BAYFUNDS, 497, 1994-08-29

BAYFUNDS
497, 1994-08-29

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BAYFUNDS
MONEY MARKET FUNDS
INVESTMENT SHARES

COMBINED PROSPECTUS

The shares offered in this prospectus represent interests in the Investment
Shares ("Shares") of the following money market portfolios ("Money Market
Funds") of BayFunds, an open-end, management investment company (a mutual fund):

MONEY MARKET FUNDS
BAYFUNDS MONEY MARKET PORTFOLIO--Investment Shares and Trust Shares
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO--Investment Shares and
Institutional Shares

In addition, BayFunds offers the following three other separate investment
portfolios, each having a distinct investment objective and policies:
BayFunds Bond Portfolio--Investment Shares and Institutional Shares
BayFunds Short Term Yield Portfolio--Investment Shares and Institutional
Shares
BayFunds Equity Portfolio--Investment Shares and Institutional Shares

This prospectus relates only to the Investment Shares of the Money Market Funds
(individually referred to as a "Fund" or collectively as the "Funds").
Investment Shares of the Money Market Funds are designed primarily for
individuals who purchase Shares through BayBanks and its affiliates.

Shareholders can invest, reinvest or redeem shares at any time with no sales
loads or redemption fees imposed by the Money Market Funds. Shareholders have
access to other portfolios in BayFunds through an exchange program with no sales
loads or redemption fees.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
BAYBANKS, INC., OR ITS SUBSIDIARIES, ARE NOT ENDORSED OR GUARANTEED BY BAYBANKS,
INC., OR ITS SUBSIDIARIES, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.

AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUNDS ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO DO SO.

This prospectus contains the information you should read and know before you
invest in Investment Shares of the Money Market Funds. Keep this prospectus for
future reference.

The Funds have also filed a combined Statement of Additional Information dated
April 22, 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 Funds by writing to the Funds or calling toll-free
1-800-BAY-FUND (1-800-229-3863).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus dated April 22, 1994

(Revised August 29, 1994)

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TABLE OF CONTENTS

Synopsis..................................................................... 1

Summary of Fund Expenses..................................................... 2

Financial Highlights--Investment Shares...................................... 3

General Information........................................................ 5

Investment Objective and Policies
of Each Fund............................................................... 5

Money Market Fund.......................................................... 5
Acceptable Investments.................................................. 6
Treasury Fund.............................................................. 6
Acceptable Investments.................................................. 6

Portfolio Investments and Strategies
of the Funds............................................................... 7
Government Securities...................................................... 7
Repurchase Agreements...................................................... 7
When-Issued and Delayed Delivery
Transactions............................................................ 7
Lending of Portfolio Securities............................................ 7
Restricted and Illiquid Securities......................................... 7
Reverse Repurchase Agreements.............................................. 8
Ratings.................................................................... 8
Bank Instruments........................................................... 9
Demand Master Notes........................................................ 9
Credit Enhancement......................................................... 9
Puts and Standby Commitments............................................... 9
Investing in Securities of Other
Investment Companies.................................................... 9
Investment Risks.......................................................... 10
Investment Limitations...................................................... 10
Regulatory Compliance....................................................... 11

BayFunds Information......................................................... 11
Management of BayFunds..................................................... 11
Board of Trustees....................................................... 11
Investment Advisers..................................................... 11
Advisory Fees......................................................... 11
Advisers' Background.................................................. 12
Distribution of the Funds' Shares.......................................... 12
Administration of the Funds................................................ 12
Administrative Services................................................. 13
Custodian............................................................... 13
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services.............................................................. 13
Shareholder Servicing Arrangements...................................... 13
Legal Counsel........................................................... 13
Independent Auditors.................................................... 13
Expenses of the Funds and Shares............................................. 14
Net Asset Value.............................................................. 14
Pricing of Shares.......................................................... 14

Investing in Shares.......................................................... 15
Minimum Investment......................................................... 15
When You May Purchase Shares............................................... 15
When Your Purchase Is Effective............................................ 15
Purchases By Mail.......................................................... 16
Purchases By Phone......................................................... 16
Purchases By Wire.......................................................... 16
Purchases Through BayBanks Offices......................................... 17
Automatic Investment Program............................................... 17

Exchange Privileges.......................................................... 17
Exchanges By Telephone..................................................... 18
Written Exchanges.......................................................... 18
Exchanges Through BayBanks Offices......................................... 18

Redeeming Shares............................................................. 19
When You May Redeem Shares................................................. 19
When Redemptions Are Paid.................................................. 19
Signature Guarantees.................................................... 19
Redemptions By Mail........................................................ 19
Redemptions By Phone....................................................... 20
Redemption Proceeds By Wire................................................ 20
Redemptions Through BayBanks Offices....................................... 20

Backup Withholding........................................................... 20
Redemptions Before Purchase
Instruments Clear....................................................... 20
Automatic Withdrawal Program............................................... 21

Shareholder Information...................................................... 21
Balances In Accounts....................................................... 21
Dividends and Distributions................................................ 21
Confirmations and Monthly Statements....................................... 22
Corporate Customers........................................................ 22
Retirement Plans........................................................... 22
Voting Rights.............................................................. 22

Authority To Act As Investment Advisers...................................... 23

Tax Information.............................................................. 24
Federal Income Tax......................................................... 24

Performance Information...................................................... 24

Other Classes of Shares...................................................... 25

Financial Highlights--Trust Shares
and Institutional Shares................................................ 26

Addresses......................................................Inside Back Cover

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SYNOPSIS

INVESTMENT OBJECTIVE AND POLICIES

BayFunds offers you a convenient and affordable way to participate in five
separate, professionally managed, diversified investment portfolios with
distinct investment objectives and policies. This prospectus relates only to the
Investment Shares of the BayFunds Money Market Portfolio ("Money Market Fund")
and BayFunds U.S. Treasury Money Market Portfolio ("Treasury Fund")
(individually a "Fund" and collectively the "Funds").

BAYFUNDS MONEY MARKET
PORTFOLIO SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH STABILITY OF
PRINCIPAL AND LIQUIDITY BY INVESTING IN A PORTFOLIO OF MONEY MARKET
INSTRUMENTS WITH REMAINING MATURITIES OF 397 DAYS OR LESS; AND

BAYFUNDS U.S. TREASURY MONEY
MARKET PORTFOLIO SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH STABILITY
OF PRINCIPAL AND LIQUIDITY BY INVESTING IN A PORTFOLIO CONSISTING PRIMARILY
OF SHORT-TERM U.S. TREASURY OBLIGATIONS WITH REMAINING MATURITIES OF 397
DAYS OR LESS.

As of the date of this prospectus, BayFunds offers shares in three other
portfolios:

BAYFUNDS SHORT TERM YIELD PORTFOLIO seeks a high level of current income
consistent with preservation of capital by investing in a diversified
portfolio of high-grade debt obligations. The Fund will maintain a
dollar-weighted average portfolio maturity of three years or less;

BAYFUNDS BOND PORTFOLIO seeks to achieve high current income and capital
appreciation by investing, under normal market and economic conditions, at
least 65% of the value of its total assets in bonds. The Fund will maintain a
dollar-weighted average porfolio maturity of twelve years or less; and

BAYFUNDS EQUITY PORTFOLIO seeks to provide long-term capital appreciation, by
investing, under normal market and economic conditions, at least 65% of the
value of its total assets in a broadly diversified portfolio of equity
securities, with current income as a secondary objective.

Shareholders may exchange Investment Shares in the Funds for Investment Shares
in the other portfolios of BayFunds without any redemption fee or other charge.
(See "Exchange Privileges" at pages 17-18.)

VALUING FUND SHARES

Each Fund attempts to maintain a stable net asset value (or market value) of
$1.00 per share, although there is no assurance that it will be able to do so.
(See "Net Asset Value" at page 14.)

BUYING AND REDEEMING FUND
SHARES

You can conveniently buy and redeem Fund shares on any Business Day. (See
"Investing in Shares" at pages 15-17 and "Redeeming Shares" at pages 19-21.)
Shares of a Fund are bought and redeemed at net asset value without a sales load
or redemption fees. The minimum initial investment in a Fund is $2,500, or $500
if you participate in the Automatic Investment Program or invest through an
Individual Retirement Account ("IRA"). Subsequent investments must be in amounts
of at least $100, or $50 if you participate in the Automatic Investment Program
or invest through an IRA. (See "Automatic Investment Program" at page 17.)

FUND MANAGEMENT

The investment adviser for the Money Market Fund is BayBanks Investment
Management, Inc., and the investment adviser for the Treasury Fund is BayBank
Boston, N.A., each of which makes investment decisions for the respective Fund.
(See "BayFunds Information" at page 11.)

SHAREHOLDER SERVICES

When you become a shareholder, you can easily obtain information about your
account, and about the Funds and other BayFunds' portfolios by calling toll-free
1-800-BAY-FUND (1-800-229-3863.)

RISK FACTORS

An investment in the Fund may involve certain risks that are explained more
fully in the sections of the prospectus discussing each Fund's investment
policies and its acceptable investments. (See "Investment Risks" at page 10.)

- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
SUMMARY OF FUND EXPENSES

<TABLE>
<CAPTION>
MONEY
INVESTMENT SHARES MARKET TREASURY
SHAREHOLDER TRANSACTION EXPENSES FUND FUND
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................. None None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)....... None None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable)..................................................... None None
Redemption Fees (as a percentage of amount redeemed, if applicable).......................... None None
Exchange Fees................................................................................ None None
<CAPTION>
MONEY
ANNUAL INVESTMENT SHARES OPERATING EXPENSES MARKET TREASURY
(As a percentage of average net assets) FUND FUND
<S> <C> <C>
Management Fees (after waiver) (1)........................................................... 0.36% 0.20%
12b-1 Fees................................................................................... None None

Total Other Expenses......................................................................... 0.46% 0.44%
Shareholder Servicing Fees (after waiver) (2)..................................... 0.18% 0.25%
Total Investment Shares Operating Expenses (3)...................................... 0.82 % 0.64 %
</TABLE>

(1) The management fee has been reduced to reflect the voluntary waiver of the
management fee for the Money Market Fund. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee for the Money Market Fund is 0.40%.

(2) The Funds can pay up to 0.25% of Investment Shares average daily net assets
for shareholder servicing agent fees. See "Shareholder Servicing
Arrangements."

(3) The Total Investment Shares Operating Expenses would be 0.93% for the Money
Market Fund, absent the voluntary waiver of expenses described in notes (1)
and (2) above.

The Annual Investment Shares Operating Expenses for the Money Market Fund and
Treasury Fund were 0.62% and 0.62%, respectively, for the fiscal year ended
December 31, 1993. The Operating Expenses in the table above are based on
estimated expenses expected during the fiscal year ending December 31, 1994.

The above table can help you understand 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 "BayFunds
Information" and "Investing in Shares." Wire-transferred redemptions may be
subject to additional fees.

EXAMPLE:
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return MONEY
and (2) redemption at the end of each time period. As noted in the table above, the Funds MARKET TREASURY
charge no redemption fees for Investment Shares. FUND FUND
1 Year........................................................................................ $ 8 $ 7
3 Years....................................................................................... $ 26 $20
5 Years....................................................................................... $ 46 $36
10 Years...................................................................................... $101 $80
</TABLE>

THE ABOVE EXAMPLE 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 the
Money Market Fund and the Treasury Fund Investment Shares. The Funds also offer
another class of shares called Trust Shares and Institutional Shares,
respectively. Trust Shares of the Money Market Portfolio and Institutional
Shares of the Treasury Fund and Investment Shares of both Funds are generally
subject to the same expenses. However, Trust Shares and Institutional Shares are
not subject to a shareholder servicing fee. See "Other Classes of Shares."

- --------------------------------------------------------------------------------
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young, the Trust's independent
auditors. Their report dated February 11, 1994, on the Fund's financial
statements for the year ended December 31, 1993, and on the following table for
the period presented, is included in the Annual Report to Shareholders dated
December 31, 1993, 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 free of charge from the Trust.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993*
<S> <C>
- ---------------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income 0.03
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ---------------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------------------------------------- -----------------
TOTAL RETURN** 2.58%
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------------
Expenses 0.62%(b)
- ----------------------------------------------------------------------------------------------------
Net investment income 2.60%(b)
- ----------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.11%(b)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $30,746
- ----------------------------------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from January 19, 1993 (date of initial
public offering) to
December 31, 1993.

** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.

(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

(b) Computed on an annualized basis.

Further information about the Fund's performance is contained in its Annual
Report dated December 31, 1993, which can be obtained free of charge.

- --------------------------------------------------------------------------------
TREASURY FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 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 0.62%(a)
- ----------------------------------------------------------------------------------------------------
Net investment income 2.59%(a)
- ----------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.07%(a)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,694
- ----------------------------------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from January 29, 1993 (date of initial
public offering) to
December 31, 1993.

** 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.

Further information about the Fund's performance is contained in its Annual
Report dated December 31, 1993, which can be obtained free of charge.

- --------------------------------------------------------------------------------
GENERAL INFORMATION

BayFunds was established as a Massachusetts business trust under a Declaration
of Trust dated April 1, 1991. The Declaration of Trust permits BayFunds to offer
separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. With respect to the Funds, as of the date of this
prospectus, the Board of Trustees ("Trustees") has established two classes of
shares, Trust Shares and Investment Shares of the Money Market Fund and
Institutional Shares and Investment Shares of the Treasury Fund. This prospectus
relates only to Investment Shares ("Shares") of the Funds.

The Shares are designed primarily for individuals who purchase Shares through
BayBanks and its affiliates and seek a convenient means of accumulating an
interest in a professionally managed, diversified portfolio of securities.

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND
POLICIES OF EACH FUND

The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.

Unless indicated otherwise, the investment policies of a Fund may be changed by
the Trustees without approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.

For additional information about the investment strategies that one or both
Funds may employ, and certain investment policies mentioned below, please refer
to the "Portfolio Investments and Strategies of the Funds" section of this
prospectus and the combined Statement of Additional Information.

MONEY MARKET FUND

THE MONEY MARKET FUND IS DESIGNED FOR CONSERVATIVE INVESTORS WHO WANT
CURRENT INCOME, LIQUIDITY, AND STABILITY OF PRINCIPAL.

THIS FUND SEEKS TO MAINTAIN A STABLE $1.00 SHARE PRICE, REFERRED TO AS NET
ASSET VALUE PER SHARE, BY INVESTING PRIMARILY IN A PORTFOLIO OF MONEY
MARKET INSTRUMENTS. WHILE THE FUND CANNOT GUARANTEE A STABLE SHARE PRICE,
THE SHORT-TERM NATURE OF ITS INVESTMENTS HELPS TO MINIMIZE PRICE
FLUCTUATIONS.

The investment objective of the Money Market Fund is to provide current income
consistent with stability of principal and liquidity. The Fund pursues its
investment objective by investing primarily in a diversified portfolio of money
market instruments with remaining maturities of 397 days or less. The average
maturity of these securities, computed on a dollar-weighted basis, will be 90
days or less.

ACCEPTABLE INVESTMENTS

The Money Market Fund invests in high quality money market instruments that are
either rated in the highest short-term rating category by 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;

commercial paper (including Canadian Commercial Paper and Europaper);

certificates of deposit, demand and time deposits, savings shares, bankers'
acceptances, deposit notes and other instruments of domestic and foreign
banks, savings and loans and other deposit or thrift institutions ("Bank
Instruments");

demand master 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

other money market instruments.

The Money Market Fund invests only in instruments denominated and payable in
U.S. dollars.

TREASURY FUND

THE TREASURY FUND IS DESIGNED FOR CONSERVATIVE INVESTORS WHO WANT CURRENT
INCOME, LIQUIDITY AND STABILITY OF PRINCIPAL AS WELL AS THE EXTRA SECURITY
OF A PORTFOLIO INVESTED ONLY IN SHORT-TERM U.S. TREASURY OBLIGATIONS AND
REPURCHASE AGREEMENTS COLLATERALIZED BY SUCH OBLIGATIONS. THIS FUND SEEKS
TO MAINTAIN A STABLE $1.00 SHARE PRICE, REFERRED TO AS NET ASSET VALUE PER
SHARE, BY INVESTING PRIMARILY IN A PORTFOLIO OF SHORT-TERM U.S. TREASURY
OBLIGATIONS. WHILE THE FUND CANNOT GUARANTEE A STABLE SHARE PRICE, THE
SHORT-TERM NATURE OF ITS INVESTMENTS HELPS TO MINIMIZE PRICE
FLUCTUATIONS.

The investment objective of the Treasury Fund is current income consistent with
stability of principal and liquidity. The Fund pursues its investment objective
by investing, under normal market conditions, at least 65% of the value of its
total assets in U.S. Treasury obligations with remaining maturities of 397 days
or less. The average maturity of these securities, computed on a dollar-weighted
basis, will be 90 days or less.

ACCEPTABLE INVESTMENTS

The Treasury Fund invests at least 65% of the value of its total assets in U.S.
Treasury obligations. These instruments are issued by the U.S. government, its
agencies, or instrumentalities and are fully guaranteed as to principal and
interest by the United States. They mature in 397 days or less from the date of
acquisition, or have a variable rate of interest adjusted no less frequently
than every 397 days, or are purchased pursuant to a repurchase agreement which
provides for repurchase by the seller within 397 days from the date of
acquisition.

- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS AND
STRATEGIES OF THE FUNDS

GOVERNMENT SECURITIES

The types of Government Securities in which the Funds may invest generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and, with respect to the Money Market Fund, 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 Home Loan Banks;

Federal Home Loan Mortgage Corporation;

Federal Farm Credit Banks;

The Student Loan Marketing Association; and

Federal National Mortgage Association.

REPURCHASE AGREEMENTS

The securities in which the Funds invest may be purchased pursuant to repurchase
agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Funds and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Funds, the Funds could receive more or less than the
repurchase price on any sale of such securities.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Funds may purchase portfolio securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Funds purchase
securities with payment and delivery scheduled for a future time. The Funds
engage in when-issued and delayed delivery transactions only for the purpose of
acquiring portfolio securities consistent with the Funds' investment objective
and policies, not for investment leverage. In when-issued and delayed delivery
transactions, the Funds rely on the seller to complete the transaction. The
seller's failure to deliver the securities may cause the Funds to miss a price
or yield considered to be advantageous.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Funds may lend their portfolio
securities on a short-term basis to broker/dealers, banks, or other
institutional borrowers of securities. The Funds will limit the amount of
portfolio securities they may lend to not more than one-third of their
respective total assets. The Funds will only enter into loan arrangements with
broker/dealers, banks, or other institutions that their investment advisers have
determined are creditworthy under guidelines established by the Trustees and
will receive collateral equal to at least 100% of the value of the securities
loaned.

RESTRICTED AND ILLIQUID SECURITIES

The Funds may invest in restricted securities. Restricted securities are any
securities in which the Funds may otherwise invest pursuant to their investment
objective and policies, but which are subject to restriction on resale under
federal securities law. However, the Funds will limit investments in illiquid
securities, including certain restricted securities not determined by the
Trustees to be liquid, non-negotiable time deposits, and repurchase agreements
providing for settlement in
more than seven days after notice, to 10% of its net assets.

The 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 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 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 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 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 Money Market Fund's investment 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 Money Market Fund
intends to not subject such paper to the limitation applicable to restricted
securities.

REVERSE REPURCHASE AGREEMENTS

The Funds may enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, a 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
Funds will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.

When effecting reverse repurchase agreements, assets of the Fund, in a dollar
amount sufficient to make payment for the obligations to be purchased, are
segregated at the trade date and maintained until the transaction is settled.

During the period any reverse repurchase agreements are outstanding, the Fund
will restrict the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase agreements,
but only to the extent necessary to assure completion of the reverse repurchase
agreements.

The use of reverse repurchase agreements may enable the Funds 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 Funds will be able to avoid selling portfolio instruments at a
disadvantageous time.

RATINGS

An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's Corporation ("S&P"), Prime-1 by Moody's Investors Service,
Inc. ("Moody's"), or F-1+ or F-1 by Fitch Investors Service, Inc. ("Fitch") are
all considered rated in the highest short-term rating category. The Funds will
follow applicable regulations in determining whether a security rated by more
than one NRSRO can be treated as being in the highest short-term rating
category. See "Regulatory Compliance."

BANK INSTRUMENTS

The Money Market Fund may invest in Bank Instruments which are either issued by
an institution having capital, surplus and undivided profits over $100 million
as of the date of its most
recently published financial statements or which are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF"), both
of which are administered by the Federal Deposit Insurance Corporation ("FDIC").
Bank Instruments may include Eurodollar Certificates of Deposit ("ECDs"), Yankee
Certificates of Deposit ("Yankee CDs"), and Eurodollar Time Deposits ("ETDs").
The Money Market Fund will treat securities that are credit enhanced with a
bank's letter of credit as Bank Instruments.

DEMAND MASTER NOTES

The Money Market Fund may purchase demand master notes, which are short-term
borrowing arrangements between a corporation or government agency and an
institutional lender (such as the 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. Many master notes give
the Money Market Fund the option of increasing or decreasing the principal
amount of the master note on a daily or weekly basis within certain limits.
Demand master notes and other short-term credit arrangements usually provide for
floating or variable rates of interest.

CREDIT ENHANCEMENT

The Money Market Fund may acquire securities that have been credit enhanced by a
guaranty, letter of credit or insurance. The Money Market Fund will 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, credit enhanced
securities will not be treated as having been issued by the credit enhancer for
diversification purposes. However, under certain circumstances, as required by
applicable regulations, the securities will be treated as having been issued
both by the issuer and the credit enhancer.

PUTS AND STANDBY COMMITMENTS

The Money Market Fund may acquire securities that are subject to puts and
standby commitments to repurchase the securities at their principal amount
(usually with accrued interest) within a fixed period (usually seven days)
following a demand by the Money Market Fund. The puts and standby commitments
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. These arrangements are used to provide the Money Market
Fund with liquidity and not to protect against changes in the market value of
the underlying securities. Puts that are exercisable even after a payment
default on the underlying security may be treated as a form of credit
enhancement.

INVESTING IN SECURITIES OF
OTHER INVESTMENT COMPANIES

The Money Market Fund may invest in the securities of other investment companies
that are money market funds having investment objectives and policies similar to
its own, but it will not own more than 3% of the total outstanding voting stock
of any such investment company, invest more than 5% of its total assets in any
one such investment company, or invest more than 10% of its total assets in such
other investment companies in general. The Money Market Fund 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. The Money
Market Fund's adviser will waive its investment advisory fee on assets invested
in securities of open-end investment companies.

INVESTMENT RISKS

The ECDs, ETDs, Yankee CDs, and Europaper which the Money Market Fund may
purchase are subject to different risks than domestic obligations of domestic
banks or corporations. Examples of
these risks include international economic and political developments, foreign
governmental restrictions that may adversely affect the payment of principal or
interest, foreign withholding or other taxes on interest income, difficulties in
obtaining or enforcing a judgment against the issuing entity, and the possible
impact of interruptions in the flow of international currency transactions.
Different risks may also exist for ECDs, ETDs, and Yankee CDs because the banks
issuing these instruments, or their domestic or foreign branches, are not
necessarily subject to the same regulatory requirements that apply to domestic
banks, such as reserve requirements, loan
limitations, examinations, accounting, auditing, recordkeeping, and the public
availability of information. These factors will be carefully considered by the
Money Market Fund's adviser in selecting investments for the Money Market Fund.

- --------------------------------------------------------------------------------

INVESTMENT LIMITATIONS

The Funds will not:

borrow money directly or through reverse repurchase agreements (arrangements
in which the Funds sell a portfolio instrument for a percentage of their cash
value with an agreement to buy it back on a set date) or pledge securities
except, under certain circumstances, the Funds may borrow money and engage in
reverse repurchase agreements in amounts up to one-third of the value of
their respective total assets and pledge up to 15% of the value of those
assets to secure such borrowings; nor

with respect to 75% of the value of their respective total assets, invest
more than 5% in securities of 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.

The above limitations cannot be changed without shareholder approval. The
following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.

The Funds will not:

invest more than 10% of their respective net assets in illiquid securities,
including repurchase agreements providing for settlement in more than seven
days after notice.

- --------------------------------------------------------------------------------
REGULATORY COMPLIANCE

The Funds may follow non-fundamental operating policies that are more
restrictive than their fundamental investment limitations, as set forth in this
prospectus and 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 (the "ICA"). In
particular, the Funds will comply with the various requirements of Rule 2a-7
under the ICA, which regulates money market mutual funds. For example, Rule 2a-7
generally prohibits the investment of more than 5% of each Fund's total assets
in the securities of any one issuer, although each Fund's investment limitation
only requires such 5% diversification with respect to 75% of its assets.
However, U.S. government securities may be purchased without regard to this 5%
limitation. The Funds will also determine the effective maturity of their
investments, as well as their ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Funds
may change these operational policies to reflect changes in the laws and
regulations without the approval of their shareholders.

- -------------------------------------------------------
BAYFUNDS INFORMATION

MANAGEMENT OF BAYFUNDS

BOARD OF TRUSTEES

A BOARD OF TRUSTEES SUPERVISES BAYFUNDS.

BayFunds is managed by a Board of Trustees. The Trustees are responsible for
managing BayFunds' business affairs and for exercising all BayFunds' powers
except those reserved for the shareholders.

INVESTMENT ADVISERS

ACTING UNDER THE DIRECTION OF THE TRUSTEES, THE ADVISERS MAKE INVESTMENT
DECISIONS FOR THE FUNDS.

Pursuant to investment advisory contracts with BayFunds, investment decisions
for the Money Market Fund are made by BayBanks Investment Management, Inc., and
investment decisions for the Treasury Fund are made by BayBank Boston, N.A., the
Funds' investment advisers (individually referred to as the "Adviser," and
collectively as the "Advisers"), subject to direction by the Trustees. The
Advisers conduct investment research and supervision for the respective Funds
and are responsible for the purchase and sale of portfolio instruments, for
which they receive an annual fee from the respective Fund.

ADVISORY FEES

BayBanks Investment Management, Inc. receives an annual investment advisory fee
equal to .40 of 1% of the Money Market Fund's average daily net assets. BayBank
Boston, N.A. receives an annual investment advisory fee equal to .20 of 1% of
the Treasury Fund's average daily net assets. The Advisers have undertaken to
reimburse the respective Funds, up to the amount of the advisory fees, for
operating expenses in excess of limitations established by certain states. The
Advisers also may voluntarily choose to waive a portion of their fees or
reimburse the Funds for certain other expenses, but reserve the right to
terminate such waiver or reimbursement at any time at their sole discretion.

ADVISERS' BACKGROUND

THE ADVISERS HAVE EXTENSIVE INVESTMENT EXPERIENCE AND ARE SUBSIDIARIES OF A
LEADING NEW ENGLAND FINANCIAL SERVICES ORGANIZATION.

The Advisers are wholly-owned subsidiaries of BayBanks, Inc., a bank holding
company organized under the laws of the Commonwealth of Massachusetts. BayBanks,
Inc., through its banking subsidiaries (hereinafter "BayBanks") and affiliates,
offers a full range of financial services to the public, including depository
services, commercial lending, cash management, brokerage, retail banking,
mortgage banking, and investment advisory and trust services. As part of their
regular banking operations, BayBanks may make loans to public companies. Thus,
it may be possible, from time to time, for the Funds to hold or acquire the
securities of issuers which are also lending clients of BayBanks. The lending
relationship will not be a factor in the selection of securities.

BayBanks Investment Management, Inc., Adviser for the Money Market Fund, is a
registered investment adviser and provides investment advisory services for
trust and other managed assets. BayBanks Investment Management, Inc. was
established as a separate subsidiary of BayBanks, Inc. in 1985, but its
predecessor division and personnel have been providing investment advisory
services to BayBanks' customers for more than 65 years. As of December 31, 1993,
the Trust Division of BayBank, a state-chartered affiliate of
BayBanks Investment Management, Inc. acted as custodian for assets totaling $4.7
billion. Of this amount, BayBanks Investment Management, Inc. managed $2.7
billion of discretionary assets. BayBanks Investment Management, Inc. and
BayBanks have been managing commingled funds for over twenty years. At the
present time BayBanks Investment Management, Inc. serves as adviser to five such
commingled funds with total assets of approximately $290 million. BayBanks
Investment Management, Inc. has managed mutual funds since August 1991 and
manages approximately $562 million (as of December 31, 1993) in various BayFunds
portfolios.

BayBank Boston, N.A., Adviser to the Treasury Fund, through its Capital Markets
Division, manages more than $2 billion of assets in the investment portfolios of
BayBanks, Inc. and BayBanks, and approximately $537 million (as of December 31,
1993) in the Treasury Fund. BayBank Boston, N.A., is a national banking
association.

DISTRIBUTION OF THE FUNDS' SHARES

FEDERATED SECURITIES CORP. IS THE PRINCIPAL DISTRIBUTOR FOR SHARES OF THE
FUNDS.

Federated Securities Corp. is the principal distributor (the "Distributor") for
Shares of the Funds. It is a Pennsylvania corporation organized on November 14,
1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.

ADMINISTRATION OF THE FUNDS

VARIOUS ORGANIZATIONS PROVIDE SERVICES TO THE FUNDS.

ADMINISTRATIVE SERVICES

Federated Administrative Services, a subsidiary of Federated Investors, provides
the Funds with certain administrative personnel and services necessary to
operate the Funds, such as legal and accounting services. Federated
Administrative Services provides these at an annual rate as specified below:

<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM DAILY NET ASSETS
ADMINISTRATIVE FEE OF BAYFUNDS
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of
$750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least $50,000
for each Fund. Federated Administrative Services may choose voluntarily to
reimburse a portion of its fee at any time.

CUSTODIAN

The Fifth Third Bank, Cincinnati, Ohio, is custodian for the securities and cash
of the Funds.

TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND
PORTFOLIO ACCOUNTING SERVICES

Supervised Service Company, Inc. (the "Transfer Agent"), Kansas City, Missouri,
is transfer agent for the Shares of the Funds, and dividend disbursing agent for
the Funds. Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of
Federated Investors, provides portfolio accounting services for the Funds.

SHAREHOLDER SERVICING ARRANGEMENTS

BayBank Systems, Inc., Waltham, Massachusetts, is the shareholder servicing
agent for the Funds ("Shareholder Servicing Agent"). Each Fund may pay the
Shareholder Servicing Agent a fee based on the average daily net asset value of
Shares for which it provides shareholder services. These shareholder services
include, but are not limited to, distributing prospectuses and other
information, providing shareholder assistance and communicating or facilitating
purchases and redemptions of Shares of each Fund. This fee will be equal to .25
of 1% of each Fund's average daily net assets for which the Shareholder
Servicing Agent provides services; however, the Shareholder Servicing Agent may
choose voluntarily to waive all or a portion of its fee at any time.

LEGAL COUNSEL

Legal counsel is provided by Ropes & Gray, Washington, D.C., Counsel to
BayFunds, and Sullivan & Worcester, Washington, D.C., Counsel to the Independent
Trustees.

INDEPENDENT AUDITORS

The independent auditors for the Funds are Ernst & Young, Pittsburgh,
Pennsylvania.

EXPENSES OF THE FUNDS
AND SHARES

The Funds pay all of their own expenses and their allocable share of BayFunds'
expenses. The expenses borne by the Funds include the following types of
expenses: organization fees; Trustees fees; fees for those management and
administration services described above (including legal, audit and custodian
fees); and printing, registration and mailing costs for legally required
documents and reports to shareholders and government agencies. The Advisers may
voluntarily waive some expenses and has, in addition, undertaken to reimburse
the Funds, up to the amount of the respective advisory fee, the amount by which
operating expenses exceed limitations imposed by certain states.

At present, the only expenses allocated to shares as a class are expenses under
the Funds' Shareholder Servicing Plan which relate to the Shares. However, the
Trustees reserve the right to allocate certain other expenses to holders of
Shares as it deems appropriate ("Class Expenses").

- --------------------------------------------------------------------------------
NET ASSET VALUE

THE TERM "NET ASSET VALUE" PER SHARE REFERS TO THE VALUE OF ONE FUND
SHARE.

Each Fund attempts to stabilize the net asset value of its Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. Net asset
value per Share for purposes of pricing purchases and redemptions is calculated
by dividing the value of all securities and other assets belonging to a Fund,
less the liabilities charged to the Fund, by the number of outstanding shares of
the Fund.

The Funds cannot guarantee that their net asset value will always remain at
$1.00 per Share.

PRICING OF SHARES

The net asset value of each Fund is determined at 2:00 p.m. (Eastern time) and
the close of regular trading hours on the New York Stock Exchange, currently
4:00 p.m. (Eastern time), Monday through Friday, except on: (i) the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day; (ii) days on
which there are not sufficient changes in the value of a Fund's portfolio
securities that its net asset value might be materially affected; and (iii) days
during which no Shares are tendered for redemption and no orders to purchase
Shares are received.

- --------------------------------------------------------------------------------
INVESTING IN
SHARES

SHARES OF THE FUNDS ARE SOLD "NO-LOAD"-- WITHOUT A SALES CHARGE. YOUR
MINIMUM INITIAL INVESTMENT IS ONLY $2,500, OR $500 IF YOU PARTICIPATE IN
THE AUTOMATIC INVESTMENT PROGRAM OR INVEST THROUGH AN IRA.

MINIMUM INVESTMENT

You can become a Fund shareholder with an initial investment of $2,500, or $500
if you participate in the Automatic Investment Program or invest through an IRA.
Subsequent investments must be in amounts of at least $100, or if you
participate in the Automatic Investment Program or invest through an IRA, the
minimum for additional Share purchases is $50. The Funds may waive any
investment minimums from time to time. In addition, the Funds may reduce or
waive investment minimums for investors purchasing through qualified BayBanks
accounts.

WHEN YOU MAY PURCHASE SHARES

The Funds offer Shares only on days on which the New York Stock Exchange and the
Federal Reserve Bank of Boston are open for business ("Business Days"). In
addition to the holidays listed above under "Pricing of Shares," other non-
Business Days include Martin Luther King's Day, Columbus Day and Veteran's Day.
If the Shareholder Servicing Agent receives your purchase order on a
non-Business Day, the order will not be executed until the next Business Day in
accordance with the Distributor's procedures. The Funds and the Distributor
reserve the right to reject any purchase request.

WHEN YOUR PURCHASE IS EFFECTIVE

Purchase orders for Shares of a Fund must be placed with the Shareholder
Servicing Agent by 11:30 a.m. (Eastern time) on a Business Day in order to be
eligible to receive dividends declared that day. Purchase orders received in
good order and accepted by the Funds from the Transfer Agent by 2:00 p.m.
(Eastern time) on a Business Day will be executed at the net asset value next
determined and will begin earning dividends that day. The Transfer Agent will
not communicate your purchase order to the Fund until the Shareholder Servicing
Agent has received the purchase price in Federal funds or other immediately
available funds. If your purchase order is received in good order and accepted
by the Funds from the Transfer Agent after 2:00 p.m. (Eastern time) and prior to
4:00 p.m. (Eastern time), it will be executed at the net asset value next
determined and Shares will begin earning dividends the next Business Day. When
you purchase Shares by check, the order is considered received when the check is
converted into Federal funds, normally within two Business Days.

To allow the Advisers to manage the Funds effectively and to enhance your
chances of being eligible to receive that day's dividend, you are strongly
encouraged to initiate all trades (purchases, redemptions, or exchanges) as
early in the day as possible. On those days when either the Federal Reserve Bank
of Boston or the U.S. Government Bond Market closes early, or, in an Adviser's
judgment, closing early is deemed to be in the best interest of a Fund's
shareholders, the right is reserved to advance the time on that day by which all
transactions (purchases, redemptions, or exchanges) must be received.

You must submit a completed and signed application at the time of your initial
purchase.

The Shareholder Servicing Agent is responsible for the prompt transmission of
purchase orders received in good order to the Transfer Agent.

SUBSEQUENT PURCHASES MAY BE MADE BY TELEPHONE, MAIL, WIRE, OR IN PERSON
THROUGH BAYBANKS OFFICES.

PURCHASES BY MAIL

If you make your initial Share purchase by mail, you must send a completed and
signed application and a check payable to the specific Fund and class, to:

BayFunds
P.O. Box 665
Waltham, MA 02254-9614

You may obtain an application by calling
1-800-BAY-FUND.

You may make subsequent investments in the Funds at any time by sending a check
for a minimum of $100 ($50 if for an IRA) payable to the specific Fund and class
at the following address:

BayFunds
P.O. Box 5-0900
Woburn, MA 01815-0900

or for IRAs:

BayFunds
P.O. Box 889
Burlington, MA 01803-5889

You must include either (a) the detachable form that regularly accompanies
confirmation of a prior transaction, (b) a subsequent order form that may be
obtained by calling 1-800-BAY-FUND, or (c) a letter stating the amount of the
investment, the name of the Fund and class of shares, the exact name and address
of the account, and your account number.

If the check does not clear, your purchase order will be cancelled and you could
be held liable for associated transaction costs.

PURCHASES BY PHONE

Once you are a Fund shareholder, you may purchase additional Shares by calling
1-800-BAY-FUND.

You must have previously authorized the specific Fund in writing to accept
telephone requests. If you have not done so, call 1-800-BAY-FUND to receive the
Options Change Form and information on this Fund feature. Each Fund uses
reasonable procedures (including a shareholder identity test and sending a
written confirmation of each telephone transaction) to confirm that instructions
given by telephone are genuine. However, a Fund is not responsible for the
authenticity of telephone instructions or for the losses caused by fraudulent or
unauthorized telephone instructions if the Fund reasonably believed that the
instructions were genuine.

The establishment of certain types of deposit account relationships with
BayBanks may permit the direct deduction of your purchase price from your
BayBanks deposit account. Please call 1-800-BAY-FUND to determine whether your
BayBanks deposit account qualifies.

For the protection of investors, all phone communications may be recorded where
not otherwise prohibited by law.

Texas residents must purchase Shares through the Distributor at 1-800-358-2805.

PURCHASES BY WIRE

If you are a Fund shareholder, you may purchase additional Shares by wire by
first notifying BayBank, as agent for the Transfer Agent, by phone at
1-800-BAY-FUND and then wiring the funds as follows:

BayBank

ABA Number: 0110-0174-2

Attention: Mutual Funds Services

For Credit to: (shareholder name and account number)

Further Credit to: (identify the appropriate Fund--Investment Shares)

PURCHASES THROUGH BAYBANKS OFFICES

You may place an order to purchase Shares of a Fund in person through designated
BayBanks offices.

Purchase orders placed through BayBanks offices typically would be received by
the Transfer Agent within two Business Days. If you want more prompt processing,
you should consider another method, such as "Purchases By Phone."

AUTOMATIC INVESTMENT PROGRAM

YOU CAN BUY SHARES CONVENIENTLY THROUGH THE AUTOMATIC INVESTMENT PROGRAM.

When you participate in the Automatic Investment Program, you can purchase
additional Fund Shares in minimum amounts of $50. You must previously have
authorized in writing the amount of funds to be deducted automatically from
eligible BayBanks deposit accounts or your deposit account maintained at a
domestic financial institution which is an automated clearing house member, and
the frequency of the deductions. The funds will be invested in Shares of the
Funds at the net asset value next determined. The Funds may reduce or waive the
investment minimums for investors purchasing through qualified BayBanks
accounts.

- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGES

IF YOUR INVESTMENT NEEDS CHANGE, YOU CAN EASILY EXCHANGE A FUND'S
INVESTMENT SHARES FOR INVESTMENT SHARES OF ANY OTHER BAYFUNDS PORTFOLIO AT
NO CHARGE.

BayFunds consists of the Funds, the BayFunds Short Term Yield Portfolio, the
BayFunds Equity Portfolio, and the BayFunds Bond Portfolio. As a shareholder,
you have access to the Investment Shares of all the portfolios ("Participating
Funds") of BayFunds through an exchange program. You may also purchase BayFunds
Shares of Massachusetts Municipal Cash Trust with redemption proceeds of a
BayFunds portfolio by calling 1-800-BAY-FUND.

You may exchange Shares having a net asset value of at least $100 for Investment
Shares of any other Participating Fund in which you have an account. The minimum
initial investment to establish an account in any other Participating Fund by
exchange is $2,500, or $500 if you participate in the Automatic Investment
Program or invest through an IRA. BayFunds does not charge any exchange fees.

Each exchange is considered a sale of shares of one fund and a purchase of
shares of another fund. Shares submitted for exchange will be redeemed at the
net asset value next determined after receipt of the exchange request by the
Transfer Agent on a Business Day. Investment Shares of the Participating Fund
to be acquired will be purchased at the net asset value per share next
determined on a Business Day. Transfers of money between a BayFunds portfolio
and BayFunds Shares of Massachusetts Municipal Cash Trust will be reflected as
a redemption and purchase on a shareholder's account statement. In a transfer
involving the BayFunds Shares of Massachusetts Municipal Cash Trust, the
purchase order will be placed on the Business Day following the Business Day
after which the redemption order has been executed.

If you do not have an account in the Participating Fund whose Investment Shares
you want to acquire, you must establish an account. Prior to any such exchange,
you must receive a copy of the current prospectus of the Investment Shares of
the Participating Fund into which an exchange is to be effected. This account
will be registered in the same name and, unless you specify otherwise, will have
the same dividend and distribution payment option you selected with your
existing account. If the new account registration (name, address, and taxpayer
identification number) is not identical to your existing account, please call
1-800-BAY-FUND for the necessary new account or transfer procedures.

The exchange privilege is available to shareholders in any state in which
Participating Funds' shares being acquired may be sold.

You may find the exchange privilege useful if your investment objectives or
market outlook should change after you invest in any of the Investment Shares of
the Participating Funds. You may obtain further information on the exchange
privilege and obtain a prospectus by calling 1-800-BAY-FUND.

BayFunds reserves the right to terminate the exchange privilege at any time on
60 days' notice. Shareholders will be notified if this privilege is terminated.

Depending on the circumstances, an exchange may generate a short-or long-term
capital gain or loss for federal income tax purposes.

EXCHANGES BY TELEPHONE

You may provide instructions for exchanges by telephone between Participating
Funds by calling 1-800-BAY-FUND.

You must have previously authorized the Funds in writing to accept telephone
requests. If you have not done so, call 1-800-BAY-FUND to receive the Options
Change Form and information on this feature. Each Fund uses reasonable
procedures (including a shareholder identity test and sending a written
confirmation of each telephone transaction) to confirm that instructions given
by telephone are genuine. However, a Fund is not responsible for the
authenticity of telephone instructions or for the losses caused by fraudulent or
unauthorized telephone instructions if the Fund reasonably believed that the
instructions were genuine.

WRITTEN EXCHANGES

You may send a written request for exchange to:

BayFunds
P.O. Box 665
Waltham, MA 02254-9614

Your written request must include your name and tax identification number; the
name of the specific Fund, the name of the class of shares; the dollar amount or
number of Shares to be redeemed; the name of the fund and class of shares in
which shares are to be purchased; and your account number. Your request must be
signed by the registered owners(s) exactly as required by the account
application.

EXCHANGES THROUGH BAYBANKS OFFICES

You may place an order to exchange Shares in person through designated BayBanks
offices.

Exchange orders received through designated BayBanks offices typically would be
received by the Transfer Agent within two Business Days. For more prompt
processing, you should consider another method, such as "Exchanges By
Telephone."

- --------------------------------------------------------------------------------
REDEEMING SHARES

WHEN YOU SELL YOUR SHARES--"REDEEM" THEM--YOU RECEIVE THE NET ASSET VALUE
PER SHARE NEXT DETERMINED AFTER THE REQUEST IS RECEIVED BY A FUND IN PROPER
FORM. THERE ARE NO FEES OR OTHER REDEMPTION CHARGES (EXCEPT FOR REDEMPTIONS
BY WIRE). YOU MAY REDEEM SOME OR ALL OF YOUR INVESTMENT.

WHEN YOU MAY REDEEM SHARES

Each Fund redeems its Shares at the net asset value next determined after the
Fund has received your redemption request from the Transfer Agent in proper
form. Redemption requests can be executed only on Business Days. If your
redemption request is received by the Shareholder Servicing Agent on a
non-Business Day, the Transfer Agent will not communicate your redemption
request to the Fund until the next Business Day.

The Funds will not process any redemptions until a completed and signed
application has been received.

WHEN REDEMPTIONS ARE PAID

Redemption proceeds may be credited to an eligible BayBanks deposit account,
paid by check, or paid by wire, as you previously designated in your
application. Shareholders of a Fund must place redemption orders with the
Shareholder Servicing Agent by 11:30 a.m. (Eastern time) on a Business Day in
order to be eligible to receive redemption proceeds by wire on the day of
redemption. The Funds ordinarily will make payment for Shares redeemed after
proper receipt from the Transfer Agent of the redemption request and of all
documents in proper form within one Business Day to an eligible BayBanks deposit
account, within five Business Days if you requested redemption proceeds by
check, or the same day by wire if the Funds receive your redemption request from
the Transfer Agent by 2:00 p.m. (Eastern time) on the day of redemption. Shares
of the Funds redeemed and wired the same day will not receive the dividend
declared on the day of redemption.

SIGNATURE GUARANTEES. If you request a redemption for an amount in excess of
$10,000 (no limitation if the proceeds are being credited to your BayBanks
deposit account), a redemption of any amount to be sent to an address other than
your address of record with the Fund, the transfer of the registration of
Shares, or a redemption of any amount payable to someone other than yourself as
the shareholder of record, your signature must be guaranteed on a written
redemption request by a trust company or insured commercial bank; an insured
savings and loan association or savings bank; a member firm of a national or
regional stock exchange; or any other "eligible guarantor institution," as
defined in the Securities Exchange Act of 1934. The Transfer Agent has adopted
standards for accepting signature guarantees from the above institutions.
BayFunds may elect in the future to limit eligible signature guarantors to
institutions that are members of a signature guarantee program. The Funds do not
accept signatures guaranteed by a notary public. BayFunds and its Transfer Agent
reserve the right to amend these standards at any time without notice. If you
have a question about the proper form for redemption requests, call
1-800-BAY-FUND.

YOU MAY REDEEM SHARES BY PHONE, MAIL, OR THROUGH BAYBANKS OFFICES. YOU MAY
RECEIVE REDEMPTION PROCEEDS BY WIRE.

REDEMPTIONS BY MAIL

You may redeem Fund Shares by submitting a written request for redemption to:

BayFunds
P.O. Box 665
Waltham, MA 02554-9614

Your written redemption request must include your name and tax identification
number, the specific Fund's name, the class of shares name, the dollar amount or
number of Shares to be redeemed, and your account number. Your request must be
signed by the registered owner(s) exactly as required by the account
application.

REDEMPTIONS BY PHONE

You may redeem Fund Shares by calling
1-800-BAY-FUND.

You must have previously authorized the Fund in writing to accept telephone
requests. If you have not done so, call 1-800-BAY-FUND to receive the Options
Change Form.

In the event of drastic economic or market changes, you may experience
difficulty in redeeming by telephone. If this occurs, you should consider
another method of redemption, such as "Redemptions By Mail." Each Fund uses
reasonable procedures (including a shareholder identity test and sending a
written confirmation of each telephone transaction) to confirm that instructions
given by telephone are genuine. However, a Fund is not responsible for the
authenticity of telephone instructions or for any losses caused by fraudulent or
unauthorized telephone instructions if the Fund reasonably believed that the
instructions were genuine.

REDEMPTION PROCEEDS BY WIRE

You may receive redemption proceeds of Fund Shares by wire by calling
1-800-BAY-FUND. Redemption proceeds of at least $1,000 will be wired directly to
the domestic commercial bank and account you previously designated in writing.
You are charged a fee for each wire redemption and the fee is deducted from your
redemption proceeds.

Each Fund reserves the right to wire redemption proceeds within five Business
Days after receiving the redemption order if, in its judgment, an earlier
payment could adversely affect the Fund. However, the redemption order will be
effected at the net asset value next determined after the redemption request is
received by a Fund from the Transfer Agent in proper form. The Funds also
reserve the right to terminate or modify the "Redemption
Proceeds By Wire" or "Redemptions By Phone" procedures at any time. In that
event, shareholders would be promptly notified.

REDEMPTIONS THROUGH BAYBANKS
OFFICES

You may place an order to redeem Fund Shares in person through designated
BayBanks offices.

Redemption orders received through designated BayBanks offices typically would
be received by the Transfer Agent within two Business Days. For more prompt
processing, you should consider another method, such as "Redemptions By Phone."

BACKUP WITHHOLDING

The Internal Revenue Service requires that backup withholding of 31% apply to
any redemption or exchange request on an account that has not certified its
taxpayer identification number ("TIN"). Shareholders who either have not
certified their number or applied for a number should be aware that backup
withholding will apply to any redemption request processed prior to receipt of a
TIN number and certification.

REDEMPTIONS BEFORE PURCHASE
INSTRUMENTS CLEAR

If any portion of a Fund's Shares to be redeemed represents an investment made
with uncollected funds, the Fund reserves the right to delay payment of proceeds
until the Shareholder Servicing Agent is reasonably certain that the funds have
been collected, which could take up to five Business Days.

AUTOMATIC WITHDRAWAL PROGRAM

An Automatic Withdrawal Program may be established for IRA accounts only whereby
automatic redemptions are made from the account and transferred electronically
to an eligible BayBanks deposit account or your deposit account maintained at a
domestic financial institution that is an automated clearing house member. The
minimum withdrawal amount is $100 per month. Depending upon the amount of the
withdrawal payments and the amount of dividends paid with respect to 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 Fund. A shareholder
may apply for participation in this program by calling 1-800-BAY-FUND for
further information. If a shareholder withdraws any funds from the IRA account
before reaching age 59-1/2 (except certain withdrawals of excess contributions
and regular payments made over the shareholder's life expectancy), the
shareholder will be subject to an IRS penalty tax of 10% of the taxable amount
withdrawn in addition to regular income taxes on the taxable amount.

- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION

BALANCES IN ACCOUNTS

Due to the high cost of maintaining accounts with low balances, a Fund may
redeem your Shares (other than in retirement plan accounts or IRAs) and send you
the proceeds if, due to shareholder redemptions your account balance falls below
a minimum value of $1,000. However, before Shares are redeemed to close an
account, the shareholder will be notified in writing and given 60 days to
purchase additional Shares to meet the minimum balance requirement. The Funds
reserve the right to amend this standard upon 60 days' prior written notice to
shareholders. The Funds also reserve the right to redeem their Shares
involuntarily or make payment for redemptions in the form of securities if it
appears appropriate to do so in light of their responsibilities under the ICA.

DIVIDENDS AND DISTRIBUTIONS

YOU EARN DIVIDENDS DAILY AND RECEIVE THEM MONTHLY. YOU SELECT THE PAYMENT
OPTION: AUTOMATIC REINVESTMENT IN ADDITIONAL SHARES, AUTOMATIC CREDIT TO
ELIGIBLE BAYBANKS DEPOSIT ACCOUNTS, OR BY CHECK.

Dividends from a Fund's net investment income are declared daily to shareholders
of record immediately following the 2:00 p.m. (Eastern time) pricing of Shares.
Dividends are paid monthly within five Business Days after the end of such
calendar month. The Funds do not expect to realize any net long-term capital
gains. However, if any such gains are realized, they will be distributed to
shareholders at least annually.

You elect in writing how you want to receive your dividends and your
distributions. You may choose automatic reinvestment in additional Fund Shares
at the net asset value next determined on the payment dates, automatic credit to
an eligible BayBanks deposit account, or by check. If you fail to select an
option, all distributions will be reinvested in additional Shares.

CONFIRMATIONS AND MONTHLY
STATEMENTS

Confirmations of each purchase, exchange or redemption are sent to each
shareholder of record. Monthly statements are sent to report transactions as
well as dividends paid during the month. However, BayBank IRA customers will
receive quarterly statements for their accounts. The Funds may suspend or
terminate their practice of confirming each transaction at any time without
notice.

The Funds' Transfer Agent maintains a Share account for each shareholder of
record. Share certificates are not issued.

CORPORATE CUSTOMERS

Corporate customers of BayBanks interested in purchasing Fund Shares should
consult their account relationship managers for procedures applicable to their
accounts or call 1-800-554-3311. This prospectus should be read in conjunction
with any materials provided by BayBanks regarding such procedures.

RETIREMENT PLANS

BayBanks makes available for purchase Fund Shares for investment by IRAs, and
rollover IRAs. For details, including minimum investments, application forms and
other investment procedures, call 1-800-BAY-FUND. For information about
Simplified Employee Pension Plans and retirement plan vehicles established by
employers for their employees which are qualified under Section 401(k) and
403(b) of the Internal Revenue Code, call BayBank at 1-800-462-9999, extension
4589, or write to BayBank, Corporate Trust--New Business Department, 7 New
England Executive Park, Burlington, MA 01803.

VOTING RIGHTS

AS A SHAREHOLDER, YOU ARE ENTITLED TO VOTE ON CERTAIN MATTERS.

Each Share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in BayFunds have equal voting rights, except that, in matters affecting only a
particular fund or class, only shares of that particular Fund or class are
entitled to vote.

As a Massachusetts business trust, BayFunds is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in BayFunds' or a Fund's operation and for the election of Trustees
under certain circumstances. Trustees may be removed by a two-thirds vote of the
number of Trustees prior to such removal or by a two-thirds vote of the
shareholders at a special meeting. A special meeting of shareholders shall be
called by the Trustees upon the written request of shareholders owning at least
10% of BayFunds' outstanding shares of all portfolios entitled to vote.

- --------------------------------------------------------------------------------
AUTHORITY TO ACT AS
INVESTMENT ADVISERS

The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956, as
amended, or any affiliate thereof from sponsoring, organizing or
controlling a registered, open-end investment company continuously engaged in
the issuance of its shares, and from issuing, underwriting, selling or
distributing securities in general. Such laws and regulations do not prohibit
such a holding company or affiliate 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 their customer. Each Fund's
investment adviser, BayBanks Investment Management, Inc., and BayBank Boston,
N.A., is subject to such banking laws and regulations.

The Advisers believe that they may perform the investment advisory services for
the Funds contemplated by their advisory agreements with BayFunds without
violating 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 present or future statutes and regulations, could prevent the
Advisers from continuing to perform all or a part of the above services for
their customers and/or the Funds. In such event, changes in the operation of the
Funds may occur, including the possible alteration or termination of any
automatic or other Fund share investment and redemption services then being
provided, and the Trustees would consider alternative investment advisers and
other means of continuing available investment services. It is not expected that
Fund shareholders would suffer any adverse financial consequences (if another
adviser with equivalent abilities to BayBanks Investment Management, Inc. and/or
BayBank Boston, N.A. are 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 laws.

- --------------------------------------------------------------------------------

TAX INFORMATION

THE FOLLOWING DISCUSSION ON TAXES IS FOR GENERAL INFORMATION ONLY. PLEASE
CONSULT YOUR OWN TAX ADVISER FOR SPECIFIC TAX INFORMATION ABOUT YOUR
PARTICULAR SITUATION.

FEDERAL INCOME TAX

Each Fund intends to meet requirements of the Internal Revenue Code applicable
to regulated investment companies in order not to be liable for any Federal
income taxes on income and gains distributed to the Fund's shareholders. Each
Fund will distribute substantially all of its net investment income and net
realized gains at least annually.

Each Fund will be treated as a single, separate entity for Federal income tax
purposes.

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. Distributions
from a Fund's net investment income and short-term capital gains will be taxed
as ordinary income and will not be eligible for the dividends received deduction
available to corporations.

Early each year, each Fund will notify its shareholders of the amount and tax
status of distributions paid to the shareholder for the preceding year.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

YOU CAN FOLLOW EACH FUND'S PERFORMANCE.

From time to time, in advertisements or in reports to shareholders, the
performance and yield of the Funds may be quoted and compared to those of other
mutual funds with similar investment objectives and to relevant money market
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the performance of the Funds may be compared to data prepared by Lipper
Analytical Services, Inc., a widely recognized independent service which
monitors the performance of mutual funds.

National financial publications in which performance and yield data are reported
may include The Wall Street Journal, The New York Times, Forbes, or Money
magazine. Publications of a local or regional nature, such as The Boston Globe
or The Boston Herald, may also be used in comparing the performance and yield of
the Funds.

The yield of the Shares represents the annualized rate of income earned on an
investment in the Shares over a seven-day period. It is the annualized dividends
earned during the period on the investment shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but, when
annualized, the income earned by an investment in the Shares is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.

Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Shares after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed
as a percentage.

Yield, effective yield and total return will be calculated separately for the
Investment Shares of the Funds, and Institutional Shares of the Treasury Fund
and Trust Shares of the Money Market Fund. Because the Investment Shares are
subject to shareholder servicing fees, the yield, effective yield and total
return of Institutional Shares of the Treasury Fund and Trust Shares of the
Money Market Fund for the same period will exceed that of the Investment Shares
of the corresponding Fund.

Shares of the Funds are sold without any sales load or other similar
non-recurring charges.

- --------------------------------------------------------------------------------
OTHER CLASSES OF SHARES

Institutional Shares of the Treasury Fund are sold to banks and other
institutions investing for their own accounts and on behalf of persons
maintaining accounts at such banks and institutions and are subject to a minimum
initial investment of $500,000 or such minimums such banks or institutions may
set for their customers. Trust Shares of the Money Market Fund are sold
primarily to trusts, fiduciaries and institutions. Investments in Trust Shares
are subject to a minimum initial investment of $10,000. Institutional Shares and
Trust Shares are sold at net asset value and are distributed without shareholder
servicing fees.

The amount of dividends payable to Institutional Shares of the Treasury Fund and
Trust Shares of the Money Market Fund will exceed that of Investment Shares of
the corresponding Fund by the difference between Class Expenses and shareholder
servicing fees borne by shares of each respective class of shares of a Fund.
(Currently, there are no differences in Class Expenses other than shareholder
servicing fees.)

The stated advisory fee is the same for both classes of shares of a Fund.

- --------------------------------------------------------------------------------
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Ernst & Young, the Trust's independent
auditors. Their report dated February 11, 1994, on the Fund's financial
statements for the year ended December 31, 1993, and on the following table for
each of the periods presented, is included in the Annual Report to Shareholders
dated December 31, 1993, 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 free of charge from the Trust.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, APRIL 30,
<S> <C> <C> <C>
1993 1992** 1992*
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.03 0.02 0.03
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.02) (0.03)
- -------------------------------------------------------------------------- --------- ----------- ---------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------- --------- ----------- ---------------
TOTAL RETURN*** 2.72% 2.13% 3.55%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 0.59% 0.59%(b) 0.48%(b)
- --------------------------------------------------------------------------
Net investment income 2.68% 3.13%(b) 4.61%(b)
- --------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.11% 0.05%(b) 0.15%(b)
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $168,909 $242,935 $280,931
- --------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from August 1, 1991 (date of initial
public investment) to April 30, 1992. During the period from May 16, 1991
(start of business) to August 1, 1991, net investment income aggregating
$0.01 per share ($1,101) was distributed to Federated Administrative
Services.

** The Fund changed its fiscal year from April 30 to December 31.

*** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.

(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

(b) Computed on an annualized basis.

Further information about the Fund's performance is contained in its Annual
Report dated December 31, 1993, which can be obtained free of charge.

- --------------------------------------------------------------------------------
TREASURY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993*
<S> <C>
- ---------------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income 0.03
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ---------------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------------------------------------- -----------------
TOTAL RETURN** 2.62%
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------------
Expenses 0.35%(a)
- ----------------------------------------------------------------------------------------------------
Net investment income 2.85%(a)
- ----------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.07%(a)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $502,724
- ----------------------------------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from January 29, 1993 (date of initial
public investment) to
December 31, 1993.

** 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.

Further information about the Fund's performance is contained in its Annual
Report dated December 31, 1993, which can be obtained free of charge.

- --------------------------------------------------------------------------------

ADDRESSES

BayFunds Money Market Portfolio and BayFunds U.S. Treasury Money Market
Portfolio
Investment Shares
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

INVESTMENT ADVISER
TO BAYFUNDS MONEY
MARKET PORTFOLIO
BayBanks Investment Management, Inc.
1414 Massachusetts Avenue
Cambridge, Massachusetts 02138

INVESTMENT ADVISER TO
BAYFUNDS U.S. TREASURY
MONEY MARKET PORTFOLIO
BayBank Boston, N.A.
175 Federal Street
Boston, Massachusetts 02110

CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45202

TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Supervised Service Company, Inc.
811 Main Street
Kansas City, Missouri 64105

SHAREHOLDER SERVICING AGENT
BayBank Systems, Inc.
One BayBank Technology Place
Waltham, Massachusetts 02154

PORTFOLIO ACCOUNTING SERVICES
Federated Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

COUNSEL TO BAYFUNDS
Ropes & Gray
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004

COUNSEL TO THE INDEPENDENT TRUSTEES
Sullivan & Worcester
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036

INDEPENDENT AUDITORS
Ernst & Young
One Oxford Centre
Pittsburgh, Pennsylvania 15219

MONEY MARKET
PORTFOLIOS

Money Market Portfolio

U.S. Treasury
Money Market Portfolio

PROSPECTUS

Investment
Shares

BayFunds

BayBanks Investment Management, Inc.
- --------------------------------------------------
Investment Adviser for Money Market Portfolio

BayBank Boston, N.A.
- --------------------------------------------------
Investment Adviser for U.S. Treasury Money Market Portfolio

Federated Securities Corp.
- --------------------------------------------------
Distributor

April 22, 1994 Mutual
(Revised August 29, 1994) YTM620 Funds At
Printed on Recycled Paper 4011108A-R (9/94) BayBank

BAYFUNDS
MONEY MARKET FUNDS
INSTITUTIONAL SHARES AND TRUST SHARES

COMBINED PROSPECTUS

The shares offered in this prospectus represent interests in the Institutional
Shares and Trust Shares ("Shares") of the following money market portfolios
("Money Market Funds") of BayFunds, an open-end, management investment company
(a mutual fund):

MONEY MARKET FUNDS
BAYFUNDS MONEY MARKET PORTFOLIO--Trust Shares and Investment Shares
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO-- Institutional Shares and
Investment Shares

In addition, BayFunds offers the following three other separate investment
portfolios, each having a distinct investment objective and policies:

BayFunds Bond Portfolio--Institutional Shares and Investment Shares

BayFunds Short Term Yield Portfolio--Institutional Shares and Investment
Shares

BayFunds Equity Portfolio--Institutional Shares and Investment Shares

This prospectus relates only to the Institutional Shares and Trust Shares of the
Money Market Funds (individually referred to as the "Fund" or collectively as
the "Funds"). Trust Shares of the Money Market Fund are sold to trusts,
fiduciaries and institutions. Institutional Shares of the Treasury Fund are sold
to BayBank Boston, N.A., its affiliated and correspondent banks and other
institutions investing for their own account and on behalf of customers
maintaining accounts at such banks and institutions.

Shareholders can invest, reinvest or redeem the Trust Shares and Institutional
Shares at any time with no sales loads or redemption fees imposed by the Funds,
although BayBank Boston, N.A., its affiliated and correspondent banks and other
institutions may charge their customers' accounts for services provided in
connection with the purchase or redemption of Institutional Shares of the
Treasury Fund. Shareholders have access to other portfolios in BayFunds through
an exchange program with no sales loads or redemption fees.

This prospectus contains the information you should read and know before you
invest in the Money Market Funds. Keep this prospectus for future reference.

Prospectus dated April 22, 1994
(Revised August 29, 1994)

- --------------------------------------------------------------------------------

TABLE OF CONTENTS

Synopsis.......................................................................1

Summary of Fund Expenses.......................................................2

Financial Highlights--Trust
Shares and Institutional Shares..............................................3

General Information............................................................5

Investment Objective and Policies of
Each Fund....................................................................5

Money Market Fund............................................................5
Acceptable Investments....................................................5
Treasury Fund................................................................6
Acceptable Investments....................................................6

Portfolio Investments and Strategies
of the Funds.................................................................7
Government Securities.....................................................7
Repurchase Agreements.....................................................7
When-Issued and Delayed
Delivery Transactions...................................................7
Lending of Portfolio Securities...........................................7
Restricted and Illiquid Securities........................................7
Reverse Repurchase Agreements.............................................8
Ratings...................................................................8
Bank Instruments..........................................................8
Demand Master Notes.......................................................9
Credit Enhancement........................................................9
Puts and Standby Commitments..............................................9
Investing in Securities of Other
Investment Companies....................................................9
Investment Risks..........................................................9
Investment Limitations........................................................10
Regulatory Compliance.........................................................11

BayFunds Information..........................................................11
Management of BayFunds......................................................11
Board of Trustees........................................................11
Investment Advisers......................................................11
Advisory Fees..........................................................11
Advisers' Background...................................................12
Distribution of the Funds' Shares...........................................12
Administration of the Funds.................................................12
Administrative Services..................................................12
Custodian................................................................13
Transfer Agent, Dividend Disbursing
Agent and Portfolio Accounting
Services...............................................................13
Legal Counsel............................................................13
Independent Auditors.....................................................13

Expenses of the Funds and Shares..............................................13

Net Asset Value...............................................................14
Pricing of Shares...........................................................14

Investing in Shares...........................................................14
Minimum Investment..........................................................14
Share Purchases of the
Money Market Fund........................................................15
Through BayBanks.........................................................15
Share Purchases of the Treasury Fund........................................16
When Shares of the Treasury Fund
May be Purchased.......................................................16
When Purchases of the Treasury
Fund Shares Are Effective..............................................16
Exchanging Securities for Shares of
the Funds................................................................17

Exchange Privileges...........................................................17

Redeeming Shares..............................................................18
When Shares of the Money Market Fund
May Be Redeemed..........................................................18
By Telephone.............................................................18
By Mail..................................................................18
When Shares of the Treasury Fund
May Be Redeemed..........................................................19
When Redemptions of the Treasury Fund
Shares Are Effective...................................................19
Redemptions Before Purchase
Instruments Clear........................................................19

Shareholder Information.......................................................20
Balances in Accounts........................................................20
Confirmations and Statements................................................20
Dividends and Distributions.................................................20
Voting Rights...............................................................21

Authority to Act as Investment Advisers.......................................21

Tax Information...............................................................22
Federal Income Tax..........................................................22

Performance Information.......................................................23

Other Classes of Shares.......................................................24

Financial Highlights--Investment Shares.....................................25

Addresses......................................................Inside Back Cover

- --------------------------------------------------------------------------------
SYNOPSIS

This prospectus relates only to the Institutional Shares of the BayFunds U.S.
Treasury Money Market Portfolio ("Treasury Fund") and Trust Shares of the
BayFunds Money Market Portfolio ("Money Market Fund"). Each Fund is designed as
a convenient means of accumulating an interest in a professionally managed,
diversified portfolio investing primarily in money market instruments as
follows:

BAYFUNDS MONEY MARKET
PORTFOLIO SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH STABILITY OF
PRINCIPAL AND LIQUIDITY BY INVESTING PRIMARILY IN A DIVERSIFIED PORTFOLIO
OF MONEY MARKET INSTRUMENTS WITH REMAINING MATURITIES OF 397 DAYS OR LESS;
AND

BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO SEEKS TO PROVIDE CURRENT
INCOME CONSISTENT WITH STABILITY OF PRINCIPAL AND LIQUIDITY BY INVESTING,
UNDER NORMAL MARKET CONDITIONS, AT LEAST 65% OF THE VALUE OF ITS TOTAL
ASSETS IN U.S. TREASURY OBLIGATIONS WITH REMAINING MATURITIES OF 397 DAYS
OR LESS.

For information on how to purchase Shares of either of these Funds, please refer
to "Investing in Shares." Each of the Funds attempts to stabilize the value of
its Shares at $1.00. A minimum initial investment of $10,000 is required for
Trust Shares of the Money Market Fund and $500,000 for Institutional Shares of
the Treasury Fund. Subsequent investment must be in amounts of at least $100 for
Trust Shares of the Money Market Fund and $100,000 for Institutional Shares of
the Treasury Fund. See "Minimum Investment." A bank or institution purchasing
Institutional Shares of the Treasury Fund will set minimums for its customers.
Shares are sold and redeemed at net asset value without a sales charge.
Information on redeeming Shares may be found under "Redeeming Shares."
Additionally, information regarding the exchange privilege offered with respect
to the other portfolios of BayFunds may be found under "Exchange Privileges."
BayBanks Investment Management, Inc. is the adviser to the Money Market Fund.
BayBank Boston, N.A. is the adviser to the Treasury Fund.

RISK FACTORS. The Funds may make certain investments and employ certain
investment techniques that involve risks, each of which are explained more fully
in the sections of this prospectus discussing the Funds' investment policies and
their acceptable investments. (See "Investment Objective and Policies of Each
Fund" and "Portfolio Investments and Strategies of the Funds.")

- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
SUMMARY OF FUND EXPENSES

<TABLE>
<CAPTION>
MONEY MARKET FUND TREASURY FUND
SHAREHOLDER TRANSACTION EXPENSES TRUST SHARES INSTITUTIONAL SHARES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price).................................................... None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................. None None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)........................ None None
Redemption Fees (as a percentage of amount redeemed, if applicable)... None None
Exchange Fees......................................................... None None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fees (after waiver) (1).................................... 0.36% 0.20%
12b-1 Fees............................................................ None None
Total Other Expenses.................................................. 0.28% 0.19%
Total Operating Expenses (2).......................................... 0.64% 0.39%
</TABLE>

(2) Total Operating Expenses for the Money Market Fund Trust Shares would be
0.68%, absent the voluntary waiver described in note (1) above.

The Annual Operating Expenses for the Money Market Fund Trust Shares and
Treasury Fund Institutional Shares were 0.59% and 0.35%, respectively, for the
fiscal year ended December 31, 1993. The Annual Operating Expenses in the table
above are based on estimated expenses expected during the fiscal year ending
December 31, 1994.

The above table can help you understand the various costs and expenses that a
shareholder of Money Market Fund Trust Shares and Treasury Fund Institutional
Shares will bear, either directly or indirectly. For more complete descriptions
of the various costs and expenses, see "BayFunds Information" and "Investing in
Shares." Wire-transferred redemptions 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 Funds
charge no redemption fees.
<TABLE>
<CAPTION>
MONEY MARKET FUND TREASURY FUND
TRUST SHARES INSTITUTIONAL SHARES
<S> <C> <C>
1 Year............................................................ $ 7 $ 4
3 Years........................................................... $20 $13
5 Years........................................................... $36 $22
10 Years.......................................................... $80 $49
</TABLE>

THE ABOVE EXAMPLE 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 the
Money Market Fund Trust Shares and Treasury Fund Institutional Shares. The Funds
also offer another class of shares called Investment Shares. Money Market Fund
Trust Shares and Investment Shares and Treasury Fund Institutional Shares and
Investment Shares are subject to the same expenses. However, Investment Shares
of both Funds are subject to a shareholder servicing fee. See "Other Classes of
Shares."

- --------------------------------------------------------------------------------
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Ernst & Young, the Trust's independent
auditors. Their report dated February 11, 1994, on the Fund's financial
statements for the year ended December 31, 1993 and on the following table for
each of the periods presented, is included in the Annual Report to Shareholders
dated December 31, 1993, 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 free of charge from the Trust.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, APRIL 30,
<S> <C> <C> <C>
1993 1992** 1992*
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.03 0.02 0.03
- -----------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.02) (0.03)
- ----------------------------------------------------------------------- --------- ----------- ---------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------- --------- ----------- ---------------
TOTAL RETURN*** 2.72% 2.13% 3.55%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 0.59% 0.59%(b) 0.48%(b)
- -----------------------------------------------------------------------
Net investment income 2.68% 3.13%(b) 4.61%(b)
- -----------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.11% 0.05%(b) 0.15%(b)
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $168,909 $242,935 $280,931
- -----------------------------------------------------------------------
</TABLE>

** The Fund changed its fiscal year from April 30 to December 31.

*** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.

(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

(b) Computed on an annualized basis.

Further information about the Fund's performance is contained in its Annual
Report dated December 31, 1993, which can be obtained free of charge.

- --------------------------------------------------------------------------------
TREASURY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Ernst & Young, the Trust's independent
auditors. Their report dated February 11, 1994, on the Fund's financial
statements for the year ended December 31, 1993, and on the following table for
the period presented, is included in the Annual Report to Shareholders dated
December 31, 1993, 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 free of charge from the Trust.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993*
<S> <C>
- ---------------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income 0.03
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ---------------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------------------------------------- -----------------
TOTAL RETURN** 2.62%
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------------
Expenses 0.35%(a)
- ----------------------------------------------------------------------------------------------------
Net investment income 2.85%(a)
- ----------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.07%(a)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $502,724
- ----------------------------------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from January 29, 1993 (date of initial
public investment) to
December 31, 1993.

** 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.

Further information about the Fund's performance is contained in its Annual
Report dated December 31, 1993, which can be obtained free of charge.

- --------------------------------------------------------------------------------
GENERAL INFORMATION

BayFunds was established as a Massachusetts business trust under a Declaration
of Trust dated April 1, 1991. The Declaration of Trust permits BayFunds to offer
separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. With respect to each Fund, as of the date of this
prospectus, the Board of Trustees ("Trustees") has established two classes of
shares, Trust Shares and Investment Shares of the Money Market Fund and
Institutional Shares and Investment Shares of the Treasury Fund. This prospectus
relates only to Trust Shares and Institutional Shares (collectively, "Shares")
of these Funds.

Trust Shares of the Money Market Fund are sold to trusts, fiduciaries and
institutions. Institutional Shares of the Treasury Fund are sold to BayBank
Boston, N.A., its affiliated and correspondent banks and other institutions
investing for their own account and on behalf of customers maintaining accounts
at such banks and institutions.

The other portfolios in BayFunds are: BayFunds Short Term Yield Portfolio;
BayFunds Bond Portfolio; and BayFunds Equity Portfolio.

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND
POLICIES OF EACH FUND

The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's Shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.

MONEY MARKET FUND

The investment objective of the Money Market Fund is to provide current income
consistent with stability of principal and liquidity. The Fund pursues this
investment objective by investing primarily in a diversified portfolio of money
market instruments with remaining maturities of 397 days or less. The average
maturity of these securities, computed on a dollar-weighted basis, will be 90
days or less.

ACCEPTABLE INVESTMENTS

The Money Market Fund invests in high quality money market instruments that are
either rated in the highest short-term rating category by 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;

commercial paper (including Canadian Commercial Paper and Europaper);

demand master 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

other money market instruments.

The Money Market Fund invests only in instruments denominated and payable in
U.S. dollars.

TREASURY FUND

ACCEPTABLE INVESTMENTS

- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS AND
STRATEGIES OF THE FUNDS

GOVERNMENT SECURITIES

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 Home Loan Banks;

Federal Home Loan Mortgage Corporation;

Federal Farm Credit Banks;

The Student Loan Marketing Association; and

Federal National Mortgage Association.

REPURCHASE AGREEMENTS

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Funds may purchase portfolio securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Funds purchase
securities with payment and delivery scheduled for a future time. The Funds
engage in when-issued and delayed delivery transactions only for the purpose of
acquiring portfolio securities consistent with the Funds' investment objectives
and policies, not for investment leverage. In when-issued and delayed delivery
transactions, the Funds rely on the seller to complete the transaction. The
seller's failure to deliver the securities may cause the Funds to miss a price
or yield considered to be advantageous.

LENDING OF PORTFOLIO SECURITIES

RESTRICTED AND ILLIQUID SECURITIES

The 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 Money Market Fund who agrees 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 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 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 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 Money Market Fund's investment 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 Money Market Fund
intends to not subject such paper to the limitation applicable to restricted
securities.

REVERSE REPURCHASE AGREEMENTS

The Funds may enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, a 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
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.

RATINGS

BANK INSTRUMENTS

The Money Market Fund may invest in Bank Instruments which are either issued by
an institution having capital, surplus and undivided profits over $100 million
as of the date of its most recently published financial statements or which are
insured by the Bank Insurance Fund ("BIF") or the Savings Association Insurance
Fund ("SAIF"), both of which are administered by the Federal Deposit Insurance
Corporation ("FDIC"). Bank Instruments may include Eurodollar Certificates of
Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee CDs"), and Eurodollar
Time Deposits ("ETDs"). The Money Market Fund will treat securities that are
credit enhanced with a bank's letter of credit as Bank Instruments.

DEMAND MASTER NOTES

CREDIT ENHANCEMENT

PUTS AND STANDBY COMMITMENTS

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

INVESTMENT RISKS

The ECDs, ETDs, Yankee CDs, and Europaper which the Money Market Fund may
purchase are subject to different risks than domestic obligations of domestic
banks or corporations. Examples of these risks include international economic
and political developments, foreign governmental restrictions that may adversely
affect the payment of principal or interest, foreign withholding or other taxes
on interest income, difficulties in obtaining or enforcing a judgment against
the issuing entity, and the possible impact of interruptions in the flow of
international currency transactions. Different risks may also exist for ECDs,
ETDs, and Yankee CDs because the banks issuing these instruments, or their
domestic or foreign branches, are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements, loan
limitations, examinations, accounting, auditing, recordkeeping, and the public
availability of information. These factors will be carefully considered by the
Money Market Fund's adviser in selecting investments for the Money Market Fund.

- -------------------------------------------------------
INVESTMENT LIMITATIONS

The Funds will not:

invest more than 10% of their respective net assets in illiquid securities,
including repurchase agreements providing for settlement in more than seven
days after notice.

- --------------------------------------------------------------------------------
REGULATORY COMPLIANCE

- --------------------------------------------------------------------------------
BAYFUNDS INFORMATION

MANAGEMENT OF BAYFUNDS

BOARD OF TRUSTEES

BayFunds is managed by a Board of Trustees. The Trustees are responsible for
managing BayFunds' business affairs and for exercising all BayFunds' powers
except those reserved for the shareholders.

INVESTMENT ADVISERS

Pursuant to investment advisory contracts with BayFunds, investment decisions
for the Money Market Fund are made by BayBanks Investment Management, Inc., and
investment decisions for the Treasury Fund are made by BayBank Boston, N.A., the
Funds' investment advisers (individually referred to as the "Adviser," and
collectively as the "Advisers"), subject to direction by the Trustees. The
Advisers continually conduct investment research and supervision for the
respective Funds and are responsible for the purchase and sale of portfolio
instruments, for which they receive an annual fee from the respective Fund.

ADVISORY FEES

BayBanks Investment Management, Inc. receives an annual investment advisory fee
equal to .40 of 1% of the Money Market Fund's average daily net assets. BayBank
Boston, N.A., receives an annual investment advisory fee equal to .20 of 1% of
the Treasury Fund's average daily net assets. The Advisers have undertaken to
reimburse the respective Funds, up to the amount of the advisory fees, for
operating expenses in excess of limitations established by certain states. The
Advisers also may voluntarily choose to waive a portion of their fees or
reimburse the Funds for certain other expenses, but reserve the right to
terminate such waiver or reimbursement at any time at their sole discretion.

ADVISERS' BACKGROUND

The Advisers are wholly-owned subsidiaries of BayBanks, Inc., a bank holding
company organized under the laws of the Commonwealth of Massachusetts. BayBanks,
Inc. through its banking subsidiaries (hereinafter "BayBanks") and affiliates,
offers a full range of financial services to the public, including depository
services, commercial lending, cash management, brokerage, retail banking,
mortgage banking, and investment advisory and trust services. As part of their
regular banking operations, BayBanks may make loans to public companies. Thus,
it may be possible, from time to time, for the Funds to hold or acquire the
securities of issuers which are also lending clients of BayBanks. The lending
relationship will not be a factor in the selection of securities.

BayBanks Investment Management, Inc., the Adviser for the Money Market Fund, is
a registered investment adviser and provides investment advisory services for
trust and other managed assets. BayBanks Investment Management, Inc. was
established as a separate subsidiary of BayBanks, Inc. in 1985, but its
predecessor division and personnel have been providing investment advisory
services to BayBanks' customers for more than 65 years. As of December 31, 1993,
the Trust Division of BayBank, a state-chartered affiliate of BayBanks
Investment Management, Inc., acted as custodian for assets totaling $4.7
billion. Of this amount, BayBanks Investment Management, Inc. managed $2.7
billion of discretionary assets. BayBanks Investment Management, Inc., and
BayBanks have been managing commingled funds for over twenty years. At the
present time BayBanks Investment Management, Inc. serves as adviser to five such
commingled funds with total assets of approximately $290 million. BayBanks
Investment Management, Inc. has managed mutual funds since August 1991 and
manages approximately $562 million (as of December 31, 1993) in various BayFunds
portfolios.

DISTRIBUTION OF THE FUNDS' SHARES

ADMINISTRATION OF THE FUNDS

ADMINISTRATIVE SERVICES

<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM DAILY NET ASSETS
ADMINISTRATIVE FEE OF BAYFUNDS
<C> <S>
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of
$750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least $50,000
for each Fund. Federated Administrative Services may choose voluntarily to
reimburse a portion of its fee at any time.

CUSTODIAN

The Fifth Third Bank, Cincinnati, Ohio, is custodian for the securities and cash
of the Funds.

TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND
PORTFOLIO ACCOUNTING SERVICES

LEGAL COUNSEL

Legal counsel is provided by Ropes & Gray, Washington, D.C., Counsel to
BayFunds, and Sullivan & Worcester, Washington, D.C., Counsel to the Independent
Trustees.

INDEPENDENT AUDITORS

The independent auditors for the Funds are Ernst & Young, Pittsburgh,
Pennsylvania.

EXPENSES OF THE FUNDS AND SHARES

At present, the only expenses allocated to shares as a class are expenses under
the Funds' Shareholder Servicing Plan which only relates to the Investment
Shares. However, the Trustees reserve the right to allocate certain other
expenses to holders of shares as it deems appropriate ("Class Expenses").

- --------------------------------------------------------------------------------
NET ASSET VALUE

The Funds cannot guarantee that their net asset value will always remain at
$1.00 per Share.

PRICING OF SHARES

- --------------------------------------------------------------------------------
INVESTING IN
SHARES

MINIMUM INVESTMENT

The minimum initial investment in Shares of the Money Market Fund is $10,000.
Subsequent investments must be in amounts of at least $100. The Money Market
Fund may waive any investment minimums from time to time.

Shares of the Treasury Fund are sold to BayBank Boston, N.A., its affiliated and
correspondent banks and other institutions investing for their own account and
on behalf of customers maintaining accounts at such banks and institutions.
(BayBank Boston, N.A. and such banks and institutions may be collectively
referred to as the "Institution.") The minimum initial investment by an
Institution is $500,000, and subsequent investments must be in amounts of at
least $100,000. An Institution will set minimums for its customers.

Depending upon the terms of each customer account, an Institution may charge the
customer account fees for services it provides, such as automatic investment,
cash management, dividend payment processing, information regarding customer
positions, and sub-accounting with respect to customer accounts. Such fees may
include compensating balance requirements or account maintenance fees, or may be
based on account assets or transactions. Customers should obtain information
about account services and fees directly from their Institution before
authorizing the purchase of Shares of the Treasury Fund, and this prospectus
should be read in conjunction with any such information.

Shares are purchased and redeemed with no sales loads or redemption fees imposed
by the Funds. Depending upon the terms of each customer account, an Institution
may charge the customer account fees for services it provides, such as automatic
investment, cash management, dividend payment processing, information regarding
customer position, and sub-accounting with respect to customer accounts. Such
fees may include compensating balance requirements or account maintenance fees,
or may be based on account assets or transactions. Customers should obtain
information about account services and fees directly from their Institution
before authorizing the purchase of Shares, and this prospectus should be read in
conjunction with any such information.

SHARE PURCHASES OF THE MONEY MARKET FUND

The Money Market Fund offers Shares only on days on which the New York Stock
Exchange and the Federal Reserve Bank of Boston are open for business ("Business
Days"). In addition to the holidays listed above under "Pricing of Shares,"
other non-Business Days include Martin Luther King's Day, Columbus Day and
Veteran's Day. A customer of BayBanks may purchase Shares of the Money Market
Fund through BayBanks. If a purchase order is received through BayBanks on a
non-Business Day, the order will not be executed until the next Business Day in
accordance with the Distributor's procedures. All other investors should
purchase Shares directly from the Distributor. The Money Market Fund and the
Distributor reserve the right to reject any purchase request.

THROUGH BAYBANKS

A customer of BayBanks may telephone the BayBanks Trust Department toll-free at
1-800-462-9999. Participants in Employee Benefits programs should contact their
Plan Administrator. For the protection of investors, all phone communications
may be recorded where not otherwise prohibited by law.

Payment may be made to BayBanks either by check or Federal funds. If a purchase
order is received in good order and accepted by the Money Market Fund from the
Transfer Agent by 2:00 p.m. (Eastern time) on a Business Day, it will be
executed at the net asset value next determined and Shares will begin earning
dividends that day. The Transfer Agent will not communicate a purchase order to
the Money Market Fund until BayBanks has received the purchase price in Federal
funds or other immediately available funds. If a purchase order is received in
good order and accepted by the Money Market Fund from the Transfer Agent after
2:00 p.m. (Eastern time) and prior to 4:00 p.m. (Eastern time), it will be
executed at the net asset value next determined and Shares will begin earning
dividends the next Business Day. When Shares are purchased by check, the order
is considered received when the check is converted into Federal funds, normally
within two Business Days. When payment is made with Federal funds, they should
be wired to BayBanks as agent for the Transfer Agent as follows: ABA No.
0113-0235-7; Wire Order Number 0110-0174-2; Fiduciary Account Number 03000-002-
298-5. Investors not purchasing through BayBanks should consult their financial
institution for wiring instructions.

To allow the Adviser to manage the Money Market Fund effectively, investors are
strongly encouraged to initiate all trades (purchases, redemptions, or
exchanges) as early in the day as possible. On those days when either the
Federal Reserve Bank of Boston or the U.S. Government Bond Market closes early,
or, in the Adviser's judgment, closing early is deemed to be in the best
interest of the Money Market Fund's shareholders, the right is reserved to
advance the time on that day by which all transactions (purchases, redemptions,
or exchanges) must be received.

Texas residents must purchase Shares through Federated Securities Corp. at
1-800-356-2805.

BayBanks is responsible for the prompt transmission of purchase orders received
in good order to the Transfer Agent.

SHARE PURCHASES OF THE TREASURY FUND

A customer of BayBanks may telephone the BayBanks Trust Department toll-free at
1-800-462-9999. BayBanks Capital Markets customers should call 1-800-554-3311.
Participants in Employee Benefits programs should contact their Plan
Administrator. Shares of the Treasury Fund may be purchased in accordance with
procedures established by an Institution in connection with the requirements of
its customer accounts. Procedures applicable to each Institution and each
customer account governing the purchase of Shares of the Treasury Fund will
differ. For example, such procedures may include instructions under which a
customer's account is "swept" automatically on a daily basis of collected
balances in excess of a minimum agreed to by an Institution and the customer.
The Treasury Fund expects that the Institution will transmit orders on behalf of
their customers for the purchase of Shares of the Treasury Fund arising from
automatic investment programs within one business day of the time the amounts in
excess of the minimum balances are swept.

Customers should consult their account relationship manager at their Institution
for further information and procedures on purchasing Shares of the Treasury
Fund. This prospectus should be read in conjunction with any materials provided
by the Institution regarding such procedures.

WHEN SHARES OF THE TREASURY FUND
MAY BE PURCHASED

The Treasury Fund sells Shares only on days on which the New York Stock Exchange
and the Federal Reserve Bank of Boston are open for business ("Business Days").
In addition to the holidays listed above under "Pricing of Shares," other non-
Business Days include Martin Luther King's Day, Columbus Day and Veteran's Day.
Orders received by the Transfer Agent on a non-Business Day will not be executed
until the next Business Day in accordance with the Distributor's procedures.

WHEN PURCHASES OF
THE TREASURY FUND SHARES
ARE EFFECTIVE

Orders by an Institution to purchase Shares received in good order and accepted
by the Treasury Fund from the Transfer Agent before 2:00 p.m. (Eastern time) on
a Business Day will be executed at the net asset value next determined and will
begin earning dividends that day. The Transfer Agent will not communicate
purchase orders to the Treasury Fund until the Transfer Agent receives Federal
funds or other available funds. Orders by an Institution to purchase Shares
received in good order and accepted by the Treasury Fund from the Transfer Agent
after 2:00 p.m. (Eastern time) and prior to 4:00 p.m. (Eastern time) will be
executed at the net asset value next determined and Shares will begin earning
dividends the next Business Day. Each Institution is responsible for
transmitting purchase orders promptly to the Treasury Fund in accordance with
the terms of its customer agreements. The Treasury Fund and the Distributor
reserve the right to reject any purchase order.

To allow the Adviser to manage the Treasury Fund effectively, investors are
strongly encouraged to initiate all trades (purchases, redemptions, or
exchanges) as early in the day as possible and to notify the Treasury Fund at
least one day in advance of transactions (purchases, exchanges or redemptions)
in excess of $5 million. On those days when either the Federal Reserve Bank of
Boston or the U.S. Government Bond Market closes early, or, in the Adviser's
judgment, closing early is deemed to be in the best interest of the Treasury
Fund's shareholders, the right is reserved to advance the time on that day by
which all transactions (purchases, exchanges and redemptions) must be received.

EXCHANGING SECURITIES FOR SHARES OF THE FUNDS

The Funds may accept securities in exchange for Shares. A Fund will allow such
exchanges only upon the prior approval of the Fund and a determination by the
Fund and its Adviser that the securities to be exchanged are acceptable.

Any securities exchanged must meet the investment objective and policies of the
Fund, must have a readily ascertainable market value, must be liquid and must
not be subject to restrictions on resale. The market value of any securities
exchanged in an initial investment, plus any cash, must be at least $100,000.

Securities accepted by a Fund will be valued in the same manner as the Fund
values its assets. The basis of the exchange will depend upon the net asset
value of Shares of the Fund on the day the securities are valued. One Share of
the Fund 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 Fund, along with the
securities.

- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGES

BayFunds consists of the Funds, the BayFunds Short Term Yield Portfolio, the
BayFunds Equity Portfolio, and the BayFunds Bond Portfolio. Customers may access
the Institutional Shares of the other portfolios of BayFunds ("Participating
Funds") through an exchange program. In addition, institutions may purchase
BayFunds Shares of Massachusetts Municipal Cash Trust with redemption proceeds
of a BayFunds portfolio. A customer of BayBanks may telephone the BayBanks Trust
Department toll-free at 1-800-462-9999. BayBanks Capital Markets customers
should call 1-800-554-3311. Participants in Employee Benefits programs should
contact their Plan Administrator. Procedures will be established by each
Institution in connection with the requirements of its customer accounts and the
Participating Funds. Customers should contact their Institution to obtain
further information on exchange privileges. Prior to any such exchange, a
customer must receive a copy of the current prospectus of the Participating Fund
into which an exchange is to be effected.

The exchange privilege is available to shareholders in any state in which
Participating Funds' shares being acquired may be sold.

- --------------------------------------------------------------------------------

REDEEMING SHARES

WHEN SHARES OF THE MONEY
MARKET MAY BE REDEEMED

The Money Market Fund redeems Shares at their net asset value next determined
after the Money Market Fund has received the redemption request from the
Transfer Agent in proper form. Redemption requests can be executed only on
Business Days. If a redemption request is received through BayBanks on a
non-Business Day, the Transfer Agent will not communicate the redemption request
to the Money Market Fund until the next Business Day.

BY TELEPHONE

A customer of BayBanks may telephone the BayBanks Trust Department toll-free at
1-800-462-9999. BayBanks Capital Markets customers should call 1-800-554-3311.
Participants in Employee Benefits programs should contact their Plan
Administrator. Redemption proceeds may be paid by check or paid by wire. The
Money Market Fund ordinarily will make payment for Shares redeemed after proper
receipt from the Transfer Agent of the redemption request the same day by wire
if the Money Market Fund receives the redemption request from the Transfer Agent
by 2:00 p.m. (Eastern time) on the day of redemption. Shares redeemed and wired
on the same day will not receive the dividend declared on the day of redemption.
Payment for Shares of the Money Market Fund redeemed by check will be within
five Business Days. The Money Market Fund reserves the right to wire redemption
proceeds within five Business Days after receiving the order if, in its
judgment, an earlier payment could adversely affect the Money Market Fund. If at
any time the Money Market Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.

An authorization form permitting the Money Market Fund to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from BayBanks or the Distributor.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail," should be considered. The Money Market
Fund uses reasonable procedures (including a shareholder identity test and
sending a written confirmation of each telephone transaction) to confirm that
instructions given by telephone are genuine. However, the Money Market Fund is
not responsible for the authenticity of telephone instructions or for any losses
caused by fraudulent or unauthorized telephone instructions if the Money Market
Fund reasonably believed that the instructions were genuine.

BY MAIL

A shareholder who is a customer of BayBanks may redeem Shares of the Money
Market Fund by sending a written request to BayBanks. The written request should
include the shareholder's name, the Fund name, the class of shares name, the
account number, and the share or dollar amount requested, and should be signed
by each registered owner exactly as the Shares are registered. For assistance in
redeeming by mail, a customer of BayBanks may telephone the BayBanks Trust
Department toll-free at 1-800-462-9999. BayBanks Capital Markets customers
should call 1-800-554-3311. Participants in Employee Benefits programs should
contact their Plan Administrator.

Except for 401(k) plan participants and administrators, shareholders requesting
a redemption of $10,000 or more (no limitation if the proceeds are being
credited to a BayBanks deposit account), a
redemption of any amount to be sent to an address other than that on record with
the Money Market Fund, a transfer of the registration of Shares, or a redemption
payable other than to the shareholder of record, must have signatures on written
redemption requests guaranteed by:

a trust company or insured commercial bank;

an insured savings and loan association or a savings bank;

a member firm of a national or regional stock exchange; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Transfer Agent has adopted standards for accepting signature guarantees from
the above institutions. The Money Market Fund may elect in the future to limit
eligible signature guarantees to institutions that are members of a signature
guarantee program. The Money Market Fund does not accept signatures guaranteed
by a notary public. The Money Market Fund and the Transfer Agent reserve the
right to amend these standards at any time without notice.

WHEN SHARES OF THE TREASURY FUND MAY BE REDEEMED

Shares of the Treasury Fund may be redeemed in accordance with procedures
established by an Institution in connection with the requirements of its
customer accounts. Procedures applicable to each Institution and each customer
account governing the redemption of Shares of the Treasury Fund will differ.
Customers should contact their Institution for further information. Each
Institution is responsible for transmitting redemption orders promptly to the
Treasury Fund and crediting customers' accounts with redemption proceeds on a
timely basis.

WHEN REDEMPTIONS OF THE TREASURY FUND SHARES ARE EFFECTIVE

Redemption orders are effected at the net asset value per Share next determined
after proper receipt of the redemption request by the Treasury Fund from the
Transfer Agent in proper form. Institutions may transmit redemption orders by
telephoning the Transfer Agent. Payment for redemption orders received by the
Transfer Agent by 2:00 p.m. (Eastern time) on a Business Day will be wired the
same day to the Institution for credit to customer accounts that day. Shares so
redeemed will not be eligible to receive the dividend declared on the redemption
date. Payment for redemption orders received after 2:00 p.m. (Eastern time) or
on a non-Business Day will normally be wired in Federal funds to the Institution
for credit to customer accounts on the next Business Day.

The Treasury Fund assesses no charges for wiring redemption proceeds. However,
Institutions may charge customer accounts for redemption services. Information
relating to such redemption services and charges, if any, are available from the
Institutions.

The Treasury Fund reserves the right to wire redemption proceeds within five
Business Days after receiving the redemption order if, in its judgment, an
earlier payment could adversely affect the Treasury Fund.

REDEMPTIONS BEFORE PURCHASE INSTRUMENTS CLEAR

If any portion of a Fund's Shares to be redeemed represents an investment made
with uncollected funds, the Fund reserves the right to delay payment of proceeds
until BayBanks is reasonably certain that the funds have been collected, which
could take up to five Business Days.

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SHAREHOLDER INFORMATION

BALANCES IN ACCOUNTS

Due to the high cost of maintaining accounts with low balances, the Money Market
Fund may redeem Trust Shares in any account and pay the proceeds to the
shareholder if, due to shareholder redemptions, the account balance falls below
the required minimum value of $10,000. In addition, the Treasury Fund may redeem
Institutional Shares if an Institution account falls below $100,000.

Before Shares of either Fund are redeemed to close an account, the shareholder
or the Institution, as applicable, will be notified in writing and allowed 60
days to purchase additional Shares to meet the minimum balance requirement of
such Fund. Each Fund reserves the right to amend this standard upon 60 days'
prior written notice. Each Fund also reserves the right to redeem its Shares
involuntarily or make payment for redemptions in the form of securities if it
appears appropriate to do so in light of its responsibilities under the ICA.
Customers of Institutions should consult their relevant account agreements for
any applicable balance requirements.

CONFIRMATIONS AND STATEMENTS

Monthly confirmations are sent to the Institutions or shareholder of record to
report transactions such as purchases and redemptions as well as dividends paid
during the month. With respect to the Treasury Fund, it is the responsibility of
the Institutions to provide their customers with confirmations and statements of
account with respect to Share transactions made for their accounts at the
Institutions in accordance with procedures established by the Institutions.

Share certificates are not issued. The Transfer Agent for the Money Market Fund
maintains a Share account for each shareholder of record. Shares of the Treasury
Fund will be held of record by the Institutions or in the name of a nominee of
the Institutions. Beneficial ownership of Shares of the Treasury Fund will be
recorded by the Institutions and reflected in statements of account provided by
the Institutions to their customers.

DIVIDENDS AND DISTRIBUTIONS

Dividends from a Fund's net investment income are declared daily to shareholders
of record (normally the Institutions in the case of the Treasury Fund)
immediately following the 2:00 p.m. (Eastern time) pricing of shares. With
respect to the Money Market Fund, dividends are paid monthly and will be
reinvested on payment dates in additional Shares of the Money Market Fund unless
cash payments are requested by writing to the Money Market Fund or BayBanks as
appropriate. With respect to the Treasury Fund, dividends are paid monthly
within five Business Days after the end of such calendar month.

Neither Fund expects to realize any net long-term capital gains. If for some
extraordinary reason a Fund realizes net long-term capital gains, it will
distribute them at least annually.

Institutions may elect to (a) have their dividends and distributions
automatically reinvested in additional Shares of the Treasury Fund at the net
asset value next determined on the payment dates, (b) receive their dividends
and distributions in cash, or (c) receive a combination of additional Shares of
the Treasury Fund and cash. It is expected that customers of an Institution's
automatic investment program will receive all dividends and distributions of the
Treasury Fund in cash credited to their account pursuant to the terms of their
agreement with an Institution; all other customers should contact their
Institution for further information about dividend elections.

VOTING RIGHTS

As a Massachusetts business trust, BayFunds is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in BayFunds' or a Fund's operation and for the election of Trustees
under certain circumstances. As of March 30, 1994, Slatt & Co., Burlington,
Massachusetts, acting in various capacities for numerous accounts, was the owner
of record of 144,009,069 Shares (99.36%) of the Money Market Fund and
188,750,949 Shares (30.80%) of the Treasury Fund and, therefore, may for certain
purposes, be deemed to control the Funds and be able to affect the outcome of
certain matters presented for a vote of shareholders. As of March 30, 1994,
Express & Co., Boston, Massachusetts, acting in various capacities for numerous
accounts, was the owner of record of 424,138,995 Shares (69.20%) of the Treasury
Fund, and therefore, may for certain purposes, be deemed to control the Treasury
Fund and be able to affect the outcome of certain matters presented for a vote
of shareholders. Trustees may be removed by a two-thirds vote of the number of
Trustees prior to such removal or by a two-thirds vote of the shareholders at a
special meeting. A special meeting of shareholders shall be called by the
Trustees upon the written request of shareholders owning at least 10% of
BayFunds' outstanding shares of all portfolios entitled to vote.

- --------------------------------------------------------------------------------
AUTHORITY TO ACT AS
INVESTMENT ADVISERS

The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956, as
amended, or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and from issuing, underwriting, selling or distributing securities
in general. Such laws and regulations do not prohibit such a holding company or
affiliate 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 their customer. Each Fund's investment adviser, BayBanks
Investment Management, Inc. and BayBank Boston, N.A., is subject to such banking
laws and regulations.

The Advisers believe that they may perform the investment advisory services for
the Funds contemplated by their advisory agreements with BayFunds without
violating 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 present or future statutes and regulations, could prevent the
Advisers from continuing to perform all or a part of the above services for
their customers and/or the Funds. In such event, changes in the operation of the
Funds may occur, including the possible alteration or termination of any
automatic or other Fund share investment and redemption services then being
provided, and the Trustees would consider alternative investment advisers and
other means of continuing available investment services. It is not expected that
Fund shareholders would suffer any adverse financial consequences (if another
adviser with equivalent abilities to BayBanks Investment Management, Inc. and/or
BayBank Boston, N.A., is found) as a result of any of these occurrences.

- --------------------------------------------------------------------------------
TAX INFORMATION

FEDERAL INCOME TAX

Each Fund will be treated as a single, separate entity for Federal income tax
purposes.

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. Distributions
from a Fund's net investment income and short-term capital gains will be taxed
as ordinary income and will not be eligible for the dividends received deduction
available to corporations.

Early each year, each Fund will notify its shareholders of the amount and tax
status of distributions paid to the shareholder for the preceding year.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION

National financial publications in which performance and yield data are reported
include The Wall Street Journal, The New York Times, Forbes, or Money magazine.
Publications of a local or regional nature, such as The Boston Globe or The
Boston Herald, may also be used in comparing the performance and yield of the
Funds.

Yield, effective yield and total return will be calculated separately for Trust
Shares of the Money Market Fund, Institutional Shares of the Treasury Fund and
Investment Shares of each of the Funds. Because Investment Shares of the Funds
are subject to shareholder servicing fees, the yield, effective yield and total
return of the Trust Shares of the Money Market Fund and Institutional Shares of
the Treasury Fund for the same period will exceed that of Investment Shares of
the corresponding Fund.

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OTHER CLASSES OF SHARES

Investment Shares of the Funds are sold primarily to individuals who purchase
shares through BayBanks and its affiliates. Investment Shares of the Funds are
sold at net asset value. Investments in Investment Shares of the Funds may be
subject to a minimum initial investment of $2,500, or $500 if in connection with
participation in the Automatic Investment Program or through an IRA. Investment
Shares are sold at net asset value and are subject to a shareholder servicing
fee.

The amount of dividends payable to Trust Shares of the Money Market Fund and
Institutional Shares of the Treasury Fund will exceed that of Investment Shares
of the corresponding Fund by the difference between Class Expenses and
shareholder servicing fees borne by shares of each respective class of shares of
the Fund. (Currently, there are no differences in Class Expenses other than
shareholder servicing fees.)

The stated advisory fee is the same for both classes of shares of the Fund.

- --------------------------------------------------------------------------------
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young, the Trust's independent
auditors. Their report dated February 11, 1994, on the Fund's financial
statements for the year ended December 31, 1993 and on the following table for
the period presented, is included in the Annual Report to Shareholders dated
December 31, 1993, 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 free of charge from the Trust.

* Reflects operations for the period from January 19, 1993 (date of initial
public offering) to
December 31, 1993.

** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.

(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

(b) Computed on an annualized basis.

Further information about the Fund's performance is contained in its Annual
Report dated December 31, 1993, which can be obtained free of charge.

- --------------------------------------------------------------------------------
TREASURY FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young, the Trust's independent
auditors. Their report dated February 11, 1994, on the Fund's financial
statements for the year ended December 31, 1993 and on the following table for
the period presented, is included in the Annual Report to Shareholders dated
December 31, 1993, 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 free of charge from the Trust.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 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 0.62%(a)
- ----------------------------------------------------------------------------------------------------
Net investment income 2.59%(a)
- ----------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.07%(a)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $34,694
- ----------------------------------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from January 29, 1993 (date of initial
public offering) to
December 31, 1993.

** 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.

Further information about the Fund's performance is contained in its Annual
Report dated December 31, 1993, which can be obtained free of charge.

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ADDRESSES

BayFunds Money Market Portfolio--Trust Shares
and BayFunds U.S. Treasury Money Market Portfolio--Institutional Shares
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779