of Shares of each Equity Fund, 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 cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Equity Funds will pay all or a
portion of the remainder of the redemption in portfolio instruments, valued in
the same way as a 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 receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
SHAREHOLDER INFORMATION
VOTING RIGHTS
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EACH TRUST SHARE OF AN EQUITY FUND GIVES THE SHAREHOLDER ONE VOTE IN
TRUSTEE ELECTIONS AND OTHER MATTERS SUBMITTED TO SHAREHOLDERS OF THE TRUST
FOR VOTE.
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All shares 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 Trust or an Equity Fund's operation
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 outstanding shares of
the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust on behalf
of an Equity Fund. To protect shareholders of an Equity Fund, the Trust has
filed legal documents with Massachusetts that expressly disclaim the liability
of shareholders of the Equity Funds for 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 on behalf
of an Equity Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations on behalf of an Equity Fund, the Trust is required to use the
property of that Equity Fund to protect or compensate the shareholder. On
request, the Trust will defend any claim made and pay any judgment against a
shareholder of the Equity
Funds for any act or obligation of the Trust on behalf of the Equity Funds.
Therefore, financial loss resulting from liability as a shareholder of the
Equity Funds will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from the assets of the
Equity Funds.
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, selling, 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. Shawmut Bank is subject to such
banking laws and regulations.
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THE GLASS-STEAGALL ACT IS A FEDERAL BANKING LAW THAT GENERALLY PROHIBITS
BANKS FROM PUBLICLY UNDERWRITING OR DISTRIBUTING CERTAIN SECURITIES.
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Shawmut Bank believes, based upon the advice of its counsel, that it may perform
the services for the Equity Funds 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 Shawmut Bank from continuing to perform all or a part of the above
services for its customers and/or the Equity Funds. 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 the Equity Funds may occur, including
possible termination of any automatic or other Equity Fund share investment and
redemption services then being provided by Shawmut Bank. It is not expected that
existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Shawmut Bank 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 Equity Funds will pay no federal income tax because each Fund expects to
meet requirements of the Internal Revenue Code, as amended, applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies.
Each Equity 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
Shawmut Funds' other portfolios will not be combined for tax purposes with those
realized by each Equity Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Shares.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
OTHER CLASSES OF SHARES
The Equity Funds offer a separate class of shares known as Investment Shares.
Investment Shares are sold primarily to financial institutions that rely upon
the distribution services provided by the distributor in the marketing of
Investment Shares, as well as to retail customers of such institutions.
Investment Shares are sold at net asset value plus a sales charge. Investments
in Investment Shares are subject to a minimum initial investment of $1,000. As
of June 6, 1994, Shawmut Bank or its affiliates, acting as fiduciary of various
accounts, was the owner of record of approximately 1,759,274 Trust Shares
(98.53%) of the Growth Equity Fund; approximately 14,598,565 Trust Shares
(99.75%) of the Growth and Income Equity Fund; and approximately 9,231,172 Trust
Shares (99.86%) of the Small Capitalization Equity Fund, and, therefore, may,
for certain purposes, be deemed to control such Equity Funds and be able to
affect the outcome of certain matters presented for a vote of shareholders.
Investment Shares are distributed pursuant to 12b-1 Plans adopted by the Trust
whereby the distributor is paid a fee of up to .50 of 1% of the Investment
Shares' average daily net assets.
The amount of dividends payable to Trust Shares will exceed that of Investment
Shares by the difference between class expenses and distribution expenses borne
by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
PERFORMANCE INFORMATION
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FROM TIME TO TIME THE EQUITY FUNDS ADVERTISE THEIR TOTAL RETURN AND YIELD
FOR TRUST SHARES.
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Total return represents the change, over a specified period of time, in the
value of an investment in Trust Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yields of Trust Shares of the Equity Funds are calculated by dividing the
net investment income per Trust Share (as defined by the Securities and Exchange
Commission) earned by the Equity Funds over a thirty-day period by the maximum
offering price per Trust Share on the last day of the period. This number is
then annualized using semi-annual compounding. The yield does not necessarily
reflect income actually earned by Trust Shares and, therefore, may not correlate
to the dividends or other distributions paid to shareholders.
Total return and yield will be calculated separately for Trust Shares and
Investment Shares. Because Investment Shares are subject to a sales charge and a
12b-1 fee, the total return and yield for Trust Shares, for the same period,
will exceed that of Investment Shares.
Trust Shares are sold without any sales charge or other similar non-recurring
charges.
From time to time, the Equity Funds may advertise their performance using
certain financial publications and/or compare its performance to certain
indices.
Further information about the performance of the Equity Funds is contained in
the Trust's Annual Report dated October 31, 1993, which can be obtained free of
charge.
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FEDERATED SECURITIES CORP.
(LOGO)
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Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3120919A-I (6/94)
