- --------------------------------------------------------------------------------
SHAWMUT
- --------------------------------------------------------------------------------
CONNECTICUT/MASSACHUSETTS
- --------------------------------------------------------------------------------
MUNICIPAL MONEY
- --------------------------------------------------------------------------------
MARKET FUNDS
- --------------------------------------------------------------------------------
INVESTMENT AND TRUST SHARES
(Portfolios of The Shawmut Funds)
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 28, 1994
FEDERATED SECURITIES CORP.
(LOGO)
Distributor
4022405A (3/94)
March 31, 1994
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK]
A. Please delete "Shawmut Connecticut Municipal Money Market Fund Financial
Highlights" and replace it with the following two tables:
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------
1994** 1993*
-------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.006 0.001
- -----------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.006) (0.001)
- ----------------------------------------------------------------------- -------- -------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
- ----------------------------------------------------------------------- -------- -------
TOTAL RETURN+ 0.56% 0.14%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 0.56%(a) 0.36%(a)
- -----------------------------------------------------------------------
Net investment income 1.67%(a) 2.12%(a)
- -----------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.26%(a) 5.46%(a)
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $23,450 $6,582
- -----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 4, 1993 (date of initial
public investment) to
October 31, 1993.
** For the period from November 1, 1993 to February 28, 1994 (unaudited).
+ Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1994*
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.008
- -----------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.008)
- ----------------------------------------------------------------------- --------
NET ASSET VALUE, END OF PERIOD $1.00
- ----------------------------------------------------------------------- ---------
TOTAL RETURN+ 0.81%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 0.36%(a)
- -----------------------------------------------------------------------
Net investment income 1.90%(a)
- -----------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.01%(a)
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $11,315
- -----------------------------------------------------------------------
</TABLE>
* For the period from October 4, 1993 (effective date) to February 28, 1994
(unaudited).
+ Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above. (Note 5).
(See Notes which are an integral part of the Financial Statements)
B. Please delete "Shawmut Massachusetts Municipal Money Market Fund Financial
Highlights" and replace it with the following:
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------
1994** 1993*
------- -------
<S> <C> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.006 0.001
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.006) (0.001)
- ------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
- ------------------------------------------------------------------------ ------- -------
TOTAL RETURN+ 0.60% 0.12%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.41%(a) 0.11%(a)
- ------------------------------------------------------------------------
Net investment income 1.74%(a) 2.75%(a)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (b) 1.26%(a) 35.31%(a)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $22,100 $1,237
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 5, 1993 (date of initial
public investment) to October 31, 1993.
** For the period from November 1, 1993 to February 28, 1994 (unaudited).
+ Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above. (Note 5).
(See Notes which are an integral part of the Financial Statements)
C. Please insert as the second paragraph under the section entitled "Voting
Rights" beginning on page 24, the following:
As of March 24, 1994, the following shareholder of record owned 25% or more
of the outstanding shares of the Money Market Funds: Olsen & Co., Boston,
Massachusetts, owned approximately 14,215,751 (99.94%) Trust Shares of
Shawmut Connecticut Municipal Money Market Fund, approximately 17,045,507
(52.72%) Shares of Shawmut Massachusetts Municipal Money Market Fund, and
465,708,638 (89.61%) Trust Shares of Shawmut Prime Money Market Fund.
D. Please insert the following unaudited financial statements of Shawmut
Connecticut Municipal Money Market Fund and Shawmut Massachusetts Municipal
Money Market Fund at the end of each combined prospectus immediately
following the last page of text.
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR
AMOUNT S&P'S* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--98.6%
- ----------------------------------------------------------------------
CALIFORNIA--7.2%
--------------------------------------------------------
$1,500,000 Irvine, CA, Daily VRDNs Improvement Bond, (National
Westminster Bank, NY, LOC) VMIG1 $ 1,500,000
--------------------------------------------------------
1,000,000 Irvine Ranch, CA, Water District, Daily VRDNs Capital
Improvement Project (Morgan Guaranty LOC) VMIG1 1,000,000
-------------------------------------------------------- -----------
Total 2,500,000
-------------------------------------------------------- -----------
CONNECTICUT--68.7%
--------------------------------------------------------
4,965,000 Berlin, CT, 2.09% BANs, 6/15/94 A-1 4,965,722
--------------------------------------------------------
600,000 Brooklyn, CT, 2.09%, 4/14/94 A 600,043
--------------------------------------------------------
1,600,000 Cheshire, CT, 2.41% BANs, 8/11/94 AA 1,600,336
--------------------------------------------------------
3,000,000 Connecticut State Development Authority, Weekly VRDNs
PCR, Refunding Bond (Connecticut Lighting & Power Co.
Project)/(Deutsche Bank, LOC) VMIG1 3,000,001
--------------------------------------------------------
1,000,000 Connecticut State HEFA Yale New Haven Hospital, 4.50%
Revenue Bond (Series G)/(MBIA Insured), 7/1/94 AAA 1,006,615
--------------------------------------------------------
1,000,000 Connecticut State HFA, 2.65% (Housing Mortgage Finance),
Mandatory put 5/16/94 VMIG1 1,000,357
--------------------------------------------------------
3,000,000 Connecticut State Special Assessment Unemployment
Compensation Advance Fund, 3.00%, Revenue Bond (Series
C)/(FGIC Insured) Mandatory put 7/1/94 AAA 3,007,950
--------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
2,500,000 Connecticut State Special Tax Obligations Weekly VRDNs
Revenue Bond, (Industrial Bank, Japan, LOC) VMIG1 2,500,000
--------------------------------------------------------
</TABLE>
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR
AMOUNT S&P'S* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
CONNECTICUT--CONTINUED
--------------------------------------------------------
$ 514,000 Danbury, CT, 2.16%, BANs, 7/8/94 AA $ 514,072
--------------------------------------------------------
1,500,000 Manchester, CT, 2.24%, BANs, 7/15/94 AA 1,500,050
--------------------------------------------------------
500,000 Meriden, CT, 8.50%, (MBIA Insured), 4/1/94 AAA 502,501
--------------------------------------------------------
1,000,000 Middletown, CT, 7.10%, 4/1/94 AA 1,004,134
--------------------------------------------------------
500,000 Middletown, CT, 6.30%, UT Bonds, 4/15/94 AA 502,232
--------------------------------------------------------
1,675,000 New Milford, CT, 2.30%, BANs, 8/18/94 AA 1,675,306
--------------------------------------------------------
500,000 Norwalk, CT, 9.00% Capital Improvement UT Bonds, 6/15/94 AA-1 508,801
-------------------------------------------------------- -----------
Total 23,888,120
-------------------------------------------------------- -----------
FLORIDA--4.3%
--------------------------------------------------------
1,500,000 Florida HFA Weekly VRDNs Multi-Family Revenue Bond
(Credit Support C G Life) AAA 1,500,000
-------------------------------------------------------- -----------
ILLINOIS--6.0%
--------------------------------------------------------
2,100,000 Illinois Development Finance Authority, PCR Weekly VRDNs
Refunding Bond, (Series B)/(Power Co. Project) (Canadian
Imperial Bank of Commerce LOC) VMIG1 2,100,000
-------------------------------------------------------- -----------
TENNESSEE--3.2%
--------------------------------------------------------
1,100,000 Metro Government Nashville & Davidson County, TN, Weekly
VRDNs IDR LT Revenue Bond, (Security Pacific Corp., LOC) MIG1 1,100,000
-------------------------------------------------------- -----------
PUERTO RICO--9.2%
--------------------------------------------------------
3,200,000 Puerto Rico Commonwealth Highway & Transportation,
Weekly VRDNs Revenue Bond, (Union Bank of Switzerland,
LOC) VMIG1 3,200,000
-------------------------------------------------------- -----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 34,288,120
-------------------------------------------------------- -----------
</TABLE>
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR
SHARES S&P'S* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
MUTUAL FUND SHARES--1.6%
- ----------------------------------------------------------------------
274,480 CMA Connecticut Municipal Money Market Fund $ 274,480
--------------------------------------------------------
285,532 Dreyfus Connecticut Municipal Money Market Fund 285,532
-------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 560,012
-------------------------------------------------------- -----------
TOTAL INVESTMENTS (AT AMORTIZED COST AND VALUE) $34,848,132+
-------------------------------------------------------- -----------
</TABLE>
+ Also represents cost for federal tax purposes.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings.
Note: The categories of investments are shown as a percentage of net assets
($34,765,072) at February 28, 1994.
The following abbreviations are used in this portfolio.
<TABLE>
<S> <C>
BANs --Bond Anticipation Notes
FGIC --Financial Guaranty Insurance Company
HEFA --Health and Education Facilities Authority
HFA --Housing Finance Authority/Agency
IDR --Industrial Development Revenue
LOC --Letter of Credit
LT --Limited Tax
MBIA --Municipal Bond Investors Assurance
PCR --Pollution Control Revenue
UT --Unlimited Tax
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR
AMOUNT S&P'S* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--105.7%
- ----------------------------------------------------------------------
CALIFORNIA--4.5%
--------------------------------------------------------
$1,000,000 Orange County, CA, Variable Sanitation District Daily
VRDNs (Sanitation District)/(Westminster National Bank,
LOC) VMIG1 $ 1,000,000
-------------------------------------------------------- -----------
MASSACHUSETTS--96.7%
--------------------------------------------------------
600,000 Andover, MA, 2.22% State Aid Anticipation Notes, 7/20/94 AA 600,112
--------------------------------------------------------
995,000 Boston, MA, 4.00% GO Refunding Bonds (Series A)/ (AMBAC
Insured), 7/1/94 AAA 1,000,164
--------------------------------------------------------
500,000 Boxborough, MA, 2.55% TANs, 5/18/94 A-1 500,158
--------------------------------------------------------
500,000 Dedham, MA, 2.50% BANs, 4/28/94 AA 500,057
--------------------------------------------------------
1,000,000 Edgartown, MA, 2.57% BANs, 8/18/94 A 1,000,260
--------------------------------------------------------
613,631 Framingham, MA, 2.36% State Aid Anticipation Notes,
7/8/94 AA 613,766
--------------------------------------------------------
700,000 Massachusetts Bay Transportation Authority, 2.15% CP
(Series B)/(Industrial Bank of Japan, LOC), 3/1/94 VMIG1 700,000
--------------------------------------------------------
1,000,000 Massachusetts Bay Transportation Authority, 2.45%
(Series B)/(Industrial Bank of Japan LOC), 3/1/94 VMIG1 1,000,000
--------------------------------------------------------
4,000,000 Massachusetts State Daily VRDNs (Series D)/(Amro Bank,
LOC) VMIG1 4,000,000
--------------------------------------------------------
</TABLE>
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR
AMOUNT S&P'S* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
MASSACHUSETTS--CONTINUED
--------------------------------------------------------
$4,000,000 Massachusetts State HEFA Weekly VRDNs Revenue Bonds
(Brigham & Womens Hospital)/(Series A)/(Sanwa, LOC) VMIG1 $ 4,000,000
--------------------------------------------------------
700,000 Massachusetts State HEFA, 2.20% (Tufts University) (FNB
Chicago, LOC), 3/1/94 VMIG1 700,000
--------------------------------------------------------
2,800,000 Massachusetts State Industrial Finance Agency, Weekly
VRDN, Resource Recovery Revenue Bonds, (Ogden
Haverhill)/(Project A) (UBS LOC) VMIG1 2,800,000
--------------------------------------------------------
500,000 Natick, MA, 2.58% BANs, 9/2/94 A1 500,196
--------------------------------------------------------
530,900 Scituate, MA, 2.24% State Aid Anticipation Note, 6/15/94 AA 531,004
--------------------------------------------------------
425,000 Sharon, MA, 5.50% GO, 7/15/94 AA 430,208
--------------------------------------------------------
800,000 South Essex, MA, Sewage District, 2.75% Temporary Notes,
6/17/94 A 801,088
--------------------------------------------------------
700,000 Westborough, MA, 2.29% State Aid Anticipation Notes,
7/21/94 AA 700,214
--------------------------------------------------------
1,000,000 Yarmouth, MA, 2.23% BANs, 6/20/94 A-1 1,000,235
-------------------------------------------------------- -----------
Total 21,377,462
-------------------------------------------------------- -----------
PUERTO RICO--4.5%
--------------------------------------------------------
1,000,000 Puerto Rico Commonwealth, 3.00% Tax & Revenue
Anticipation Notes, (Series A), 7/29/94 MIG-1 1,002,149
-------------------------------------------------------- -----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES 23,379,611
-------------------------------------------------------- -----------
</TABLE>
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR
SHARES S&P'S* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
MUTUAL FUND SHARES--3.7%
- ----------------------------------------------------------------------
21,959 CMA Massachusetts Municipal Money Fund 21,959
--------------------------------------------------------
798,015 Dreyfus Massachusetts Municipal Money Market Fund 798,015
-------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 819,974
-------------------------------------------------------- -----------
TOTAL INVESTMENTS (AT AMORTIZED COST AND VALUE) $24,199,585+
-------------------------------------------------------- -----------
</TABLE>
+ Also represents cost for federal tax purposes.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings.
Note: The categories of investments are shown as a percentage of net assets
($22,099,952) at February 28, 1994.
The following abbreviations are used in this portfolio.
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
BANs --Bond Anticipation Notes
CP --Commercial Paper
GO --General Obligation
HEFA --Health and Education Facilities Authority
LOC --Letter of Credit
TANs --Tax Anticipation Notes
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS
MUNICIPAL MUNICIPAL
MONEY MARKET MONEY MARKET
FUND FUND
- ------------------------------------------------------- ------------- -------------
<S> <C> <C>
ASSETS:
- -------------------------------------------------------
Investments at amortized cost and value (Note 2A) $34,848,132 $24,199,585
- -------------------------------------------------------
Interest receivable 153,654 63,956
- -------------------------------------------------------
Receivable for investments sold 1,502,638 --
- -------------------------------------------------------
Prepaid/deferred expenses (Note 2E) 2,052 3,320
- ------------------------------------------------------- ------------- -------------
Total assets 36,506,476 24,266,861
- ------------------------------------------------------- ------------- -------------
LIABILITIES:
- -------------------------------------------------------
Payable for investments purchased 1,600,336 2,003,922
- -------------------------------------------------------
Payable for Fund shares repurchased 120,000 150,950
- -------------------------------------------------------
Dividends payable 16,364 12,037
- -------------------------------------------------------
Accrued expenses and other liabilities 4,704 --
- ------------------------------------------------------- ------------- -------------
Total liabilities 1,741,404 2,166,909
- ------------------------------------------------------- ------------- -------------
Total net assets $34,765,072 $22,099,952
- ------------------------------------------------------- ------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Price
Per Share: (net assets/shares outstanding)
- -------------------------------------------------------
Trust Shares $1.00 $1.00
- ------------------------------------------------------- ------ ------
Investment Shares $1.00 --
- ------------------------------------------------------- ------ ------
SHARES OUTSTANDING:
- -------------------------------------------------------
Trust Shares 11,315,164 22,099,952
- ------------------------------------------------------- ------------- -------------
Investment Shares 23,449,908 --
- ------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
STATEMENTS OF OPERATIONS
PERIOD ENDED FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS
MUNICIPAL MUNICIPAL
MONEY MARKET MONEY MARKET
FUND* FUND*
- -------------------------------------------------------------- ------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------
Interest income (Note 2B) $ 193,328 $ 105,055
- --------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------
Investment advisory fee (Note 5) 43,061 24,373
- --------------------------------------------------------------
Trustees' fee 127 27
- --------------------------------------------------------------
Administrative personnel and services fees (Note 5) 15,968 16,667
- --------------------------------------------------------------
Custodian fees (Note 5) 2,400 2,500
- --------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 5) 15,379 7,444
- --------------------------------------------------------------
Auditing fees 3,622 3,625
- --------------------------------------------------------------
Legal fees 2,135 1,770
- --------------------------------------------------------------
Printing and postage 3,405 3,183
- --------------------------------------------------------------
Recordkeeping fees (Note 5) 17,147 11,500
- --------------------------------------------------------------
Insurance premiums 2,057 2,081
- --------------------------------------------------------------
Distribution services fees (Note 5) 29,594 --
- --------------------------------------------------------------
Registration fees 11,450 7,851
- --------------------------------------------------------------
Miscellaneous 964 359
- -------------------------------------------------------------- ---------- ----------
Total expenses 147,309 81,380
- --------------------------------------------------------------
Deduct--
- --------------------------------------------------------------
Waiver of investment advisory fee (Note 5) 23,854 10,579
- --------------------------------------------------------------
Waiver of custodian fees (Note 5) 2,400 2,500
- --------------------------------------------------------------
Waiver of distribution services fees (Note 5) 14,797 --
- --------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 63,092 48,251
- -------------------------------------------------------------- ---------- ----------
Net expenses 43,166 20,050
- -------------------------------------------------------------- ---------- ----------
Net investment income $ 150,162 $ 85,005
- -------------------------------------------------------------- ---------- ----------
</TABLE>
* For the period from November 1, 1993 to February 28, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONNECTICUT CONNECTICUT MASSACHUSETTS MASSACHUSETTS
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
MONEY MONEY MONEY MONEY
MARKET MARKET MARKET MARKET
FUND FUND FUND FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
10/31/94+ 10/31/93* 10/31/94+ 10/31/93**
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------
OPERATIONS--
- --------------------------------------------
Net investment income $ 150,162 $ 4,674 $ 85,005 $ 735
- -------------------------------------------- ------------ ---------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------------
Dividends to shareholders from net
investment income:
- --------------------------------------------
Trust Shares (51,110) -- (85,005 ) (735)
- --------------------------------------------
Investment Shares (99,052) (4,674 ) -- --
- -------------------------------------------- ------------ ---------- ----------- -----------
Change in net assets from distributions
to shareholders (150,162) (4,674 ) (85,005 ) (735)
- -------------------------------------------- ------------ ---------- ----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS
(NOTE 4)--
- --------------------------------------------
Net proceeds from sale of shares 48,777,252 6,678,827 34,475,020 1,236,303
- --------------------------------------------
Net asset value of shares issued to
shareholders electing to receive payment
of dividends in Fund shares 96,896 3,772 48,432 580
- --------------------------------------------
Cost of shares redeemed (20,691,139) (100,536 ) (13,660,383 ) --
- -------------------------------------------- ------------ ---------- ------------ -----------
Change in net assets from Fund share
transactions 28,183,009 6,582,063 20,863,069 1,236,883
- -------------------------------------------- ------------ ---------- ------------ -----------
Change in net assets 28,183,009 6,582,063 20,863,069 1,236,883
- --------------------------------------------
NET ASSETS:
- --------------------------------------------
Beginning of period 6,582,063 -- 1,236,883 --
- -------------------------------------------- ------------ ---------- ------------ -----------
End of period $ 34,765,072 $6,582,063 $ 22,099,952 $ 1,236,883
- -------------------------------------------- ------------ ---------- ------------ -----------
</TABLE>
+ For the period from November 1, 1993 to February 28, 1994 (unaudited).
* For the period from October 4, 1993 (date of initial public investment) to
October 31, 1993.
** For the period from October 5, 1993 (date of initial public investment) to
October 31, 1993.
(See Notes which are an integral part of the Financial Statements)
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Shawmut Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The financial
statements included herein present only those of Shawmut Connecticut Municipal
Money Market Fund ("Connecticut Municipal Money Market Fund") and Shawmut
Massachusetts Municipal Money Market Fund ("Massachusetts Municipal Money Market
Fund") (hereinafter each individually referred to as a "Fund," or collectively
as the "Funds").
The financial statements of the other portfolios are presented separately.
The assets of each Fund of the Trust are segregated and a shareholder's interest
is limited to the Fund in which shares are held.
Connecticut Municipal Money Market Fund provides two classes of shares
("Investment Shares" and "Trust Shares"). Investment Shares are identical in all
respects to Trust Shares except that Investment Shares are sold pursuant to a
distribution plan ("Plan") adopted in accordance with the Investment Company Act
Rule 12b-1. Under the Plan, the Funds pay Federated Securities Corp. (the
"Distributor") a fee at an annual rate up to 0.50 of 1% of the average daily net
assets of the Investment Shares to finance any activity which is principally
intended to result in the sale of Investment Shares.
Shares of Massachusetts Municipal Money Market Fund are offered without class
designation.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Funds use the amortized cost method to value their portfolio
securities in accordance with Rule 2a-7 under the Investment Company Act of 1940 as
amended. Investments in other regulated investment companies are valued at net asset
value.
B. INCOME--Interest income is recorded on the accrual basis and includes discount earned
less any premium plus net realized gains, if any.
C. FEDERAL TAXES--It is the policy of the Funds to comply with the provisions of the
Internal Revenue Code, as amended, applicable to regulated investment companies and to
distribute to shareholders each year substantially all of their taxable income.
Accordingly, no provisions for federal tax are necessary.
</TABLE>
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in when-issued or
delayed delivery transactions. The Funds will record when-issued securities and maintain
security positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement date.
E. DEFERRED EXPENSES--The costs incurred by each Fund with respect to its initial
registration, excluding the initial expense of registering the shares, have been deferred
and are being amortized using the straight-line method over a period of five years from
each Fund's commencement date.
F. EXPENSES--Expenses of the Funds (other than distribution service fees) and waivers and
reimbursements, if any, are allocated to each class of shares based on their relative
daily average net assets for the period. Expenses incurred by the Funds which do not
specifically relate to an individual fund are allocated among all Funds based on a Fund's
relative net asset value size or as deemed appropriate by the administrator.
G. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS
The Funds compute their net income daily, and immediately prior to the
calculation of their net asset value at the close of business, declare and
record dividends to shareholders of record at the time of the previous
computation of the Funds' net asset value. Payment of dividends is made monthly
in cash, or in additional shares at the net asset value on the payable date.
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees ("Trustees") to issue an
unlimited number of full and fractional shares of beneficial interest (without
par value) for each Fund and separate class of shares. Transactions in Fund
shares were as follows:
For the Period from November 1, 1993 to February 28, 1994:
<TABLE>
<CAPTION>
CONNECTICUT
MUNICIPAL MASSACHUSETTS
MONEY MUNICIPAL
MARKET MONEY MARKET
FUND FUND**
----------- -------------
TRUST SHARES SHARES SHARES
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Shares sold 19,388,088 34,475,020
- --------------------------------------------------------------
Shares issued to shareholders electing to receive payments of
dividends in Fund shares -- 48,432
- --------------------------------------------------------------
Shares redeemed (8,073,074 ) (13,660,383)
-----------
- -------------------------------------------------------------- ----------
11,315,014 20,863,069
-----------
----------
INVESTMENT SHARES
- --------------------------------------------------------------
Shares sold 29,389,164 --
- --------------------------------------------------------------
Shares issued to shareholders electing to receive payments of
dividends in Fund shares 96,896 --
- --------------------------------------------------------------
Shares redeemed (12,618,065) --
-----------
- -------------------------------------------------------------- ----------
16,867,995 --
-----------
- -------------------------------------------------------------- ----------
Change in net assets resulting from Fund share transactions 28,183,009 20,863,069
-----------
- -------------------------------------------------------------- ----------
</TABLE>
** Shares of Massachusetts Municipal Money Market Fund are offered without class
designation. Transactions in shares are listed as "Trust Shares" for
convenience only.
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
For the Fiscal Year Ended October 31, 1993:
<TABLE>
<CAPTION>
CONNECTICUT
MUNICIPAL MASSACHUSETTS
MONEY MUNICIPAL
MARKET MONEY MARKET
FUND* FUND**
----------- -------------
TRUST SHARES SHARES SHARES
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Shares sold 150 1,236,303
- --------------------------------------------------------------
Shares issued to shareholders electing to receive payments of
dividends in Fund shares -- 580
- --------------------------------------------------------------
Shares redeemed -- --
----------
- -------------------------------------------------------------- ----------
150 1,236,883
----------
----------
INVESTMENT SHARES
- --------------------------------------------------------------
Shares sold 6,678,677 --
- --------------------------------------------------------------
Shares issued to shareholders electing to receive payments of
dividends in Fund shares 3,772 --
- --------------------------------------------------------------
Shares redeemed (100,536 ) --
----------
- -------------------------------------------------------------- ----------
6,581,913 --
----------
- -------------------------------------------------------------- ----------
Change in net assets resulting from Fund share transactions 6,582,063 1,236,883
----------
- -------------------------------------------------------------- ----------
</TABLE>
* The Trust Shares of Connecticut Municipal Money Market Fund were not being
publically offered as of October 31, 1993.
** Shares of Massachusetts Municipal Money Market Fund are offered without class
designation. Transactions in shares are listed as "Trust Shares" for
convenience only.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Shawmut Bank, N.A., the Trust's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee based upon a percentage of each
Fund's average daily net assets (see below). The Adviser may voluntarily choose
to waive a portion of its fee. The Adviser will waive its investment advisory
fee on assets invested in securities of open-end investment companies. The
Adviser can terminate these voluntary waivers of expenses at any time at its
sole discretion. The Adviser has also undertaken to reimburse the Funds for
operating expenses in excess of limitations established by
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
certain states. For the period ended February 28, 1994, the Adviser earned and
voluntarily waived the following fees:
<TABLE>
<CAPTION>
ADVISER
ADVISER FEE
ANNUAL FEE VOLUNTARILY
FUND RATE* EARNED WAIVED
- ---------------------------------------------------------- ------ ------- -----------
<S> <C> <C> <C>
Connecticut Municipal Money Market Fund 0.50% $43,061 $23,854
- ----------------------------------------------------------
Massachusetts Municipal Money Market Fund 0.50% 24,373 10,579
- ----------------------------------------------------------
</TABLE>
* As a percentage of average daily net assets
In addition, the Adviser reimbursed Connecticut Municipal Money Market Fund and
Massachusetts Municipal Money Market Fund $63,092 and $48,251, respectively, of
other operating expenses.
Administrative personnel and services are provided by Federated Administrative
Services ("FAS" or "Administrator") at an annual rate of .15 of 1% on the first
$250 million of average aggregate net assets of the Trust; .125 of 1% on the
next $250 million; .10 of 1% on the next $250 million; and .075 of 1% on average
aggregate net assets in excess of $750 million. FAS may voluntarily waive a
portion of its fee. For the period ended February 28, 1994, FAS earned the
following fees:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEE EARNED
- ---------------------------------------------------------- --------------
<S> <C> <C>
Connecticut Municipal Money Market Fund $ 15,968
- ----------------------------------------------------------
Massachusetts Municipal Money Market Fund 16,667
- ----------------------------------------------------------
</TABLE>
Shawmut Bank, N.A. is the Trust's custodian. For the period ended February 28,
1994, Shawmut Bank, N.A. earned and voluntarily waived the following fees:
<TABLE>
<CAPTION>
CUSTODIAN FEE
CUSTODIAN FEE VOLUNTARILY
FUND EARNED WAIVED
- ---------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Connecticut Municipal Money Market Fund $2,400 $ 2,400
- ----------------------------------------------------------
Massachusetts Municipal Money Market Fund 2,500 2,500
- ----------------------------------------------------------
</TABLE>
Expenses of organizing the Funds were borne initially by FAS. The Funds have
agreed to reimburse the Administrator for the organizational expenses initially
borne by the Administrator during the five-year
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
period following December 1, 1992, when the Trust's registration statement first
became effective. For the period ended February 28, 1994, the Funds paid FAS as
follows:
<TABLE>
<CAPTION>
INITIAL ORGANIZATIONAL
ORGANIZATIONAL EXPENSES
FUND EXPENSES REIMBURSED
- ---------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Connecticut Municipal Money Market Fund $ 27,716 $ 616
- ----------------------------------------------------------
Massachusetts Municipal Money Market Fund 16,751 372
- ----------------------------------------------------------
</TABLE>
The Connecticut Municipal Money Market Fund has adopted a Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Fund will reimburse
Federated Securities Corp. ("FSC"), the Fund's principal distributor, from the
assets of the Investment Shares of the Fund, for fees it paid which relate to
the distribution and administration of the Fund's Investment Shares. The Plan
provides that the Fund may incur distribution expenses up to 0.50 of 1% of the
average daily net assets of the Investment Shares annually, to pay commissions,
maintenance fees and to compensate the distributor. For the period ended
February 28, 1994, FSC earned and waived the following:
<TABLE>
<CAPTION>
DISTRIBUTION DISTRIBUTION
SERVICES FEE SERVICES FEE
FUND EARNED WAIVED
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Connecticut Municipal Money Market Fund $ 29,594 $ 14,797
- ---------------------------------------------------------------
</TABLE>
Federated Services Company is the transfer agent and dividend disbursing agent
for the Funds. It also provides certain accounting and recordkeeping services
with respect to the Funds' portfolio of investments. For the period ended
February 28, 1994, Federated Services Company received for its services the
following fees:
<TABLE>
<CAPTION>
TRANSFER
AND
DIVIDEND
DISBURSING
AGENT RECORDKEEPING
FUND FEES EARNED FEES EARNED
- ------------------------------------------------------------ ------------ -------------
<S> <C> <C>
Connecticut Municipal Money Market Fund $ 15,379 $17,147
- ------------------------------------------------------------
Massachusetts Municipal Money Market Fund 7,444 11,500
- ------------------------------------------------------------
</TABLE>
Certain Officers and Trustees of the Trust are Officers and Trustees of FAS,
Federated Services Company and FSC.
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
THE SHAWMUT FUNDS
MONEY MARKET FUNDS
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
SHAWMUT PRIME MONEY MARKET FUND
TRUST SHARES
COMBINED PROSPECTUS
The shares offered by this prospectus represent interests in Trust Shares of the
money market portfolios
(collectively, the "Money Market 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 Money Market Funds, the
Trust consists of the following separate investment portfolios, each having a
distinct investment objective 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
EQUITY FUNDS
Shawmut Growth and Income Equity Fund
Shawmut Growth Equity Fund
Shawmut Small Capitalization Equity Fund
This combined prospectus contains the information you should read and know
before you invest in the Money Market Funds. Keep this prospectus for future
reference. The Money Market Funds have also filed a Combined Statement of
Additional Information for Trust Shares and Investment Shares dated February 28,
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 Money Market 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.
EACH OF THE MONEY MARKET FUNDS ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT EACH OF THE MONEY MARKET FUNDS
WILL BE ABLE TO DO SO.
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 February 28, 1994
TABLE OF CONTENTS
SYNOPSIS 3
- ------------------------------------------------------
SUMMARY OF MONEY MARKET FUNDS' EXPENSES--
TRUST SHARES 4
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 5
- ------------------------------------------------------
GENERAL INFORMATION 8
- ------------------------------------------------------
THE SHAWMUT FUNDS 8
- ------------------------------------------------------
OBJECTIVES AND POLICIES OF EACH FUND 8
- ------------------------------------------------------
Connecticut Municipal Money Market Fund 8
Investment Objective 8
Investment Policies 8
Acceptable Investments 9
Massachusetts Municipal Money
Market Fund 9
Investment Objective 9
Investment Policies 9
Acceptable Investments 10
Prime Money Market Fund 10
Investment Objective 10
Investment Policies 10
Acceptable Investments 10
MONEY MARKET FUNDS INVESTMENTS
AND STRATEGIES 11
- ------------------------------------------------------
Variable Rate Demand Notes 11
Ratings 11
Credit Enhancement 11
Demand Features 12
Restricted and Illiquid Securities 12
When-Issued and Delayed Delivery
Transactions 12
Temporary Investments 12
Investing in Securities of Other
Investment Companies 13
Municipal Leases 13
Participation Interests 13
Tender Option Bonds 13
Non-Diversification 14
Connecticut and Massachusetts Municipal
Securities 14
Standby Commitments 14
Connecticut and Massachusetts Investment
Risks 15
Repurchase Agreements 15
Bank Instruments 15
Short-term Credit Facilities 15
Investment Limitations 16
Regulatory Compliance 16
THE SHAWMUT FUNDS INFORMATION 17
- ------------------------------------------------------
Management of The Shawmut Funds 17
Board of Trustees 17
Investment Adviser 17
Advisory Fees 17
Adviser's Background 17
Distribution of Money Market Trust Shares 18
Distribution Plan 18
Administration of the Money Market Funds 19
Administrative Services 19
Custodian 19
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services 19
Legal Counsel 19
Independent Accountants 19
Expenses of the Money Market Funds
and Trust Shares 19
NET ASSET VALUE 20
- ------------------------------------------------------
INVESTING IN TRUST SHARES 20
- ------------------------------------------------------
Through Shawmut Bank 20
Directly from the Distributor 20
Minimum Investment Required 21
What Shares Cost 21
Exchanging Securities for
Money Market Fund Shares 21
Subaccounting Services 21
Certificates and Confirmations 21
Dividends 22
Capital Gains 22
EXCHANGE PRIVILEGE 22
- ------------------------------------------------------
Exchanging Shares 22
Exchanging-by-Telephone 22
REDEEMING TRUST SHARES 22
- ------------------------------------------------------
Through Shawmut Bank 23
Directly from the Money Market Funds 23
By Mail 23
Signatures 23
Receiving Payment 24
By Check 24
By Wire 24
Accounts with Low Balances 24
Redemption in Kind 24
SHAREHOLDER INFORMATION 24
- ------------------------------------------------------
Voting Rights 24
Massachusetts Partnership Law 25
EFFECT OF BANKING LAWS 25
- ------------------------------------------------------
TAX INFORMATION 26
- ------------------------------------------------------
Federal Income Tax 26
Connecticut Tax Considerations 26
Massachusetts Tax Considerations 27
Other State and Local Taxes 27
OTHER CLASSES OF SHARES 27
- ------------------------------------------------------
PERFORMANCE INFORMATION 27
- ------------------------------------------------------
SYNOPSIS
INVESTMENT OBJECTIVES
The Shawmut Funds offer you a convenient, affordable way to participate in
separate, professionally managed portfolios of securities. This prospectus
relates only to the Money Market Funds of the Trust.
MONEY MARKET FUNDS
- ------------------------------------------------------
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
("Connecticut Municipal Money Market Fund") seeks current income which is
exempt from federal income tax and Connecticut state income tax on
individuals, trusts, and estates (the "CSIT"), consistent with stability of
principal and liquidity, by investing primarily in short-term Connecticut
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of
Connecticut or its political subdivisions and financing authorities, but
which are exempt from CSIT.
- ------------------------------------------------------
- ------------------------------------------------------
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
("Massachusetts Municipal Money Market Fund") seeks current income which is
exempt from federal income tax and income taxes imposed by the Commonwealth
of Massachusetts, consistent with stability of principal and liquidity, by
investing primarily in short-term Massachusetts municipal securities,
including
securities of states, territories, and possessions of the United States
which are not issued by or on behalf of Massachusetts
or its political subdivisions and financing
authorities, but which are exempt
from income taxes imposed by the Commonwealth of Massachusetts.
- ------------------------------------------------------
- ------------------------------------------------------
SHAWMUT PRIME MONEY MARKET FUND
("Prime Money Market Fund") seeks current income, consistent with stability
of principal and liquidity, by investing primarily in a diversified
portfolio of money market instruments maturing in thirteen months or less.
- ------------------------------------------------------
BUYING AND REDEEMING MONEY MARKET FUND SHARES
A minimum initial investment of $2,500 may be 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.
MONEY MARKET FUND MANAGEMENT
The Money Market Funds' investment adviser is Shawmut Bank, N.A., which makes
investment decisions for the Money Market Funds.
SHAREHOLDER SERVICES
As a shareholder, you can easily obtain information about your account by
calling your Shawmut Bank trust officer.
THE SHAWMUT FUNDS
SUMMARY OF MONEY MARKET FUND EXPENSES--TRUST SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS PRIME
MUNICIPAL MUNICIPAL MONEY
MONEY MARKET MONEY MARKET MARKET
FUND FUND* FUND
-------------- -------------- --------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................... None None None
Maximum Sales Load Imposed--on Reinvested Dividends
(as a percentage of offering price)............................... None None None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds as applicable)................................ None None None
Redemption Fee (as a percentage of amount redeemed, if
applicable)....................................................... None None None
Exchange Fee........................................................ None None None
</TABLE>
* Massachusetts Municipal Money Market Fund currently sells its shares without
class designation. Purchasers of either the Trust Shares or Investment Shares of
the other Shawmut Funds may purchase shares of Massachusetts Municipal Money
Market Fund.
<TABLE>
<S> <C> <C> <C>
ANNUAL TRUST SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1).................................... 0.45% 0.45% 0.29%
12b-1 Fees.......................................................... None None None
Total Other Expenses (after waiver and reimbursement)(2)............ 0.16% 0.16% 0.13%
Total Trust Shares Operating Expenses (after waiver and
reimbursement)(3)................................................. 0.61% 0.61% 0.42%
</TABLE>
(1) The management fee has been reduced to reflect the anticipated 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
.50%.
(2) Estimated other expenses have been reduced to reflect the anticipated
voluntary waiver by the custodian and the anticipated voluntary
reimbursement of expenses by the investment adviser for the Connecticut
Municipal Money Market Fund and the Massachusetts Municipal Money Market
Fund.
(3) The Annual Trust Shares Operating Expenses for the fiscal year ended October
31, 1993 were 0.11% for the Connecticut Municipal Money Market Fund and the
Massachusetts Municipal Money Market Fund and 0.58% for the Prime Money
Market 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, total Trust Shares Operating Expenses are estimated
to be 1.11% for the Connecticut Municipal Money Market Fund, 1.32% for the
Massachusetts Municipal Money Market Fund, and 0.63% for the Prime Money
Market Fund.
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 Money Market Funds charge no redemption fee.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Connecticut Municipal Money Market Fund.............. $6 $20 $34 $76
Massachusetts Municipal Money Market Fund............ $6 $20 $34 $76
Prime Money Market Fund.............................. $4 $13 $24 $53
</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 Money Market Funds. Connecticut Municipal Money Market Fund
and Prime Money Market Fund 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 CONNECTICUT MUNICIPAL MONEY MARKET 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, 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.
Trust Shares were not being offered as of October 31, 1993. Accordingly, there
are no Financial Highlights for such Shares. The Financial Highlights presented
below are historical information for Investment Shares.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
INVESTMENT SHARES 1993*
- ------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.001
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.001)
- -------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------------- -------
TOTAL RETURN** 0.14%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 0.36%(a)
- --------------------------------------------------------------------------
Net investment income 2.12%(a)
- --------------------------------------------------------------------------
Expense waiver/reimbursement (b) 5.46%(a)
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $6,582
- --------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 4, 1993 (date of initial
public investment) 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 (Note 5).
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET 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, 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
OCTOBER 31,
1993*
----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.001
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.001)
- -------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------------- -------
TOTAL RETURN** 0.12%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 0.11%(a)
- --------------------------------------------------------------------------
Net investment income 2.75%(a)
- --------------------------------------------------------------------------
Expense waiver/reimbursement (b) 35.31%(a)
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,237
- --------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 5, 1993 (date of initial
public investment) 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 (Note 5).
SHAWMUT PRIME MONEY MARKET 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 $1.00
- -------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------
Net investment income 0.02
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
- ------------------------------------------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $1.00
- ------------------------------------------------------------------------------------- ------
TOTAL RETURN*** 2.41%
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------
Expenses 0.58%(a)
- -------------------------------------------------------------------------------------
Net investment income 2.71%(a)
- -------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.12%(a)
- -------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $257,851
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
INVESTMENT SHARES OCTOBER 31, 1993**
- ------------------------------------------------------------------------------------- ------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- -------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------
Net investment income 0.02
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
- ------------------------------------------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $1.00
- ------------------------------------------------------------------------------------- ------
TOTAL RETURN*** 1.73%
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------
Expenses 0.85%(a)
- -------------------------------------------------------------------------------------
Net investment income 2.36%(a)
- -------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.37%(a)
- -------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $28,758
- -------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 14, 1992 (date of initial
public investment) to October 31, 1993. For the period from October 21, 1992
(start of business) to December 13, 1992, net investment income aggregating
$0.004 per share ($400) was distributed to Federated Administrative
Services.
** 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 (Note 5).
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 Connecticut Municipal Money Market Fund and
Prime Money Market Fund, known as Trust Shares and Investment Shares. This
prospectus relates only to Trust Shares of Connecticut
Municipal Money Market Fund and Prime Money Market Fund and to the Shares of
Massachusetts Municipal Money Market Fund.
A minimum initial investment of $2,500 may be required. Subsequent investments
must be in amounts of at least $100, as described in this prospectus in the
section entitled "Minimum Investment Required." Shares are sold at net asset
value and are redeemed at net asset value without a sales charge imposed by the
Money Market Funds.
THE SHAWMUT FUNDS
The shareholders of the Money Market 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, and Shawmut Small
Capitalization Equity Fund. Shareholders in the Money Market 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.
OBJECTIVE AND POLICIES OF EACH FUND
CONNECTICUT MUNICIPAL MONEY
MARKET FUND
INVESTMENT OBJECTIVE
The investment objective of the Connecticut Municipal Money Market Fund is to
provide current income exempt from federal regular income tax and the CSIT,
consistent with stability of principal and liquidity. The investment objective
cannot be changed without the 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
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THE CONNECTICUT MUNICIPAL MONEY MARKET FUND PURSUES ITS INVESTMENT
OBJECTIVE BY INVESTING IN A PORTFOLIO OF CONNECTICUT MUNICIPAL SECURITIES
(AS DEFINED BELOW) WITH REMAINING MATURITIES OF THIRTEEN MONTHS OR LESS AT
THE TIME OF PURCHASE BY THE FUND.
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Unless indicated otherwise, the investment policies described in this prospectus
may be changed by the Trustees without the approval of share-
holders. Shareholders will be notified before any material changes in these
policies become effective. As a matter of investment policy which cannot be
changed without approval of shareholders, the Connecticut Municipal Money Market
Fund invests its assets so that at least 80% of its annual interest income is
exempt from federal regular income tax or at least 80% of the total value of its
assets are invested in obligations the interest income from which is exempt from
federal regular income tax. The average maturity of the securities in the
Connecticut Municipal Money Market Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less.
ACCEPTABLE INVESTMENTS
Under normal circumstances, the Connecticut Municipal Money Market Fund will
invest its assets so that at least 65% of the value of its assets will be
invested in debt obligations issued by or on behalf of the State of Connecticut
and its political subdivisions and financing authorities, and obligations of
other states, territories and possessions of the United States, including the
District of Columbia, and any political subdivision or financing authority of
any of these, the interest income from which is, in the opinion of qualified
legal counsel, exempt from federal regular income tax and CSIT ("Connecticut
Municipal Securities"). Examples of Connecticut Municipal Securities include,
but are not limited to:
- - municipal commercial paper and other short-term notes;
- - variable rate demand notes;
- - municipal bonds (including bonds having remaining maturities of less than
thirteen months without demand features);
- - municipal leases, including certificates of participation in leases;
- - tender option bonds; and
- - participation, trust, and partnership interests in any of the foregoing
obligations.
MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
INVESTMENT OBJECTIVE
The investment objective of the Massachusetts Municipal Money Market Fund is to
provide current income exempt from federal regular income tax and the income
taxes imposed by the Commonwealth of Massachusetts, consistent with stability of
principal and liquidity. The investment objective cannot be changed without the
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
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THE MASSACHUSETTS MUNICIPAL MONEY MARKET FUND PURSUES ITS INVESTMENT
OBJECTIVE BY INVESTING IN A PORTFOLIO OF MASSACHUSETTS MUNICIPAL SECURITIES
(AS DEFINED BELOW) WITH REMAINING MATURITIES OF THIRTEEN MONTHS OR LESS AT
THE TIME OF PURCHASE BY THE FUND.
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Unless indicated otherwise, the investment policies described in this prospectus
may be changed by the Trustees without the approval of shareholders.
Shareholders will be notified before any material changes in these policies
become effective. As a matter of investment policy which cannot be changed
without approval of shareholders, the Massachusetts Municipal Money Market Fund
invests its assets so that at least 80% of its annual interest income is exempt
from federal regular income tax or at least 80% of the total value of its assets
are invested in obligations the interest income from which is exempt from
federal regular income tax. The average maturity of the securities in the
Massachusetts Municipal Money Market Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less.
ACCEPTABLE INVESTMENTS
Under normal circumstances, the Massachusetts Municipal Money Market Fund will
invest its assets so that at least 65% of the value of its assets will be
invested in debt obligations issued by or on behalf of the Commonwealth of
Massachusetts and its political subdivisions and financing authorities, and
obligations of other states, territories and possessions of the United States,
including the District of Columbia, and any political subdivision or financing
authority of any of these, the interest income from which is, in the opinion of
qualified legal counsel, exempt from federal regular income tax and income taxes
imposed by the Commonwealth of Massachusetts imposed upon non-corporate
taxpayers ("Massachusetts Municipal Securities"). Examples of Massachusetts
Municipal Securities include, but are not limited to:
- - municipal commercial paper and other short-term notes;
- - variable rate demand notes;
- - municipal bonds (including bonds having remaining maturities of less than
thirteen months without demand features);
- - municipal leases, including certificates of participation in leases;
- - tender option bonds; and
- - participation, trust, and partnership interests in any of the foregoing
obligations.
PRIME MONEY MARKET FUND
INVESTMENT OBJECTIVE
The investment objective of the Prime Money Market Fund is to provide current
income consistent with stability of principal and liquidity. The investment
objective cannot be changed without the 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
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THE PRIME MONEY MARKET FUND PURSUES ITS INVESTMENT OBJECTIVE BY INVESTING
PRIMARILY IN A DIVERSIFIED PORTFOLIO OF MONEY MARKET INSTRUMENTS MATURING
IN THIRTEEN MONTHS OR LESS.
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Unless indicated otherwise, the investment policies set forth in this prospectus
may be changed by the Board of Trustees without the approval of shareholders.
Shareholders will be notified before any material change in these investment
policies becomes effective. The average maturity of these securities, computed
on a dollar-weighted basis, will be 90 days or less.
ACCEPTABLE INVESTMENTS
The Prime Money Market Fund invests in eligible quality money market instruments
that are either rated in one of the two highest short-term rating categories by
one or more nationally recognized statistical rating organizations ("NRSROs") or
are of comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
- - domestic issues of corporate debt obligations, including notes, bonds, and
debentures;
- - commercial paper, including eurodollar commercial paper ("Europaper");
- - certificates of deposit, demand and time deposits, and bankers' acceptances of
domestic banks and other deposit institutions ("Bank Instruments");
- - short-term credit facilities, such as demand notes;
- - obligations issued or guaranteed as to payment of principal and interest by
the U.S. government or one of its agencies or instrumentalities ("Government
Securities'); and
- - repurchase agreements.
The Prime Money Market Fund invests only in instruments denominated and payable
in U.S. dollars.
MONEY MARKET FUNDS INVESTMENTS AND STRATEGIES
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term securities
(Municipal Securities for the Connecticut/Massachusetts Municipal Money Market
Funds and long-term corporate debt instruments for the Prime Money Market Fund)
that have variable or floating interest rates and provide the Money Market Funds
with the right to tender the security for repurchase at its stated principal
amount plus accrued interest. Such securities typically bear interest at a rate
that is intended to cause the securities to trade at par. The interest rate may
float or be adjusted at regular intervals (ranging from daily to annually), and
is normally based on an applicable interest index or a stated percentage of a
prime rate or another published interest rate or interest rate index. Most
variable rate demand notes allow the Money Market Funds to demand the repurchase
of the security on not more than seven days prior notice. Other notes only
permit the Money Market Funds to tender the security at the time of each
interest rate adjustment or at other fixed intervals. See "Demand Features." The
Money Market Funds treat variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the Money
Market Funds may next tender the security for repurchase.
RATINGS. The Municipal Securities in which the Connecticut/Massachusetts
Municipal Money Market Funds invest must either be rated in one of the two
highest short-term rating categories by one or more NRSROs or be of comparable
quality to securities having such ratings. A
NRSRO's two highest rating categories are determined without regard for
sub-categories and gradations. For example, securities rated SP-1+, SP-1, or
SP-2 by Standard & Poor's Corporation ("S&P"), MIG-1 or MIG-2 by Moody's
Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1, and FIN-2 by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in one of the two
highest short-term rating categories. The Connecticut/Massachusetts Municipal
Money Market Funds will follow applicable regulations in determining whether a
security rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories. See "Regulatory Compliance."
If a Municipal Security has not been rated by a NRSRO, the
Connecticut/Massachusetts Municipal Money Market Funds' investment adviser will
acquire the security only if it determines that the security is of comparable
quality to securities that have received the requisite ratings. In this regard,
the adviser will generally treat Municipal Securities as eligible portfolio
securities if the issuer has received long-term bond ratings within the two
highest rating categories by a NRSRO with respect to other bonds issued. The
adviser also considers other relevant information in its evaluation of unrated
short-term securities.
For the Prime Money Market Fund's securities, a NRSRO's two highest rating
categories are also determined without regard for sub-categories and gradations.
For example, the Prime Money Market Fund's securities rated A-1+, A-1, or A-2 by
S&P, Prime-1 or Prime-2 by Moody's, or F-1 (+ or -) or F-2 (+ or -) by Fitch are
all considered rated in one of the two highest short-term rating categories. The
Prime Money Market Fund will limit its investments in securities rated in the
second highest short-term rating category, e.g., A-2 by S&P, Prime 2 by Moody's
or F-2 (+ or -) by Fitch, to not more than 5% of its total assets, with not more
than 1% invested in the securities of any one issuer. The Prime Money Market
Fund will follow applicable regulations in determining whether a security rated
by more than one NRSRO can be treated as being in the one of the two highest
short-term rating categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Money Market Funds' acceptable investments
may have
been credit enhanced by a guaranty, letter of credit, or insurance. The Money
Market Funds typically evaluate the credit quality and ratings of credit
enhanced securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. Generally, the Prime Money Market Fund will not treat credit enhanced
securities as having been issued by the credit enhancer for diversification
purposes. However, the Connecticut/Massachusetts Municipal Money Market Funds
will not treat credit enhanced securities as having been issued by the credit
enhancer for diversification purposes, unless the Connecticut/Massachusetts
Municipal Money Market Funds have invested more than 10% of their respective
assets in securities issued, guaranteed, or otherwise credit enhanced by the
credit enhancer, in which case the securities will be treated as having been
issued both by the issuer and the credit enhancer. The bankruptcy, receivership,
or default of the credit enhancer may adversely affect the quality and
marketability of the underlying security.
The Connecticut/Massachusetts Municipal Money Market Funds may have more than
25% of their respective total assets invested in securities credit enhanced by
banks or insurance companies.
DEMAND FEATURES. The Money Market Funds may acquire securities that are subject
to puts and standby commitments ("demand features") to purchase the securities
at their principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by a Money Market Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer in
the securities, or by another third party, and may not be transferred separately
from the underlying security. A Money Market Fund uses these arrangements to
provide liquidity and not to protect against changes in the market value of the
underlying securities. The bankruptcy, receivership, or default by the issuer of
the demand feature, or a default on the underlying security or other event that
terminates the demand feature before its exercise, will adversely affect the
liquidity of the underlying security. Demand features that are exercisable even
after a payment default on the underlying security may be treated as a form of
credit enhancement.
RESTRICTED AND ILLIQUID SECURITIES. The Money Market Funds may invest in
restricted securities. Restricted securities are any securities in which a Money
Market Fund may invest pursuant to its investment objective and policies but
which are subject to restrictions on resale under federal securities laws.
Pursuant to criteria established by the Trustees, certain restricted securities
are considered liquid. To the extent restricted securities are deemed to be
illiquid, the Money Market Funds will limit their purchase, together with other
securities not considered to be liquid, to 10% of their individual net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Money Market Funds may
purchase securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which a Money Market Fund purchases securities
with payment and delivery scheduled for a future time. In when-issued and
delayed delivery transactions, a Money Market Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause a Money Market Fund to miss a price or yield considered to be
advantageous.
TEMPORARY INVESTMENTS. In such proportions as, in the judgment of its investment
adviser, prevailing market conditions warrant, the Prime Money Market Fund may,
for temporary defensive purposes, invest in repurchase agreements and other
mutual funds.
From time to time on a temporary basis, when the investment adviser determines
that market conditions call for a temporary defensive posture, the
Connecticut/Massachusetts Municipal Money Market Funds may invest in short-term
non-Connecticut/Massachusetts (respectively) municipal tax-exempt obligations or
other taxable, temporary investments. All temporary in-
vestments will satisfy the same credit quality standards as the
Connecticut/Massachusetts Municipal Money Market Funds' acceptable investments.
See "Ratings" above. Temporary investments include: investments in other mutual
funds; notes issued by or on behalf of municipal or corporate issuers;
marketable obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; other debt securities; commercial paper;
certificates of deposit of banks; and repurchase agreements (arrangements in
which the organization sells the Fund a temporary investment and agrees at the
time of sale to repurchase it at a mutually agreed upon time and price).
Although the Connecticut/Massachusetts Municipal Money Market Funds are
permitted to make taxable, temporary investments, there is no current intention
of generating income subject to federal regular income tax or CSIT or income
taxes imposed by the Commonwealth of Massachusetts, respectively.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Money Market Funds
may invest in the securities of other investment companies that have similar
policies and objectives, but they will not individually own more than 3% of the
total outstanding voting stock of any investment company, invest more than 5% of
their respective total assets in any one investment company, or invest more than
10% of their respective total assets in investment companies in general. The
Money Market Funds will invest in other investment companies primarily for the
purpose of investing short-term cash which has not yet been invested in other
portfolio instruments. However, from time to time on a temporary basis, the
Money Market Funds may invest exclusively in a single other similarly managed
investment company. Shareholders should realize that when these funds invest 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.
The following investments and strategies apply only to the
CONNECTICUT/MASSACHUSETTS MUNICIPAL MONEY MARKET FUNDS:
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above.
PARTICIPATION INTERESTS. The Connecticut/Massachusetts Municipal Money Market
Funds may purchase interests in Municipal Securities from financial institutions
such as commercial and investment banks, savings and loan associations, and
insurance companies. These interests may take the form of participations,
beneficial interests in a trust, partnership interests, or any other form of
indirect ownership that allows the respective Fund to treat the income from the
investment as exempt from federal income tax. The Connecticut/Massachusetts
Municipal Money Market Funds invest in these participation interests in order to
obtain credit enhancement or demand features that would not be available through
direct ownership of the underlying Municipal Securities.
TENDER OPTION BONDS. The Connecticut/Massachusetts Municipal Money Market
Funds may purchase tender option bonds and similar securities. A tender
option bond generally has a long maturity and bears interest at a fixed rate
substantially higher than prevailing short-term tax-exempt rates, and is
coupled with an agreement by a third party, such as a bank, broker-dealer, or
other financial institution, pursuant to which such institution grants the
security holders the option, usually upon not more than seven days notice or
at periodic intervals, to tender their securities to the institution and
receive the face value of the security. In providing the option, the
financial institution receives a fee that reduces the fixed rate of the
underlying bond and results in the Connecticut/Massachusetts Municipal Money
Market Funds effectively
receiving a demand obligation that bears interest at the prevailing short-term
tax exempt rate. The Connecticut/Massachusetts Municipal Money Market Funds'
adviser will monitor, on an ongoing basis, the creditworthiness of the issuer of
the tender option bond, the financial institution providing the option, and any
custodian holding the underlying long-term bond. The bankruptcy, receivership,
or default of any of the parties to the tender option bond will adversely affect
the quality and marketability of the security.
NON-DIVERSIFICATION. The Connecticut/Massachusetts Municipal Money Market
Funds are non-diversified investment portfolios. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Connecticut/Massachusetts Municipal Money Market Fund,
therefore, will entail greater risk than would exist in a diversified
investment portfolio because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Connecticut/Massachusetts Municipal Money Market Funds' portfolios. Any
economic, political, or regulatory developments affecting the value of the
securities in the Connecticut/Massachusetts Municipal Money Market Funds'
portfolios will have a greater impact on the total value of the portfolios
than would be the case if the portfolios were diversified among more issuers.
The Connecticut/Massachusetts Municipal Money Market Funds intend to comply with
Subchapter M of the Internal Revenue Code. This undertaking requires that at the
end of each quarter of the taxable year, with regard to at least 50% of a Fund's
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer; beyond that, no more than 25% of its total assets are
invested in the securities of a single issuer.
CONNECTICUT AND MASSACHUSETTS MUNICIPAL SECURITIES. Connecticut and
Massachusetts Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, health-related entities,
transportation-related projects, educational programs, water and pollution
control, and sewer works. They are also issued to repay outstanding obligations,
to raise funds for general operating expenses, and to make loans to other public
institutions and facilities.
Connecticut and Massachusetts Municipal Securities include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct and equip facilities for privately
or publicly owned corporations. The availability of this financing encourages
these corporations to locate within the sponsoring communities and thereby
increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
STANDBY COMMITMENTS. Some securities dealers are willing to sell Connecticut
and Massachusetts Municipal Securities to the Connecticut/Massachusetts
Municipal Money Market Funds accompanied by their commitments to repurchase
the Municipal Securities prior to maturity, at the Connecticut/Massachusetts
Municipal Money Market Funds' option, for the amortized cost of the Municipal
Securities at the time of repurchase. These arrangements are not used to
protect against changes in the market value of Municipal Securities. They
permit the Connecticut/Massachusetts Municipal Money Market Funds, however,
to remain fully invested and still provide liquidity to satisfy redemptions.
The cost of Connecticut or Massachusetts Municipal Securities accompanied by
these
standby commitments could be greater than the cost of Municipal Securities
without such commitments. Standby commitments are not marketable or otherwise
assignable and have value only to the Connecticut/Massachusetts Municipal Money
Market Funds. The default or bankruptcy of a securities dealer giving such a
commitment would not affect the quality of the Connecticut or Massachusetts
Municipal Securities purchased. However, without a standby commitment, these
securities could be more difficult to sell. The Connecticut/Massachusetts
Municipal Money Market Funds enters into standby commitments only with those
dealers whose credit the investment adviser believes to be of high quality.
CONNECTICUT AND MASSACHUSETTS INVESTMENT RISKS. Yields on Connecticut and
Massachusetts Municipal Securities depend on a variety of factors, including:
the general conditions of the short-term municipal note market and of the
municipal bond market; the size and maturity of the particular offering; the
maturity of the obligations; and the rating of the issue. Further, any adverse
economic conditions or developments affecting the State of Connecticut and the
Commonwealth of Massachusetts or their respective municipalities could impact
the Connecticut/Massachusetts Municipal Money Market Funds' portfolios. The
ability of the Connecticut/Massachusetts Municipal Money Market Funds to achieve
their investment objectives also depends on the continuing ability of the
issuers of Connecticut and Massachusetts Municipal Securities and demand
features, or the credit enhancers of either, to meet their obligations for the
payment of interest and principal when due.
Investing in Connecticut and Massachusetts Municipal Securities which meet the
Connecticut/Massachusetts Municipal Money Market Funds' quality standards may
not be possible if the State of Connecticut and the Commonwealth of
Massachusetts or their respective municipalities do not maintain their current
credit ratings. An expanded discussion of the current economic risks associated
with the purchase of Connecticut or Massachusetts Municipal Securities is
contained in the Combined Statement of Additional Information.
The following investments and strategies apply only to the PRIME MONEY MARKET
FUND:
REPURCHASE AGREEMENTS. The U.S. government securities and other securities in
which the Prime Money Market Fund invests 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 the Prime Money Market 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 the
Prime Money Market Fund, the Prime Money Market Fund could receive less than the
repurchase price on any sale of such securities.
BANK INSTRUMENTS. The Prime Money Market Fund only invests in Bank Instruments
either issued by an institution having capital, surplus and undivided profits
over $100 million or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee CDs")
and Eurodollar Time Deposits ("ETDs"). The Prime Money Market Fund will treat
securities credit enhanced with a bank's letter of credit as Bank Instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing arrangements
between a corporation and an institutional lender (such as the Prime Money
Market Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Prime Money Market Fund may also enter into, or acquire
participations in, short-term revolving credit facilities with corporate
borrowers. Demand notes and other short-term credit arrangements usually provide
for floating or variable rates of interest.
INVESTMENT LIMITATIONS
- ------------------------------------------------------
THE MONEY MARKET FUNDS FOLLOW A NUMBER OF GUIDELINES IN MANAGING THEIR
PORTFOLIOS IN ORDER TO LIMIT INVESTMENT RISKS.
- ------------------------------------------------------
The following investment limitations apply only to CONNECTICUT/MASSACHUSETTS
MUNICIPAL MONEY MARKET FUNDS:
The Connecticut/Massachusetts Municipal Money Market Funds will not borrow money
directly or pledge securities except, under certain circumstances, a Fund may
borrow up to one-third of the value of its total assets and pledge up to 10% of
the value of total assets to secure such borrowings.
The above investment limitation cannot be changed without the respective
shareholder approval. The following limitation, however, can be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.
The Connecticut/Massachusetts Municipal Money Market Funds will not invest more
than 5% of their respective total assets in industrial development bonds or
other Municipal Securities when the payment of principal and interest is the
responsibility of companies (or guarantors, where applicable) with less than
three years of continuous operations, including the operation of any
predecessor.
The following limitation, which may be changed by the Trustees without
shareholder approval, applies only to the PRIME MONEY MARKET FUND:
The Prime Money Market Fund will not invest more than 5% of the value of its
total assets in securities of issuers which have records of less than three
years of continuous operations, including the operation of any predecessor.
REGULATORY COMPLIANCE
The Money Market Funds may follow non-fundamental operational policies that are
more restrictive than their respective fundamental investment limitations, as
set forth in this prospectus and its Combined Statement of Additional
Information, in order to comply with applicable laws and regulations, including
the provisions of and regulations under the Investment Company Act of 1940, as
amended. In particular, the Money Market Funds will comply with the various
requirements of Rule 2a-7 which regulates money market mutual funds. The Money
Market Funds will determine the effective maturity of their respective
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Money
Market Funds may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.
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
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PURSUANT TO AN INVESTMENT ADVISORY CONTRACT WITH THE TRUST, INVESTMENT
DECISIONS FOR THE MONEY MARKET FUNDS ARE MADE BY SHAWMUT BANK, (THE
"ADVISER"), SUBJECT TO DIRECTION BY THE TRUSTEES.
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The Adviser continually conducts investment research and supervision for the
Money Market Funds and is responsible for the purchase and sale of portfolio
instruments, for which it receives an annual fee from the respective assets of
the Money Market Funds.
ADVISORY FEES
- ------------------------------------------------------
THE ADVISER MAY VOLUNTARILY WAIVE PART OF ITS ADVISORY FEES.
- ------------------------------------------------------
The Adviser receives an annual investment advisory fee equal to .50 of 1% of
each of the Money Market Fund's average daily net assets. The Adviser has
undertaken to waive a portion of its advisory fee, up to the amount of the
advisory fee, to reimburse any of the Money Market 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 the Money Market Funds for
certain operating expenses. The Adviser can terminate such voluntary waiver or
reimbursement policy with any of the Money Market Funds at any time 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, MANAGED MORE THAN $15 BILLION IN DISCRETIONARY TRUST ASSETS. SHAWMUT
BANK HAS SERVED AS AN ADVISER TO MUTUAL FUNDS SINCE THE INCEPTION OF THE
SHAWMUT FUNDS ON DECEMBER 1, 1992.
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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.
DISTRIBUTION OF MONEY
MARKET FUNDS' TRUST 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.
DISTRIBUTION PLAN. Under the distribution plan adopted in accordance with
Investment Company Act Rule 12b-1 (the "Plan"), the Massachusetts Municipal
Money Market Fund will pay to the distributor an amount computed at an annual
rate of up to .50 of 1% of the average daily net asset value of the Fund to
finance any activity which is principally intended to result in the sale of
shares subject to the Plan.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide distribution and/or administrative services as agents for their
clients or customers. Administrative services may include, but are not limited
to, the following functions: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel as
necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client inquiries;
assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as may reasonably be requested.
The distributor will pay financial institutions a fee based upon the Shares
subject to the Plan and owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be determined
from time to time by the distributor.
The Massachusetts Municipal Money Market Fund Plan is a compensation type plan.
As such, the Massachusetts Municipal Money Market Fund makes no payments to the
distributor except as described above. Therefore, the Fund does not pay for
unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Massachusetts Municipal
Money Market Fund, including interest, carrying or other financing charges in
connection with excess amounts expended, or the distributor's overhead expenses.
However, the distributor may be able to recover such amounts or may earn a
profit from future payments made by the Massachusetts Municipal Money Market
Fund under the Plan.
As of the date of this prospectus, the Massachusetts Municipal Money Market Fund
is not paying or accruing 12b-1 fees. The Massachusetts Municipal Money Market
Fund does not intend to accrue or pay 12b-1 fees until either a separate class
of shares has been created for certain fiduciary investors or a determination is
made that such investors will be subject to 12b-1 fees. The Massachusetts
Municipal Money Market Fund can pay up to .50% of average daily net assets as
12b-1 fees to the distributor.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or
distributors of securities may differ from interpretations given to the
Glass-Steagall Act and, therefore, banks and financial institutions may be
required to register as dealers pursuant to state law.
ADMINISTRATION OF THE
MONEY MARKET FUNDS
ADMINISTRATIVE SERVICES. Federated Administrative Services ("FAS"), a subsidiary
of Federated Investors, provides the Money Market Funds with certain
administrative personnel and services necessary to operate the Money Market
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 Money Market 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 Money Market Funds. Under the
Custodian Agreement, Shawmut Bank, N.A., holds the Money Market 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 Money Market
Funds. It also provides certain accounting and recordkeeping services with
respect to each of the Money Market Funds' portfolio investments.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin, 2101 L Street, N.W., Washington, DC 20037.
INDEPENDENT ACCOUNTANTS. The independent accountants for the Money Market Funds
are Price Waterhouse, 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES OF THE MONEY MARKET FUNDS AND TRUST SHARES. Holders of Trust Shares pay
their allocable portion of the Money Market 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 Money Market Fund expenses for which holders of Trust Shares pay
their allocable portion include, but are not limited to: registering the Money
Market Funds and shares of the Money Market 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 Board of Trustees reserves 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: 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 MONEY MARKET FUND
SHARE.
- ------------------------------------------------------
The Money Market Funds attempt to stabilize the net asset value of their
respective shares at $1.00. The net asset value per share is determined by
dividing the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding. The Money Market Funds cannot
guarantee that the net asset value of their respective shares will always remain
at $1.00 per share.
INVESTING IN TRUST SHARES
- ------------------------------------------------------
YOU CAN BUY MONEY MARKET FUNDS TRUST SHARES BY FEDERAL RESERVE WIRE, MAIL,
OR TRANSFER, AS EXPLAINED BELOW.
- ------------------------------------------------------
Shares of the Money Market 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 Money Market 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 Wire Reserve System are open for business. Texas
residents must purchase, exchange, and redeem Shares through Federated
Securities Corp. at 1-800-358-2801. The Money Market 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 Trust 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 Money Market 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 Money Market 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 11:00 a.m. (Eastern
time) and must be transmitted by Shawmut Bank to the applicable Money Market
Fund before 12:00 noon (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 Shares
directly from the distributor. To do so: complete and sign the new account form
available from the Money Market Funds; complete an application for the
establishment of a trust or agency 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 Money Market Funds, Attention:
Vice President, Securities Operations, OF0501, One Federal Street, Boston,
Massachusetts 02211. The order is considered received after a trust or agency
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 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
Money Market Funds' distributor, at 1-800-618-8573.
Shares cannot be purchased by wire on any day on 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 $2,500.
- ------------------------------------------------------
The minimum initial investment in Shares by an investor is $2,500. Subsequent
investments must be in amounts of at least $100. The Money Market Funds may
waive the initial minimum investment for employees of Shawmut Bank and its
affiliates from time to time.
WHAT SHARES COST
- ------------------------------------------------------
SHARES ARE SOLD AT THEIR NET ASSET VALUE NEXT DETERMINED AFTER AN ORDER IS
RECEIVED.
- ------------------------------------------------------
The net asset value is determined at 12:00 noon and 4:00 p.m. (Eastern time),
Monday through Friday, except on: (i) days on which there are not sufficient
changes in the value of a Money Market 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.
Money Market Fund Trust Shares are sold at their net asset value next determined
after an order is received without a sales charge.
EXCHANGING SECURITIES FOR MONEY MARKET FUND SHARES
Investors may exchange certain Connecticut Municipal Securities or Massachusetts
Municipal Securities, or a combination of securities and cash, for shares of
Connecticut Municipal Money Market Fund and Massachusetts Municipal Money Market
Fund, respectively. The securities and any cash must have a market value of at
least $2,500. Each of these Funds reserves the right to determine the
acceptability of securities to be exchanged. Securities accepted by either Fund
are valued in the same manner as the Fund values its assets. Investors wishing
to exchange securities should first contact Federated Securities Corp.
When shares are purchased by exchange of Connecticut Municipal Securities, or
Massachusetts Municipal Securities, the proceeds from the redemption of those
shares are not available until the transfer agent is reasonably certain that the
transfer has settled, which can take up to five business days.
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 Money Market 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 daily and paid monthly to all shareholders invested in
each Money Market Fund on the record date. Trust Shares purchased by wire before
11:00 a.m. (Eastern time) begin earning dividends that day. Trust Shares
purchased by check begin earning dividends on the next business day after the
check is converted by Shawmut Bank into federal funds.
CAPITAL GAINS
Capital gains realized by a Money Market Fund, if any, will be distributed to
that Fund's shareholders at least once every 12 months.
EXCHANGE PRIVILEGE
EXCHANGING SHARES. Shareholders may exchange 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 Money
Market 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 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 11:00 a.m. (Eastern
time) for Shares to be exchanged the same day. The telephone exchange privilege
may be modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders 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.
REDEEMING TRUST SHARES
- ------------------------------------------------------
YOU CAN REDEEM TRUST SHARES OF THE MONEY MARKET FUNDS BY MAIL OR TELEPHONE.
TO ENSURE YOUR SHARES ARE REDEEMED EXPEDITIOUSLY, PLEASE FOLLOW THE
PROCEDURES EXPLAINED BELOW.
- ------------------------------------------------------
The Money Market Funds redeems 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 Money Market 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 11:00 a.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 Money Market 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 Money Market Fund.
Before Shawmut Bank may request redemption by telephone on behalf of a
shareholder, an authorization form permitting the Money Market Funds to accept
redemption requests by telephone must first be completed. This authorization is
included in Shawmut Bank's trust account documentation. 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.
DIRECTLY FROM THE MONEY MARKET FUNDS
BY MAIL. A shareholder may redeem Trust Shares by sending a written request to
Federated Services Company. If Trust 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 Money Market 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 Money Market 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 Money Market 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 firm 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 ("SAIF"), which is administered by the
FDIC; or
- - any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Money Market Funds do not accept signatures guaranteed by a notary public.
The Money Market Funds, and their transfer agent have adopted standards for
accepting signature guarantees from the above institutions. The Money Market
Funds may elect in the future to limit eligible signature guarantors to
institutions that are members of a signature guarantee program. The Money Market
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 shareholder's trust
account maintained 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. 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,
but in no event more than seven days, after receipt of a proper redemption
request provided the transfer agent has received payment for Trust Shares from
the shareholder.
BY WIRE. Requests to wire proceeds from redemptions received before 11:00 a.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 Money Market
Funds may redeem shares in any account and pay the proceeds to the shareholder
if the account balance falls below a required minimum of $2,500. This
requirement does not apply, however, if the balance falls below $2,500 because
of changes in a Money Market 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 Money Market Funds are obligated to redeem Shares solely in cash up to
$250,000 or 1% of the net asset value of Shares of each individual Income 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 Money Market 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
- ------------------------------------------------------
EACH TRUST SHARE OF A MONEY MARKET FUND GIVES THE SHAREHOLDER ONE VOTE IN
TRUSTEE ELECTIONS AND OTHER MATTERS SUBMITTED TO SHAREHOLDERS OF THE TRUST
FOR VOTE.
- ------------------------------------------------------
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 a Money Market 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. As of February 10, 1994, Shawmut Bank or its affiliates, acting as
fiduciary of various accounts, was the owner of record of the following Money
Market Funds; approxi-
mately 12,239,914 (100%) of the Trust Shares of Connecticut Municipal Money
Market Fund; approximately 9,601,158 (44.87%) of the shares of the Massachusetts
Municipal Money Market Fund; and approximately 292,519,479 (54.02%) of the Trust
Shares of Prime Money Market Fund. Additionally, as of February 10, 1994,
Shawmut Bank or its affiliates, acting as a nominee or agent of accounts of its
customers, was the owner of record of approximately 248,512,447 (45.89%) of the
Trust Shares of Prime Money Market Fund.
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 the Money Market Funds. To protect shareholders of the Money Market Funds,
the Trust has filed legal documents with Massachusetts that expressly disclaim
the liability of shareholders of a Money Market Fund 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 a Money Market Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations on behalf of a Money Market Fund, the Trust is required to use the
property of that Money Market 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 Money Market Funds for any act or obligation of the Trust on
behalf of the Money Market Funds. Therefore, financial loss resulting from
liability as a shareholder of the Money Market Funds will occur only if the
Trust cannot meet its obligations to indemnify shareholders and pay judgments
against them from the assets of the Money Market 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.
- ------------------------------------------------------
THE GLASS-STEAGALL ACT IS A FEDERAL BANKING LAW THAT GENERALLY PROHIBITS
BANKS FROM PUBLICLY UNDERWRITING OR DISTRIBUTING CERTAIN SECURITIES.
- ------------------------------------------------------
Shawmut Bank believes, based upon the advice of its counsel, that it may perform
the services for the Money Market 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 Money Market 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 Money Market Funds may occur,
including possible termination of any automatic or other Money Market Funds
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 Money Market 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.
Money Market 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 Money Market Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Shares.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
CONNECTICUT TAX CONSIDERATIONS
As applied to Connecticut resident individuals, estates and trust owning shares
in the Connecticut Municipal Money Market Fund, the CSIT taxes items of income
derived from such shares in a variety of ways.
Distributions which are tax-exempt interest dividends under the federal income
tax are not subject to the CSIT to the extent that such distributions are
derived from interest on obligations issued by or on behalf of the State of
Connecticut or its instrumentalities or by State municipalities ("Connecticut
obligations"), or to the extent that such dividends are derived from interest on
obligations, the income from which federal law forbids the states to tax. All
other tax-exempt interest dividends distributed by the Connecticut Municipal
Money Market Fund are subject to the CSIT.
Regarding proper treatment of distributions from the Fund which are capital
gains dividends for federal income tax purposes and which are derived from the
sale or exchange of Connecticut obligations, shareholders should consult their
local tax advisor.
All other distributions from the Connecticut Municipal Money Market Fund are
subject to the CSIT.
For purposes of the CSIT, a shareholder's Connecticut tax basis in the shares of
the Connecticut Municipal Money Market Fund will be the federal adjusted tax
basis of such shareholder, and any gain realized for federal income tax purposes
on the disposition of shares in the Connecticut Municipal Money Market Fund will
constitute taxable gain for purposes of the CSIT.
The Connecticut corporation business tax ("CCBT") is imposed on corporations and
certain other entities. Distributions from the Connecticut Municipal Money
Market Fund to a shareholder subject to the CCBT are not eligible for the
dividends received deduction under the CCBT and therefore are included in the
taxable income of a taxpayer to the extent such distributions are treated as
either exempt-interest dividends or capital gains dividends for federal income
tax purposes. The Connecticut Department of Revenue Services has issued a letter
ruling which has the effect of treating all other distributions from the Fund as
ineligible for the CCBT dividends received deduction. Any gain realized for
federal income tax purposes on the disposition of shares in the Connecticut
Municipal Money Market Fund is includable in the gross income of a shareholder
subject to the CCBT.
MASSACHUSETTS TAX CONSIDERATIONS
Under the laws of the Commonwealth of Massachusetts, dividends paid by the
Massachusetts Municipal Money Market Fund representing interest payments on
municipal obligations issued by the Commonwealth of Massachusetts or a political
subdivision thereof (or interest on obligations of United States territories or
possessions to the extent exempt from taxation by the states pursuant to federal
law) will be exempt from Massachusetts individual income tax. Accordingly,
shareholders of the Massachusetts Municipal Money Market Fund who are residents
of the Commonwealth of Massachusetts will not be subject to Massachusetts
individual income tax on dividends paid by the Fund to the extent such dividends
are derived from interest on municipal obligations which would be tax-exempt if
directly received by such shareholder, whether such dividends are taken in cash
or reinvested in additional shares of the Massachusetts Municipal Money Market
Fund.
Massachusetts corporations must include all dividends paid by the Fund in their
net income, and the value of their shares of stock in the Fund in their net
worth, when computing the Massachusetts excise taxes on corporations.
OTHER STATE AND LOCAL TAXES
Income from the Connecticut/Massachusetts Municipal Money Market Funds is not
necessarily free from regular state income taxes in states other than
Connecticut/Massachusetts, as appropriate, or from personal property taxes.
State laws differ on this issue and 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
Connecticut Municipal Money Market Fund and Prime Money Market Fund offer a
separate classes 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. Investments in Investment Shares are subject to a minimum
initial investment of $2,500.
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
- ------------------------------------------------------
FROM TIME TO TIME THE MONEY MARKET FUNDS ADVERTISE THEIR TOTAL RETURN AND
YIELD FOR TRUST SHARES.
- ------------------------------------------------------
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 Money Market Funds are calculated each day by
dividing the net investment income per share (as defined by the Securities and
Exchange Commission) earned by the Money Market Funds over a thirty-day period
by the net asset value per 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 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 Money Market Funds may advertise their performance using
certain reporting services and/or compare its performance to certain indices.
Further information about the performance of the Money Market Funds is contained
in the Trust's Annual Report dated October 31, 1993, which can be obtained free
of charge.
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3120921A-I (2/94)
THE SHAWMUT FUNDS
MONEY MARKET FUNDS
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
SHAWMUT PRIME MONEY MARKET FUND
INVESTMENT SHARES
COMBINED PROSPECTUS
The Investment Shares ("Shares") offered by this prospectus represent interests
in Investment Shares of the money market portfolios (collectively, the "Money
Market 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 Money Market Funds, the Trust consists of the
following separate investment portfolios, each having a distinct investment
objective 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
EQUITY FUNDS
Shawmut Growth and Income Equity Fund
Shawmut Growth Equity Fund
Shawmut Small Capitalization Equity Fund
This combined prospectus contains the information you should read and know
before you invest in the Money Market Funds. Keep this prospectus for future
reference. The Money Market Funds have also filed a Combined Statement of
Additional Information for Trust Shares and Investment Shares dated February 28,
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 Money Market 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.
EACH OF THE MONEY MARKET FUNDS ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT EACH OF THE MONEY MARKET FUNDS
WILL BE ABLE TO DO SO.
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.
INVESTMENT SHARES OF THE SHAWMUT FUNDS ARE AVAILABLE THROUGH LICENSED
REPRESENTATIVES OF SHAWMUT BROKERAGE, INC., MEMBER NASD/SIPC, AND AN AFFILIATE
OF SHAWMUT BANK.
Prospectus dated February 28, 1994
TABLE OF CONTENTS
SYNOPSIS 3
- ------------------------------------------------------
SUMMARY OF MONEY MARKET FUNDS' EXPENSES--
INVESTMENT SHARES 4
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 6
- ------------------------------------------------------
GENERAL INFORMATION 9
- ------------------------------------------------------
THE SHAWMUT FUNDS 9
- ------------------------------------------------------
OBJECTIVE AND POLICIES OF EACH FUND 10
- ------------------------------------------------------
Connecticut Municipal Money Market Fund 10
Investment Objective 10
Investment Policies 10
Acceptable Investments 10
Massachusetts Municipal Money Market Fund 11
Investment Objective 11
Investment Policies 11
Acceptable Investments 11
Prime Money Market Fund 11
Investment Objective 11
Investment Policies 12
Acceptable Investments 12
MONEY MARKET FUNDS INVESTMENTS
AND STRATEGIES 13
- ------------------------------------------------------
Variable Rate Demand Notes 13
Ratings 13
Credit Enhancement 13
Demand Features 14
Restricted and Illiquid Securities 14
When-Issued and Delayed Delivery
Transactions 14
Temporary Investments 14
Investments in the Securities of Other
Investment Companies 15
Municipal Leases 15
Participation Interests 15
Tender Option Bonds 15
Non-Diversification 16
Connecticut and Massachusetts
Municipal Securities 16
Standby Commitments 16
Connecticut and Massachusetts
Investment Risks 17
Repurchase Agreements 17
Bank Instruments 17
Short-term Credit Facilities 18
Investment Limitations 18
Regulatory Compliance 18
THE SHAWMUT FUNDS INFORMATION 19
- ------------------------------------------------------
Management of The Shawmut Funds 19
Board of Trustees 19
Investment Adviser 19
Advisory Fees 19
Adviser's Background 19
Distribution of Money Market
Investment Shares 20
Distribution Plan 20
Administration of the Money Market Funds 21
Administrative Services 21
Custodian 21
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services 21
Legal Counsel 21
Independent Accountants 21
Expenses of the Money Market Funds
and Investment Shares 21
NET ASSET VALUE 22
- ------------------------------------------------------
INVESTING IN INVESTMENT SHARES 22
- ------------------------------------------------------
Through Shawmut Bank 22
Directly from the Distributor 22
Minimum Investment Required 23
What Shares Cost 23
Exchanging Securities for
Money Market Fund Shares 23
Systematic Investment Program 23
Subaccounting Services 23
Certificates and Confirmations 24
Dividends 24
Capital Gains 24
EXCHANGE PRIVILEGE 24
- ------------------------------------------------------
Exchanging Shares 24
Exchanging-by-Telephone 24
REDEEMING INVESTMENT SHARES 25
- ------------------------------------------------------
Through Shawmut Bank 25
Directly from the Money Market Funds 25
By Mail 25
Signatures 26
Receiving Payment 26
By Check 26
By Wire 26
Checkwriting 26
Accounts with Low Balances 26
Systematic Withdrawal Program 26
Redemption in Kind 27
SHAREHOLDER INFORMATION 27
- ------------------------------------------------------
Voting Rights 27
Massachusetts Partnership Law 28
EFFECT OF BANKING LAWS 28
- ------------------------------------------------------
TAX INFORMATION 29
- ------------------------------------------------------
Federal Income Tax 29
Connecticut Tax Considerations 29
Massachusetts Tax Considerations 29
Other State and Local Taxes 30
OTHER CLASSES OF SHARES 30
- ------------------------------------------------------
PERFORMANCE INFORMATION 30
- ------------------------------------------------------
SYNOPSIS
INVESTMENT OBJECTIVES
The Shawmut Funds offer you a convenient, affordable way to participate in
separate, professionally managed portfolios of securities. This prospectus
relates only to the Money Market Funds of the Trust.
MONEY MARKET FUNDS
- ------------------------------------------------------
SHAWMUT CONNECTICUT MUNICIPAL
MONEY MARKET FUND
("Connecticut Municipal Money Market Fund") seeks current income which is
exempt from federal income tax and Connecticut state income tax on
individuals, trusts, and estates (the "CSIT"), consistent with stability of
principal and liquidity, by investing primarily in short-term Connecticut
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of
Connecticut or its political subdivisions and financing authorities, but
which are exempt from CSIT.
- ------------------------------------------------------
- ------------------------------------------------------
SHAWMUT MASSACHUSETTS MUNICIPAL
MONEY MARKET FUND
("Massachusetts Municipal Money Market Fund") seeks current income which is
exempt from federal income tax and income taxes imposed by the Commonwealth
of Massachusetts, consistent with stability of principal and liquidity, by
investing primarily in short-term Massachusetts municipal securities,
including
securities of states, territories, and possessions of the United States
which are not issued by or on behalf of Massachusetts or its political
subdivisions and financing authorities, but which are exempt from income
taxes imposed by the Common-
wealth of Massachusetts.
- ------------------------------------------------------
- ------------------------------------------------------
SHAWMUT PRIME MONEY MARKET FUND
("Prime Money Market Fund") seeks current income, consistent with stability
of principal and liquidity, by investing primarily in a diversified
portfolio of money market instruments maturing in thirteen months or less.
- ------------------------------------------------------
BUYING AND REDEEMING MONEY MARKET FUND SHARES
A minimum initial investment of $2,500 may be required. Subsequent investments
must be in amounts of at least $100, as described in this prospectus in the
section entitled "Minimum Investment Required."
MONEY MARKET FUND MANAGEMENT
The Money Market Funds' investment adviser is Shawmut Bank, N.A., which makes
investment decisions for the Money Market Funds.
SHAREHOLDER SERVICES
As a shareholder, you can easily obtain information about your account by
calling 1-800-SHAWMUT.
THE SHAWMUT FUNDS
SUMMARY OF MONEY MARKET FUND EXPENSES
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS
MUNICIPAL MUNICIPAL PRIME
MONEY MONEY MONEY
MARKET FUND MARKET FUND* MARKET FUND
-------------- --------------- -------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................... None None None
Maximum Sales Load Imposed--on Reinvested Dividends
(as a percentage of offering price)..................... None None None
Deferred Sales Load (as a percentage of original purchase
price or redemption proceeds as applicable)............. None None None
Redemption Fee (as a percentage of amount redeemed, if
applicable)............................................. None None None
Exchange Fee.............................................. None None None
</TABLE>
* Massachusetts Municipal Money Market Fund currently sells its shares without
class designation. Purchasers of either the Trust Shares or Investment Shares of
the other Shawmut Funds may purchase shares of Massachusetts Municipal Money
Market Fund.
<TABLE>
<S> <C> <C> <C>
ANNUAL INVESTMENT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1).......................... 0.45% 0.45% 0.29%
12b-1 Fees(2)............................................. 0.25% 0.00% 0.25%
Total Other Expenses (after waiver and
reimbursement)(3)....................................... 0.16% 0.16% 0.13%
Total Investment Shares Operating Expenses (after waivers
and reimbursement)(4)................................... 0.86% 0.61% 0.67%
</TABLE>
(1) The management fee has been reduced to reflect the anticipated voluntary
waiver by the investment adviser. The Adviser can terminate this anticipated
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.50%.
(2) The 12b-1 fee has been reduced to reflect the voluntary waiver by the
distributor. Both the Connecticut Municipal Money Market Fund and Prime
Money Market Fund can pay up to 0.50% of the average daily net assets of
Investment Shares as a 12b-1 fee to the distributor. As of date of this
prospectus, the Massachusetts Municipal Money Market Fund is not paying or
accruing 12b-1 fees. The Massachusetts Municipal Money Market Fund does not
intend to accrue or pay 12b-1 fees until either a separate class of shares
has been created for certain fiduciary investors or a determination is made
that such investors will be subject to the 12b-1 fees. The Massachusetts
Municipal Money Market Fund can pay up to 0.50% of the average daily net
assets as a 12b-1 fee to the distributor.
(3) Estimated other expenses have been reduced to reflect the voluntary waiver
by the custodian and the voluntary reimbursement of expenses by the
investment adviser for the Connecticut Municipal Money Market Fund and the
Massachusetts Municipal Money Market Fund.
(4) The Annual Investment Shares Operating Expenses for the fiscal year ended
October 31, 1993 were 0.36% for the Connecticut Municipal Money Market Fund,
0.11% for the Massachusetts Municipal Money Market Fund, and 0.85% for the
Prime Money Market Fund. The Annual Investment Shares Operating Expenses in
the table above are based on expenses expected during the fiscal year ending
October 31, 1994. Absent the voluntary waivers and reimbursement explained
in the above footnotes, the Total Investment Shares Operating Expenses are
estimated to be 1.61% for the Connecticut Municipal Money Market Fund; 1.32%
for the Massachusetts Municipal Money Market Fund; and 1.13% for the Prime
Money Market Fund.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INVESTMENT 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 INVESTMENT 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 Money Market Funds charge no redemption fee.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Connecticut Municipal Money Market Fund.......... $9 $27 $48 $106
Massachusetts Municipal Money Market Fund........ $6 $20 $34 $ 76
Prime Money Market Fund.......................... $7 $21 $37 $ 83
</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
Investment Shares of the Money Market Funds. Connecticut Municipal Money Market
Fund and Prime Money Market Fund also offer another class of shares called Trust
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 CONNECTICUT MUNICIPAL MONEY MARKET 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, 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
OCTOBER 31,
INVESTMENT SHARES 1993*
- ------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.001
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.001)
- -------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------------- -------
TOTAL RETURN** 0.14%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 0.36%(a)
- --------------------------------------------------------------------------
Net investment income 2.12%(a)
- --------------------------------------------------------------------------
Expense waiver/reimbursement (b) 5.46%(a)
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $6,582
- --------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 4, 1993 (date of initial
public investment) 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 (Note 5).
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET 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, 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
OCTOBER 31,
1993*
----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.001
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.001)
- -------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------------- -------
TOTAL RETURN** 0.12%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 0.11%(a)
- --------------------------------------------------------------------------
Net investment income 2.75%(a)
- --------------------------------------------------------------------------
Expense waiver/reimbursement (b) 35.31%(a)
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,237
- --------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 5, 1993 (date of initial
public investment) 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 (Note 5).
SHAWMUT PRIME MONEY MARKET 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 $1.00
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------
Net investment income 0.02
- --------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
- -------------------------------------------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------------------------- ------
TOTAL RETURN*** 2.41%
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------
Expenses 0.58%(a)
- --------------------------------------------------------------------------------------
Net investment income 2.71%(a)
- --------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.12%(a)
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $257,851
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
INVESTMENT SHARES OCTOBER 31, 1993**
- -------------------------------------------------------------------------------------- ----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------
Net investment income 0.02
- --------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
- -------------------------------------------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------------------------- ------
TOTAL RETURN*** 1.73%
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------
Expenses 0.85%(a)
- --------------------------------------------------------------------------------------
Net investment income 2.36%(a)
- --------------------------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.37%(a)
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $28,758
- --------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 14, 1992 (date of initial
public investment) to October 31, 1993. For the period from October 21, 1992
(start of business) to December 13, 1992, net investment income aggregating
$0.004 per share ($400) was distributed to Federated Administrative
Services.
** 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 (Note 5).
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 Connecticut Municipal Money Market Fund and
Prime Money Market Fund, known as Trust Shares and Investment Shares. This
prospectus relates only to Investment Shares of Connecticut Municipal Money
Market Fund and Prime Money Market Fund, and to the Shares of Massachusetts
Municipal Money Market Fund.
A minimum initial investment of $2,500 may be required. Subsequent investments
must be in amounts of at least $100, as described in this prospectus in the
section entitled "Minimum Investment Required." Shares are sold at net asset
value and are redeemed at net asset value without a sales charge imposed by the
Money Market Funds.
THE SHAWMUT FUNDS
The shareholders of the Money Market Funds are shareholders of The Shawmut
Funds, which 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, and Shawmut Small
Capitalization Equity Fund. Shareholders in the Money Market 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.
OBJECTIVE AND POLICIES OF EACH FUND
CONNECTICUT MUNICIPAL MONEY
MARKET FUND
INVESTMENT OBJECTIVE
The investment objective of the Connecticut Municipal Money Market Fund is to
provide current income exempt from federal regular income tax and the CSIT,
consistent with stability of principal and liquidity. The investment objective
cannot be changed without the 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 CONNECTICUT MUNICIPAL MONEY MARKET FUND PURSUES ITS INVESTMENT
OBJECTIVE BY INVESTING IN A PORTFOLIO OF CONNECTICUT MUNICIPAL SECURITIES
(AS DEFINED BELOW) WITH REMAINING MATURITIES OF THIRTEEN MONTHS OR LESS AT
THE TIME OF PURCHASE BY THE FUND.
- ------------------------------------------------------
Unless indicated otherwise, the investment policies described in this prospectus
may be changed by the Trustees without the approval of shareholders.
Shareholders will be notified before any material changes in these policies
become effective. As a matter of investment policy which cannot be changed
without approval of shareholders, the Connecticut Municipal Money Market Fund
invests its assets so that at least 80% of its annual interest income is exempt
from federal regular income tax or at least 80% of the total value of its assets
are invested in obligations the interest income from which is exempt from
federal regular income tax. The average maturity of the securities in the
Connecticut Municipal Money Market Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less.
ACCEPTABLE INVESTMENTS
Under normal circumstances, the Connecticut Municipal Money Market Fund will
invest its assets so that at least 65% of the value of its assets will be
invested in debt obligations issued by or on behalf of the State of Connecticut
and its political subdivisions and financing authorities, and obligations of
other states, territories and possessions of the United States, including the
District of Columbia, and any political subdivision or financing authority of
any of these, the interest income from which is, in the opinion of qualified
legal counsel, exempt from federal regular income tax and CSIT ("Connecticut
Municipal Securities"). Examples of Connecticut Municipal Securities include,
but are not limited to:
- - municipal commercial paper and other short-term notes;
- - variable rate demand notes;
- - municipal bonds (including bonds having remaining maturities of less than
thirteen months without demand features);
- - municipal leases, including certificates of participation in leases;
- - tender option bonds; and
- - participation, trust, and partnership interests in any of the foregoing
obligations.
MASSACHUSETTS MUNICIPAL
MONEY MARKET FUND
INVESTMENT OBJECTIVE
The investment objective of the Massachusetts Municipal Money Market Fund is to
provide current income exempt from federal regular income tax and the income
taxes imposed by the Commonwealth of Massachusetts, consistent with stability of
principal and liquidity. The investment objective cannot be changed without the
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 MASSACHUSETTS MUNICIPAL MONEY MARKET FUND PURSUES ITS INVESTMENT
OBJECTIVE BY INVESTING IN A PORTFOLIO OF MASSACHUSETTS MUNICIPAL SECURITIES
(AS DEFINED BELOW) WITH REMAINING MATURITIES OF THIRTEEN MONTHS OR LESS AT
THE TIME OF PURCHASE BY THE FUND.
- ------------------------------------------------------
Unless indicated otherwise, the investment policies described in this prospectus
may be changed by the Trustees without the approval of shareholders.
Shareholders will be notified before any material changes in these policies
become effective. As a matter of investment policy which cannot be changed
without approval of shareholders, the Massachusetts Municipal Money Market Fund
invests its assets so that at least 80% of its annual interest income is exempt
from federal regular income tax or at least 80% of the total value of its assets
are invested in obligations the interest income from which is exempt from
federal regular income tax. The average maturity of the securities in the
Massachusetts Municipal Money Market Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less.
ACCEPTABLE INVESTMENTS
Under normal circumstances, the Massachusetts Municipal Money Market Fund will
invest its assets so that at least 65% of the value of its assets will be
invested in debt obligations issued by or on behalf of the Commonwealth of
Massachusetts and its political subdivisions and financing authorities, and
obligations of other states, territories and possessions of the United States,
including the District of Columbia, and any political subdivision or financing
authority of any of these, the interest income from which is, in the opinion of
qualified legal counsel, exempt from federal regular income tax and income taxes
imposed by the Commonwealth of Massachusetts imposed upon non-corporate
taxpayers ("Massachusetts Municipal Securities"). Examples of Massachusetts
Municipal Securities include, but are not limited to:
- - municipal commercial paper and other short-term notes;
- - variable rate demand notes;
- - municipal bonds (including bonds having remaining maturities of less than
thirteen months without demand features);
- - municipal leases, including certificates of participation in leases;
- - tender option bonds; and
- - participation, trust, and partnership interest in any of the foregoing
obligations.
PRIME MONEY MARKET FUND
INVESTMENT OBJECTIVE
The investment objective of the Prime Money Market Fund is to provide current
income consistent with stability of principal and liquidity. The investment
objective cannot be changed without the 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 PRIME MONEY MARKET FUND PURSUES ITS INVESTMENT OBJECTIVE BY INVESTING
PRIMARILY IN A DIVERSIFIED PORTFOLIO OF MONEY MARKET INSTRUMENTS MATURING
IN THIRTEEN MONTHS OR LESS.
- ------------------------------------------------------
Unless indicated otherwise, the investment policies set forth in this prospectus
may be changed by the Trustees without the approval of shareholders.
Shareholders will be notified before any material change in these investment
policies becomes effective. The average maturity of these securities, computed
on a dollar-weighted basis, will be 90 days or less.
ACCEPTABLE INVESTMENTS
The Prime Money Market Fund invests in eligible quality money market instruments
that are either rated in one of the two highest short-term rating categories by
one or more nationally recognized statistical rating organizations ("NRSROs") or
are of comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
- - domestic issues of corporate debt obligations, including notes, bonds, and
debentures;
- - commercial paper, including eurodollar commercial paper ("Europaper");
- - certificates of deposit, demand and time deposits, and bankers' acceptances of
domestic banks and other deposit institutions ("Bank Instruments");
- - short-term credit facilities, such as demand notes;
- - obligations issued or guaranteed as to payment of principal and interest by
the U.S. government or one of its agencies or instrumentalities ("Government
Securities'); and
- - repurchase agreements.
The Prime Money Market Fund invests only in instruments denominated and payable
in U.S. dollars.
MONEY MARKET FUNDS INVESTMENTS AND STRATEGIES
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term securities
(Municipal Securities for the Connecticut/Massachusetts Municipal Money Market
Funds and long-term corporate debt instruments for the Prime Money Market Fund)
that have variable or floating interest rates and provide the Money Market Funds
with the right to tender the security for repurchase at its stated principal
amount plus accrued interest. Such securities typically bear interest at a rate
that is intended to cause the securities to trade at par. The interest rate may
float or be adjusted at regular intervals (ranging from daily to annually), and
is normally based on an applicable interest index or a stated percentage of a
prime rate or another published interest rate or interest rate index. Most
variable rate demand notes allow the Money Market Funds to demand the repurchase
of the security on not more than seven days prior notice. Other notes only
permit the Money Market Funds to tender the security at the time of each
interest rate adjustment or at other fixed intervals. See "Demand Features." The
Money Market Funds treat variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the Money
Market Funds may next tender the security for repurchase.
RATINGS. The Municipal Securities in which the Connecticut/Massachusetts
Municipal Money Market Funds invest must either be rated in one of the two
highest short-term rating categories by one or more NRSROs or be of comparable
quality to securities having such ratings. A NRSRO's two highest rating
categories are determined without regard for sub-categories and gradations. For
example, securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Corporation
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, and FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Connecticut/Massachusetts Municipal Money Market Funds will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in one of the two highest short-term rating categories. See
"Regulatory Compliance."
If a Municipal Security has not been rated by a NRSRO, the
Connecticut/Massachusetts Municipal Money Market Funds' investment adviser will
acquire the security only if it determines that the security is of comparable
quality to securities that have received the requisite ratings. In this regard,
the adviser will generally treat Municipal Securities as eligible portfolio
securities if the issuer has received long-term bond ratings within the two
highest rating categories by a NRSRO with respect to other bonds issued. The
adviser also considers other relevant information in its evaluation of unrated
short-term securities.
For the Prime Money Market Fund's securities, a NRSRO's two highest rating
categories are also determined without regard for sub-categories and gradations.
For example, the Prime Money Market Fund's securities rated A-1+, A-1, or A-2 by
S&P, Prime-1 or Prime-2 by Moody's, or F-1 (+ or -) or F-2 (+ or -) by Fitch are
all considered rated in one of the two highest short-term rating categories. The
Prime Money Market Fund will limit its investments in securities rated in the
second highest short-term rating category, e.g., A-2 by S&P, Prime 2 by Moody's
or F-2 (+ or -) by Fitch, to not more than 5% of its total assets, with not more
than 1% invested in the securities of any one issuer. The Prime Money Market
Fund will follow applicable regulations in determining whether a security rated
by more than one NRSRO can be treated as being in the one of the two highest
short-term rating categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Money Market Funds' acceptable investments
may have
been credit enhanced by a guaranty, letter of credit, or insurance. The Money
Market Funds typically evaluate the credit quality and ratings of credit
enhanced securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. Generally, the Prime Money Market Fund will not treat credit enhanced
securities as having been issued by the credit enhancer for diversification
purposes. However, the Connecticut/Massachusetts Municipal Money Market Funds
will not treat credit enhanced securities as having been issued by the credit
enhancer for diversification purposes, unless the Connecticut/Massachusetts
Municipal Money Market Funds have invested more than 10% of their respective
assets in securities issued, guaranteed, or otherwise credit enhanced by the
credit enhancer, in which case the securities will be treated as having been
issued both by the issuer and the credit enhancer. The bankruptcy, receivership,
or default of the credit enhancer may adversely affect the quality and
marketability of the underlying security.
The Connecticut/Massachusetts Municipal Money Market Funds may have more than
25% of their respective total assets invested in securities credit enhanced by
banks or insurance companies.
DEMAND FEATURES. The Money Market Funds may acquire securities that are subject
to puts and standby commitments ("demand features") to purchase the securities
at their principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by a Money Market Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer in
the securities, or by another third party, and may not be transferred separately
from the underlying security. A Money Market Fund uses these arrangements to
provide liquidity and not to protect against changes in the market value of the
underlying securities. The bankruptcy, receivership, or default by the issuer of
the demand feature, or a default on the underlying security or other event that
terminates the demand feature before its exercise, will adversely affect the
liquidity of the underlying security. Demand features that are exercisable even
after a payment default on the underlying security may be treated as a form of
credit enhancement.
RESTRICTED AND ILLIQUID SECURITIES. The Money Market Funds may invest in
restricted securities. Restricted securities are any securities in which a Money
Market Fund may invest pursuant to its investment objective and policies but
which are subject to restrictions on resale under federal securities laws.
Pursuant to criteria established by the Trustees, certain restricted securities
are considered liquid. To the extent restricted securities are deemed to be
illiquid, the Money Market Funds will limit their purchase, together with other
securities not considered to be liquid, to 10% of their individual net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Money Market Funds may
purchase securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which a Money Market Fund purchases securities
with payment and delivery scheduled for a future time. In when-issued and
delayed delivery transactions, a Money Market Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause a Money Market Fund to miss a price or yield considered to be
advantageous.
TEMPORARY INVESTMENTS. In such proportions as, in the judgment of its investment
adviser, prevailing market conditions warrant, the Prime Money Market Fund may,
for temporary defensive purposes, invest in repurchase agreements and other
mutual funds.
From time to time on a temporary basis, when the investment adviser determines
that market conditions call for a temporary defensive posture, the
Connecticut/Massachusetts Municipal Money Market Funds may invest in short-term
non-Connecticut/Massachusetts (respectively) municipal tax-exempt obligations or
other taxa-
ble, temporary investments. All temporary investments will satisfy the same
credit quality standards as the Connecticut/Massachusetts Municipal Money Market
Funds' acceptable investments. See "Ratings" above. Temporary investments
include: investments in other mutual funds; notes issued by or on behalf of
municipal or corporate issuers; marketable obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; other debt securities;
commercial paper; certificates of deposit of banks; and repurchase agreements
(arrangements in which the organization sells a Money Market Fund a temporary
investment and agrees at the time of sale to repurchase it at a mutually agreed
upon time and price).
Although the Connecticut/Massachusetts Municipal Money Market Funds are
permitted to make taxable, temporary investments, there is no current intention
of generating income
subject to federal regular income tax, CSIT, or income taxes imposed by the
Commonwealth of Massachusetts, respectively.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Money Market Funds
may invest in the securities of other investment companies that have similar
policies and objectives, but they will not individually own more than 3% of the
total outstanding voting stock of any investment company, invest more than 5% of
their respective total assets in any one investment company, or invest more than
10% of their respective total assets in investment companies in general. The
Money Market Funds will invest in other investment companies primarily for the
purpose of investing short-term cash which has not yet been invested in other
portfolio instruments. However, from time to time on a temporary basis, a Money
Market Fund may invest exclusively in a single other similarly managed
investment company. Shareholders should realize that when a Fund 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.
The following investments and strategies apply only to the
CONNECTICUT/MASSACHUSETTS MUNICIPAL MONEY MARKET FUNDS:
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above.
PARTICIPATION INTERESTS. The Connecticut/ Massachusetts Municipal Money Market
Funds may purchase interests in Municipal Securities from financial institutions
such as commercial and investment banks, savings and loan associations, and
insurance companies. These interests may take the form of participations,
beneficial interests in a trust, partnership interests, or any other form of
indirect ownership that allows the respective Fund to treat the income from the
investment as exempt from federal income tax. The Connecticut/Massachusetts
Municipal Money Market Funds invest in these participation interests in order to
obtain credit enhancement or demand features that would not be available through
direct ownership of the underlying Municipal Securities.
TENDER OPTION BONDS. The Connecticut/Massachusetts Municipal Money Market
Funds may purchase tender option bonds and similar securities. A tender
option bond generally has a long maturity and bears interest at a fixed rate
substantially higher than prevailing short-term tax-exempt rates, and is
coupled with an agreement by a third party, such as a bank, broker-dealer, or
other financial institution, pursuant to which such institution grants the
security holders the option, usually upon not more than seven days notice or
at periodic intervals, to tender their securities to the institution and
receive the face value of the security. In providing the option, the financial
institution receives a fee
that reduces the fixed rate of the underlying bond and results in the
Connecticut/Massachusetts Municipal Money Market Funds effectively receiving a
demand obligation that bears interest at the prevailing short-term tax exempt
rate. The Connecticut/Massachusetts Municipal Money Market Funds' adviser will
monitor, on an ongoing basis, the creditworthiness of the issuer of the tender
option bond, the financial institution providing the option, and any custodian
holding the underlying long-term bond. The bankruptcy, receivership, or default
of any of the parties to the tender option bond will adversely affect the
quality and marketability of the security.
NON-DIVERSIFICATION. The Connecticut/Massachusetts Municipal Money Market
Funds are non-diversified investment portfolios. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Connecticut/Massachusetts Municipal Money Market Fund,
therefore, will entail greater risk than would exist in a diversified
investment portfolio because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Connecticut/Massachusetts Municipal Money Market Funds' portfolios. Any
economic, political, or regulatory developments affecting the value of the
securities in the Connecticut/Massachusetts Municipal Money Market Funds'
portfolios will have a greater impact on the total value of the portfolios
than would be the case if the portfolios were diversified among more issuers.
The Connecticut/Massachusetts Municipal Money Market Funds intend to comply with
Subchapter M of the Internal Revenue Code. This undertaking requires that at the
end of each quarter of the taxable year, with regard to at least 50% of a Fund's
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer; beyond that, no more than 25% of its total assets are
invested in the securities of a single issuer.
CONNECTICUT AND MASSACHUSETTS MUNICIPAL SECURITIES. Connecticut and
Massachusetts Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, health-related entities,
transportation-related projects, educational programs, water and pollution
control, and sewer works. They are also issued to repay outstanding obligations,
to raise funds for general operating expenses, and to make loans to other public
institutions and facilities.
Connecticut and Massachusetts Municipal Securities include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct and equip facilities for privately
or publicly owned corporations. The availability of this financing encourages
these corporations to locate within the sponsoring communities and thereby
increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
STANDBY COMMITMENTS. Some securities dealers are willing to sell Connecticut
and Massachusetts Municipal Securities to the Connecticut/Massachusetts
Municipal Money Market Funds accompanied by their commitments to repurchase
the Municipal Securities prior to maturity, at the Connecticut/Massachusetts
Municipal Money Market Funds' option, for the amortized cost of the Municipal
Securities at the time of repurchase. These arrangements are not used to
protect against changes in the market value of Municipal Securities. They
permit the Connecticut/Massachusetts Municipal Money Market Funds, however,
to remain fully invested
and still provide liquidity to satisfy redemptions. The cost of Connecticut or
Massachusetts Municipal Securities accompanied by these 'standby' commitments
could be greater than the cost of Municipal Securities without such commitments.
Standby commitments are not marketable or otherwise assignable and have value
only to the Connecticut/Massachusetts Municipal Money Market Funds. The default
or bankruptcy of a securities dealer giving such a commitment would not affect
the quality of the Connecticut or Massachusetts Municipal Securities purchased.
However, without a standby commitment, these securities could be more difficult
to sell. The Connecticut/Massachusetts Municipal Money Market Funds enter into
standby commitments only with those dealers whose credit the investment adviser
believes to be of high quality.
CONNECTICUT AND MASSACHUSETTS INVESTMENT RISKS. Yields on Connecticut and
Massachusetts Municipal Securities depend on a variety of factors, including:
the general conditions of the short-term municipal note market and of the
municipal bond market; the size and maturity of the particular offering; the
maturity of the obligations; and the rating of the issue. Further, any adverse
economic conditions or developments affecting the State of Connecticut and the
Commonwealth of Massachusetts or their respective municipalities could impact
the Connecticut/Massachusetts Municipal Money Market Funds' portfolios. The
ability of the Connecticut/Massachusetts Municipal Money Market Funds to achieve
their investment objectives also depends on the continuing ability of the
issuers of Connecticut and Massachusetts Municipal Securities and demand
features, or the credit enhancers of either, to meet their obligations for the
payment of interest and principal when due.
Investing in Connecticut and Massachusetts Municipal Securities which meet the
Connecticut/Massachusetts Municipal Money Market Funds' quality standards may
not be possible if the State of Connecticut and the Commonwealth of
Massachusetts or their respective municipalities do not maintain their current
credit ratings. An expanded discussion of the current economic risks associated
with the purchase of Connecticut or Massachusetts Municipal Securities is
contained in the Combined Statement of Additional Information.
The following investments and strategies apply only to the PRIME MONEY MARKET
FUND:
REPURCHASE AGREEMENTS. The U.S. government securities and other securities in
which the Prime Money Market Fund invests 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 the Prime Money Market 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 the
Prime Money Market Fund, the Prime Money Market Fund could receive less than the
repurchase price on any sale of such securities.
BANK INSTRUMENTS. The Prime Money Market Fund only invests in Bank Instruments
either issued by an institution having capital, surplus and undivided profits
over $100 million, or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee CDs")
and Eurodollar Time Deposits ("ETDs"). The Prime Money Market Fund will treat
securities credit enhanced with a bank's letter of credit as Bank Instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing arrangements
between a corporation and an institutional lender (such as the Prime Money
Market Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Prime Money Market Fund may also enter into, or acquire
participations in, short-term revolving credit facilities with corporate
borrowers. Demand notes and other short-term credit arrangements usually provide
for floating or variable rates of interest.
INVESTMENT LIMITATIONS
- ------------------------------------------------------
THE MONEY MARKET FUNDS FOLLOW A NUMBER OF GUIDELINES IN MANAGING THEIR
PORTFOLIOS IN ORDER TO LIMIT INVESTMENT RISKS.
- ------------------------------------------------------
The following investment limitations apply only to CONNECTICUT/MASSACHUSETTS
MUNICIPAL MONEY MARKET FUNDS:
The Connecticut/Massachusetts Municipal Money Market Funds will not borrow money
directly or pledge securities except, under certain circumstances, a Fund may
borrow up to one-third of the value of its total assets and pledge up to 10% of
the value of total assets to secure such borrowings.
The above investment limitation cannot be changed without the respective
shareholder approval. The following limitation, however, can be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.
The Connecticut/Massachusetts Municipal Money Market Funds will not invest more
than 5% of their respective total assets in industrial development bonds or
other Municipal Securities when the payment of principal and interest is the
responsibility of companies (or guarantors, where applicable) with less than
three years of continuous operations, including the operation of any
predecessor.
The following limitation, which may be changed by the Trustees without
shareholder approval, applies only to the PRIME MONEY MARKET FUND:
The Prime Money Market Fund will not invest more than 5% of the value of its
total assets in securities of issuers which have records of less than three
years of continuous operations, including the operation of any predecessor.
REGULATORY COMPLIANCE
The Money Market Funds may follow non-fundamental operational policies that are
more restrictive than their respective fundamental investment limitations, as
set forth in this prospectus and its Combined Statement of Additional
Information, in order to comply with applicable laws and regulations, including
the provisions of and regulations under the Investment Company Act of 1940, as
amended. In particular, the Money Market Funds will comply with the various
requirements of Rule 2a-7 which regulates money market mutual funds. Each of the
Money Market Funds will determine the effective maturity of its respective
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Money
Market Funds may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.
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 MONEY MARKET FUNDS ARE MADE BY SHAWMUT BANK, (THE
"ADVISER"), SUBJECT TO DIRECTION BY THE TRUSTEES.
- ------------------------------------------------------
The Adviser continually conducts investment research and supervision for the
Money Market Funds and is responsible for the purchase and sale of portfolio
instruments, for which it receives an annual fee from the respective assets of
the Money Market Funds.
ADVISORY FEES
- ------------------------------------------------------
THE ADVISER MAY VOLUNTARILY WAIVE PART OF ITS ADVISORY FEES.
- ------------------------------------------------------
The Adviser receives an annual investment advisory fee equal to .50 of 1% of
each of the Money Market Fund's average daily net assets. 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 Money Market 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 Money Market
Funds for certain operating expenses. The Adviser can terminate such voluntary
waiver or reimbursement policy with any of the Money Market Funds at any time 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, MANAGED MORE THAN $15 BILLION IN DISCRETIONARY TRUST ASSETS. SHAWMUT
BANK 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.
DISTRIBUTION OF MONEY MARKET
FUNDS' INVESTMENT SHARES
- ------------------------------------------------------
FEDERATED SECURITIES CORP. IS THE PRINCIPAL DISTRIBUTOR FOR INVESTMENT
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.
DISTRIBUTION PLAN. Under the distribution plan adopted in accordance with
Investment Company Act Rule 12b-1 (the "Plan"), each of the Money Market Funds
Investment Shares will pay to the distributor an amount computed at an annual
rate of up to .50 of 1% of the average daily net asset value of each of the
Money Market Funds to finance any activity which is principally intended to
result in the sale of Investment Shares subject to the Plan.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide distribution and/or administrative services as agents for their
clients or customers who own Investment Shares of the Money Market Funds.
Administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
clerical, supervisory, computer, and other personnel as necessary or beneficial
to establish and maintain shareholder accounts and records; processing purchase
and redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; assisting clients in changing
dividend options, account designations, and addresses; and providing such other
services as may reasonably be requested.
The distributor will pay financial institutions a fee based upon the Investment
Shares subject to the Plan and owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the distributor.
The Money Market Funds' Plan is a compensation type plan. As such, the Money
Market Funds make no payments to the distributor except as described above.
Therefore, the Money Market Funds do not pay for unreimbursed expenses of the
distributor, including amounts expended by the distributor in excess of amounts
received by it from each of the Money Market Funds including interest, carrying
or other financing charges in connection with excess amounts expended, or the
distributor's overhead expenses. However, the distributor may be able to recover
such amounts or may earn a profit from future payments made by the Money Market
Funds under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE MONEY
MARKET FUNDS
ADMINISTRATIVE SERVICES. Federated Administrative Services ("FAS"), a subsidiary
of Federated Investors, provides the Money Market Funds with certain
administrative personnel and services necessary to operate the Money Market
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 Money Market 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 Money Market Funds. Under the
Custodian Agreement, Shawmut Bank, N.A., holds the Money Market 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 Money Market
Funds. It also provides certain accounting and recordkeeping services with
respect to each of the Money Market Funds' portfolio investments.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin, 2101 L Street, N.W.,Washington, DC 20037.
INDEPENDENT ACCOUNTANTS. The independent accountants for the Money Market Funds
are Price Waterhouse, 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES OF THE MONEY MARKET FUNDS AND INVESTMENT SHARES
Holders of Investment Shares pay their allocable portion of the Money Market
Funds' and Trust's expenses. The Trust expenses for which holders of Investment
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 Money Market Fund expenses for which holders of Investment Shares
pay their allocable portion include, but are not limited to: registering the
Money Market Funds and shares of the Money Market 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, other than distribution expenses, are allocated
exclusively to the Investment Shares as a class. However, the Board of Trustees
reserves the right to allocate certain other expenses to holders of Investment
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 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 Investment Shares; legal fees
relating solely to Invest-
ment Shares; and Trustees' fees incurred as a result of issues relating solely
to Investment Shares.
NET ASSET VALUE
- ------------------------------------------------------
THE TERM "NET ASSET VALUE" REFERS TO THE VALUE OF ONE MONEY MARKET FUND
SHARE.
- ------------------------------------------------------
The Money Market Funds attempt to stabilize the net asset value of their
respective shares at $1.00. The net asset value per share is determined by
dividing the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding. The Money Market Funds cannot
guarantee that the net asset value of their respective shares will always remain
at $1.00 per share.
INVESTING IN INVESTMENT SHARES
- ------------------------------------------------------
YOU CAN BUY INVESTMENT SHARES OF THE MONEY MARKET FUNDS BY FEDERAL RESERVE
WIRE, MAIL, OR TRANSFER, AS EXPLAINED BELOW.
- ------------------------------------------------------
Shares of the Money Market 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 Money Market 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 Wire Reserve System are open for business. Texas
residents must purchase, exchange, and redeem Shares through Federated
Securities Corp. at 1-800-618-8573. The Money Market Funds reserve the right to
reject any purchase request.
THROUGH SHAWMUT BANK
An investor may call Shawmut Bank (call toll-free 1-800-SHAWMUT) to receive
information and to place an order to purchase Investment Shares. Orders placed
through Shawmut Bank are considered received when payment is converted to
federal funds and the appropriate Money Market 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 11:00 a.m. (Eastern time) and must be
transmitted by Shawmut Bank to the applicable Money Market Fund before 12:00
noon (Eastern time) in order for Shares to be purchased at that day's public
offering price.
Payments must be made by either check or federal funds deposited into a
shareholder account established with Shawmut Bank. Payment is normally made
through a debit to the shareholder account no later than the business day
following the conversion of a check into federal funds.
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Investment Shares directly from the distributor. To do so: complete and sign the
new account form available from the Money Market Funds; enclose a check made
payable to Shawmut Connecticut Municipal Money Market Fund, Shawmut
Massachusetts Municipal Money Market Fund, and Prime Money Market Fund (as
appropriate)--Investment Shares; and mail both to Shawmut Money Market Funds,
3 Copley Place, OF9919, Boston, Massachusetts 02116. The order is considered
received after the check is converted by Shawmut Bank into federal funds and
Shawmut Bank establishes a shareholder account for the investor. This is
generally the next business day after Shawmut Bank receives the check.
To purchase Investment Shares of the Money Market 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 and has
established a shareholder account for the investor. To request additional
information concerning purchases by wire, please contact Federated Securities
Corp., the Money Market
Funds' distributor, at 1-800-618-8573. Investment Shares cannot be purchased by
wire on any day on 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 $2,500, OR $500 IN THE CASE OF RETIREMENT
PLAN ACCOUNTS.
- ------------------------------------------------------
The minimum initial investment in Investment Shares by an investor is $2,500, or
$500 in the case of retirement plan accounts. Subsequent investments by
participants in the Systematic Investment Program, as described in this
prospectus, or by retirement plan accounts, must be in amounts of at least $50.
Subsequent investments by all other investors must be in amounts of at least
$100. The Money Market Funds may waive the initial minimum investment for
employees of Shawmut Bank and its affiliates from time to time.
WHAT SHARES COST
- ------------------------------------------------------
SHARES ARE SOLD AT THEIR NET ASSET VALUE NEXT DETERMINED AFTER AN ORDER IS
RECEIVED.
- ------------------------------------------------------
The net asset value is determined at 12:00 noon and 4:00 p.m. (Eastern time),
Monday through Friday, except on: (i) days on which there are not sufficient
changes in the value of a Money Market 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.
Shares of the Money Market Funds are sold at their net asset value next
determined after an order is received without a sales charge.
EXCHANGING SECURITIES FOR MONEY MARKET FUND SHARES
Investors may exchange certain Connecticut Municipal Securities or Massachusetts
Municipal Securities, or a combination of securities and cash, for Shares of
Connecticut Municipal Money Market Fund and Massachusetts Municipal Money Market
Fund, respectively. The securities and any cash must have a market value of at
least $2,500. Each of these Funds reserves the right to determine the
acceptability of securities to be exchanged. Securities accepted by either Fund
are valued in the same manner as the Fund values its assets. Investors wishing
to exchange securities should first contact Federated Securities Corp.
When shares are purchased by exchange of Connecticut Municipal Securities or
Massachusetts Municipal Securities, the proceeds from the redemption of those
shares are not available until the transfer agent is reasonably certain that the
transfer has settled, which can take up to five business days.
SYSTEMATIC INVESTMENT PROGRAM
Once a Money Market Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $50. Under this program,
funds may be automatically withdrawn periodically from the shareholder's
checking account and invested in shares at the net asset value next determined
after an order is received by a Money Market Fund. A shareholder may apply for
participation in this program through his account officer at Shawmut Bank.
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 Investment 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
Investment 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 Money Market 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
report account activity during the previous month, including dividends paid
during the period.
DIVIDENDS
Dividends are declared daily and paid monthly to all shareholders invested in
each Money Market Fund on the record date. Investment Shares purchased by wire
before 11:00 a.m. (Eastern time) begin earning dividends that day. Investment
Shares purchased by check begin earning dividends on the next business day after
the check is converted by Shawmut Bank into federal funds.
CAPITAL GAINS
Capital gains realized by a Money Market Fund, if any, will be distributed to
that Fund's shareholders at least once every 12 months.
EXCHANGE PRIVILEGE
EXCHANGING SHARES. Shareholders may exchange Investment Shares, with a minimum
net asset value of $1,000, for shares of other funds advised by Shawmut Bank.
Shares of funds with a sales charge may be exchanged at net asset value for
shares of other funds with an equal sales charge or no sales charge. Shares of
funds with no sales charge, or a lower sales charge, acquired by direct purchase
or reinvestment of dividends on such shares may be exchanged for shares of funds
with a sales charge, or a higher sales charge, at net asset value, plus the
applicable sales charge or additional incremental sales charge, as the case may
be, imposed by the fund shares being purchased.
When an exchange is made from a fund with a sales charge to a fund with no sales
charge, the shares exchanged and additional shares which have been purchased by
reinvesting dividends on such shares retain the character of the exchanged
shares for purposes of exercising further exchange privileges; thus, an exchange
of such shares for shares of a fund with a sales charge would be a net asset
value.
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 fund or class thereof 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, 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
Shawmut Bank.
EXCHANGE-BY-TELEPHONE. Instructions for exchanges between participating funds
which are part of the Trust may be given by calling
Shawmut Bank at 1-800-SHAWMUT. To utilize the exchange-by-telephone service, a
shareholder must complete an authorization form permitting a Shawmut Fund to
honor telephone instructions. The authorization is included in the shareholder
account application. Shares may be exchanged by telephone only between fund
accounts having identical shareholder registrations. Telephone exchange
instructions may be electronically recorded.
Any 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 11:00 a.m. (Eastern
time) for Shares to be exchanged the same day. The telephone exchange privilege
may be modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders 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, 3 Copley Place, OF9919, Boston, Massachusetts 02116.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
REDEEMING INVESTMENT SHARES
- ------------------------------------------------------
YOU CAN REDEEM INVESTMENT SHARES OF THE MONEY MARKET FUNDS BY MAIL OR
TELEPHONE. TO ENSURE YOUR SHARES ARE
REDEEMED EXPEDITIOUSLY, PLEASE FOLLOW
THE PROCEDURES EXPLAINED BELOW.
- ------------------------------------------------------
The Money Market Funds redeem Investment 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 Money Market Funds compute their
net asset value. Requests for redemptions can be made by telephone or in writing
by contacting a Shawmut Bank account officer or directly from the Money Market
Funds. Redemption requests received prior to 11:00 a.m. (Eastern time) will be
effected on the same business day.
THROUGH SHAWMUT BANK
Shareholders may redeem Investment Shares by calling their Shawmut Bank account
officer to request the redemption. Investment 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 Money Market 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 Money Market Fund.
Before Shawmut Bank may request redemption by telephone on behalf of a
shareholder, an authorization form permitting the Money Market Funds to accept
redemption requests by
telephone must first be completed. This authorization is included in
shareholder's account application. 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, 3 Copley Place, OF9919,
Boston Massachusetts 02116.
DIRECTLY FROM THE MONEY MARKET FUNDS
BY MAIL. A shareholder may redeem Investment Shares by sending a written request
to Federated Services Company. The written request should include the
shareholder's name, the Money Market 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 en-
dorsed and should be sent by registered or certified mail with the written
request. Shareholders should call the Money Market 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 Money Market 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 firm 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 ("SAIF"), which is administered by the
FDIC; or
- - any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Money Market Funds do not accept signatures guaranteed by a notary public.
The Money Market Funds and their transfer agent have adopted standards for
accepting signature guarantees from the above institutions. The Money Market
Funds may elect in the future to limit eligible signature guarantors to
institutions that are members of a signature guarantee program. The Money Market
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 shareholder's account
maintained 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. The net asset value of Investment
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,
but in no event more than seven days, after receipt of a proper redemption
request provided the transfer agent has received payment for Investment Shares
from the Shareholder.
BY WIRE. Requests to wire proceeds from redemptions received before 11:00 a.m.
(Eastern time) will be honored the following business day after Shawmut Bank
receives proper instructions.
CHECKWRITING
At the shareholder's request, Shawmut Bank will establish a checking account for
redeeming Investment Shares. With a Money Market Fund checking account, Shares
may be redeemed simply by writing a check. The redemption will be made at the
net asset value on the date that the check is presented to the appropriate Money
Market Fund. A check may not be written to close an account. For further
information, contact the appropriate Fund.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Money Market
Funds may redeem shares in any account and pay the proceeds to the shareholder
if the account balance falls below a required minimum of $2,500, or $500 in the
case of retirement plan accounts. This requirement does not apply, however, if
the balance falls below $2,500 or $500, respectively, because of changes in a
Money Market 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.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Investment
Shares are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Investment Shares, redemptions may reduce, and eventually deplete,
the shareholder's investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in the appropriate Money Market Fund. To be eligible to participate
in this program, a shareholder must have an account value of at least $10,000. A
shareholder may apply for participation in this program through Shawmut Bank.
REDEMPTION IN KIND
The Money Market Funds are obligated to redeem Investment Shares solely in cash
up to $250,000 or 1% of the net asset value of each individual Money Market
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 Money Market 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
- ------------------------------------------------------
EACH INVESTMENT SHARE OF A MONEY MARKET FUND GIVES THE SHAREHOLDER ONE VOTE
IN TRUSTEE ELECTIONS AND OTHER MATTERS SUBMITTED TO SHAREHOLDERS OF THE
TRUST FOR VOTE.
- ------------------------------------------------------
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 a Money Market 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. As of February 10, 1994, Shawmut Bank or its affiliates, acting as
fiduciary of various accounts, owned approximately 9,601,158 (44.87%) of the
shares of the Massachusetts Municipal Money Market Fund.
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 a Money Market Fund. To protect shareholders of the Money Market Funds, the
Trust has filed legal documents with Massachusetts that expressly disclaim the
liability of shareholders of the Money Market 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 a Money Market Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations on behalf of a Money Market Fund, the Trust is required to use the
property of that Money Market Funds to protect or compensate the shareholder. On
request, the Trust will defend any claim made and pay any judgment against a
shareholder of the Money Market Funds for any act or obligation of the Trust on
behalf of the Money Market Funds. Therefore, financial loss resulting from
liability as a shareholder of the Money Market Funds will occur only if the
Trust cannot meet its obligations to indemnify shareholders and pay judgments
against them from the assets of the Money Market 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.
- ------------------------------------------------------
THE GLASS-STEAGALL ACT IS A FEDERAL BANKING LAW THAT GENERALLY PROHIBITS
BANKS FROM PUBLICLY UNDERWRITING OR DISTRIBUTING CERTAIN SECURITIES.
- ------------------------------------------------------
Shawmut Bank believes, based upon the advice of its counsel, that it may perform
the services for the Money Market 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 Money Market 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 Money Market
Funds may occur, including possible termination of any automatic or other Money
Market Funds 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 Money Market 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.
The Money Market Funds 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 Money
Market Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional Investment Shares.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
CONNECTICUT TAX CONSIDERATIONS
As applied to Connecticut resident individuals, estates and trusts owning shares
in the Connecticut Municipal Money Market Fund, the CSIT taxes items of income
derived from such shares in a variety of ways.
Distributions which are tax-exempt interest dividends under the federal income
tax are not subject to the CSIT to the extent that such distributions are
derived from interest on obligations issued by or on behalf of the State of
Connecticut or its instrumentalities or by State municipalities ("Connecticut
obligations"), or to the extent that such dividends are derived from interest on
obligations, the income from which federal law forbids the states to tax. All
other tax-exempt interest dividends distributed by the Connecticut Municipal
Money Market Fund are subject to the CSIT.
Regarding proper treatment of distributions from the Fund which are capital
gains dividends for federal income tax purposes and which are derived from the
sale or exchange of Connecticut obligations, shareholders should consult their
local tax advisor.
All other distributions from the Connecticut Municipal Money Market Fund are
subject to the CSIT.
For purposes of the CSIT, a shareholder's Connecticut tax basis in the shares of
the Connecticut Municipal Money Market Fund will be the federal adjusted tax
basis of such shareholder, and any gain realized for federal income tax purposes
on the disposition of shares in the Connecticut Municipal Money Market Fund will
constitute taxable gain for purposes of the CSIT.
The Connecticut corporation business tax ("CCBT") is imposed on corporations and
certain other entities. Distributions from the Connecticut Municipal Money
Market Fund to a shareholder subject to the CCBT are not eligible for the
dividends received deduction under the CCBT and therefore are included in the
taxable income of a taxpayer to the extent such distributions are treated as
either exempt-interest dividends or capital gains dividends for federal income
tax purposes. The Connecticut Department of Revenue Services has issued a letter
ruling which has the effect of treating all other distributions from the Fund as
ineligible for the CCBT dividends received deduction. Any gain realized for
federal income tax purposes on the disposition of shares in the Connecticut
Municipal Money Market Fund is includable in the gross income of a shareholder
subject to the CCBT.
MASSACHUSETTS TAX CONSIDERATIONS
Under the laws of the Commonwealth of Massachusetts, dividends paid by the
Massachusetts Municipal Money Market Fund representing interest payments on
municipal obligations issued by the Commonwealth of Massachusetts or a political
subdivision thereof (or interest on obligations of United States territories or
possessions
to the extent exempt from taxation by the states pursuant to federal law) will
be exempt from Massachusetts individual income tax. Accordingly, shareholders of
the Massachusetts Municipal Money Market Fund who are residents of the
Commonwealth of Massachusetts will not be subject to Massachusetts individual
income tax on dividends paid by the Fund to the extent such dividends are
derived from interest on municipal obligations which would be tax-exempt if
directly received by such shareholder, whether such dividends are taken in cash
or reinvested in additional shares of the Massachusetts Municipal Money Market
Fund.
Massachusetts corporations must include all dividends paid by the Fund in their
net income, and the value of their shares of stock in the Fund in their net
worth, when computing the Massachusetts excise taxes on corporations.
OTHER STATE AND LOCAL TAXES
Income from the Connecticut/Massachusetts Municipal Money Market Fund is not
necessarily free from regular state income taxes in states other than
Connecticut/Massachusetts, as appropriate, or from personal property taxes.
State laws differ on this issue and 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
Connecticut Municipal Money Market Fund and Prime Money Market Fund offer a
separate classes of shares known as Trust Shares. Trust Shares are sold
primarily to accounts for which Shawmut Bank, N.A., or its affiliates, act in a
fiduciary or agency capacity. Trust Shares are sold at net asset value, without
a sales charge, and without a Rule 12b-1 Plan. Investments in Trust Shares are
subject to a minimum initial investment of $2,500.
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
- ------------------------------------------------------
FROM TIME TO TIME THE MONEY MARKET FUNDS ADVERTISE THEIR TOTAL RETURN AND
YIELD FOR INVESTMENT SHARES.
- ------------------------------------------------------
Total return represents the change, over a specified period of time, in the
value of an investment in Investment 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 Investment Shares of the Money Market Funds are calculated by
dividing the net investment income per share (as defined by the Securities and
Exchange Commission) earned by the Money Market Funds over a thirty-day period
by the net asset value per 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 Investment Shares and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
Total return and yield will be calculated separately for Investment Shares and
Trust Shares. Because Investment Shares are subject to a 12b-1 fee, the total
return and yield for Trust Shares, for the same period, will exceed that of
Investment Shares for funds with separate classes of shares.
Investment Shares are sold without any sales charge or other similar
non-recurring charges.
From time to time, the Money Market Funds may advertise their performance using
certain reporting services and/or compare its performance to certain indices.
Further information about the performance of the Money Market Funds is contained
in the Trust's Annual Report dated October 31, 1993, which can be obtained free
of charge.
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3120921A-R (2/94)
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
TRUST SHARES AND INVESTMENT SHARES
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
(PORTFOLIOS OF THE SHAWMUT FUNDS)
- --------------------------------------------------------------------------------
SUPPLEMENT TO COMBINED STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY
28, 1994
A. Please insert the following information as the third paragraph under the
section entitled "Money Market Funds Ownership" on page 11:
"As of March 24, 1994, the following shareholders of record owned 5% or
more of the outstanding shares of the Money Market Funds: Henry L. and
Sandra L. Snow, New Haven, Connecticut, owned approximately 1,137,553
(6.20%) Trust Shares of Shawmut Connecticut Municipal Money Market Fund;
Clement McIver, Jr., c/o Methods Machine Tool, Sudbury, Massachusetts,
owned approximately 2,002,586 (6.19%) Shares of Shawmut Massachusetts
Municipal Money Market Fund; Olsen & Co., Boston Massachusetts, owned
approximately 53,927,232 (10.38%) Trust Shares of Shawmut Prime Money
Market Fund; and Wornat Leasing, Hartford, Connecticut, owned
approximately 3,799,126 (5.51%) Investment Shares of Shawmut Prime Money
Market Fund.
B. Please delete the text which appears under the subsection entitled
"Advisor Fees" on page 11 and replace it with the following:
"For its advisory services, the Adviser receives an annual investment
advisory fee as described in the combined prospectus. During the period
from the Connecticut Municipal Money Market Fund's effective date,
September 12, 1993, to February 28, 1994, the Connecticut Municipal
Money Market Fund's adviser earned $44,165 as its advisory fee, of which
$24,958 was voluntarily waived.
During the period from the Massachusetts Municipal Money Market Fund's
effective date, September 12, 1993 to February 28, 1994, the
Massachusetts Municipal Money Market Fund's adviser earned $24,507 as
its advisory fee, of which $10,713 was voluntarily waived.
During the fiscal year ended October 31, 1993, the Prime Money Market
Fund's adviser earned $1,128,024 as its advisory fee, of which $270,978
was voluntarily waived.
In addition, the Funds' adviser reimbursed other operating expenses for
the following Funds: Connecticut Municipal Money Market Fund ($73,176)
and Massachusetts Municipal Money Market Fund ($57,512)."
C. Please insert the following information as the second paragraph under
the section entitled "Administrative Services" on page 12:
"From the effective date of Connecticut Municipal Money Market Fund and
Massachusetts Municipal Money Market Fund, September 12, 1993 to
February 28, 1994, Federated Administrative Services earned the
following administrative fees: Connecticut Municipal Money Market Fund,
$16,233 of which $265 was voluntarily waived, and Massachusetts
Municipal Money Market Fund, $16,699 of which $32 was voluntarily
waived."
Please insert the following information as the last sentence of the
section:
"From the effective date of Connecticut Municipal Money Market Fund and
Massachusetts Municipal Money Market Fund, September 12, 1993, to
February 28, 1994, the Funds' custodian earned the following fees:
Connecticut Municipal Money Market Fund, $2,444, all of which was waived
and Massachusetts Municipal Money Market Fund, $2,505, all of which was
waived."
D. Please insert the following information as a final paragraph under the
sub-section entitled "Distribution Plan (Investment Shares)" on page 13:
"From the effective date of Connecticut Municipal Money Market Fund and
Massachusetts Municipal Money Market Fund, September 12, 1993, to
February 28, 1994, brokers and administrators (financial institutions)
earned the following fees pursuant to the Plan: Connecticut Municipal
Money Market Fund, $30,698, of which $14,797 was voluntarily waived."
E. Please insert the following information as the first paragraph under the
section entitled "Yield" on page 16:
"The yield for Shawmut Connecticut Municipal Money Market Fund Trust
Shares for the seven-day period ended February 28, 1994, was 1.74%. The
yield for Investment Shares for the same period was 1.49%. The yield for
Shawmut Massachusetts Municipal Money Market Fund for the seven-day
period ended February 28, 1994, was 1.70%. The yield for Shawmut Prime
Money Market Fund Trust Shares for the seven-day period ended February
28, 1994 was 2.63%. The yield for Investment Shares for the same period
was 2.38%"
F. Please insert the following information as the first paragraph under the
section entitled "Effective Yield" on page 16:
"The effective yield for Shawmut Connecticut Municipal Money Market
Trust Shares for the seven-day period ended February 28, 1994, was
1.75%. The effective yield for Investment Shares for the same period was
1.50%. The effective yield for Shawmut Massachusetts Municipal Money
Market Fund for the seven-day period ended February 28, 1994, was 1.72%.
The effective yield for Shawmut Prime Money Market Fund Trust Shares for
the seven-day period ended February 28, 1994, was 2.66%. The effective
yield for Investment Shares for the same period was 2.40%."
G. Please insert the following information as the first and second
paragraphs under the section entitled "Tax Equivalent Yield" on page 16:
"The tax equivalent yield for Shawmut Connecticut Municipal Money Market
Trust Shares for the seven-day period ended February 28, 1994, was
2.58%. The tax equivalent yield for Investment Shares for the same
period was 2.21%. The tax equivalent yield for Shawmut Massachusetts
Municipal Money Market Fund for the seven-day period ended February 28,
1994, was 2.83%.
The tax equivalent yield for the Municipal Money Market Funds is
calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the Portfolio would have had to earn to equal its
actual yield, assuming a 28% federal tax rate and assuming that income
is 100% tax-exempt." In addition, the tax equivalent yield assumes that
the entire investment portfolio of a Fund is invested in securities that
are exempt from federal and state tax. To the extent that a Fund does
not invest in such qualifying securities, the tax equivalent yield may
be overstated.
H. Please delete the second sentence under the section entitled "Financial
Statements" on page 19:
"A copy of the Annual Report may be obtained without charge by
contacting the Trust at the address located on the back cover of the
combined prospectus."
Please replace the sentence with the following:
"A copy of the Annual Report may be obtained without charge by
contacting your Shawmut Bank trust officer or Mutual Fund Specialist."
March 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
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Distributor
4022405B (3/94)
THE SHAWMUT MONEY MARKET FUNDS
(PORTFOLIOS OF THE SHAWMUT FUNDS)
SHAWMUT CONNECTICUT MUNICIPAL MONEY MARKET FUND
TRUST SHARES
INVESTMENT SHARES
SHAWMUT MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
SHAWMUT PRIME MONEY MARKET FUND
TRUST SHARES
INVESTMENT SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
Shawmut Connecticut Municipal Money Market Fund ("Connecticut Municipal Money
Market Fund"), Shawmut Massachusetts Municipal Money Market Fund ("Massachusetts
Municipal Money Market Fund"), and Shawmut Prime Money Market Fund ("Prime Money
Market Fund") (collectively, referred to as the "Money Market Funds") represent
interests in investment portfolios of The Shawmut Funds (the "Trust"). This
combined Statement of Additional Information should be read with the respective
prospectuses for the Money Market Funds, Trust Shares and Investment Shares,
dated February 28, 1994. This Statement is not a prospectus itself. To receive a
copy of either prospectus, write or call the Money Market Funds.
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 THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES OFFERED BY THE 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.
INVESTMENT SHARES OF THE SHAWMUT FUNDS ARE AVAILABLE THROUGH LICENSED
REPRESENTATIVES OF SHAWMUT BROKERAGE, INC., MEMBER NASD/SIPC, AND AN AFFILIATE
OF SHAWMUT BANK.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
TABLE OF CONTENTS
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GENERAL INFORMATION ABOUT THE MONEY
MARKET FUNDS 1
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Investment Objective and Policies
of the Money Market Funds 1
Acceptable Investments 1
When-Issued and Delayed Delivery
Transactions 1
Investment Limitations 4
Massachusetts Investment Risks 7
Connecticut Investment Risks 8
THE SHAWMUT FUNDS MANAGEMENT 9
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Officers and Trustees Funds 9
Funds 10
Money Market Funds Ownership 11
Trustee Liability 11
INVESTMENT ADVISORY SERVICES 11
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Adviser to the Money Market Funds 11
Advisory Fees 11
ADMINISTRATIVE SERVICES 12
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BROKERAGE TRANSACTIONS 12
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PURCHASING SHARES 12
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Distribution Plan 12
Conversion to Federal Funds 13
DETERMINING NET ASSET VALUE 13
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Use of the Amortized Cost Method 13
EXCHANGING SECURITIES FOR MONEY
MARKET FUNDS SHARES 14
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Tax Consequences 14
REDEEMING SHARES 14
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Redemption in Kind 14
EXCHANGE PRIVILEGE 15
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Requirements for Exchange 15
Making An Exchange 15
TAX STATUS 15
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The Money Market Funds' Tax Status 15
Federal Income Tax 15
Massachusetts State Income Tax 15
Other State and Local Taxes 16
Shareholders' Tax Status 16
YIELD 16
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EFFECTIVE YIELD 16
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TAX-EQUIVALENT YIELD 16
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Tax-Equivalency Table 17
PERFORMANCE COMPARISONS 19
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FINANCIAL STATEMENTS 19
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APPENDIX 20
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GENERAL INFORMATION ABOUT THE MONEY MARKET FUNDS
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The Money Market Funds are portfolios of The Shawmut Funds, which was
established as a Massachusetts business trust under a Declaration of Trust dated
July 16, 1992.
Shares of the Connecticut Municipal Money Market Fund and the Prime Money Market
Fund are offered in two classes, known as Trust Shares and Investment Shares.
This combined statement of additional information relates to Trust Shares and
Investment Shares of the Connecticut Municipal Money Market Fund and the Prime
Money Market Fund, as well as Massachusetts Municipal Money Market Fund
(individually and collectively referred to as "Shares").
INVESTMENT OBJECTIVE AND POLICIES OF THE MONEY MARKET FUNDS
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Connecticut Municipal Money Market Fund's investment objective is to provide
current income which is exempt from federal regular income tax and Connecticut
state income tax, consistent with stability of principal and liquidity. The
investment objective cannot be changed without the approval of shareholders. The
policies described below may be changed by the Board of Trustees (the
"Trustees") without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
Massachusetts Municipal Money Market Fund's investment objective is to provide
current income which is exempt from federal regular income tax and income taxes
imposed by the Commonwealth of Massachusetts, consistent with stability of
principal and liquidity. The investment objective cannot be changed without the
approval of shareholders. The 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.
Prime Money Market Fund's investment objective is to provide current income
consistent with stability of principal and liquidity. The investment objective
cannot be changed without the approval of shareholders. The 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
Connecticut Municipal Money Market Fund invests primarily in debt obligations
issued by or on behalf of Connecticut and of other states, territories and
possessions of the United States, including the District of Columbia, and any
political subdivision or financing authority of any of these, the income from
which is, in the opinion of qualified legal counsel, exempt from both federal
regular income tax and Connecticut state income tax imposed upon non-corporate
taxpayers ("Connecticut Municipal Securities").
Massachusetts Municipal Money Market Fund invests primarily in debt obligations
issued by or on behalf of the Commonwealth of Massachusetts and of other states,
territories and possessions of the United States, including the District of
Columbia, and any political subdivision or financing authority of any of these,
the income from which is, in the opinion of qualified legal counsel, exempt from
both federal regular income tax and income taxes imposed by the Commonwealth of
Massachusetts imposed upon non-corporate taxpayers ("Massachusetts Municipal
Securities").
Prime Money Market Fund invests in money market instruments which mature in
thirteen months or less and which include, but are not limited to, commercial
paper and demand master notes, bank instruments, U.S. government obligations,
and repurchase agreements.
The instruments of banks and savings and loans that are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF") such
as certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances, are not necessarily guaranteed by those organizations.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price and yield for the Money Market Funds. Settlement dates
may be a month or more after entering into these transactions, and the
market values of the securities purchased may vary from the purchase
prices.
These transactions are arrangements in which the Money Market Funds
purchases securities with payment and delivery scheduled for a future
time. The Money Market Funds engage in when-issued and delayed delivery
transactions only for the purpose of acquiring portfolio securities
consistent with their respective investment objectives and policies and
not for investment leverage.
No fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the appropriate Money Market Fund
sufficient to make payment for the securities to be purchased are
segregated on the Money Market Funds' records at the trade date. These
securities are marked to market daily and maintained until the
transaction is settled. The Money Market Funds may engage in these
transactions to an extent that would cause the segregation of an amount
up to 20% of the total value of a Fund's assets.
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The following acceptable investments and strategies apply only to the
CONNECTICUT MUNICIPAL MONEY MARKET FUND and MASSACHUSETTS MUNICIPAL MONEY MARKET
FUND (collectively referred to as "Connecticut/Massachusetts Municipal Money
Market Funds"):
CHARACTERISTICS
The Municipal Securities in which the Connecticut/Massachusetts Municipal
Money Market Funds invest have the characteristics set forth in the
prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of Municipal Securities are:
- municipal notes and commercial paper;
- general obligation serial bonds sold with differing maturity dates;
- refunded municipal bonds; and
- all revenue bonds, including industrial development bonds.
MUNIPREFERRED SECURITIES
The Connecticut/Massachusetts Municipal Money Market Funds may purchase
interests in Municipal Securities that are offered in the form of a
security representing a diversified portfolio of investment grade bonds.
These securities provide investors, such as the Connecticut/Massachusetts
Municipal Money Market Funds, with liquidity and income exempt from
federal income tax and some state income taxes.
PARTICIPATION INTERESTS
The financial institutions from which the Connecticut/Massachusetts
Municipal Money Market Funds purchase participation interests frequently
provide or secure from another financial institution irrevocable letters
of credit or guarantees and give the Connecticut/Massachusetts Municipal
Money Market Funds the right to demand payment of the principal amounts
of the participation interests plus accrued interest on short notice
(usually within seven days).
VARIABLE RATE DEMAND NOTES
Variable interest rates generally reduce changes in the market value of
Municipal Securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate Municipal
Securities than for fixed income obligations.
The terms of these variable rate demand instruments require payment of
principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests, or a guarantor of
either issuer.
MUNICIPAL LEASES
The Connecticut/Massachusetts Municipal Money Market Funds may purchase
Municipal Securities in the form of participation interests which
represent undivided proportional interests in lease payments by a
governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure the payments on the certificates.
Lease obligations may be limited by municipal charter or the nature of
the appropriation for the lease. In particular, lease obligations may be
subject to periodic appropriation. If the entity does not appropriate
funds for future lease payments, the entity cannot be compelled to make
such payments. Furthermore, a lease may provide that the participants
cannot accelerate lease obligations upon default. The participants would
only be able to enforce lease payments as they become due. In the event
of a default or failure of appropriation, unless the participation
interests are credit enhanced, it is unlikely that the participants would
be able to obtain an acceptable substitute source of payment.
When determining whether municipal leases purchased by the
Connecticut/Massachusetts Municipal Money Market Funds will be classified
as a liquid or illiquid security, the Board of Trustees has directed the
adviser to consider certain factors such as: the frequency of trades and
quotes for the security; the volatility of quotations and trade prices
for the security; the number of dealers willing to purchase or sell the
security and the number of potential purchasers; dealer undertaking to
make a market in the security; the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer); the rating of the security and the financial condition and
prospects of the issuer of the security; whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the lease property because the
property is no longer deemed essential to its operations (e.g., the
potential for an 'event of nonappropriation'); any credit enhancement or
legal recourse
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provided upon an event of nonappropriation or other termination of the
lease; and such other factors as may be relevant to the
Connecticut/Massachusetts Municipal Money Market Funds ' ability to
dispose of the security.
TEMPORARY INVESTMENTS
The Connecticut/Massachusetts Municipal Money Market Funds may also
invest in high quality temporary investments during times of unusual
market conditions for defensive purposes.
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 the
Connecticut/Massachusetts Municipal Money Market Funds and agree at
the time of sale to repurchase them at a mutually agreed upon time
and price within one year from the date of acquisition. The
Connecticut/Massachusetts Municipal Money Market Funds or their
custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase
the securities from the Connecticut/Massachusetts Municipal Money
Market Funds, the Connecticut/Massachusetts Municipal Money Market
Funds could receive less than the repurchase price on any sale of
such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities
by a Fund might be delayed pending court action. The
Connecticut/Massachusetts Municipal Money Market Funds believes that
under the regular procedures normally in effect for custody of the
Connecticut/Massachusetts Municipal Money Market Funds' portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Connecticut/Massachusetts
Municipal Money Market Funds and allow retention or disposition of
such securities. The Connecticut/Massachusetts Municipal Money
Market Funds will only enter into repurchase agreements with banks
and other recognized financial institutions, such as broker/dealers,
which are deemed by the Connecticut/Massachusetts Municipal Money
Market Funds' investment adviser to be creditworthy, pursuant to
guidelines established by the Trustees.
From time to time, such as when suitable Municipal Securities are
not available, the Connecticut/ Massachusetts Municipal Money Market
Funds may maintain a portion of their respective assets in cash. Any
portion of the Connecticut/Massachusetts Municipal Money Market
Funds' assets maintained in cash will reduce the amount of assets in
Municipal Securities and thereby reduce the Connecticut/
Massachusetts Municipal Money Market Funds' yield.
The following acceptable investments and strategies apply only to the PRIME
MONEY MARKET FUND:
BANK INSTRUMENTS
In addition to domestic bank obligations such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, the
Prime Money Market Fund may invest in:
- Eurodollar Certificates of Deposit issued by foreign branches of U.S.
or foreign banks;
- Eurodollar Time Deposits, which are U.S. dollar-denominated deposits in
foreign branches of U.S. or foreign banks; and
- Yankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and
held in the United States.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Prime Money Market
Fund may invest generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations issued or
guaranteed by U.S. government agencies or instrumentalities. These
securities are backed by:
- the full faith and credit of the U.S. Treasury;
- the issuer's right to borrow from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
- the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- Federal Farm Credit Banks;
- Federal Home Loan Banks;
- Federal National Mortgage Association;
- --------------------------------------------------------------------------------
- Student Loan Marketing Association; and
- Federal Home Loan Mortgage Corporation.
REPURCHASE AGREEMENTS
The Prime Money Market Fund requires a custodian to take possession of
the securities subject to repurchase agreements, and these securities are
marked to market daily. To the extent that the original seller does not
repurchase the securities from the Prime Money Market Fund, the Prime
Money Market Fund could receive less than the repurchase price on any
sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the
Prime Money Market Fund might be delayed pending court action. The Prime
Money Market Fund believes that under the regular procedures normally in
effect for custody of the Prime Money Market Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would
rule in favor of the Prime Money Market Fund and allow retention or
disposition of such securities. The Prime Money Market Fund will only
enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Prime Money Market Fund's adviser to be creditworthy pursuant to
guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Prime Money Market Fund may also enter into reverse repurchase
agreements. This transaction is similar to borrowing cash. In a reverse
repurchase agreement the Prime Money Market Fund transfers possession of
a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date
in the future the Prime Money Market Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable the
Prime Money Market Fund to avoid selling portfolio instruments at a time
when a sale may be deemed to be disadvantageous, but the ability to enter
into reverse repurchase agreements does not ensure that the Prime Money
Market Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Prime
Money Market Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These
assets are marked to market daily and are maintained until the
transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Prime Money Market Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of
the Securities Act of 1933. Section 4(2) commercial paper is restricted
as to disposition under federal securities law and is generally sold to
institutional investors, such as the Prime Money Market Fund, who agree
that they are purchasing the paper for investment purposes and not with a
view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Prime Money Market Fund through or
with the assistance of the issuer or investment dealers who make a market
in Section 4(2) commercial paper, thus providing liquidity. The Prime
Money Market Fund believes that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Prime Money
Market Fund intends, therefore, to treat the restricted securities which
meet the criteria for liquidity established by the Trustees, including
Section 4(2) commercial paper, as determined by the Prime Money Market
Fund's adviser, as liquid and not subject to the investment limitation
applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Prime Money Market Fund intends to not
subject such paper to the limitation applicable to restricted securities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Money Market Funds will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Money Market Funds will not issue senior securities except that the
Money Market Funds may borrow money in amounts up to one-third of the
value of their respective total assets, including the amounts borrowed.
The Money Market Funds will not borrow money for investment leverage, but
rather as a temporary, extraordinary, or emergency measure or to
facilitate management portfolio by enabling the Money Market Funds to
meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Money Market Funds will
not purchase any securities while borrowings in excess of 5% of
- --------------------------------------------------------------------------------
their respective total assets are outstanding. In the past year ending
October 31, 1993, borrowings were not at any time in excess of 5% of the
Money Market Funds' respective total assets.
The Money Market Funds do not consider the issuance of separate classes
of shares to involve the issuance of "senior securities" within the
meaning of the investment limitation set forth above.
PLEDGING ASSETS
The Connecticut/Massachusetts Municipal Money Market Funds will not
mortgage, pledge, or hypothecate any assets except to secure permitted
borrowings. In those cases, it may pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 10% of the
value of total assets at the time of the pledge.
INVESTING IN REAL ESTATE
The Money Market Funds will not purchase or sell real estate or real
estate limited partnerships, although they may invest in securities of
issuers whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Money Market Funds will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
UNDERWRITING
The Money Market Funds will not underwrite any issue of securities,
except as each may be deemed to be an underwriter under the Securities
Act of 1933 in connection with the sale of securities in accordance with
its respective investment objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Money Market Funds will not lend any of their respective assets
except that each may acquire certain money market instruments or publicly
or nonpublicly issued Municipal Securities as appropriate or temporary
investments or enter into repurchase agreements, in accordance with their
respective investment objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
Connecticut/Massachusetts Municipal Money Market Funds: With regard to at
least 50% of their respective total assets, no more than 5% of their
respective total assets are to be invested in the securities of a single
issuer, and no more than 25% of their respective total assets are to be
invested in the securities of a single issuer at the close of each
quarter of each fiscal year.
Under this limitation, each governmental subdivision, including states,
territories, possessions of the United States, or their political
subdivisions, agencies, authorities, instrumentalities, or similar
entities, will be considered a separate issuer if its assets and revenues
are separate from those of the governmental body creating it and the
security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a
nongovernmental user are considered to be issued solely by that user. If,
in the case of an industrial development bond or government-issued
security, a governmental or other entity guarantees the security, such
guarantee would be considered a separate security issued by the
guarantor, as well as the other issuer, subject to limited exclusions
allowed by the Investment Company Act of 1940.
Prime Money Market Fund: With respect to securities comprising 75% of the
value of its total assets, the Prime Money Market Fund will not purchase
securities issued by any one issuer (other than cash, cash items, or
securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements
collateralized by such securities) if as a result more than 5% of the
value of its total assets would be invested in the securities of that
issuer or if it would own more than 10% of the outstanding voting
securities of such issuer.
CONCENTRATION OF INVESTMENTS
CONNECTICUT/MASSACHUSETTS MUNICIPAL MONEY MARKET FUNDS: The Funds will
not purchase securities if, as a result of such purchase, 25% or more of
the value of their respective total assets would be invested in any one
industry or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
However, the Funds may invest as temporary investments more than 25% of
the value of their respective assets in cash or cash items, securities
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities, or instruments secured by these money market
instruments, and repurchase agreements.
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND: The Fund will not invest 25% or more of the
value of its total assets in any one industry, including Eurodollar
commercial paper. However, investing in domestic bank instruments (e.g.,
time and demand deposits and certificates of deposit, but not bank
commercial paper), U.S. government obligations or repurchase agreements
secured by U.S. government obligations, shall not be considered
investments in any one industry.
RESTRICTED SECURITIES
The Connecticut/Massachusetts Municipal Money Market Funds will not
invest more than 10% of their respective net assets in securities subject
to restrictions on resale under the Securities Act of 1933.
The above limitations may not be changed without shareholder approval of the
appropriate Money Market Fund's shareholders. The following limitations,
however, may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material change in these limitations
becomes effective.
PLEDGING ASSETS
The Prime Money Market Fund will not mortgage, pledge, or hypothecate any
assets except to secure permitted borrowings. In those cases, it may
pledge assets having a market value not exceeding the lesser of the
dollar amounts borrowed or 10% of the value of total assets at the time
of the pledge.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Money Market Funds will limit their respective investments in other
investment companies to not more than 3% of the total outstanding voting
stock of any investment company, will invest no more than 5% of their
respective total assets in any one investment company, and will invest no
more than 10% of their respective total assets in investment companies in
general. However, these limitations are not applicable if the securities
are acquired in a merger, consolidation, reorganization, or acquisition
of assets. The Adviser will waive its investment advisory fee on assets
invested in open-end investment companies.
The Money Market Funds will limit their respective investments in the
securities of other investment companies to those of money market funds
which are of comparable or better portfolio quality and have investment
objectives and policies similar to their own.
Rule 2a-7 under the Investment Company Act of 1940 (the 'Rule') requires
that the Money Market Funds limit their investments to instruments that,
in the opinion of the Trustees, present minimal credit risk and that, if
rated, meet minimum rating standards set forth in the Rule. If the
instruments are not rated, the Trustees must determine that they are of
comparable quality. Shares of investment companies purchased by the Money
Market Funds will meet these same criteria and will have investment
policies consistent with Rule 2a-7.
INVESTING IN NEW ISSUERS
The Connecticut/Massachusetts Municipal Money Market Funds will not
invest more than 5% of the value of their respective total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor.The Prime Money Market Fund will not invest more than 5% of
the value of its total assets in securities of issuers which have records
of less than three years of continuous operations, including the
operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Money Market Funds will not purchase or retain the securities of any
issuer if the officers and Trustees of the Trust or its investment
adviser, owning individually more than 1/2 of 1% of the issuer's
securities, together own more than 5% of the issuer's securities.
DEALING IN PUTS AND CALLS
The Connecticut/Massachusetts Municipal Money Market Funds will not
purchase or sell puts, calls, straddles, spreads, or any combination of
them, except that the Connecticut/Massachusetts Municipal Money Market
Funds may purchase Municipal Securities accompanied by agreements of
sellers to repurchase them at the appropriate Fund's option.
INVESTING IN MINERALS
The Money Market Funds will not purchase or sell oil, gas, or other
mineral exploration or development programs, or leases.
- --------------------------------------------------------------------------------
INVESTING IN RESTRICTED SECURITIES
The Prime Money Market 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 restricted
securities which meet the criteria for liquidity as established by the
Board of Trustees.
INVESTING IN ILLIQUID SECURITIES
The Money Market Funds will not invest more than 10% of the value of
their respective net assets in illiquid securities, including repurchase
agreements providing for settlement in more than seven days after notice,
non-negotiable fixed time deposits with maturities over seven days, and
restricted securities not determined by the Trustees to be liquid.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Money Market Funds did not borrow money or pledge securities in excess of 5%
of net assets during the past fiscal year, and did not intend to borrow money or
pledge securities in excess of 5% of the value of their respective net assets
during the coming fiscal year.
For purposes of its policies and limitations, the Money Market Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."
MASSACHUSETTS INVESTMENT RISKS (MASSACHUSETTS MUNICIPAL MONEY MARKET FUND)
The Commonwealth of Massachusetts stabilized its fiscal position in 1992.
Through conservative revenue estimates and significant expenditure reductions
the Commonwealth was able to generate a surplus ($283 million) for the 1992
fiscal year end. Tax revenues exceeded the administration's estimates by
approximately $1.2 billion or 7%. The Commonwealth greatly reduced its reliance
upon short-term debt in fiscal 1992. Approximately $635 million of commercial
paper was issued in 1992 to fund current operations compared with $1.2 billion
issued in both 1991 and 1990. The Commonwealth projects commercial paper
borrowing to be only $400 million in fiscal 1993. Expenditure reductions also
contributed to a large degree to the stabilization of the Commonwealth's
financial position in 1992. Local aid payments were reduced from $2.7 billion in
1991 to $2.47 billion. Higher education spending was reduced by $70 million
(11.5%) and the Commonwealth's work force was reduced by 8,250 employees.
Medicaid expenditures were only 1.9% higher compared with increases which were
averaging 19.25% during the period 1988 to 1991.
The fiscal 1993 budget has allowed for increased spending while instituting
additional expenditure controls. The budget forecasts total revenue of $14,485
million (a 4.9% increase) and tax revenue is estimated at $9,685 million (a 2.2%
increase). Fund balances are expected to be drawn down by $364 million.
Nonrecurring revenues included in the budget total $229 million, compared with
$830 million included in the 1992 budget. Projected spending of $14,849.5
million is an 8.7% increase over fiscal 1992. The largest spending increase
(13.8% or $349 million) is for direct local aid. This represents the first
increase in three years. Medicaid expenditures are budgeted to increase 7.9%
even after program reforms which are to save $100 million in 1993. This reflects
the difficulty for state governments to control Medicaid costs.
Debt levels for the Commonwealth are among the highest of the states. The debt
situation has been exacerbated by the issuance of $250 million of fiscal
recovery bonds at the end of fiscal 1992. In fiscal 1991, dedicated income tax
bonds were issued to finance the combined deficits in the general and local aid
funds. The issuance was part of the Fiscal Recovery Loan Act of 1990. $1.4
billion of bonds were issued and are secured by the pledge of dedicated tax
revenues. These bonds amortize through 1997. Debt service requirements for
general obligation and special obligation debt alone are 8.2% of estimated
fiscal 1993 spending requirements. The increased debt levels which are the
result of capital borrowing and deficit bonds have doubled scheduled debt
service requirements between 1987 and 1992. As a result, debt service will
remain high through 1997.
The regional economy may have reached the trough of the current economic cycle.
The largest cause for concern in the Massachusetts economy is the significant
job loss which has occurred between 1989 and present. From calendar year 1989 to
1991, 309,200 non-farm jobs were lost. This represents a 10.1% decline with the
largest decline of 5.4% occurring in 1991. Much of the loss has occurred in the
construction and high tech industries. The defense related industries, which
provide 3% of private sector employment, have suffered some employment losses.
However, more significant declines are expected in this industry in the future,
especially with the election of the new administration. There is some sign of
moderation on the employment front. The unemployment rate has declined to 8.3%
as of July 1992 from an average of 9% in 1991. The service sector in
Massachusetts has fared rather well and has been expanding. The presence of a
large number of higher education and health care institutions, a well educated
work force, and a large investment
- --------------------------------------------------------------------------------
community has helped to provide a solid economic base. The presence of several
large public works programs (MWRA, Bay Tunnel), improvements in the banking
community and lower real estate values should put the Commonwealth in a stronger
position as the national economy recovers.
During the past few years, the current administration in cooperation with the
legislature have made steady progress in resolving the fiscal ills facing the
Commonwealth which included budget tightening, reducing local state aid, and
employing new methods of financing projects. Because of the significant
progress, the major rating agencies upgraded the Commonwealth to A rated status
this past fall.
CONNECTICUT INVESTMENT RISKS (CONNECTICUT MUNICIPAL MONEY MARKET FUND)
The Connecticut Municipal Money Market Fund invests in obligations of
Connecticut issuers which results in the Connecticut Municipal Money Market
Fund's performance being subject to risks associated with the overall conditions
present within the state. The following information is a brief summary of the
recent prevailing economic conditions and a general summary of the state's
financial status. This information is based on official statements relating to
securities that have been offered by Connecticut issuers and from other sources
believed to be reliable but should not be relied upon as a complete description
of all relevant information.
The State of Connecticut has experienced fiscal problems in three of the last
four years. Following a contentious budget enactment for fiscal year 1992, the
State enacted an individual income tax while slightly reducing the sales tax.
The State has also suffered from the recent national recession that impacted the
State especially hard and continues to force changing economic conditions in the
State.
The Connecticut economy is largely composed of manufacturing (especially defense
related) and service industries (such as insurance) that were robust and growing
for much of the past two decades. Beginning in the late 1980's, the regional
economy slowed down and entered a recession that has affected several areas of
the State's economy. Specifically, the cutbacks in the defense and insurance
industries and general corporate restructurings due to declining profits have
caused large numbers of job losses and increased the fiscal strain on the State
and local governments.
The two major revenue sources available to cities and towns in Connecticut are
local property taxes and aid from the state. State aid is mostly related to
educational grants and human service funds for lower income individuals.
Property values and the resulting taxes which grew significantly during the
1980's have stabilized and even fallen slightly in some areas. Especially hard
hit are those local governments with large job losses due to cutbacks or
shutdowns due to the impact to the tax base.
The Connecticut Municipal Money Market Fund concentration in securities issued
by the State and its political subdivisions provides a greater level of risk
than a fund which is diversified across numerous states and municipal entities.
The ability of the State or its municipalities to meet their obligations will
depend on the availability of tax and other revenues; economic, political, and
demographic conditions within the State; and the underlying fiscal condition of
the State, and its municipalities.
THE SHAWMUT FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Shawmut Bank, N.A.,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John F. Donahue+* Chairman Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors and Trustee Advisers, Federated Management, and Federated Research; Director, AEtna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Trust.
- --------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Wood and Associates, Inc., Realtors; and Northgate Village Development
Commercial Department Corporation; General Partner or Trustee in private real estate ventures in
John R. Wood and Southwest Florida; Director, Trustee, or Managing General Partner of the
Associates, Inc., Realtors Funds; formerly, President, Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
- --------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza-23rd floor Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Pittsburgh, PA Chairman and Director, PNC Bank, N.A., and PNC Bank Corp and Director, Ryan
Homes, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- --------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly President, State
Boston, MA Street Bank & Trust Company and State Street Boston Corporation; and
Trustee, Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurant, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
- --------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace and RAND Corporation; Online Computer
Learning Library Center, Inc. and U.S. Space Foundation; Chairman, Czecho Slovak
University of Pittsburgh Management Center; Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy & Technology;
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue* Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management, and Federated Research; President and Director,
Tower Federated Administrative Services; Trustee, Federated Services Company;
Pittsburgh, PA President or Vice President of the Funds; Director, Trustee or Managing
General Partner of some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.
- --------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales President, Vice President, Treasurer and Trustee, Federated Investors; Vice President
Federated Investors Treasurer, and Treasurer, Federated Advisers, Federated Management, and Federated
Tower and Trustee Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Trustee, Federated Services Company; Chairman, Treasurer,
and Director, Federated Administrative Services; Trustee or Director of some
of the Funds; Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Director and Executive Vice President, Federated
Securities Corp.; Vice President and Secretary of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Vice President of the Funds;
Pittsburgh, PA Director, Trustee, or Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire Insurance Company and President
of its Federated Research Division.
- --------------------------------------------------------------------------------------------------------------------------------
Jeffrey W. Sterling Vice President Vice President, Federated Administrative Services; Director of Private Label
Federated Investors and Assistant Management, Federated Investors; Vice President and Assistant Treasurer of
Tower Treasurer some of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an 'interested person' of the Trust as defined in
the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
FUNDS
'The Funds' and 'Funds' mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; The Boulevard
Funds; California Municipal Cash Trust; Cash Trust Series, Inc.; Cash Trust
Series II; 111 Corcoran Funds; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; FT Series, Inc.; Federated ARMs Fund; Federated Exchange
Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Intermediate Government Trust;
Federated Master Trust; Federated Municipal Trust; Federated Short-Intermediate
Government
- --------------------------------------------------------------------------------
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insurance Management Series; Intermediate Municipal
Trust; Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity
Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty Term Trust, Inc.-1999; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
The Planters Funds; Portage Funds; RIMCO Monument Funds; Short-Term Municipal
Trust; Signet Select Series; The Shawmut Funds; Star Funds; The Starburst Funds;
The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; and Trust for U.S. Treasury Obligations.
MONEY MARKET FUNDS OWNERSHIP
Officers and Trustees own less than 1% of the Money Market Funds' outstanding
shares.
As of February 10, 1994, the following shareholders of record owned 5% or more
of the outstanding shares of the Money Market Funds: Henry L. Snow and Sandra L.
Snow, New Haven, Connecticut, owned approximately 1,117,312 (6.91%) Investment
Shares of the Connecticut Municipal Money Market Fund; Clement McIver, Jr., c/o
Methods Machine Tool, Sudbury, Massachusetts, owned approximately 2,000,091
(9.35%) shares of the Massachusetts Municipal Money Market Fund; Vectron
Laboratories, Inc., Profit Sharing Plan Trust, Norwalk, Connecticut, owned
approximately 2,557,466 (5.31%) Investment Shares of the Prime Money Market
Fund; and Wornat Leasing, Hartford, Connecticut, owned approximately 3,803,675
(7.89%) Investment Shares of the Prime Money Market Fund.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE MONEY MARKET FUNDS
The Money Market Funds' investment adviser is Shawmut Bank, N.A. (the
"Adviser"). The Adviser shall not be liable to the Trust, the Money Market
Funds, or any shareholder for any losses that may be sustained in the purchase,
holding, or sale of any security, or for anything done or omitted by it, except
acts or omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the combined prospectus. During the fiscal year ended
October 31, 1993, the Funds' adviser earned the following advisory fees:
Connecticut Municipal Money Market Fund, $1,104, all of which was voluntarily
waived; Massachusetts Municipal Money Market Fund, $134, all of which was
voluntarily waived; and Prime Money Market Fund, $1,128,024, of which $270,978
was voluntarily waived. In addition, the Fund's adviser reimbursed other
operating expenses for the following Funds: Connecticut Municipal Money Market
Fund, $10,084 and Massachusetts Municipal Money Market Fund, $9,261.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If a Money Market Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and extraordinary
expenses) exceed 2 1/2% per year of the first $30 million of average net
assets, 2% per year of the next $70 million of average net assets, and
1 1/2% per year of the remaining average net assets, the Adviser will
reimburse that Money Market Fund for its expenses over the limitation. If
Money Market Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Money Market Funds for the fee set
forth in the combined prospectus. For the fiscal year ended October 31, 1993,
Federated Administrative Services earned the following administrative fees from
the Funds: Connecticut Municipal Money Market Fund, $265, all of which was
voluntarily waived; Massachusetts Municipal Money Market Fund, $32, all of which
was voluntarily waived; and Prime Money Market Fund, $283,923.
Shawmut Bank, N.A., serves as custodian to the Money Market Funds. As
compensation for its services, the custodian receives a fee based upon a sliding
scale ranging from a minimum of .011% to a maximum of .02% as a percentage of
net Fund assets, plus certain costs. For the fiscal year ended October 31, 1993,
the Funds' custodian earned the following fees: Connecticut Municipal Money
Market Fund, $44, all of which was voluntarily waived; Massachusetts Municipal
Money Market Fund, $5, all of which was voluntarily waived; and Prime Money
Market Fund, $15,717.
BROKERAGE TRANSACTIONS
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It is the Money Market Funds' policy with respect to the selection of brokers
and dealers in the purchase and sale of securities to obtain the "best net
realized price" on each transaction. The Money Market Funds conduct business
only with financially sound brokers or dealers on that basis. Brokerage
commission is, however, only one element in determining "best net realized
price." The Adviser may also select brokers and dealers who offer research and
other services. These services may be furnished directly to the Money Market
Funds or to the Adviser and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser for other
accounts. To the extent that receipt of these services may supplant services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value on days the New York Stock Exchange and
Federal Reserve Wire System are open for business. The procedure for purchasing
shares of the Money Market Funds is explained in the prospectus under "Investing
in the Money Market Funds."
DISTRIBUTION PLAN (INVESTMENT SHARES)
With respect to the Investment Shares classes of the Connecticut Municipal Money
Market Fund and Prime Money Market Fund, the Trust has adopted a Plan pursuant
to Rule 12b-1 which was promulgated by the Securities and Exchange Commission
pursuant to the Investment Company Act of 1940. The Plan permits the payment of
fees to administrators (including broker/dealers and depository institutions
such as commercial banks and savings and loan associations) for distribution and
administrative services. The Plan is designed to stimulate administrators to
provide distribution and administrative support services to the Connecticut
Municipal Money Market Fund and Prime Money Market Fund and their shareholders.
The administrative services are provided by a representative who has knowledge
of the shareholder's particular circumstances and goals, and include, but are
not limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions, wiring funds and
receiving funds for Share purchases and redemptions, confirming and reconciling
all transactions, reviewing the activity in Connecticut Municipal Money Market
Fund and Prime Money Market Fund accounts, and providing training and
supervision of broker personnel; posting and reinvesting dividends to
Connecticut Municipal Money Market Fund and Prime Money Market Fund accounts or
arranging for this service to be performed by the Connecticut Municipal Money
Market Fund and Prime Money Market Fund transfer agent; and maintaining and
distributing current copies of prospectuses and shareholder reports to the
beneficial owners of Shares and prospective shareholders.
By adopting the Plan, the Board of Trustees expects that the Connecticut
Municipal Money Market Fund and Prime Money Market Fund will be able to achieve
a more predictable flow of cash for investment purposes and to meet redemptions.
This will facilitate more efficient portfolio management and assist the Fund in
seeking to achieve its
- --------------------------------------------------------------------------------
investment objectives. By identifying potential investors whose needs are served
by the Connecticut Municipal Money Market Fund and Prime Money Market Fund'
objectives, and properly servicing these accounts, the Connecticut Municipal
Money Market Fund and Prime Money Market Fund may be able to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits which the Connecticut Municipal Money Market Fund and Prime Money
Market Fund hope to achieve through the Plan include, but are not limited to,
the following: (1) an efficient and effective administrative system; (2) a more
efficient use of shareholder assets by having them rapidly invested in the
Connecticut Municipal Money Market Fund and Prime Money Market Fund, through an
automatic transfer of funds from a demand deposit account to an investment
account, with a minimum of delay and administrative detail; and (3) an efficient
and reliable shareholder records system and prompt responses to shareholder
requests and inquiries concerning their accounts.
For the fiscal year ended October 31, 1993, brokers earned the following fees
from the Funds pursuant to the Plan: Connecticut Municipal Money Market Fund,
$1,104, of which $552 was voluntarily waived; Massachusetts Municipal Money
Market Fund, --0--; Prime Money Market Fund, $20,984, of which $10,492 was
voluntarily waived.
CONVERSION TO FEDERAL FUNDS
It is the Money Market Funds' policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from shareholders must
be in federal funds or be converted into federal funds. Shawmut Bank, N.A. acts
as the shareholder's agent in depositing checks and converting them to federal
funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Money Market Funds attempt to stabilize the value of a share at $1.00. The
days on which the net asset value is calculated by the Money Market Funds are
described in the combined prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have determined that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value. The
Money Market Funds' use of the amortized cost method of valuing portfolio
instruments depends on their compliance with the provisions of Rule 2a-7
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Money Market Funds must establish
procedures reasonably designed to stabilize the net asset value per share, as
computed for purposes of distribution and redemption, at $1.00 per share, taking
into account current market conditions and the Money Market Funds' respective
investment objectives.
Under the Rule, the Money Market Funds are permitted to purchase instruments
which are subject to demand features or standby commitments. As defined by the
Rule, as amended, a demand feature entitles the Money Market Funds to receive
the principal amount of the instrument from the issuer or a third party on (1)
no more than 30 days' notice or (2) at specified intervals not exceeding one
year on no more than 30 days' notice. A standby commitment entitles the Money
Market Funds to achieve same day settlement and to receive an exercise price
equal to the amortized cost of the underlying instrument plus accrued interest
at the time of exercise.
Although demand features and standby commitments are defined as "puts" under the
Rule, the Money Market Funds do not consider them to be "puts" as that term is
used in the Money Market Funds' respective investment limitations. Demand
features and standby commitments are features which enhance an instrument's
liquidity, and the investment limitations which proscribe puts are designed to
prohibit the purchase and sale of put and call options and are not designed to
prohibit the Money Market Funds from using techniques which enhance the
liquidity of portfolio instruments.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share of each
Money Market Fund based upon available indications of market value. The
Trustees will decide what, if any, steps should be taken if there is a
difference of more than 0.5 of 1% between the two values for any Money
Market Fund. The Trustees will take any steps they consider appropriate
(such as redemption in kind or shortening the average portfolio maturity)
to minimize any material dilution or other unfair results arising from
differences between the two methods of determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Money Market Funds limit their investments to
instruments that, in the opinion of the Trustees, present minimal credit
risks and have received the requisite rating from one or more nationally
recognized statistical rating organizations. If the instruments are not
rated, the Trustees must determine that
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they are of comparable quality. The Rule also requires the Money Market
Funds to maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to the objective of maintaining a stable net
asset value of $1.00 per share. In addition, no instrument with a
remaining maturity of more than 397 days can be purchased by a Money
Market Fund.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity or more than 90 days, Money
Market Fund will invest its available cash to reduce the average maturity
to 90 days or less as soon as possible.
The Money Market Funds may attempt to increase yield by trading portfolio
securities to take advantage of short-term market variations. This policy may,
from time to time, result in high portfolio turnover. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset value
is affected by any unrealized appreciation or depreciation of a portfolio.
In periods of declining interest rates, the indicated daily yield on shares of a
Money Market Fund, computed based upon amortized cost valuation, may tend to be
higher than a similar computation made by using a method of valuation based upon
market prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares of a
Money Market Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market prices and
estimates.
EXCHANGING SECURITIES FOR MONEY MARKET FUND SHARES
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Investors may exchange Connecticut/Massachusetts Municipal Securities they
already own for shares of the Connecticut/Massachusetts Municipal Money Market
Funds (respectively), or they may exchange a combination of securities and cash
for shares. An investor should forward the securities in negotiable form with an
authorized letter of transmittal to Federated Securities Corp. The
Connecticut/Massachusetts Municipal Money Market Fund, as appropriate will
notify the investor of its acceptance and valuation of the securities within
five business days of their receipt by State Street Bank.
The Connecticut/Massachusetts Municipal Money Market Funds value securities in
the same manner as they value their assets. The basis of the exchange will
depend upon the net asset value of shares of the Connecticut/Massachusetts
Municipal Money Market Funds, as appropriate on the day the securities are
valued. One Share will be issued for each equivalent amount of securities
accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, or other
rights attached to the securities become the property of the
Connecticut/Massachusetts Municipal Money Market Funds, as appropriate along
with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Shares,
a gain or loss may be realized by the investor.
REDEEMING SHARES
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The Money Market Funds redeem their respective Shares at the next computed net
asset value after redemption requests are received. Redemption procedures are
explained in the combined prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Money Market Funds' respective portfolios.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of a Money Market
Fund's net asset value during any 90-day period.
EXCHANGE PRIVILEGE
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REQUIREMENTS FOR EXCHANGE
Shareholders using the exchange privilege must exchange shares having a net
asset value of at least $1,000. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
Further information on the exchange privilege and prospectuses may be obtained
by calling Shawmut Bank.
MAKING AN EXCHANGE
Instructions for exchanges may be given in writing or by telephone. Written
instructions may require a signature guarantee.
TAX STATUS
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THE MONEY MARKET FUNDS' TAX STATUS
The Money Market Funds will pay no federal income tax because they expect to
meet the requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Money
Market Funds must, among other requirements: derive at least 90% of their
respective gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of their respective gross income from the sale
of securities held less than three months; invest in securities within certain
statutory limits; and distribute to their respective shareholders at least 90%
of their respective net income earned during the year.
FEDERAL INCOME TAX
The Money Market Funds will pay no federal income tax because they expects to
meet requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies.
Each of the Money Market Funds will be treated as a single, separate entity for
federal income tax purposes so that income (including capital gains) and losses
realized by the Trust's other portfolios will not be combined for tax purposes
with those realized by a Money Market Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from a Money Market Fund that represent net interest on
tax-exempt municipal bonds.
In the case of a corporate shareholder, dividends of a Money Market Fund which
represent interest on municipal bonds may be subject to the 20% corporate
alternative minimum tax. The corporate alternative minimum tax treats 75% of the
excess of a taxpayer's pre-tax 'adjusted current earnings' over the taxpayer's
alternative minimum taxable income as a tax preference item. Since 'earnings and
profits' generally includes the full amount of any of a Money Market Fund's
dividend, and alternative minimum taxable income does not include the portion of
a Money Market Fund's dividend attributable to municipal bonds which are not
private activity bonds, 75% of the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of any of the Money Market Funds representing net interest income
earned on some temporary investments and any realized net short-term gains are
taxed as ordinary income. Long-term capital gains distributions are taxed as
long-term capital gains, regardless of the length of time the Money Market Fund
shares have been held by the shareholder. These tax consequences apply whether
dividends are received in cash or as additional shares. Information on the tax
status of dividends and distributions is provided annually.
MASSACHUSETTS STATE INCOME TAX
Individual shareholders of the Massachusetts Municipal Money Market Fund who are
subject to Massachusetts income taxation will not be required to pay
Massachusetts income tax on that portion of their dividends which is
attributable to interest earned on Massachusetts tax-free municipal obligations,
gain from the sale of certain of such obligations, interest earned on
obligations of the United States, and interest earned on obligations of United
States territories or possessions to the extent interest on such obligations is
exempt from taxation by the state pursuant to federal law. All remaining
dividends will be subject to Massachusetts income tax.
If a shareholder of the Massachusetts Municipal Money Market Fund is a
Massachusetts business corporation or any foreign business corporation which
exercises its charter, qualifies to do business, actually does business or owns
or uses any part of its capital, plant or other property in Massachusetts, then
it will be subject to Massachusetts excise taxation either as a tangible
property corporation or as an intangible property corporation. If the corporate
shareholder is a tangible property corporation, it will be taxed upon its net
income allocated to Massachusetts and the value of certain tangible property. If
it is an intangible property corporation, it will be taxed upon its net income
and net worth allocated to Massachusetts. Net income is gross income less
allowable deductions for federal income tax purposes, subject to specified
modifications. Dividends received from the Massachusetts Municipal Money Market
Fund are includable in gross income and generally may not be deducted by a
corporate shareholder in computing its net income. The
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corporation's shares in the Massachusetts Municipal Money Market Fund are not
includable in the computation of the tangible property base of a tangible
property corporation, but are includable in the computation of the net worth
base of an intangible property corporation.
Shares of Massachusetts Municipal Money Market Fund will be exempt from local
property taxes in Massachusetts.
OTHER STATE AND LOCAL TAXES
Income from the Massachusetts Municipal Money Market Fund is not
necessarily free from state income taxes or from local property taxes in
states other than Massachusetts. State laws differ on this issue, and
shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
SHAREHOLDERS' TAX STATUS
Unless otherwise exempt, shareholders are subject to federal income tax on
dividends received as cash or additional shares. No portion of any income
dividend paid by a Money Market Fund is eligible for the dividends received
deduction available to corporations. These dividends, and any short-term capital
gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by each of the Money Market Funds could result
in an increase in dividends. Capital losses could result in a decrease in
dividends. If for some extraordinary reason a Money Market Fund realizes
net long-term capital gains, it will distribute them at least once every
12 months.
YIELD
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The Money Market Funds calculate the yield for their shares daily, based upon
the seven days ending on the day of the calculation, called the "base period."
This yield is computed by:
- - determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased
- - with dividends earned from the original one share and all dividends declared
on the original and any purchased shares;
- - dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- - multiplying the base period return by 365/7.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Money
Market Funds shares, the performance will be reduced for those shareholders
paying those fees.
EFFECTIVE YIELD
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The Money Market Funds' effective yield is computed by compounding the
unannualized base period return by:
- - adding 1 to the base period return;
- - raising the sum to the 365/7th power; and
- - subtracting 1 from the result.
TAX-EQUIVALENT YIELD
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The tax-equivalent yield is calculated similarly to the yield, but reflects the
taxable yield that Shares would have had to earn to equal its actual yield,
assuming a 15%, 28%, 31%, 36% or 39.60% federal tax rate and the regular
personal income tax rates imposed by Connecticut and Massachusetts for
individual taxpayers and assuming that income earned by the Fund is 100%
tax-exempt on a regular federal, state, and local basis.
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TAX-EQUIVALENCY TABLE--CONNECTICUT MUNICIPAL MONEY MARKET FUND
The Connecticut Municipal Money Market Fund may use a tax-equivalency table in
advertising and sales literature. The interest earned by the municipal bonds in
the Fund's portfolio generally remains free from federal regular income tax, and
from the regular personal income tax imposed by Connecticut.* As the table below
indicates, a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between "tax-free" and taxable yields.
<TABLE>
<S> <C> <C> <C> <C> <C>
TAXABLE YIELD EQUIVALENT FOR 1993
STATE OF CONNECTICUT
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FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE:
19.50% 32.50% 35.50% 40.50% 44.10%
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JOINT RETURN: $1-36,900 $36,901-89,150 $89,151-140,000 $140,001-250,000 OVER $250,000
SINGLE RETURN: $1-22,100 $22,101-53,500 $53,501-115,000 $115,001-250,000 OVER $250,000
- -----------------------------------------------------------------------------------------------------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
- -----------------------------------------------------------------------------------------------------------
1.50% 1.86% 2.22% 2.33% 2.52% 2.68%
2.00% 2.48% 2.96% 3.10% 3.36% 3.58%
2.50% 3.11% 3.70% 3.88% 4.20% 4.47%
3.00% 3.73% 4.44% 4.65% 5.04% 5.37%
3.50% 4.35% 5.19% 5.43% 5.88% 6.26%
4.00% 4.97% 5.93% 6.20% 6.72% 7.16%
4.50% 5.59% 6.67% 6.98% 7.56% 8.05%
5.00% 6.21% 7.41% 7.75% 8.40% 8.94%
5.50% 6.83% 8.15% 8.53% 9.24% 9.84%
6.00% 7.45% 8.89% 9.30% 10.08% 10.73%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions.
The above chart is for illustrative purposes only and uses tax brackets that
went into effect beginning January 1, 1993. It is not an indicator of past or
future performance of the Fund.
* Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local regular or alternative minimum taxes.
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TAX-EQUIVALENCY TABLE--MASSACHUSETTS MUNICIPAL MONEY MARKET FUND
The Massachusetts Municipal Money Market Fund may use a tax-equivalency table in
advertising and sales literature. The interest earned by the municipal bonds in
the Fund's portfolio generally remains free from federal regular income tax, and
from the regular personal income tax imposed by Massachusetts.* As the table
below indicates, a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between "tax-free" and taxable yields.
<TABLE>
<S> <C> <C> <C> <C> <C>
TAXABLE YIELD EQUIVALENT FOR 1993
COMMONWEALTH OF MASSACHUSETTS
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FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE:
27.00% 40.00% 43.00% 48.00% 51.60%
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JOINT RETURN: $1-36,900 $36,901-89,150 $89,151-140,000 $140,001-250,000 OVER $250,000
SINGLE RETURN: $1-22,100 $22,101-53,500 $53,501-115,000 $115,001-250,000 OVER $250,000
- -----------------------------------------------------------------------------------------------------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
- -----------------------------------------------------------------------------------------------------------
1.50% 2.05% 2.50% 2.63% 2.88% 3.10%
2.00% 2.74% 3.33% 3.51% 3.85% 4.13%
2.50% 3.42% 4.17% 4.39% 4.81% 5.17%
3.00% 4.11% 5.00% 5.26% 5.77% 6.20%
3.50% 4.79% 5.83% 6.14% 6.73% 7.23%
4.00% 5.48% 6.67% 7.02% 7.69% 8.26%
4.50% 6.16% 7.50% 7.89% 8.65% 9.30%
5.00% 6.85% 8.33% 8.77% 9.62% 10.33%
5.50% 7.53% 9.17% 9.65% 10.58% 11.36%
6.00% 8.22% 10.00% 10.53% 11.54% 12.40%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions.
The above chart is for illustrative purposes only and uses tax brackets that
went into effect beginning January 1, 1993. It is not an indicator of past or
future performance of the Fund.
* Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local regular or alternative minimum taxes.
PERFORMANCE COMPARISONS
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The performance of a Money Market Fund depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates on money market instruments;
- - changes in a Money Market Fund's expenses; and
- - the relative amount of a Money Market Fund's cash flow.
From time to time a Money Market Fund's may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
For the Connecticut/Massachusetts Municipal Money Market Funds:
- - LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote their Lipper rankings in the 'money
market instrument funds' category in advertising and sales literature.
- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
For the Prime Money Market Fund:
- - DONOGHUE'S MONEY FUND REPORT publishes annualized yields of hundreds of money
market funds on a weekly basis and through its Money Market Insight
publication reports monthly and 12-months-to-date investment results for the
same money funds.
- - LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the 'money market
instrument funds' category in advertising and sales literature.
- - BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading bank and
thrift institution money market deposit accounts. The rates published in the
index are an average of the personal account rates offered on the Wednesday
prior to the date of publication by ten of the largest banks and thrifts in
each of the five largest Standard Metropolitan Statistical Areas. Account
minimums range upward from $2,500 in each institution and compounding methods
vary. If more than one rate is offered, the lowest rate is used. Rates are
subject to change at any time specified by the institution.
A Money Market Fund may also advertise the performance of such indices and the
types of securities in which it invests as compared to the rate of inflation.
Investors may use such indices or reporting services in addition to the Money
Market Funds' combined prospectus to obtain a more complete view of a Money
Market Fund's performance before investing. Of course, when comparing any Money
Market Fund's performance to any index, factors such as composition of the index
and prevailing market conditions should be considered in assessing the
significance of such comparisons.
When comparing funds using reporting services, or total return and yield or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
Advertisements and other sales literature for a Money Market Fund may quote
total returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in the
Money Market Funds based on monthly reinvestment of dividends over a specified
period of time.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements for the fiscal year ended October 31, 1993 are
incorporated herein by reference to the Annual Report of the Trust dated October
31, 1993. A copy of the Annual Report may be obtained without charge by
contacting the Trust at the address located on the back cover of the prospectus.
APPENDIX
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STANDARD AND POOR'S CORPORATION SHORT-TERM MUNICIPAL OBLIGATION RATING
DEFINITIONS
SP1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM MUNICIPAL OBLIGATION RATING
DEFINITIONS
MIG1/VMIG1--Notes which are rated MIG1/VMIG1 are of the best quality. There is
present strong protection by established cash flows, superior liquidity support,
or demonstrated broad-based access to the market for refinancing.
MIG2/VMIG2--Notes which are rated MIG2/VMIG2 are of high quality. Margins of
protection are ample although not so large as in MIG1/VMIG1 ratings.
FITCH INVESTORS SERVICE, INC. TAX-EXEMPT INVESTMENT NOTE RATING DEFINITIONS
FIN-1--Notes regarded as having the strongest degree of assurance for timely
payment.
FIN-2--Notes reflecting a degree of assurance for timely payment only slightly
less in degree than the highest category.
STANDARD & POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
'A-1.'
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
P-1--Issuers (or supporting institutions) rated Prime-1 (P-1) have a superior
ability for repayment of senior short-term debt obligations. P-1 repayment
ability will often be evidenced by many of the following characteristics:
Conservative capitalization structure with moderate reliance debt and ample
asset protection.
Broad margins in earnings coverage of fixed financial charges and high internal
cash generation.
Well-established access to a range of financial markets and assured sources of
alternate liquidity.
P-2--Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
ability for repayment of senior short-term obligations. This will normally be
evidenced by many of the characteristics cited above, but to a lesser degree.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
FITCH INVESTORS SERVICE, INC. SHORT-TERM RATING DEFINITIONS
F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--(Very Strong Credit Quality). Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
'F-1+.'
F-2--(Good Credit Quality). Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the 'F-1+' and 'F-1' categories.
3120921B (2/94)
