BAYFUNDS[Registered Trademark]
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
October 4, 1996
Dear Shareholder,
On July 31, 1996 and on August 15, 1996, the Board of Trustees of BayFunds
met to consider and approve a proposal for reorganizing each of the portfolios
of BayFunds[Registered Trademark] ("BayFunds") with a series of 1784
Funds[Registered Trademark] ("1784 Funds") with similar investment objectives
and policies. After carefully studying the merits of the proposal, the Board of
Trustees of BayFunds has determined that the reorganization of each of its
portfolios with a corresponding portfolio of 1784 Funds will be of substantial
benefit for the shareholders of the portfolios of BayFunds.
Specifically, by combining each portfolio of BayFunds with a corresponding
portfolio of 1784 Funds, the shareholders of BayFunds will become part of a
larger fund family with a wider array of mutual fund portfolios. Also, the
Trustees of BayFunds believe that combining the assets of each portfolio of
BayFunds with a corresponding portfolio of 1784 Funds could result in more
efficient mutual fund operations and potentially lower expense ratios for the
shareholders of BayFunds.
Since the Board of Trustees of BayFunds has approved combining the
portfolios of BayFunds with certain portfolios of 1784 Funds that have similar
investment objectives and policies, you and your fellow shareholders are being
asked to approve the proposal at a special meeting of BayFunds' shareholders to
be held at BayBank Systems, Inc., One BayBank Technology Place, Waltham,
Massachusetts 02154 on November 6, 1996 at 2:00 p.m. A proxy card is enclosed
for use in the special meeting. This card represents shares you held as of the
record date, September 20, 1996. IT IS IMPORTANT THAT YOU COMPLETE, SIGN AND
RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.
If you and the other shareholders of your portfolio approve the proposed
reorganization of your portfolio and certain other conditions are satisfied,
you will be able to continue your investment program through ownership in a
portfolio of 1784 Funds with similar investment objectives and policies, but
with the added potential benefit of greater economies of scale due to the
combined assets of BayFunds and 1784 Funds. As a shareholder of 1784 Funds, you
would enjoy access, through the exchange privilege, to a much larger family of
funds, including types of funds that BayFunds currently does not offer. This
will provide you with a convenient way to diversify your investments.
I encourage you to review the attached materials for all the details. Some
of your questions are answered on the next page. Some important facts about the
proposed reorganizations are outlined below:
- The reorganizations will not affect the value of your account. There are
no sales charges on the reorganizations.
- The reorganizations are not expected to result in any material tax
consequences to any of the BayFunds portfolios or their shareholders.
- The 1784 Funds are no-load funds.
Since all the BayFunds portfolios are required to vote, we have grouped
the portfolios on one proxy statement to reduce costs. If you hold shares in
more than one portfolio, you will receive a proxy card for each portfolio you
own. Please vote each proxy card you receive.
Because the Board of Trustees believes the proposed reorganizations will
benefit all shareholders, they encourage you to vote for the proposal. Should
you have any additional questions, we invite you to call BayFunds toll free at
1-800-BAY-FUND.
Respectfully,
/s/ Kenneth G. Condon
--------------------------
Chairman
<PAGE>
Q. WHY HAVE I RECEIVED THIS PACKAGE?
A. BayFunds has entered into an Agreement and Plan of Reorganization with 1784
Funds. Under the Agreement, the assets of BayFunds and the assets of 1784 Funds
will be combined, and your BayFunds shares will be exchanged for shares of 1784
Funds portfolios with similar investment objectives and policies. The Board of
Trustees of BayFunds has approved the proposed reorganizations. You, as a
BayFunds shareholder, are now being asked to approve the proposed
reorganizations of your portfolio(s) with the corresponding 1784 Funds
portfolio(s).
Q. WHY ARE THE REORGANIZATIONS BEING PROPOSED?
A. The Trustees of BayFunds believe that combining the assets of BayFunds and
1784 Funds could result in more efficient mutual fund operations and
potentially lower expense ratios. Also, as a result of these transactions,
shareholders of the BayFunds portfolios will become part of a larger fund
family with more portfolios including some types of funds that BayFunds
currently does not offer. As a 1784 Funds shareholder, you will have access to
these funds through the 1784 Funds exchange privilege.
Q. HOW WILL THIS AFFECT ME AS A BAYFUNDS SHAREHOLDER?
A. You will become a shareholder of 1784 Funds portfolio(s) with similar
investment objectives and policies as the BayFunds portfolio(s) you currently
hold. As a 1784 Funds shareholder, you will also have access to the wider array
of portfolios offered by 1784 Funds.
There are no sales charges on this transaction. The shares of the 1784 Funds
portfolios that you receive will have a total value equal to the value of the
BayFunds shares you held immediately before the transaction.
Q. WILL THE REORGANIZATIONS RESULT IN ANY TAXES?
A. The reorganizations are not expected to result in any material tax
consequences to any of the BayFunds portfolios or their shareholders.
Q. ARE THE 1784 FUNDS NO-LOAD FUNDS? DO THEY CHARGE A 12B-1 FEE?
A. 1784 Funds portfolios are all "no-load", which means you can buy shares,
exchange shares among portfolios, and sell shares without paying fees. Although
some of the 1784 Funds portfolios have 12b-1 plans authorized, they are not
charging a 12b-1 fee at this time and have no present intention of doing so.
Q. WHAT FUND(S) WILL I HOLD FOLLOWING THE REORGANIZATIONS?
<TABLE>
A. BayFunds portfolio shareholders will receive shares of the following 1784
Funds portfolios. Unlike BayFunds, each 1784 Funds portfolio presently has
a single class of shares outstanding. Note that, if you hold shares of the
BayFunds U.S. Treasury Money Market Portfolio, which 1784 Funds portfolio
shares you will receive depends on which class of shares you presently own.
<CAPTION>
BAYFUNDS 1784 FUNDS
- -------------------------------------------- ---------------------------------------------------
<S> <C>
BayFunds U.S. Treasury Money Market 1784 U.S. Treasury Money Market Fund
Portfolio,
Investment Shares
BayFunds U.S. Treasury Money Market 1784 Institutional U.S. Treasury Money Market Fund
Portfolio,
Institutional Shares
BayFunds Money Market Portfolio 1784 Prime Money Market Fund
BayFunds Equity Portfolio 1784 Growth Fund
BayFunds Short Term Yield Portfolio 1784 Short-Term Income Fund
BayFunds Bond Portfolio 1784 Income Fund
</TABLE>
<PAGE>
Q. WILL THE INVESTMENT ADVISER CHANGE?
A. No. The First National Bank of Boston ("Bank of Boston") currently
serves as investment adviser to both BayFunds and 1784 Funds. Bank of Boston
will continue as the investment adviser to 1784 Funds following these
transactions.
Q. IF I HAVE A BAYBANK PREMIUM VALUE PACKAGE OR IF I AM A BAYPLUS CUSTOMER,
WILL I BE ABLE TO USE MY 1784 FUNDS BALANCES TO MEET THE MINIMUM BALANCE
REQUIREMENTS FOR WAIVING NORMAL MONTHLY SERVICE CHARGES IF THE REORGANIZATIONS
ARE APPROVED?
A. Yes. After the reorganizations have been consummated the balances of the
1784 Funds portfolios which have been involved in the reorganizations may be
used to meet the minimum balance requirements for the waiver of normal monthly
service charges on a BayBank Premium Value Package or a BayPlus Account.
Q. HOW DO THE REORGANIZATIONS IMPACT MY HOLDINGS OF BAYFUNDS SHARES OF THE
MASSACHUSETTS MUNICIPAL CASH TRUST?
A. BayFunds Shares of the Massachusetts Municipal Cash Trust are part of a
separate legal entity and are not covered by this proxy statement. Customers
with questions should call 1-800-BAY-FUND or speak with an Investment
Specialist.
Q. HOW DOES THE BOARD OF TRUSTEES OF BAYFUNDS RECOMMEND THAT I VOTE?
A. After careful consideration, the Board of Trustees of BayFunds unanimously
recommends that you vote "FOR" the proposed reorganizations.
Q. HOW DO I CONTACT YOU?
A. If you have any questions, call BayFunds toll-free at 1-800-BAY-FUND,
Monday through Friday, 8:00 a.m. to 8:00 p.m. (Eastern time) or Saturday and
Sunday, 9:00 a.m. to 4:00 p.m. (Eastern time).
PLEASE VOTE.
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
<PAGE>
BAYFUNDS[Registered Trademark]
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
To be held on November 6, 1996
A Special Meeting of the shareholders of BayFunds[Registered Trademark]
(the "Trust"), will be held at BayBank Systems, Inc., One BayBank Technology
Place, Waltham, Massachusetts 02154, on November 6, 1996 at 2:00 p.m. Eastern
Time for the following purposes:
ITEM 1. To consider and act upon a proposal to approve an Agreement and
Plan of Reorganization (the "Reorganization Agreement"), between the
Trust and 1784 Funds[Registered Trademark], and the transactions
contemplated thereby including (a) the transfer of all of the assets
and balance sheet liabilities of each of the BayFunds U.S. Treasury
Money Market Portfolio, the BayFunds Money Market Portfolio, the
BayFunds Equity Portfolio, the BayFunds Short Term Yield Portfolio and
the BayFunds Bond Portfolio (collectively, the "Acquired Funds") to a
corresponding portfolio of 1784 Funds[Registered Trademark]
(collectively, the "Acquiring Funds") in exchange for shares of such
Acquiring Fund or Acquiring Funds, (b) the distribution of shares of
the Acquiring Fund or Acquiring Funds so received by an Acquired Fund
to the shareholders of such Acquired Fund and (c) the termination of
the Acquired Funds and BayFunds and the deregistration of BayFunds.
ITEM 2. To transact such other business as may properly come before the meeting
and any adjournment thereof.
YOUR TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF ITEM 1.
The proposed reorganizations and related matters are described in the
attached Proxy Statement. A copy of the Reorganization Agreement is attached to
the Proxy Statement as Appendix I.
Only shareholders of record on September 20, 1996 are entitled to notice
of and to vote at, the Special Meeting or any adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY BAYFUNDS'
BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE SPECIAL MEETING.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO
BAYFUNDS A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY
ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
VICTOR R. SICLARI
Secretary
October 4, 1996
<PAGE>
PROSPECTUS/PROXY STATEMENT
DATED SEPTEMBER 27, 1996
1784 FUNDS[Registered Trademark]
680 SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
TELEPHONE 1-800-252-1784
BAYFUNDS[Registered Trademark]
1001 LIBERTY AVENUE
PITTSBURGH, PA 15222-3779
TELEPHONE 1-800-BAY-FUND
This Prospectus/Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Trustees of BayFunds[Registered
Trademark] ("BayFunds") in connection with a Special Meeting (the "Meeting") of
shareholders of BayFunds to be held on November 6, 1996 at 2:00 p.m. Eastern
Time, at BayBank Systems, Inc., One BayBank Technology Place, Waltham,
Massachusetts 02154, at which shareholders will be asked to consider and
approve a proposed Agreement and Plan of Reorganization, dated September 26,
1996 (the "Reorganization Agreement"), by and between BayFunds and 1784
Funds[Registered Trademark]("1784 Funds").
BayFunds and 1784 Funds are open-end, series, management investment
companies. The First National Bank of Boston ("Bank of Boston") provides
investment advisory services to the portfolios of 1784 Funds and to the
portfolios of BayFunds. In reviewing the proposed reorganizations of the
portfolios as described in the next paragraph (each such transaction between a
portfolio of BayFunds and the corresponding portfolio of 1784 Funds, a
"Reorganization" and, collectively, the "Reorganizations"), the BayFunds Board
of Trustees considered, among other things, that Bank of Boston is the
investment adviser to both BayFunds and 1784 Funds, that each Reorganization
(other than the Reorganization of the BayFunds U.S. Treasury Money Market
Portfolio) would constitute a tax-free reorganization, that combining the
assets of each portfolio of BayFunds with a corresponding portfolio of 1784
Funds could result in a more efficient mutual fund operations and could
potentially lower expense ratios for shareholders, and that the interests of
shareholders would not be diluted as a result of the Reorganizations.
This Prospectus/Proxy Statement constitutes the Proxy Statement of
BayFunds for the Special Meeting of its shareholders and 1784 Funds' Prospectus
for the shares of the 1784 Funds portfolios (other than the 1784 Prime Money
Market Fund) that have been registered with the SEC and are to be issued in
connection with the Reorganizations. Because the operations of the BayFunds
Money Market Portfolio will be carried on by the 1784 Prime Money Market Fund,
this Prospectus/Proxy Statement does not constitute a Prospectus for the shares
that will be issued by the 1784 Prime Money Market Fund in connection with the
Reorganization of the BayFunds Money Market Portfolio.
<PAGE>
<TABLE>
The Reorganization Agreement provides that each portfolio of BayFunds
(each, an "Acquired Fund" and collectively, the "Acquired Funds") will transfer
substantially all its assets and balance sheet liabilities (or, in the case of
the BayFunds U.S. Treasury Money Market Portfolio, all of the assets and
liabilities attributable to each of its separate classes identified below) to a
portfolio of 1784 Funds (each, an "Acquiring Fund" and collectively, the
"Acquiring Funds") identified below:
<CAPTION>
ACQUIRED FUNDS ACQUIRING FUNDS
- -------------------------------------------- ---------------------------------------------------
<S> <C>
BayFunds U.S. Treasury Money Market 1784 U.S. Treasury Money Market Fund
Portfolio Class A Shares
Investment Shares
BayFunds U.S. Treasury Money Market 1784 Institutional U.S. Treasury Money Market Fund
Portfolio
Institutional Shares
BayFunds Money Market Portfolio 1784 Prime Money Market Fund
Investment Shares
Trust Shares
BayFunds Equity Portfolio 1784 Growth Fund
Investment Shares
Institutional Shares
BayFunds Short Term Yield Portfolio 1784 Short-Term Income Fund
Investment Shares
Institutional Shares
BayFunds Bond Portfolio 1784 Income Fund
Investment Shares
Institutional Shares
</TABLE>
In the case of the BayFunds U.S. Treasury Money Market Portfolio (a) the
assets and balance sheet liabilities attributable to the Investment Shares of
the BayFunds U.S. Treasury Money Market Portfolio will be transferred to the
1784 U.S. Treasury Money Market Fund and (b) the assets and balance sheet
liabilities attributable to the Institutional Shares of the BayFunds U.S.
Treasury Money Market Portfolio will be transferred to the 1784 Institutional
U.S. Treasury Money Market Fund.
In exchange for the transfer of these assets and liabilities, the holders
of each class of shares of such Acquired Fund will receive the shares (which
shall be of the class, if any, specified above) of the Acquiring Fund
identified above opposite the name of such class.
Each of the Acquired Funds will then make a liquidating distribution of
Acquiring Fund shares to the shareholders of the Acquired Fund, so that a
holder of a class of shares in an Acquired Fund at the time of the
Reorganization will receive the shares of the corresponding Acquiring Fund with
the same aggregate net asset value as the shareholder had in the Acquired Fund
immediately before the Reorganization of such Acquired Fund. Following the
Reorganizations of the Acquired Funds, each of the Acquired Funds and BayFunds
will be terminated and BayFunds shall be deregistered as described in the
Reorganization Agreement.
Each of the Acquiring Funds other than the 1784 Prime Money Market Fund is
currently conducting investment operations as described in this
Prospectus/Proxy Statement. The 1784 Prime Money Market Fund has recently been
organized for the purpose of continuing the investment operations of the
BayFunds Money Market Portfolio.
This Prospectus/Proxy Statement sets forth the information that a
shareholder should know before voting on the Reorganization Agreement (and
related transactions) and should be retained for future reference. The
Prospectus dated October 1, 1996 relating to the shares of the Acquiring Funds,
which describes the operations of those Acquiring Funds, accompanies this
Prospectus/Proxy Statement. Additional information is set forth in (a) the
Statement of Additional Information relating to this Prospectus/Proxy
Statement, dated September 27, 1996, (b) the Statement of Additional
Information relating to the Acquiring Funds, dated October 1, 1996, (c) the
Annual Reports relating to the Acquiring Funds for the fiscal year ended May
31, 1996, (d) the Prospectuses dated March 1, 1996, as supplemented August 16,
1996 and September 26, 1996,
<PAGE>
and the Combined Statements of Additional Information, dated March 1, 1996,
each relating to the Acquired Funds and (e) the Annual Reports for the
fiscal year ended December 31, 1995 and the Semi-Annual Reports for the
six-month period ended June 30, 1996 relating to the Acquired Funds. Each of
these documents is on file with the Securities and Exchange Commission (the
"SEC"), and is available without charge upon oral or written request by writing
or calling either BayFunds or 1784 Funds at the respective addresses or
telephone numbers indicated above. The information contained in the
Prospectuses dated March 1, 1996, as supplemented August 16, 1996 and September
26, 1996, the Combined Statements of Additional Information dated March 1,
1996, the Annual Reports for the fiscal year ended December 31, 1995 and the
Semi-Annual Reports for the six-month period ended June 30, 1996, each relating
to the Acquired Funds, is incorporated herein by reference.
This Prospectus/Proxy Statement is expected to first be sent to
shareholders on or about October 4, 1996.
THE SECURITIES OF 1784 FUNDS 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/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY BAYFUNDS OR 1784 FUNDS.
SHARES OF 1784 FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, BANK OF BOSTON CORPORATION, THE FIRST NATIONAL BANK OF BOSTON OR
ANY OF ITS AFFILIATES. SHARES OF 1784 FUNDS ARE NOT FEDERALLY INSURED BY,
GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE WILL VARY AS A
RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF 1784 FUNDS, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN INVESTMENT IN
1784 FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED. THERE IS NO ASSURANCE THAT THE 1784 U.S TREASURY MONEY MARKET
FUND, THE 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND OR THE 1784 PRIME
MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Summary............................................................................... 5
Proposed Reorganizations............................................................ 5
Reasons for Reorganizations......................................................... 5
Federal Income Tax Consequences..................................................... 5
Overview of BayFunds and 1784 Funds................................................. 6
BayFunds U.S. Treasury Money Market Portfolio, 6
1784 U.S. Treasury Money Market Fund and
1784 Institutional U.S. Treasury Money Market Fund.............................
BayFunds Equity Portfolio and 1784 Growth Fund................................... 6
BayFunds Short Term Yield Portfolio and 6
1784 Short-Term Income Fund....................................................
BayFunds Bond Portfolio and 1784 Income Fund..................................... 7
Certain Arrangements with Service Providers -- BayFunds.......................... 7
Certain Arrangements with Service Providers -- 1784 Funds........................ 8
Comparative Fee Tables........................................................... 8
Expense Ratios -- Acquired Funds................................................. 15
Expense Ratios -- Acquiring Funds................................................ 16
Purchases........................................................................ 16
Exchanges........................................................................ 17
Dividends and Distributions...................................................... 17
Redemption Procedures............................................................ 18
Voting Information.................................................................. 18
Risk Factors.......................................................................... 19
BayFunds U.S. Treasury Money Market Portfolio, 19
1784 U.S. Treasury Money Market Fund and
1784 Institutional U.S. Treasury Money Market Fund...............................
BayFunds Equity Portfolio and 1784 Growth Fund...................................... 19
BayFunds Short Term Yield Portfolio and 1784 Short-Term Income Fund................. 20
BayFunds Bond Portfolio and 1784 Income Fund........................................ 21
Investment Policies and Risks -- General............................................ 22
Investment Limitations.............................................................. 23
Other Information................................................................... 27
Information Relating to the Proposed Reorganizations.................................. 27
Description of the Reorganization Agreement......................................... 27
Capitalization...................................................................... 29
Federal Income Tax Consequences..................................................... 30
Information Relating to Voting Matters................................................ 32
General Information................................................................. 32
Shareholder and Board Approvals..................................................... 32
Appraisal Rights.................................................................... 35
Quorum.............................................................................. 35
Annual Meetings..................................................................... 36
Additional Information about 1784 Funds............................................... 36
Additional Information about BayFunds................................................. 37
Litigation............................................................................ 39
Financial Highlights.................................................................. 39
Financial Statements.................................................................. 44
Management's Discussion of Acquiring Fund Performance................................. 45
Other Business........................................................................ 48
Shareholder Inquiries................................................................. 48
</TABLE>
<PAGE>
SUMMARY
The following is a summary of certain information relating to the proposed
Reorganizations, the parties thereto and the related transactions, and is
qualified by reference to the more complete information contained elsewhere in
this Prospectus/Proxy Statement, the Statement of Additional Information
relating to this Prospectus/Proxy Statement, the Prospectuses and Combined
Statements of Additional Information of BayFunds, the Prospectus and Statement
of Additional Information of 1784 Funds and the Reorganization Agreement
attached to this Prospectus/Proxy Statement as Appendix I. BayFunds' Annual
Reports to Shareholders and the most recent Semi-Annual Reports to Shareholders
may be obtained free of charge by calling 1-800-BAY-FUND.
PROPOSED REORGANIZATIONS. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, the Board of Trustees of both BayFunds and 1784 Funds,
including in each case the trustees who are not "interested persons" within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act"),
have determined that each of the proposed Reorganizations is in the best
interests of each Acquired Fund's and each Acquiring Fund's shareholders,
respectively, and that the interests of existing shareholders of the Acquired
Funds and the Acquiring Funds, respectively, will not be diluted as a result of
such Reorganizations.
Pages one through eighteen hereof summarize the proposed Reorganizations.
REASONS FOR THE REORGANIZATIONS. The primary reasons for each of the
proposed Reorganizations are: (a) the merger between BayBanks, Inc. and Boston
Merger Corp., a wholly-owned subsidiary of Bank of Boston Corporation, (b) the
fact that The First National Bank of Boston serves as the investment adviser to
each of the Acquired Funds and each of the Acquiring Funds, (c) the fact that
shareholder interests would not be diluted in the proposed Reorganizations, (d)
the status of each Reorganization (other than the reorganization of the
BayFunds U.S. Treasury Money Market Portfolio) as a tax-free reorganization,
(e) the anticipated minimal tax consequences of the Reorganization of the
BayFunds U.S. Treasury Money Market Portfolio, (f) the similarity of the
investment objective and policies of each Acquired Fund and the corresponding
Acquiring Fund or Acquiring Funds, (g) the beneficial economies of scale that
could result from each Reorganization, (h) the improved marketing opportunities
that could result from each Reorganization, and (i) the opportunity for the
shareholders of each Acquired Fund to participate in a larger family of funds
through the exchange privilege offered by 1784 Funds.
FEDERAL INCOME TAX CONSEQUENCES. Shareholders of each of the Acquired
Funds (other than the BayFunds U.S. Treasury Money Market Portfolio) will
recognize no gain or loss for federal income tax purposes on their receipt of
shares of the corresponding Acquiring Fund. Shareholders of each of the
Acquiring Funds (other than the 1784 U.S. Treasury Money Market Fund and the
1784 Institutional U.S. Treasury Money Market Fund) will in general have no tax
consequence from the Reorganizations. None of the Acquired Funds (other than
the BayFunds U.S. Treasury Money Market Portfolio) will incur federal tax
liability as a result of the Reorganization of such Acquired Fund, and no
Acquiring Fund (other than the 1784 U.S. Treasury Money Market Fund and the
1784 Institutional U.S. Treasury Money Market Fund) will recognize gain or loss
for federal tax purposes on its issuance of shares in the Reorganization of
such Acquiring Fund with the corresponding Acquired Fund. The Reorganization of
the BayFunds U.S. Treasury Money Market Portfolio with the 1784 U.S. Treasury
Money Market Fund and the 1784 Institutional U.S. Treasury Money Market Fund
will not qualify as a "tax free" reorganization under federal income tax law,
and the 1784 U.S. Treasury Money Market Fund's and the 1784 Institutional U.S.
Treasury Money Market Fund's bases in the assets acquired from the BayFunds
U.S. Treasury Money Market Portfolio will be the fair market value of such
assets at the time such Reorganization is consummated. However, because each of
the BayFunds U.S. Treasury Money Market Portfolio and the 1784 U.S. Treasury
Money Market Fund and the 1784 Institutional U.S. Treasury Money Market Fund
value their securities at amortized cost and seek to maintain a $1.00 net asset
value per share, such Reorganization is not expected to result in any material
tax consequences to any of such funds or their shareholders. See "Information
Relating to the Proposed Reorganizations -- Federal Income Tax Consequences."
<PAGE>
OVERVIEW OF BAYFUNDS AND 1784 FUNDS. There are no material differences
between the investment objectives and policies of the BayFunds Money Market
Portfolio and the 1784 Prime Money Market Fund. The investment objectives and
policies of each of the other Acquired Funds are similar to those of the
corresponding Acquiring Fund or Acquiring Funds as described below.
BayFunds U.S. Treasury Money Market Portfolio, 1784 U.S. Treasury Money Market
Fund and 1784 Institutional U.S. Treasury Money Market Fund.
The investment objective of each of the BayFunds U.S. Treasury Money
Market Portfolio, the 1784 U.S. Treasury Money Market Fund and the 1784
Institutional U.S. Treasury Money Market Fund is to preserve principal value
and maintain a high degree of liquidity while providing current income. The
BayFunds U.S. Treasury Money Market Portfolio pursues its investment objective
by investing, under normal circumstances, at least 65% of the value of its
total assets in U.S. Treasury obligations and repurchase agreements
collateralized by such obligations. To achieve their investment objectives, the
1784 U.S. Treasury Money Market Fund and the 1784 Institutional U.S. Treasury
Money Market Fund invest in U.S. Treasury obligations, including bills, notes
and bonds, and repurchase agreements secured by U.S. Treasury obligations. Each
of the BayFunds U.S. Treasury Money Market Portfolio, the 1784 U.S. Treasury
Money Market Fund, and the 1784 Institutional U.S. Treasury Money Market Fund
complies with industry regulations applicable to money market funds. These
regulations require that such investments mature or be deemed to mature within
397 days from the date of acquisition, that the average maturity of such
investments (on a dollar-weighted basis) be 90 days or less, and that all such
investments be in U.S. dollar denominated high quality securities. See "Risk
Factors -- BayFunds U.S. Treasury Money Market Portfolio (Investment Shares and
Institutional Shares) and 1784 U.S. Treasury Money Market Fund and 1784
Institutional U.S. Treasury Money Market Fund (collectively, the "1784 Treasury
Funds")."
BayFunds Equity Portfolio and 1784 Growth Fund.
The investment objective of the BayFunds Equity Portfolio is long-term
capital appreciation. The investment objective of the 1784 Growth Fund is
capital appreciation. Dividend income, if any, is incidental to both the
objective of the BayFunds Equity Portfolio and the 1784 Growth Fund. Under
normal circumstances, the BayFunds Equity Portfolio pursues its investment
objective by investing at least 65% of the value of its total assets in a
broadly diversified portfolio of equity securities. Under normal circumstances,
at least 65% of the 1784 Growth Fund's assets are invested in common stocks and
securities convertible into common stock of U.S. or foreign issuers. The
BayFunds Equity Portfolio emphasizes investment in securities with the
potential for long-term, above-average capital appreciation. The 1784 Growth
Fund emphasizes investment in securities with above-average growth potential,
with a particular focus on smaller, lesser known companies. See "Risk Factors
- -- BayFunds Equity Portfolio and 1784 Growth Fund."
BayFunds Short Term Yield Portfolio and 1784 Short-Term Income Fund.
The investment objective of the BayFunds Short Term Yield Portfolio is a
high level of current income consistent with preservation of capital. The
investment objective of the 1784 Short-Term Income Fund is to maximize current
income, with the preservation of capital as a secondary objective. The BayFunds
Short Term Yield Portfolio pursues its investment objective by investing, under
normal circumstances, in a diversified portfolio of high-grade debt
obligations, which may include bonds, notes, debentures, asset-backed and
mortgage-backed securities, commercial paper, bank instruments and money market
instruments. To achieve its investment objective, the 1784 Short-Term Income
Fund invests, under normal circumstances, at least 80% of its net assets in
debt securities, such as bonds, notes, debentures, asset-backed and
mortgage-backed securities and municipal securities. The 1784 Short-Term Income
Fund generally invests in securities of medium to high credit quality. The 1784
Short-Term Income Fund can invest up to 30% of its assets in securities of
non-U.S. issuers, including issuers in developing countries. Each of the
BayFunds Short Term Yield Portfolio and the 1784 Short-Term Income Fund
maintains a dollar-weighted average maturity of three years or less under
normal circumstances. See "Risk Factors -- BayFunds Short Term Yield Portfolio
and 1784 Short-Term Income Fund."
<PAGE>
BayFunds Bond Portfolio and 1784 Income Fund.
The investment objective of the BayFunds Bond Portfolio is high current
income and capital appreciation. The investment objective of the 1784 Income
Fund is to maximize current income. Preservation of capital is a secondary
objective of the 1784 Income Fund. The BayFunds Bond Portfolio pursues its
investment objective by investing, under normal circumstances, at least 65% of
the value of its total assets in bonds. The BayFunds Bond Portfolio buys only
investment grade U.S. dollar denominated debt obligations. To achieve its
investment objective, the 1784 Income Fund invests, under normal circumstances,
at least 80% of its net assets in debt securities, such as bonds, notes,
debentures, asset-backed and mortgage-backed securities and municipal
securities. The 1784 Income Fund generally invests in securities of medium to
high credit quality. The 1784 Income Fund can invest up to 30% of its assets in
securities of non-U.S. issuers, including issuers in developing countries. The
BayFunds Bond Portfolio expects to maintain a dollar-weighted average maturity
of twelve years or less. The 1784 Income Fund expects to maintain a
dollar-weighted average maturity from seven to thirty years under normal
circumstances. See "Risk Factors -- BayFunds Bond Portfolio and 1784 Income
Fund."
See "Risk Factors" below and the BayFunds and 1784 Funds Prospectuses
which are incorporated herein by reference for a further description of the
similarities and differences between the investment objectives and policies of
the Acquired Funds (other than the BayFunds Money Market Portfolio) and the
corresponding Acquiring Fund or Acquiring Funds (other than the 1784 Prime
Money Market Fund).
Certain Arrangements with Service Providers -- BayFunds.
At a special meeting of the shareholders of BayFunds held on June 28, 1996
the shareholders of each of the Acquired Funds considered and approved a new
Investment Advisory Agreement between BayFunds and The First National Bank of
Boston ("Bank of Boston"). The new Investment Advisory Agreement with Bank of
Boston became effective upon the merger between Boston Merger Corp., a
wholly-owned subsidiary of Bank of Boston Corporation, with and into BayBanks,
Inc. and replaced the Investment Advisory Agreement between BayFunds and
BayBank, N.A. with respect to the BayFunds U.S. Treasury Money Market Portfolio
and the Investment Advisory Agreement between BayFunds and BayBanks Investment
Management, Inc. with respect to the BayFunds Money Market Portfolio, the
BayFunds Short Term Yield Portfolio, the BayFunds Equity Portfolio and the
BayFunds Bond Portfolio. The fees to be paid under the new Investment Advisory
Agreement are identical to the fees paid under each of the previous Investment
Advisory Agreements.
Pursuant to the terms of the new Investment Advisory Agreement, Bank of
Boston, subject in each case to the direction of the BayFunds' Board of
Trustees, provides a continuous investment program for each Acquired Fund,
including investment research and management with respect to all securities,
investments and cash equivalents in the Acquired Funds.
Federated Administrative Services ("Federated"), a subsidiary of Federated
Investors, provides each of the Acquired Funds with certain administrative
personnel and services necessary to operate such Acquired Fund, such as legal
and accounting services. For its services, Federated receives a fee, calculated
at an annual rate of 0.15% of the first $250 million of average aggregate daily
net assets of the Acquired Funds, 0.125% of the second $250 million of average
aggregate daily net assets of the Acquired Funds, 0.10% of the next $250
million of average aggregate daily net assets of the Acquired Funds, and 0.075%
of the average aggregate daily net assets of the Acquired Funds over $750
million. The minimum administrative fee received during any fiscal year is at
least $50,000 for each Acquired Fund. Federated may chose to voluntarily
reimburse a portion of its fee at any time.
BayBank Systems, Inc. ("BayBank Systems") is the shareholder servicing
agent for the Investment Shares of each of the Acquired Funds and provides
services which are necessary for the maintenance of shareholder accounts. Each
Acquired Fund pays BayBank Systems a fee based on the average daily net asset
value of Investment Shares for which BayBank Systems provides shareholder
services. This fee equals 0.25% of each Acquired Fund's average daily net
assets of Investment Shares for which BayBank Systems provides services.
BayBank Systems may, however, choose voluntarily to waive all or a portion of
this fee at any time.
<PAGE>
Federated Securities Corp. is the principal distributor for the shares of
each of the Acquired Funds.
The Fifth Third Bank provides custodial services to each of the Acquired
Funds. DST Systems, Inc. is the transfer agent and the dividend disbursing
agent for each of the Acquired Funds.
Certain Arrangements with Service Providers -- 1784 Funds.
Bank of Boston serves as the investment adviser for each of the Acquiring
Funds and is entitled to receive investment advisory fees, which are accrued
daily and paid monthly, from each of the Acquiring Funds. See "Management" in
the Prospectus of 1784 Funds accompanying this Prospectus/Proxy Statement,
which is incorporated herein by reference, for additional information on Bank
of Boston.
SEI Fund Resources ("SFR") provides administrative services and certain
accounting services to each of the Acquiring Funds. SEI Financial Management
Corporation, a wholly-owned subsidiary of SEI Corporation, is the owner of all
beneficial interest in SFR. Upon consummation of the Reorganizations, SFR will
receive a fee for its services as administrator and fund accountant, which is
calculated daily and paid monthly, at an annual rate of 0.085% of the first $5
billion of average aggregate daily net assets of 1784 Funds, and 0.045% of the
average aggregate daily net assets of 1784 Funds over $5 billion. Upon
consummation of the Reorganizations, SFR may, at its own expense, appoint Bank
of Boston as a subadministrator to 1784 Funds. See "Management" in the
Prospectus of 1784 Funds accompanying this Prospectus/Proxy Statement, which is
incorporated herein by reference, for additional information about SFR.
SEI Financial Services Company ("SEI"), a wholly-owned subsidiary of SEI
Corporation, is the distributor of the shares of each Acquiring Fund. 1784
Funds has adopted a distribution plan pursuant to Rule 12b-1 under 1940 Act
(the "Distribution Plan") with respect to each of the Acquiring Funds other
than with respect to the 1784 Institutional U.S. Treasury Money Market Fund,
the 1784 Prime Money Market Fund and the Class A Shares of the 1784 U.S.
Treasury Money Market Fund. The Distribution Plan and the related distribution
agreements provide that 1784 Funds will pay a fee calculated daily and paid
monthly, at an annual rate of 0.25% of the average daily net assets of each
Acquiring Fund (other than of the 1784 Institutional U.S. Treasury Money Market
Fund, the 1784 Prime Money Market Fund or the Class A Shares of the 1784 U.S.
Treasury Money Market Fund). SEI can use these fees to compensate
broker/dealers and service providers (including Bank of Boston and its
affiliates) which provide administrative and/or distribution services to
holders of shares of the Acquiring Funds (other than the 1784 Institutional
U.S. Treasury Money Market Fund, the 1784 Prime Money Market Fund and the Class
A Shares of the 1784 U.S. Treasury Money Market Fund) or their customers who
beneficially own these shares. No fees have been paid to SEI under the
Distribution Plan or the related distribution agreements.
Bank of Boston provides custodial services to 1784 Funds. Boston Financial
Data Services is the dividend disbursing agent and shareholder servicing agent
for 1784 Funds. State Street Bank and Trust Company is the transfer agent for
1784 Funds. From and after the consummation of the Reorganizations, BayBank
Systems, Inc. will be the shareholder servicing agent for the 1784 U.S.
Treasury Money Market Fund and the 1784 Prime Money Market Fund.
See the comparative fee tables set forth below for a comparison of the
annual operating expenses of each Acquired Fund to the annual operating
expenses of the corresponding Acquiring Fund or Acquiring Funds.
Comparative Fee Tables.
The tables set forth below show (a) shareholder transaction expenses and
estimated annual operating expenses for each class of shares of each Acquired
Fund as of May 31, 1996, for the five-month period ended on such date, and for
each Acquiring Fund (or its relevant class thereof) as of May 31, 1996 for its
fiscal year ended on such date, in each case restated to reflect expenses each
class of shares of the Acquired Funds and the Acquiring Funds, respectively,
expect to incur during the current fiscal year and (b) pro forma information
<PAGE>
for each Acquiring Fund assuming the Reorganization of such Acquiring Fund had
taken place on May 31, 1996.
<TABLE>
<CAPTION>
BAYFUNDS U.S.
TREASURY MONEY PRO FORMA
MARKET 1784 U.S. 1784 U.S.
PORTFOLIO, TREASURY MONEY TREASURY MONEY
INVESTMENT MARKET FUND, MARKET FUND,
SHARES CLASS A SHARES CLASS A SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases and
reinvested dividends.......................... None None None
Deferred sales charges imposed on redemptions... None None None
Redemption Fee*................................. None None None
Exchange Fee.................................... None None None
<FN>
- ---------------
*There is a fee for redemptions by wire.
</TABLE>
<TABLE>
<S> <C> <C> <C>
ANNUAL OPERATING EXPENSES (1)
(expressed as a percentage of average net
assets)
Advisory Fee (2)................................ 0.20% 0.40% 0.40%
12b-1 Fee....................................... None None None
Other Expenses (2).............................. 0.42% 0.24% 0.25%
---- ---- ----
Total Operating Expenses (2).................... 0.62% 0.64% 0.65%
</TABLE>
EXAMPLE: (1)
<TABLE>
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of
the shares after the number of years indicated:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BayFunds U.S. Treasury Money Market Portfolio,
Investment Shares.............................. $6 $20 $35 $77
1784 U.S. Treasury Money Market Fund, Class A
Shares......................................... $7 $21 $36 $81
Pro Forma 1784 U.S. Treasury Money Market Fund,
Class A Shares................................. $7 $21 $36 $79
<FN>
- ---------------
(1) Unless otherwise noted, the information in the expense table and the
example reflects voluntary fee waivers and/or reimbursements. The
assumption in the example of a 5% annual return is required by the SEC for
all mutual funds, and is not a prediction of any fund's future performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
(2) Absent fee waivers and reimbursements, advisory fees would be 0.20% for
Investment Shares of the BayFunds U.S. Treasury Money Market Portfolio,
0.40% for Class A Shares of the 1784 U.S. Treasury Money Market Fund and
0.40% for Class A Shares of the 1784 U.S. Treasury Money Market Fund on a
pro forma basis; and other expenses and total operating expenses would be
0.42% and 0.62%, respectively, for Investment Shares of the BayFunds U.S.
Treasury Money Market Portfolio, 0.35% and 0.75%, respectively, for Class A
Shares of the 1784 U.S. Treasury Money Market Fund and 0.31% and 0.71%,
respectively, for Class A Shares of the 1784 U.S. Treasury Money Market
Fund on a pro forma basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BAYFUNDS U.S. PRO FORMA
TREASURY MONEY 1784 1784
MARKET INSTITUTIONAL INSTITUTIONAL
PORTFOLIO, U.S. TREASURY U.S. TREASURY
INSTITUTIONAL MONEY MARKET MONEY MARKET
SHARES FUND FUND
-------------- -------------- --------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases and
reinvested dividends.......................... None None None
Deferred sales charges imposed on redemptions... None None None
Redemption Fee*................................. None None None
Exchange Fee.................................... None None None
<FN>
- ---------------
*There is a fee for redemptions by wire.
</TABLE>
<TABLE>
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES(1)
(expressed as a percentage of average net
assets)
Advisory Fee (2)................................ 0.20% 0.20% 0.20%
12b-1 Fee....................................... None None None
Other Expenses (2).............................. 0.17% 0.20% 0.17%
---- ---- ----
Total Operating Expenses (2).................... 0.37% 0.40% 0.37%
</TABLE>
EXAMPLE: (1)
<TABLE>
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of
the shares after the number of years indicated:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BayFunds U.S. Treasury Money Market Portfolio,
Institutional Shares.......................... $4 $12 $21 $47
1784 Institutional U.S. Treasury Money Market
Fund.......................................... $4 $13 $22 $51
Pro Forma 1784 Institutional U.S. Treasury Money
Market Fund................................... $4 $12 $21 $47
<FN>
- ---------------
(1) Unless otherwise noted, the information in the expense table and the
example reflects voluntary fee waivers and/or reimbursements. The
assumption in the example of a 5% annual return is required by the SEC for
all mutual funds, and is not a prediction of any fund's future performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
(2) Absent fee waivers and reimbursements, advisory fees would be 0.20% for
Institutional Shares of the BayFunds U.S. Treasury Money Market Fund, 0.20%
for the 1784 Institutional U.S. Treasury Money Market Fund and 0.20% for
the 1784 Institutional U.S. Treasury Money Market Fund on a pro forma
basis; and other expenses and total operating expenses would be 0.17% and
0.37%, respectively, for Institutional Shares of the BayFunds U.S. Treasury
Money Market Portfolio, 0.20% and 0.39%, respectively, for the 1784
Institutional U.S. Treasury Money Market Fund, and 0.17% and 0.37%,
respectively, for the 1784 Institutional U.S. Treasury Money Market Fund on
a pro forma basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO
FORMA
BAYFUNDS 1784 1784
MONEY MARKET BAYFUNDS PRIME PRIME
PORTFOLIO, MONEY MARKET MONEY MONEY
INVESTMENT PORTFOLIO, MARKET MARKET
SHARES TRUST SHARES FUND(3) FUND
------------- ------------ -------- ------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases and
reinvested dividends....................... None None None None
Deferred sales charges imposed on
redemptions................................ None None None None
Redemption Fee*.............................. None None None None
Exchange Fee................................. None None None None
<FN>
- ---------------
*There is a fee for redemptions by wire.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES (1)
(expressed as a percentage of average net
assets)
Advisory Fee (2)............................. 0.40% 0.40% 0.40% 0.40%
12b-1 Fee.................................... None None None None
Other Expenses (2)........................... 0.46% 0.21% 0.25% 0.25%
---- ---- ---- ----
Total Operating Expenses (2)................. 0.86% 0.61% 0.65% 0.65%
</TABLE>
EXAMPLE: (1)
<TABLE>
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of
shares after the number of years indicated:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BAYFUNDS MONEY MARKET PORTFOLIO
Investment Shares........................................ $9 $27 $48 $106
Trust Shares............................................. $6 $20 $35 $ 77
1784 PRIME MONEY MARKET FUND (3)......................... $7 $21 $36 $ 81
PRO FORMA 1784 PRIME MONEY MARKET FUND................... $7 $21 $36 $ 81
<FN>
- ---------------
(1) Unless otherwise noted, the information in the expense table and the
example reflects voluntary fee waivers and/or reimbursements. The
assumption in the example of a 5% annual return is required by the SEC for
all mutual funds, and is not a prediction of any fund's future performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
(2) Absent fee waivers and reimbursements, advisory fees would be 0.40% for
Investment Shares of the BayFunds Money Market Portfolio, 0.40% for Trust
Shares of the BayFunds Money Market Portfolio, 0.40% for the 1784 Prime
Money Market Fund and 0.40% for the 1784 Prime Money Market Fund on a pro
forma basis; and other expenses and total operating expenses would be 0.46%
and 0.86%, respectively, for Investment Shares of the BayFunds Money Market
Portfolio, 0.21% and 0.61%, respectively, for Trust Shares of the BayFunds
Money Market Portfolio, 0.25% and 0.65%, respectively, for the 1784 Prime
Money Market Fund and 0.19% and 0.59%, respectively, for the 1784 Prime
Money Market Fund on a pro forma basis.
(3) Because the 1784 Prime Money Market Fund is newly organized, amounts are
estimated for the current fiscal year.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BAYFUNDS BAYFUNDS
EQUITY EQUITY PRO FORMA
PORTFOLIO, PORTFOLIO, 1784 1784
INVESTMENT INSTITUTIONAL GROWTH GROWTH
SHARES SHARES FUND (4) FUND
---------- ------------- -------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases and
reinvested dividends.......................... None None None None
Deferred sales charges imposed on redemptions... None None None None
Redemption Fee*................................. None None None None
Exchange Fee.................................... None None None None
<FN>
- ---------------
*There is a fee for redemptions by wire.
</TABLE>
<TABLE>
ANNUAL FUND OPERATING EXPENSES (1)
(expressed as a percentage of average net
assets)
<S> <C> <C> <C> <C>
Advisory Fee (2)................................ 0.70% 0.70% 0.74% 0.74%
12b-1 Fee (2)(3)................................ None None None None
Other Expenses (2).............................. 0.56% 0.31% 0.20% 0.20%
---- ---- ---- ----
Total Operating Expenses (2).................... 1.26% 1.01% 0.94% 0.94%
</TABLE>
EXAMPLE: (1)
<TABLE>
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of
shares after the number of years indicated:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BAYFUNDS EQUITY PORTFOLIO
Investment Shares........................................ $13 $40 $69 $152
Institutional Shares..................................... $10 $32 $56 $124
1784 GROWTH FUND (4)..................................... $10 $30 $52 $115
PRO FORMA 1784 GROWTH FUND............................... $10 $30 $52 $115
<FN>
- ---------------
(1) Unless otherwise noted, the information in the expense table and the
example reflects voluntary fee waivers and/or reimbursements. The
assumption in the example of a 5% annual return is required by the SEC for
all mutual funds, and is not a prediction of any fund's future performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
(2) Absent fee waivers and reimbursements, advisory fees would be 0.70% for
Investment Shares of the BayFunds Equity Portfolio, 0.70% for Institutional
Shares of the BayFunds Equity Portfolio, 0.74% for the 1784 Growth Fund and
0.74% for the 1784 Growth Fund on a pro forma basis; 12b-1 fees would be
0.25% for the 1784 Growth Fund and 0.25% for the 1784 Growth Fund on a pro
forma basis; and other expenses and total operating expenses would be 0.56%
and 1.26%, respectively, for Investment Shares of the BayFunds Equity
Portfolio, 0.31% for and 1.01%, respectively, for Institutional Shares of
the BayFunds Equity Portfolio, 0.89% and 1.73%, respectively, for the 1784
Growth Fund and 0.24% and 0.98%, respectively, for the 1784 Growth Fund on
a pro forma basis.
(3) 12b-1 fees are asset-based sales charges. The 12b-1 fee for the 1784 Growth
Fund is computed at an annual rate of 0.25% of the 1784 Growth Fund's
average daily net assets. Absent waiver of this fee, after a substantial
period of time annual payment of the fee may total more than the maximum
sales charge that would have been permissible if imposed entirely as an
initial sales charge.
(4) The 1784 Growth Fund commenced operations on March 28, 1996. All
information has been annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO
BAYFUNDS BAYFUNDS FORMA
SHORT TERM SHORT TERM 1784 1784
YIELD YIELD SHORT- SHORT-
PORTFOLIO, PORTFOLIO, TERM TERM
INVESTMENT INSTITUTIONAL INCOME INCOME
SHARES SHARES FUND FUND
----------- ------------- ------ ------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases and
reinvested dividends............................. None None None None
Deferred sales charges imposed on redemptions...... None None None None
Redemption Fee*.................................... None None None None
Exchange Fee....................................... None None None None
<FN>
- ---------------
*There is a fee for redemptions by wire.
</TABLE>
<TABLE>
ANNUAL FUND OPERATING EXPENSES (1)
(expressed as a percentage of average net assets)
<S> <C> <C> <C> <C>
Advisory Fee (2)................................... 0.50% 0.50% 0.50% 0.50%
12b-1 Fee (2)(3)................................... None None None None
Other Expenses (2)................................. 0.62% 0.37% 0.16% 0.20%
---- ---- ---- ----
Total Operating Expenses (2)....................... 1.12% 0.87% 0.66% 0.70%
</TABLE>
EXAMPLE: (1)
<TABLE>
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of
shares after the number of years indicated:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BAYFUNDS SHORT TERM YIELD PORTFOLIO
Investment Shares........................................ $11 $36 $62 $136
Institutional Shares..................................... $ 9 $28 $48 $107
1784 SHORT-TERM INCOME FUND.............................. $ 7 $21 $37 $ 82
PRO FORMA 1784 SHORT-TERM INCOME FUND.................... $ 7 $22 $38 $ 85
<FN>
- ---------------
(1) Unless otherwise noted, the information in the expense table and the
example reflects voluntary fee waivers and/or reimbursements. The
assumption in the example of a 5% annual return is required by the SEC for
all mutual funds, and is not a prediction of any fund's future performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
(2) Absent fee waivers and reimbursements, advisory fees would be 0.50% for
Investment Shares of the BayFunds Short Term Yield Portfolio, 0.50% for
Institutional Shares of the BayFunds Short Term Yield Portfolio, 0.50% for
the 1784 Short-Term Income Fund and 0.50% for the 1784 Short-Term Income
Fund on a pro forma basis; 12b-1 fees would be 0.25% for the 1784
Short-Term Income Fund and 0.25% for the 1784 Short-Term Income Fund on a
pro form basis; and other expenses and total operating expenses would be
0.62% and 1.12%, respectively, for Investment Shares of the BayFunds Short
Term Yield Portfolio, 0.37% and 0.87%, respectively, for Institutional
Shares of the BayFunds Short Term Yield Portfolio, 0.56% and 1.06%,
respectively, for the 1784 Short-Term Income Fund and 0.28% and 0.78%,
respectively, for the 1784 Short-Term Income Fund on a pro forma basis.
(3) 12b-1 fees are asset-based sales charges. The 12b-1 fee for the 1784
Short-Term Income Fund is computed at an annual rate of 0.25% of the 1784
Short-Term Income Fund's average daily net assets. Absent waiver of this
fee, after a substantial period of time annual payment of the fee may total
more than the maximum sales charge that would have been permissible if
imposed entirely as an initial sales charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BAYFUNDS
BAYFUNDS BOND PRO FORMA
BOND PORTFOLIO, PORTFOLIO, 1784 1784
INVESTMENT INSTITUTIONAL INCOME INCOME
SHARES SHARES FUND FUND
--------------- ------------- ------ ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases and
reinvested dividends........................ None None None None
Deferred sales charges imposed on
redemptions................................. None None None None
Redemption Fee*............................... None None None None
Exchange Fee.................................. None None None None
<FN>
- ---------------
*There is a fee for redemptions by wire.
</TABLE>
<TABLE>
ANNUAL FUND OPERATING EXPENSES (1)
(expressed as a percentage of average net
assets)
<C> <C> <C> <C> <C>
Advisory Fee (2).............................. 0.60% 0.60% 0.60% 0.60%
12b-1 Fee (2)(3).............................. None None None None
Other Expenses (2)............................ 0.61% 0.36% 0.20% 0.20%
----- ----- ----- -----
Total Operating Expenses (2).................. 1.21% 0.96% 0.80% 0.80%
</TABLE>
EXAMPLE: (1)
<TABLE>
A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return, reinvestment of all dividends and redemption of
shares after the number of years indicated:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BAYFUNDS BOND PORTFOLIO
Investment Shares........................................ $12 $38 $67 $147
Institutional Shares..................................... $10 $31 $53 $118
1784 INCOME FUND......................................... $ 8 $26 $44 $ 99
PRO FORMA 1784 INCOME FUND............................... $ 8 $26 $44 $ 99
<FN>
- ---------------
(1) Unless otherwise noted, the information in the expense table and the
example reflects voluntary fee waivers and/or reimbursements. The
assumption in the example of a 5% annual return is required by the SEC for
all mutual funds, and is not a prediction of any fund's future performance.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
(2) Absent fee waivers and reimbursements, advisory fees would be 0.60% for
Investment Shares of the BayFunds Bond Portfolio, 0.60% for Institutional
Shares of the BayFunds Bond Portfolio, 0.74% for the 1784 Income Fund and
0.74% for the 1784 Income Fund on a pro forma basis; 12b-1 fees would be
0.25% for the 1784 Income Fund and 0.25% for the 1784 Income Fund on a pro
forma basis; and other expenses and total operating expenses would be 0.61%
and 1.21%, respectively, for Investment Shares of the BayFunds Bond
Portfolio, 0.36% and 0.96%, respectively, for Institutional Shares of the
BayFunds Bond Portfolio, 0.46% and 1.20%, respectively, for the 1784 Income
Fund and 0.21% and 0.95%, respectively, for the 1784 Income Fund on a pro
forma basis.
(3) 12b-1 fees are asset-based sales charges. The 12b-1 fee for the 1784 Income
Fund is computed at an annual rate of 0.25% of the 1784 Income Fund's
average daily net assets. Absent waiver of this fee, after a substantial
period of time annual payment of the fee may total more than the maximum
sales charge that would have been permissible if imposed entirely as an
initial sales charge.
</TABLE>
<PAGE>
Expense Ratios -- The Acquired Funds.
<TABLE>
The following table sets forth (a) the ratios of operating expenses to
average net assets of each of the Acquired Funds for the one year period ended
December 31, 1995 (i) after fee waivers and expense reimbursements, and (ii)
absent fee waivers and expense reimbursements, and (b) the annualized ratios of
operating expenses to average net assets of each of the Acquired Funds for the
six-month period ended June 30, 1996 (i) after fee waivers and expense
reimbursements, and (ii) absent fee waivers and expense reimbursements:
FISCAL YEAR ENDED DECEMBER 31, 1995
<CAPTION>
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS FEE WAIVERS
AND EXPENSE AND EXPENSE
ACQUIRED FUND REIMBURSEMENTS REIMBURSEMENTS
- ---------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
BayFunds U.S. Treasury Money Market Portfolio
Investment Shares....................................... 0.63% 0.63%
Institutional Shares.................................... 0.38% 0.38%
BayFunds Money Market Portfolio
Investment Shares....................................... 0.87% 0.87%
Trust Shares............................................ 0.62% 0.62%
BayFunds Equity Portfolio
Investment Shares....................................... 1.30% 1.30%
Institutional Shares.................................... 1.05% 1.05%
BayFunds Short Term Yield Portfolio
Investment Shares....................................... 1.11% 1.11%
Institutional Shares.................................... 0.86% 0.86%
BayFunds Bond Portfolio
Investment Shares....................................... 1.29% 1.29%
Institutional Shares.................................... 1.04% 1.04%
</TABLE>
<TABLE>
SIX-MONTH PERIOD ENDED JUNE 30, 1996
<CAPTION>
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS FEE WAIVERS
AND EXPENSE AND EXPENSE
ACQUIRED FUND REIMBURSEMENTS REIMBURSEMENTS
- ---------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
BayFunds U.S. Treasury Money Market Portfolio
Investment Shares....................................... 0.62% 0.62%
Institutional Shares.................................... 0.37% 0.37%
BayFunds Money Market Portfolio
Investment Shares....................................... 0.85% 0.85%
Trust Shares............................................ 0.60% 0.60%
BayFunds Equity Portfolio
Investment Shares....................................... 1.24% 1.24%
Institutional Shares.................................... 0.99% 0.99%
BayFunds Short Term Yield Portfolio
Investment Shares....................................... 1.12% 1.12%
Institutional Shares.................................... 0.87% 0.87%
BayFunds Bond Portfolio
Investment Shares....................................... 1.12% 1.12%
Institutional Shares.................................... 0.87% 0.87%
</TABLE>
<PAGE>
Expense Ratios -- The Acquiring Funds.
<TABLE>
The following table sets forth the ratios of operating expenses to average
net assets of each of the Acquiring Funds (other than the 1784 Prime Money
Market Fund) for the fiscal year ended May 31, 1996 (a) after fee waivers and
expense reimbursements and (b) absent fee waivers and disbursements:
FISCAL YEAR ENDED MAY 31, 1996
<CAPTION>
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE FEE
WAIVERS AND EXPENSE WAIVERS AND EXPENSE
ACQUIRING FUND REIMBURSEMENTS REIMBURSEMENTS
- ---------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
1784 U.S. Treasury Money Market Fund
Class A Shares.......................................... 0.64% 0.75%
1784 Institutional U.S. Treasury Money Market Fund........ 0.32% 0.39%
1784 Growth Fund.......................................... 0.20% 1.73%
1784 Short-Term Income Fund............................... 0.63% 1.06%
1784 Income Fund.......................................... 0.80% 1.20%
</TABLE>
The 1784 Prime Money Market Fund has recently been organized for the
purpose of continuing the investment operating of the BayFunds Money Market
Portfolio and had not commenced operations as at May 31, 1996.
Purchases.
<TABLE>
Shares of each of the Acquiring Funds are sold on a continuous basis
without a sales load. Purchases may be made Monday through Friday, except on
certain holidays. Each Acquiring Fund's share price is the net asset value next
calculated after an investment is received and accepted by the distributor of
the shares of the Acquiring Funds. The net asset value of each Acquiring Fund
is normally calculated at 4:00 p.m. Eastern time (12:00 noon for the 1784 U.S.
Treasury Money Market Fund, the 1784 Institutional U.S. Treasury Money Market
Fund and the 1784 Prime Money Market Fund). The following minimum investments
apply to each of the Acquiring Funds (other than the 1784 Institutional U.S.
Treasury Money Market Fund) unless they are waived by the distributor of the
shares of the Acquiring Funds:
<S> <C>
To open an account.......................................... $1,000.00
For tax-sheltered retirement plans........................ 250.00
To add to an account........................................ 250.00
Through automatic investment plans........................ 50.00
Minimum account balance..................................... 1,000.00
For tax-sheltered retirement plans........................ 250.00
</TABLE>
The initial minimum investment in the 1784 Institutional U.S. Treasury
Money Market Fund is $100,000, and subsequent investments must be in amounts of
at least $5,000.
Shares of each of the Acquired Funds are sold on a continuous basis
without a sales load. Purchases may be made Monday through Friday, except on
certain holidays. Each Acquired Fund's share price is the net asset value next
calculated after an investment is received and accepted by the distributor of
the shares of the Acquired Funds. The net asset value of each of the BayFunds
U.S. Treasury Money Market Portfolio and the BayFunds Money Market Portfolio is
calculated at 2:00 p.m. Eastern time and as of the close of trading (normally
4:00 p.m., Eastern time) of the New York Stock Exchange and the net asset value
of each of the BayFunds Bond Portfolio, the BayFunds Short Term Yield Portfolio
and the BayFunds Equity Portfolio is determined as of the close of trading
(normally 4:00 p.m., Eastern time) of the New York Stock Exchange, in each
case, Monday through Friday, except certain holidays and days during which no
shares are tendered for redemption and no orders to purchase shares are
received. The following minimum investments apply to
<PAGE>
purchases of Investment Shares of each of the Acquired Funds unless they are
waived by the distributor of the Investment Shares of the Acquired Funds:
To open an account............................................ $2,500.00
For automatic investment plans.............................. 500.00
For tax-sheltered retirement plans.......................... 500.00
To add to an account.......................................... 100.00
Through automatic investment plans.......................... 50.00
Through tax-sheltered retirement plans...................... 50.00
Minimum account balance....................................... 2,500.00
For automatic investment plans.............................. 500.00
For tax-sheltered retirement plans.......................... 500.00
The initial minimum investment in Institutional Shares of the BayFunds
U.S. Treasury Money Market Portfolio is $500,000 and subsequent investments
must be in amounts of at least $100,000. The initial minimum investment in
Trust Shares of the BayFunds Money Market Portfolio is $10,000 and subsequent
investments must be in amounts of at least $100. The initial minimum investment
in Institutional Shares of the BayFunds Equity Portfolio, the BayFunds Short
Term Yield Portfolio and the BayFunds Bond Portfolio is $10,000 and subsequent
investments must be in amounts of at least $100.
Participants in the Acquired Funds' Automatic Investment Program may
direct the deduction of the purchase price for shares of any Acquired Fund from
an eligible deposit account. If the Reorganization of any such Acquired Fund is
approved and consummated as set forth herein, all amounts so deducted will be
automatically invested in the corresponding Acquiring Fund.
Exchanges.
All or a portion of shares of any of the Acquiring Funds may be exchanged
on any business day at their net asset value for shares of one or more of the
other Acquiring Funds or any other portfolio of 1784 Funds. Shares of any class
of any of the Acquired Funds may be exchanged at their net asset value for the
shares of any of the other Acquired Funds. In addition, shareholders of the
Acquired Funds may also purchase BayFunds Shares of the Massachusetts Municipal
Cash Trust with redemption proceeds of the shares of an Acquired Fund.
Dividends and Distributions.
Substantially all of the net income from dividends and interest of each of
the 1784 Institutional U.S. Treasury Money Market Fund, the 1784 U.S. Treasury
Money Market Fund and the 1784 Prime Money Market Fund is declared as a
dividend daily to shareholders of record. Shares begin accruing dividends on
the date of purchase, and accrue dividends up to and including the day prior to
redemption. Dividends are paid monthly on the first business day of each month.
Substantially all of the net income of each the 1784 Short-Term Income
Fund and the 1784 Income Fund from dividends and interest is declared as a
dividend daily to shareholders of record. Shares begin accruing dividends on
the day following the date of purchase, and accrue dividends through and
including the day of redemption. Dividends are paid monthly on or about the
last business day of each month.
Substantially all of the 1784 Growth Fund's net income from dividends and
interest is paid to shareholders of record semi-annually on or about the last
day of June and December.
The net realized short-term and long-term capital gains, if any, of each
of the Acquiring Funds are distributed to shareholders at least annually. Each
of the Acquiring Funds may also make additional distributions it its
shareholders to the extent necessary to avoid the application of the 4%
non-deductible excise tax on certain undistributed income and net capital gains
of mutual funds.
Dividends from the net investment income of the BayFunds U.S. Treasury
Money Market Portfolio and the BayFunds Money Market Portfolio are declared
daily to shareholders of record and paid monthly. Shares
<PAGE>
begin accruing dividends on the date of purchase, and accrue dividends up to
and including the day prior to redemption. If either the BayFunds U.S.
Treasury Money Market Portfolio or the BayFunds Money Market Portfolio realizes
net long-term capital gains, it will distribute them at least annually.
Dividends from the net investment income of the BayFunds Bond Portfolio
and the BayFunds Short Term Yield Portfolio are declared daily and paid monthly
to all shareholders of record. Net realized capital gains are distributed at
least annually.
Dividends from the net investment income of BayFunds Equity Portfolio are
declared and paid quarterly to all shareholders of record within five business
days of the end of such calendar quarter. Net realized capital gains are
distributed at least annually.
Holders of Investment Shares of any of the Acquired Funds may choose
automatic reinvestment of dividends in additional Investment Shares at the net
asset value next determined on the payment dates, automatic credit to an
eligible BayBank, N.A. deposit account, or payment by check. If shareholders
fail to select an option, all distributions are reinvested in additional
Investment Shares. Holders of Institutional Shares of any of the Acquired Funds
may elect to have their dividends and distributions automatically reinvested in
additional Institutional Shares of such Acquired Fund at the net asset value
next determined on the payment dates, receive their dividends and distributions
in cash or receive a combination of additional Institutional Shares of such
Acquired Fund or cash. Dividends and distributions with respect to the Trust
Shares of the BayFunds Money Market Portfolio are reinvested on payment dates
in additional Trust Shares of the BayFunds Money Market Portfolio unless cash
payments are requested in writing.
The amount of dividends payable to Institutional Shares of the Acquired
Funds and to Trust Shares of the BayFunds Money Market Portfolio will exceed
that of Investment Shares of the corresponding Acquired Fund by the difference
between class expenses and shareholder servicing fees borne by shares of each
respective class of shares of such Acquired Fund. Currently there are no
differences in class expenses other than shareholder servicing fees.
Redemption Procedures.
The shares of each of the Acquiring Funds and each of the Acquired Funds
are redeemable on any business day at a price equal to the net asset value of
the shares the next time it is calculated after receipt by the shareholder
servicing agent of a redemption request in good order.
VOTING INFORMATION. This Prospectus/Proxy Statement is being furnished in
connection with the solicitation of proxies by BayFunds' Board of Trustees in
connection with a Special Meeting of Shareholders to be held at BayBank
Systems, Inc., One BayBank Technology Place, Waltham, Massachusetts 02154 on
November 6, 1996, at 2:00 p.m. Eastern Time (such meeting and any adjournment
thereof hereinafter referred to as the "Meeting"). Only shareholders of record
at the close of business on September 20, 1996 will be entitled to notice of
and to vote at the Meeting. Each share or fraction thereof is entitled to one
vote or fraction thereof and all shares will vote separately by Acquired Fund
and, with respect to the BayFunds U.S. Treasury Money Market Portfolio,
separately by class of shares. Shares represented by a properly executed proxy
will be voted in accordance with the instructions thereon, or if no
specification is made, the persons named as proxies will vote in favor of each
proposal set forth in the Notice of Meeting. In addition, shareholders may vote
their shares by telephone in accordance with the procedures for telephonic
voting adopted by the BayFunds Board of Trustees. Shareholders who choose to
vote by telephone will receive a written confirmation of their votes prior to
the Meeting. All proxies may be revoked at any time before they are exercised
by submitting to BayFunds a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and voting in person. To obtain the
necessary representation at the Meeting, solicitations may be made by mail,
telephone, or personal interview by D.F. King & Co. ("DF King") or its agents
as well as by officers and service contractors of BayFunds. It is anticipated
that the total cost of any such solicitation, if made by DF King or its agents,
would be approximately $25,000 plus out-of-pocket expenses, and, if made by any
other party, would be nominal. The expense of solicitation, as well as the
preparation, printing and mailing of the enclosed form of proxy and this
Prospectus/Proxy Statement and the costs of telephonic voting will be borne by
Bank of Boston and BayBank, N.A. For additional information,
<PAGE>
including a description of the shareholder vote required for approval of the
Reorganization Agreement and related transactions contemplated thereby, see
"Information Relating to Voting Matters."
RISK FACTORS
There are no material differences between the investment objective and
policies of the BayFunds Money Market Portfolio and the 1784 Prime Money Market
Fund. The investment objectives and policies of the other Acquired Funds are,
in many respects, similar to those of the corresponding Acquiring Fund or
Acquiring Funds. There are, however, certain differences. The following
discussion summarizes some of the more significant similarities and differences
in the investment policies and risk factors of the Acquired Funds (other than
the BayFunds Money Market Portfolio) and the corresponding Acquiring Fund or
Acquiring Funds and is qualified in its entirety by the Prospectuses and
Statements of Additional Information of the Acquired Funds and the Acquiring
Funds incorporated herein by reference.
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO (INVESTMENT SHARES AND
INSTITUTIONAL SHARES) AND 1784 U.S. TREASURY MONEY MARKET FUND AND 1784
INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND (COLLECTIVELY, "THE 1784 TREASURY
FUNDS"). The BayFunds U.S. Treasury Money Market Portfolio invests, under
normal circumstances, at least 65% of its total assets in (a) U.S. Treasury
obligations ("U.S. Treasury Obligations"), such as U.S. Treasury bills, notes,
bonds, and separately traded interest and principal component parts of such
obligations that are transferable through the Federal Reserve book-entry system
known as Separately Traded Registered Interest and Principal Securities
("STRIPS") and (b) repurchase agreements that are collateralized by such
obligations. Each of the 1784 Treasury Funds invests, under normal
circumstances, at least 65% of its total assets in (a) U.S. Treasury
Obligations and (b) repurchase agreements secured by U.S. Treasury Obligations.
Obligations issued or guaranteed as to principal and interest by the U.S.
government ("Government Securities") are not direct obligations of the United
States government but are backed by (i) the full faith and credit of the United
States, (ii) the issuer's right to borrow from the U.S. Treasury, (iii) the
discretionary authority of the U.S. government to purchase certain obligations
of agencies or instrumentalities, or (iv) the credit of the agency or
instrumentality issuing the obligations. Each of the BayFunds U.S. Treasury
Money Market Portfolio and the 1784 Treasury Funds may invest all or any
portion of the remaining 35% of its total assets in Government Securities or in
repurchase agreements that are secured by such obligations. In addition, each
of the 1784 Treasury Funds limits its investments in STRIPS to 20% of its total
assets. STRIPS are usually structured with two classes that receive different
portions of the interest and principal payments from the underlying obligation.
The yield to maturity on the interest-only class is extremely sensitive to the
rate of principal payments on the underlying obligation. The market value of
the principal-only class generally is unusually volatile in response to changes
in interest rates.
BAYFUNDS EQUITY PORTFOLIO AND 1784 GROWTH FUND. The BayFunds Equity
Portfolio invests, under normal circumstances, at least 65% of its total assets
in a broadly diversified portfolio of equity securities. Equity securities
include common stock of U.S. or foreign companies which are either listed on
domestic or foreign exchanges or traded in the over-the-counter markets
(including depositary receipts), preferred stock of such companies, warrants,
and securities convertible into or exchangeable for common stock of such
companies. The 1784 Growth Fund invests, under normal. circumstances, at least
65% of its total assets in common stock of U.S. or foreign companies which are
either listed on domestic or foreign exchanges or traded in the
over-the-counter markets (including depositary receipts) and securities
convertible into or exchangeable for common stock of U.S. or foreign companies.
Common stocks are generally more volatile than other securities. Preferred
stocks share some of the characteristics of both debt and equity and are
generally preferred over common stocks with respect to dividends and
liquidation. Warrants are options to purchase common stock at a specific price.
Most warrants have an expiration date after which they are worthless. In
addition, if the market price of the common stock does not exceed the warrant's
exercise price during the life of the warrant, the warrant will expire as
worthless. Warrants have no voting rights, pay no dividends, and have no rights
with respect to the assets of the company issuing them. The percentage increase
or decrease in the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the optioned common
stock.
<PAGE>
The 1784 Growth Fund invests with an emphasis on securities of smaller,
lesser-known companies. The securities of companies with small market
capitalizations may have more risks than the securities of other companies.
Smaller companies may be more susceptible to market downturns or setbacks
because they may have limited product lines, markets, distribution channels,
and financial and management resources. There is often less publicly available
information about smaller companies than about more established companies. As a
result, the prices of securities issued by smaller companies may be volatile.
The 1784 Growth Fund may also invest all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to it. The BayFunds Equity Portfolio may purchase securities
of other investment companies to the extent permitted under the 1940 Act and
the rules and regulations thereunder. A fund's purchase of investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.
BAYFUNDS SHORT TERM YIELD PORTFOLIO AND 1784 SHORT-TERM INCOME FUND.
Except as provided in the next paragraph, the BayFunds Short Term Yield
Portfolio invests in debt obligations which are rated by one or more of the
nationally recognized statistical rating organizations (a "Rating
Organization") in one of the three highest ratings groups at the time of
purchase (e.g., AAA, AA or A by Standard & Poor's Rating Group ("S&P"), Duff &
Phelps Credit Rating Co. ("D&P"), or Fitch Investor Services, Inc. ("Fitch"),
or Aaa, Aa or A by Moody's Investor Services, Inc. ("Moody's")) or, if not
rated, of comparable quality as determined by the investment adviser. By
comparison, except as provided in the next paragraph, the 1784 Short-Term
Income Fund expects to invest, under normal circumstances, at least 65% of its
assets in securities rated by one or more Rating Organizations in one of the
three highest ratings groups at the time of purchase or, if not rated, of
comparable quality as determined by the investment adviser but, unlike the
BayFunds Short Term Yield Portfolio, may also invest in debt obligations which
are rated in a lower ratings group by one or more Rating Organizations.
Securities rated in the lowest categories of investment grade (that is, BBB by
S&P, D&P or Fitch or Baa by Moody's) and equivalent securities may have
speculative characteristics. In adverse economic or other circumstances,
issuers of these securities are more likely to have difficulty making principal
and interest payments than issuers of higher grade obligations. Investments in
higher quality instruments may result in lower yield than would be available
from investments in lower quality instruments.
Both the BayFunds Short Term Yield Portfolio and the 1784 Short-Term
Income Fund may invest in mortgage-backed and asset-backed securities. The
BayFunds Short Term Yield Portfolio invests in asset-backed securities which
are rated by one or more Rating Organizations in one of the two highest ratings
groups at the time of purchase or, if not rated, of comparable quality as
determined by the investment adviser. By comparison, the 1784 Short-Term Income
Fund invests in mortgage-backed securities which are rated in one of the three
highest ratings groups by one or more Rating Organizations at the time of
purchase or, if not rated, of comparable quality as determined by the
investment adviser. Mortgage-backed and asset-backed securities generally pay
back principal and interest over the life of the security. At the time a fund
reinvests the payments and any unscheduled repayments of principal received,
the fund may receive a rate of interest which is actually lower than the rate
of interest paid on these securities. Mortgage-backed and asset-backed
securities are subject to higher prepayment risks than most other types of debt
instruments with prepayment risks because the underlying mortgage loans or the
collateral supporting the asset-backed securities may be prepaid without
penalty or premium. Prepayment risks on mortgage-backed securities tend to
increase during periods of declining mortgage interest rates because underlying
mortgages are refinanced to take advantage of the lower rates. Although
asset-backed securities generally are less likely to experience substantial
prepayments than are mortgage-backed securities, certain of the factors that
affect the rate of prepayments on mortgage-backed securities also affect the
rate of prepayments on asset-backed securities. In addition, asset-backed
securities present certain risks that are not presented by mortgage-backed
securities. Primarily, these securities do not have the benefit of any security
interest in the related collateral.
The 1784 Short-Term Income Fund, unlike the BayFunds Short Term Yield
Portfolio, may invest in municipal notes, which include but are not limited to
general obligation notes, tax anticipation notes (notes sold to finance working
capital needs of the issuer in anticipation of receiving taxes on a future
date), revenue anticipation notes (notes sold to provide needed cash prior to
receipt of expected non-tax revenues from a
<PAGE>
specific source), bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes. The 1784 Short-Term Income Fund's
investment in any of the notes described above will be limited to those
obligations which are rated (i) MIG-2 or VMIG-2 or better at the time of
investment by Moody's, (ii) SP-2 or better at the time of investment by S&P, or
(iii) F-2 or better at the time of investment by Fitch, or which, if not rated,
are of at least comparable quality, as determined by the investment advisor.
Municipal bonds in which the 1784 Short-Term Income Fund may invest must be
rated BBB or better by S&P or Fitch or Baa or better by Moody's at the time of
investment or, if not rated, must be determined by the investment advisor to
have essentially the same characteristics and quality as bonds having the above
ratings. Bonds rated BBB by S&P or Fitch or Baa by Moody's may have speculative
characteristics. The 1784 Short-Term Income Fund may invest in industrial
development and pollution control bonds if the interest paid thereon is exempt
from federal income tax. These bonds are issued by or on behalf of public
authorities to raise money to finance various privately-operated facilities for
business and manufacturing, housing, sports, and pollution control. These bonds
may also be used to finance public facilities such as airports, mass transit
systems, ports, and parking. The payment of the principal and interest on such
bonds is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities in which the 1784 Short-Term Income Fund, unlike the
BayFunds Short Term Yield Portfolio, may invest also include participations in
municipal leases. These are undivided interests in a portion of an obligation
in the form of a lease or installment purchase issued by a state or local
government to acquire equipment or facilities. Municipal leases frequently have
special risks not normally associated with general obligation bonds or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt-issuance limitations are deemed
to be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly
or other periodic basis. Although the obligations will be secured by the leased
equipment or facilities, the disposition of the property in the event of
non-appropriation or foreclosure might, in some cases, prove difficult. In
light of these concerns, 1784 Funds has adopted and follows procedures for
determining whether municipal lease securities purchased by the 1784 Short-Term
Income Fund are liquid and for monitoring the liquidity of municipal lease
securities held in the 1784 Short-Term Income Fund's portfolio. The procedures
require that a number of factors be used in evaluating the liquidity of a
municipal lease security, including the frequency of trades and quotes for the
security, the number of dealers willing to purchase or sell the security and
the number of other potential purchasers, the willingness of dealers to
undertake to make a market in the security, the nature of the marketplace in
which the security trades, the credit quality of the security, and other
factors which the investment advisor may deem relevant.
The 1784 Short-Term Income Fund can invest up to 30% of its assets in
securities of non-U.S. issuers, including issuers in developing countries.
Investments in non-U.S. securities involve risks relating to political, social
and economic developments abroad, as well as risks resulting from differences
between the regulations to which U.S. and non-U.S. issuers and markets are
subject. Non-U.S. markets may be less liquid and more volatile than U.S.
markets.
BAYFUNDS BOND PORTFOLIO AND 1784 INCOME FUND. The BayFunds Bond Portfolio
invests, under normal circumstances, at least 65% of the value of its total
assets in bonds. The debt securities in which each the BayFunds Bond Portfolio
and the 1784 Income Fund may invest are rated by one or more Rating
Organizations in one of the four highest rating categories at the time of
purchase (e.g., AAA, AA, A, or BBB by S&P, D&P or Fitch, or Aaa, Aa, A, or Baa
by Moody's), or, if not rated, are of comparable quality as determined by the
investment adviser. Under normal circumstances, the 1784 Income Fund will,
however, invest at least 65% of its net assets in those debt instruments rated
by one or more Ratings Organizations in one of the three highest ratings
categories at the time of purchase or, if not so rated, are of comparable
quality as determined by the investment adviser.
<PAGE>
Both the BayFunds Bond Portfolio and the 1784 Income Fund may invest in
mortgage-backed and asset-backed securities. The BayFunds Bond Portfolio
invests in asset-backed securities which are rated by one or more Rating
Organizations in one of the two highest ratings groups at the time of purchase
or, if not rated, of comparable quality as determined by the investment
adviser. By comparison, the 1784 Income Fund invests in mortgage-backed
securities which are rated in one of the three highest ratings groups by one or
more Rating Organizations at the time of purchase or, if not rated, of
comparable quality as determined by the investment adviser. See "Risk Factors
- -- BayFunds Short Term Yield Portfolio and 1784 Short-Term Income Fund" above
for a discussion of the risks of investments in mortgage-backed and
asset-backed securities.
The BayFunds Bond Portfolio's dollar-weighted average maturity will not
exceed twelve years. By contrast, the 1784 Income Fund's dollar-weighted
average maturity is expected to be from seven to thirty years under normal
circumstances. While longer-term securities tend to have higher yields than
short-term securities, they are subject to greater price fluctuations as a
result of interest rate changes and other factors.
The 1784 Income Fund may also invest in municipal securities, unlike the
BayFunds Bond Portfolio. See "Risk Factors -- BayFunds Short Term Yield
Portfolio and 1784 Short-Term Income Fund" above for a discussion of the risks
of investments in municipal securities.
The 1784 Income Fund can invest up to 30% of its assets in securities of
non-U.S. issuers, including issuers in developing countries. See "Risk
Factors -- BayFunds Short Term Yield Portfolio and 1784 Short-Term Income Fund"
above for a discussion of the risks of investments in non-U.S. issuers.
INVESTMENT POLICIES AND RISKS -- GENERAL. This section describes certain
policies and risks that are generally common to a number of the Acquired Funds
and Acquiring Funds.
Forward Commitments or Purchases on a When-Issued Basis. Forward
commitments or purchases of securities on a when-issued basis are transactions
where the price of the securities is fixed at the time of commitment and the
delivery and payment ordinarily takes place beyond customary settlement time.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the buyer before settlement. The securities are
subject to market fluctuation due to changes in market interest rates; the
securities are also subject to fluctuation in value pending settlement based
upon public perception of the creditworthiness of the issuer of these
securities. Liquid assets sufficient to make payments for the securities to
purchased are segregated at the trade date. The Acquired Funds do not intend to
engage in forward commitments or commitments to purchase securities on a when
issued basis to the extent that would cause the segregation of more than 20% of
the total value of their respective assets. By contrast, each of the Acquiring
Funds may invest up to 25% of its assets in forward commitments or commitments
to purchase securities on a when-issued basis.
Repurchase Agreements. A repurchase agreement is an agreement where a
person buys a security and simultaneously commits to sell the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. A fund which buys
the security bears a risk of loss in the event the other party defaults on its
obligations and the fund is delayed or prevented from its right to dispose of
the collateral securities or if the fund realizes a loss on the sale of the
collateral securities. Each of the Acquired Funds and the Acquiring Funds may
enter into repurchase agreements. Each Acquired Fund and Acquiring Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions which are deemed by its investment adviser to be creditworthy
pursuant to guidelines established by the Board of Trustees. Pursuant to an
exemptive order from the SEC, the Acquiring Funds may enter into repurchase
agreements on a pooled basis.
Reverse Repurchase Agreements. Each of the Acquired Funds and the
Acquiring Funds may enter into reverse repurchase agreements. Reverse
repurchase agreements involve the sale of securities held by a fund and the
agreement by the fund to repurchase the securities at an agreed-upon price,
date and interest payment. When a fund enters into reverse repurchase
transactions, securities of a dollar amount equal in value to the securities
subject to the agreement will be maintained in a segregated account with the
fund's custodian. The segregation of assets could impair the fund's ability to
meet its current obligations or impede investment
<PAGE>
management if a large portion of the fund's assets are involved. Reverse
repurchase agreements are considered to be a form of borrowing.
Securities Lending. Consistent with applicable regulatory requirements and
in order to generate additional income, each of the Acquired Funds and each of
the Acquiring Funds may lend securities to broker-dealers and other
institutional borrowers. Loans must be callable at any time and continuously
secured by collateral (cash or U.S. government securities) in an amount not
less than the market value, determined daily, of the securities loaned. Each of
the Acquired Funds and Acquiring Funds intend that the value of securities
loaned by it would not exceed 33 1/3% of its total assets. In the event of the
bankruptcy of the other party to a securities loan, a fund could experience
delays in recovering either the securities lent or cash. To the extent that, in
the meantime, the value of the securities lent has increased or the value of
the securities purchased has decreased, the fund could experience a loss.
Options. The Acquiring Funds and the BayFunds Equity Portfolio may engage
in writing call options from time to time. Under a call option, the purchaser
of the option has the right to purchase, and the writer (the fund) the
obligation to sell, the underlying security at the exercise price during the
option period. Options written on individual securities are written solely as
covered call options (such as options written on securities owned by the fund)
and may be written for hedging purposes or, in the case of the 1784 Growth
Fund, the BayFunds Equity Portfolio, the 1784 Short-Term Income Fund and the
1784 Income Fund, in order to generate additional income. Such options must be
listed on a national securities exchange. Each of the Acquiring Funds may write
covered call options on its securities provided the aggregate value of such
options does not exceed 10% of its net assets. None of the Acquired Funds other
than the BayFunds Equity Portfolio may engage in writing covered call options.
There are risks associated with options transactions, including that the
success of a hedging strategy may depend on the ability of the investment
adviser to predict movements in the prices of individual securities, market
fluctuations and movements in interest rates; there may be an imperfect
correlation between the movement in prices of securities held by a fund and
price movements of the related options; there may not be a liquid secondary
market for options; and while a fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market
value of the underlying security.
Futures and Options on Futures. Futures contracts provide for the future
sale by one party and purchase by another party of a specified amount of a
specified security at a specified future time and at a specified price. An
option on a futures contract gives the purchaser the right, in exchange for a
premium, to assume a position in a futures contract at a specified exercise
price during the term of the option. Each of the Acquiring Funds and the
BayFunds Equity Portfolio may enter into futures contracts and options on
futures contracts provided that the sum of its initial margin deposits on open
futures contracts plus the amount paid for premiums for unexpired options on
futures contracts does not exceed 5% of the market value of its total assets
and, with respect to each of the Acquiring Funds only, the outstanding
obligations to purchase securities under futures contracts do not exceed 20% of
its total assets. Each of the Acquiring Funds and the BayFunds Equity Portfolio
will enter into only those futures contracts which are traded on national
futures exchanges.
Each of the Acquiring Funds and the BayFunds Equity Portfolio use futures
contracts and related options only for bona fide hedging purposes, i.e., to
offset unfavorable changes in the value of securities otherwise held or
expected to be acquired for investment purposes. There are risks associated
with these hedging activities. See "Options" above.
INVESTMENT LIMITATIONS. None of the Acquiring Funds or the Acquired Funds
may change their fundamental investment limitations without the affirmative
vote of the holders of a majority of the outstanding voting securities (as
defined in the 1940 Act) of such Acquiring Fund or Acquired Fund. However,
investment limitations that are not fundamental policies may be changed by the
Board of Trustees without shareholder approval. The investment limitations of
the Acquired Funds and the corresponding Acquiring Fund or Acquiring Funds are
similar, but not identical.
Concentration of Investments. As a fundamental policy, none of the
Acquiring Funds nor any of the Acquired Funds may purchase any securities which
would cause more than 25% of the total assets of the such
<PAGE>
fund to be invested in the securities of one or more issuers conducting their
principal business activities in the same industry. This limitation does not
apply (a) to investments in obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities and, with respect to the
Acquiring Funds only, repurchase agreements involving such securities, and (b)
for each of the 1784 Institutional U.S. Treasury Money Market Fund, the 1784
U.S. Treasury Money Market Fund, the 1784 Prime Money Market Fund and the
BayFunds Money Market Portfolio, to investments in obligations issued by
domestic banks, foreign branches of domestic banks and U.S. branches of foreign
banks, to the extent that it may under the 1940 Act, reserve freedom of action
to concentrate its investments in such securities. The BayFunds Short Term
Yield Portfolio will consider investment in instruments issued by foreign banks
and instruments issued by domestic banks to be investments in separate
industries for purpose of concentration. This limitation also does not apply to
an investment of all of the investable assets of the 1784 Growth Fund or the
1784 Prime Money Market Fund in a diversified, open-end management investment
company having the same investment objective and policies and substantially the
same investment restrictions as those applicable to such fund (a "Qualifying
Portfolio"). See "Investing in Securities of Other Investment Companies" below.
For purposes of this limitation, (i) utility companies will be divided
according to their services; (ii) financial service companies will be
classified according to the end users of their services; for example,
automobile finance, bank finance and diversified finance will each be
considered a separate industry; (iii) with respect to the Acquiring Funds only,
supranational entities will be considered to be a separate industry; and (iv)
with respect to the Acquiring Funds only, loan participations are considered to
be issued by both the issuing bank and the underlying corporate borrower.
Loans. As a fundamental policy, none of the Acquiring Funds or Acquired
Funds may make loans, except that an Acquiring Fund or an Acquired Fund may (a)
purchase or hold debt instruments; (b) enter into repurchase agreements; and
(c) engage in securities lending, in each case where permitted by its
investment objective, policies and limitations.
Diversification of Investments. As a fundamental policy, none of the
Acquiring Funds or the Acquired Funds may acquire more than 10% of the voting
securities of any one issuer (except, with respect to the Acquiring Funds, for
securities issued or guaranteed by the United States, its agencies or
instrumentalities and repurchase agreements involving such securities), or
invest more than 5% of its total assets in the securities of an issuer (except
for securities issued or guaranteed by the United States, its agencies or
instrumentalities and, with respect to the Acquiring Funds, repurchase
agreements involving such securities); provided that (a) the foregoing
limitation does not apply to 25% of the total assets of any of the Acquired
Funds or the Acquiring Funds (other than the 1784 Institutional U.S. Treasury
Money Market Fund and the 1784 U.S. Treasury Money Market Fund), and (b) the
foregoing limitation does not apply to an investment of all of the investable
assets of the 1784 Growth Fund or the 1784 Prime Money Market Fund in a
Qualifying Portfolio.
Investing to Exercise Control. As a fundamental policy, none of the
Acquiring Funds may invest in companies for the purpose of exercising control.
It is a non-fundamental policy of the BayFunds Equity Portfolio that it will
not purchase securities for the purpose of exercising control over the issuer
of the securities. The other Acquired Funds do not have a policy regarding
investing to exercise control.
Issuing Senior Securities or Borrowing Money. As a fundamental policy,
none of the Acquiring Funds may borrow and none of the Acquired Funds may
borrow or issue senior securities, except that (a) an Acquiring Fund may borrow
money from banks and may enter into reverse repurchase agreements and (b) an
Acquired Fund may borrow money directly (not necessarily from banks) or through
reverse repurchase agreements, in each case in an amount not to exceed 33 1/3%
of its total assets and then only as a temporary measure for extraordinary or
emergency purposes (which, for the Acquiring Funds and the BayFunds Money
Market Portfolio, may include the need to meet shareholder redemption
requests). None of the Acquiring Funds or the Acquired Funds will purchase any
securities for its portfolio at any time at which its borrowings equal or
exceed 5% of its total assets. None of the Acquiring Funds or the Acquired
Funds will borrow for investment purposes. The Acquiring Funds may issue senior
securities in connection with permitted borrowings as outlined above or as
permitted by rule, regulation or order of the SEC.
<PAGE>
Pledging Assets. As a fundamental policy, none of the 1784 U.S Treasury
Money Market Fund, the 1784 Institutional U.S. Treasury Money Market Fund, the
BayFunds U.S. Treasury Money Market Portfolio or the BayFunds Money Market
Portfolio may pledge, mortgage, or hypothecate assets except to secure
temporary borrowings permitted in the preceding paragraph if the market value
of the assets pledged (a) for the 1784 U.S Treasury Money Market Fund and the
1784 Institutional U.S. Treasury Money Market Fund, does not exceed 10% of the
value of the total assets taken at current value at the time of the incurrence
of such loan, except as permitted with respect to securities lending and (b)
for the BayFunds U.S. Treasury Money Market Portfolio and the BayFunds Money
Market Portfolio, does not exceed the lesser of the dollar amounts borrowed or
15% of the value of the total assets at the time of the pledge. Each of the
BayFunds Short Term Yield Portfolio, the BayFunds Bond Portfolio and the
BayFunds Equity Portfolio has a non-fundamental policy which is the same as the
foregoing policy for the BayFunds Money Market Portfolio and the BayFunds U.S.
Treasury Money Market Portfolio regarding pledging of assets. The Acquiring
Funds, other than the 1784 U.S Treasury Money Market Fund and the 1784
Institutional U.S. Treasury Money Market Fund, do not have a policy regarding
the pledging of assets.
Investing in Real Estate and Commodities. As a fundamental policy, none of
the Acquiring Funds or the Acquired Funds may purchase or sell real estate,
including real estate limited partnership interests, commodities and
commodities contracts, but excluding interests in a pool of securities that are
secured by interests in real estate. Each of the Acquiring Funds, the BayFunds
U.S. Treasury Money Market Portfolio and the BayFunds Money Market Portfolio
may, however, subject to compliance with other investment policies, invest in
companies which invest in real estate. In addition, each of the Acquiring Funds
may, subject to its permitted investments, invest in companies which invest in
commodities or commodities contracts. Each of the Acquiring Funds and the
BayFunds Equity Portfolio may invest in futures contracts and options thereon
to the extent permitted by its investment objective, policies and limitations.
Selling Short or Buying on Margin. As a fundamental policy, none of the
Acquiring Funds or the Acquired Funds may make short sales of securities,
maintain a short position or purchase securities on margin, except that the
Acquired Funds and the Acquiring Funds may obtain short-term credits as
necessary for the clearance of securities transactions. With respect to the
Acquired Funds (other than the BayFunds U.S. Treasury Money Market Portfolio),
the deposit or payment by such Acquired Fund of initial or variation margin in
connection with financial futures contracts or related options transactions in
not considered the purchase of a security on margin.
Underwriting. As a fundamental policy, none of the Acquiring Funds or the
Acquired Funds may act as an underwriter of securities of other issuers, except
as it may deemed an underwriter under federal securities laws in selling a
security held by it.
Investing in Securities of Other Investment Companies. As a fundamental
policy, none of the Acquiring Funds may purchase securities of other investment
companies except as permitted by the 1940 Act and the rules and regulations
thereunder. Under these rules and regulations, each of the Acquiring Funds is
prohibited from acquiring the securities of other investment companies if, as a
result of such acquisition, (a) such Acquiring Fund owns more than 3% of the
total voting stock of the investment company; (b) securities issued by any one
investment company represent more than 5% of the total assets of such Acquiring
Fund; or (c) securities (other than treasury stock) issued by all investment
companies represent more than 10% of the total assets of such Acquiring Fund,
provided, that with respect to the 1784 Growth Fund and the 1784 Prime Money
Market Fund, the limitations do not apply to an investment of all of the
investable assets of such Acquiring Fund in a Qualifying Portfolio. Unless
otherwise required by applicable law, the 1784 Growth Fund and the 1784 Prime
Money Market Fund may invest all of the investable assets of such Acquiring
Fund in a Qualifying Portfolio without a shareholder vote.
By contrast, each of the Acquired Funds has a non-fundamental policy to
limit its purchase of securities of other investment companies to the extent
permitted under the 1940 Act and the rules and regulations thereunder. However
these limits are not applicable if the securities are acquired in a merger,
consolidation, or acquisition of assets.
<PAGE>
Investment companies typically incur fees that are separate from those
fees incurred directly by the Acquiring Fund or the Acquired Fund. An Acquiring
Fund's or an Acquired Fund's purchase of such investment company securities
results in the layering of expenses, such that shareholders would indirectly
bear a proportionate share of the operating expenses of such investment
companies, including advisory fees.
Puts, Calls or Other Options. As a fundamental policy, none of the
Acquiring Funds may write or purchase puts, calls, or other options or
combinations thereof, except that each Acquiring Fund may write covered call
options with respect to any or all of the securities it holds, subject to such
Acquiring Fund's investment objective, policies and limitations, and each
Acquiring Fund may purchase and sell other options, subject to such Acquiring
Fund's investment objective, policies and limitations. As a non-fundamental
policy, the BayFunds Equity Portfolio will not write call options on securities
unless the securities are held in its portfolio or unless it is entitled to
them in deliverable form without further payment or after segregating cash in
the amount of further payment.
Warrants. As a non-fundamental policy, each of the BayFunds Equity
Portfolio and the 1784 Growth Fund may invest up to 5% of its net assets in
warrants, except that with respect to the 1784 Growth Fund this limitation does
not apply to warrants acquired in units or attached to securities. Included in
this limitation for each of the BayFunds Equity Portfolio and the 1784 Growth
Fund, but not to exceed 2% of its net assets, may be warrants not listed on the
New York Stock Exchange or American Stock Exchange. In addition, the 1784
Short-Term Income Fund and the 1784 Income Fund may each invest in warrants
acquired in units or attached to securities. Such warrants may not be listed on
the New York Stock Exchange or the American Stock Exchange. By contrast, none
of the other Acquired Funds are permitted to invest in warrants.
Restricted and Illiquid Securities. As a non-fundamental policy, none of
the Acquiring Funds or Acquired Funds will invest in illiquid securities in an
amount exceeding, in the aggregate, 15% of its net assets (10% for the 1784
U.S. Treasury Money Market Fund, the 1784 Institutional U.S. Treasury Money
Market Fund, the 1784 Prime Money Market Fund, the BayFunds U.S. Treasury Money
Market Portfolio and the BayFunds Money Market Portfolio), provided that (a)
for purposes of the Acquired Funds, repurchase agreements providing for
settlement in more than seven days after notice are counted toward the
percentage limitation, and (b) this limitation does not apply to an investment
by the 1784 Growth Fund or the 1784 Prime Money Market Fund of all of its
investable assets in a Qualifying Portfolio.
The foregoing limitation does not apply to restricted securities held by
any of the Acquiring Funds if it is determined by or under procedures
established by the Board of Trustees of 1784 Funds that, based on trading
markets for the specific restricted security in question, such security is not
illiquid.
By contrast, as a fundamental policy, neither the BayFunds U.S. Treasury
Money Market Portfolio nor the BayFunds Money Market Portfolio will purchase
restricted securities if immediately thereafter more than 5% (for the BayFunds
U.S. Treasury Money Market Portfolio) or more than 10% (for the BayFunds Money
Market Portfolio) of its net assets, taken at market value, would be invested
in such securities (except for commercial paper issued under Section 4(2) of
the Securities Act of 1933 and certain other restricted securities which meet
the criteria for liquidity as established by the Board of Trustees of
BayFunds).
Additionally, it is a non-fundamental policy of each of the BayFunds Short
Term Yield Portfolio and the BayFunds Bond Portfolio that it will not invest
more than 10% of the value of its total assets in restricted securities, except
for certain restricted securities which meet the criteria for liquidity
established by the Board of Trustees of BayFunds. The BayFunds Equity Portfolio
limits its investments in restricted securities to 5% of its total assets to
comply with certain state restrictions.
The absence of a trading market for restricted or illiquid securities can
make it difficult to ascertain a market value for these securities. Disposing
of illiquid securities may involve time-consuming negotiation and legal
expense, and it may be difficult or impossible to sell illiquid securities
promptly at an acceptable price.
Investing in Issuers Whose Securities are Owned by Officers or
Trustees. As a non-fundamental policy, none of the Acquiring Funds or the
Acquired Funds may purchase or retain securities of an issuer if an officer or
trustee of 1784 Funds or BayFunds, respectively, or any investment adviser of
1784 Funds or BayFunds,
<PAGE>
respectively, owns beneficially more than 1/2 of 1% of such issuer and all such
officers and trustees owning more than 1/2 of 1% of such shares or securities
together own more than 5% of such shares or securities.
Investing in New Issuers. As a non-fundamental policy, none of the
Acquiring Funds or the Acquired Funds may invest more than 5% of the value of
its total assets in securities of issuers which have records of less than 3
years of continuous performance, except that the foregoing limitation does not
apply to (a) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; (b) with respect to the Acquiring Funds,
municipal securities which are rated by at least one nationally-recognized bond
rating service; or (c) an investment of all of the investable assets of the
1784 Growth Fund or the 1784 Prime Money Market Fund in a Qualifying Portfolio.
Investing in Oil, Gas & Minerals. As a matter of non-fundamental policy,
none of the Acquiring Funds or the Acquired Funds may invest in interests in
oil, gas or other mineral exploration or development programs or leases.
OTHER INFORMATION. 1784 Funds and BayFunds are registered as open-end
management investment companies under the 1940 Act. Currently 1784 Funds offers
fourteen investment funds and BayFunds offers five investment funds. The 1784
Prime Money Market Fund will be offered by 1784 Funds after its reorganization
with the BayFunds Money Market Portfolio. The 1784 Florida Tax-Exempt Income
Fund has not yet commenced operations.
1784 Funds and BayFunds are organized as Massachusetts business trusts and
are subject to the provisions of their respective Declaration of Trust and
Bylaws.
Shares of both 1784 Funds and BayFunds: (i) are entitled to one vote for
each full share held and a proportionate fractional vote for each fractional
share held; (ii) will vote in the aggregate and not by class or series except
as otherwise expressly required by law or when class voting is permitted by the
respective Board of Trustees; and (iii) are entitled to participate equally in
the dividends and investment fund and in the net distributable assets of such
fund on liquidation. In addition, shares of the Acquiring Funds and Acquired
Funds have no preemptive rights and only such conversion and exchange rights as
the respective Boards of Trustees may grant in their discretion. When issued
for payment as described in their prospectuses, Acquiring Funds shares and
Acquired Fund shares are fully paid and nonassessable by such entities except
as required under Massachusetts law. Neither BayFunds nor 1784 Funds is
required under Massachusetts law to hold annual shareholder meetings and each
of BayFunds and 1784 Funds intends to do so only if required by the 1940 Act.
Shareholders have the right to remove trustees. To the extent required by law,
BayFunds and 1784 Funds will assist in shareholder communications in such
matters.
The foregoing is only a summary. Shareholders may obtain copies of the
Declaration of Trust and Bylaws of 1784 Funds and BayFunds upon written request
at the addresses shown on the cover page of this Prospectus/Proxy Statement.
INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS
BayFunds and 1784 Funds have entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") which provides that each of the
Acquired Funds is to be acquired by an Acquiring Fund or Acquiring Funds.
Significant provisions of the Reorganization Agreement are summarized below;
however, this summary is qualified in its entirety by reference to the
Reorganization Agreement, a copy of which is attached as Appendix I to this
Prospectus/Proxy Statement.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. The Reorganization Agreement
provides that at the Effective Time (as defined in the Reorganization
Agreement) of the Reorganization of each Acquired Fund, substantially all of
the assets and balance sheet liabilities of such Acquired Fund shall be
acquired by the Acquiring Fund or Acquiring Funds identified in the table below
opposite its name and the holders of each
<PAGE>
<TABLE>
class of shares of such Acquired Fund shall receive the shares (which shall be
of the class, if any, specified) of the Acquiring Fund identified below opposite
the name of such class:
<CAPTION>
BAYFUNDS PORTFOLIOS AND CLASSES 1784 FUNDS PORTFOLIOS AND CLASSES
- ------------------------------- ---------------------------------
<S> <C>
BayFunds U.S. Treasury Money Market 1784 U.S. Treasury Money Market Fund
Portfolio Investment Shares Class A Shares
BayFunds U.S. Treasury Money Market 1784 Institutional U.S. Treasury Money
Portfolio Institutional Shares Market Fund
BayFunds Money Market Portfolio 1784 Prime Money Market Fund
Investment Shares
Trust Shares
BayFunds Equity Portfolio 1784 Growth Fund
Investment Shares
Institutional Shares
BayFunds Short Term Yield Portfolio 1784 Short-Term Income Fund
Investment Shares
Institutional Shares
BayFunds Bond Portfolio 1784 Income Fund
Investment Shares
Institutional Shares
</TABLE>
In the case of the BayFunds U.S. Treasury Money Market Portfolio (a) the
assets and balance sheet liabilities attributable to the Investment Shares of
the BayFunds U.S. Treasury Money Market Portfolio will be transferred to the
1784 U.S. Treasury Money Market Fund and (b) the assets and balance sheet
liabilities attributable to the Institutional Shares of the BayFunds U.S.
Treasury Money Market Portfolio will be transferred to the 1784 Institutional
U.S. Treasury Money Market Fund.
In exchange for the transfer of the assets of each of the Acquired Funds
and the assumption of the balance sheet liabilities of each of the Acquired
Funds, 1784 Funds will issue to each Acquired Fund, at the Effective Time of
the Reorganization of such Acquired Fund, a number of full and fractional
shares of the Acquiring Fund or Acquiring Funds as set forth in the table
above. The number of shares of the Acquiring Fund or Acquiring Funds so issued
will have an aggregate net asset value equal to the value of the assets of the
Acquired Fund. In determining the value of the assets of an Acquired Fund, each
security shall be priced in accordance with the policies and procedures of 1784
Funds as described in its then current prospectus for the corresponding
Acquiring Fund.
The Reorganization Agreement provides that each of the Acquired Funds will
declare a dividend prior to the Effective Time of the Reorganization of such
Acquired Fund in order to distribute to its shareholders all of its net
investment company income earned and all of its net capital gains realized up
to and including the Effective Time of the Reorganization of such Acquired
Fund.
At the Effective Time of the Reorganization of an Acquired Fund, such
Acquired Fund shall liquidate and distribute pro rata to the record holders of
each class of its shares at such Effective Time the shares of the Acquiring
Fund identified in the table above to be received by the holders of such class
of such Acquired Fund. All of the issued and outstanding shares of each class
of each Acquired Fund shall be canceled on the books of BayFunds at the
Effective Time of the Reorganization of that Acquired Fund and shall thereafter
represent only the right to receive the shares of the Acquiring Fund identified
in the table above, and the Acquired Fund's transfer book shall be closed
permanently. As soon as practicable after the Reorganizations, BayFunds shall
make all filings and take all other steps as shall be necessary and proper to
effect its complete dissolution, and shall file an application pursuant to
Section 8(f) of the 1940 Act for an order declaring that it
<PAGE>
has ceased to be an investment company. After the Effective Time of the
Reorganization of an Acquired Fund, BayFunds shall not conduct any business on
behalf of that Acquired Fund, and after all of the Reorganizations have been
consummated, BayFunds shall not conduct any business, except in connection with
the liquidation and dissolution of the Acquired Funds, the termination of the
Acquired Funds and BayFunds, and the deregistration of BayFunds.
The expenses of 1784 Funds incurred in connection with the Reorganizations
will be borne by Bank of Boston. The expenses of BayFunds in connection with
the Reorganizations will be borne by BayBank, N.A.
The consummation of the Reorganization with respect to each of the
Acquired Funds is subject to certain conditions. The Reorganization of each
Acquired Fund will be contingent upon the approval of the Reorganization
Agreement by the majority of the shareholders of such Acquired Fund and, with
respect to the BayFunds U.S. Treasury Money Market Portfolio, by the majority
of the shareholders of each class of shares of such Acquired Fund. In addition,
the Reorganization of each Acquired Fund will be contingent upon: (a) the
receipt of certain legal opinions described in the Reorganization Agreement
(see Appendix I attached hereto), (b) the continuing accuracy of the
representations and warranties in the Reorganization Agreement, and (c) the
performance in all material respects of the agreements in the Reorganization
Agreement. If these conditions are satisfied, the Effective Time of the
Reorganization of each Acquired Fund (other than the BayFunds Money Market
Portfolio) is expected to be November 25, 1996. The Effective Time of the
Reorganization of the BayFunds Money Market Portfolio with the 1784 Prime Money
Market Fund, if these conditions are met, is expected to be December 9, 1996.
BayFunds and 1784 Funds may mutually agree to terminate the Reorganization
Agreement with respect to a Reorganization at or prior to the Effective Time of
such Reorganization. In addition, either BayFunds or 1784 Funds may waive the
other party's breach of a provision or failure to satisfy a condition of the
Reorganization Agreement.
The Board of Trustees of BayFunds has approved the Reorganization of each
of the Acquired Funds based upon the belief that each such Reorganization would
be in the best interest of each Acquired Fund and its shareholders. In
approving the Reorganization Agreement, the Board of Trustees of BayFunds
primarily considered the following factors: (a) the merger between BayBanks,
Inc. and Boston Merger Corp., (b) the fact that Bank of Boston serves as the
investment adviser to each of the Acquired Funds and each of the Acquiring
Funds, (c) the fact that shareholder interests would not be diluted in the
proposed Reorganizations, (d) the status of each Reorganization (other than the
reorganization of the BayFunds U.S. Treasury Money Market Portfolio) as a
tax-free reorganization, (e) the anticipated minimal tax consequences of the
Reorganization of the BayFunds U.S. Treasury Money Market Portfolio, (f) the
similarity of the investment objective and policies of each Acquired Fund and
the corresponding Acquiring Fund or Acquiring Funds, (g) the beneficial
economies of scale that could result from each Reorganization, (h) the improved
marketing opportunities that could result from each Reorganization, and (i) the
opportunity for the shareholders of each Acquired Fund to participate in a
larger family of funds through the exchange privilege offered by 1784 Funds.
After consideration of the foregoing factors and other relevant
information, the Board of Trustees of BayFunds unanimously approved the
Reorganization Agreement and directed that it be submitted to the shareholders
of each Acquired Fund for approval. The Board of Trustees of BayFunds
recommends that shareholders vote in favor of the Reorganization Agreement.
At a meeting held on July 31, 1996, the Board of Trustees of 1784 Funds
also unanimously approved the Reorganization Agreement, finding that each of
the Reorganizations was in the best interests of the Acquiring Funds and the
shareholders of the Acquiring Funds and that the interests of the existing
shareholders of the Acquiring Funds would not be diluted by the consummation of
the Reorganizations.
CAPITALIZATION. Because each Acquired Fund will be combined in the
Reorganization of such Acquired Fund with an Acquiring Fund or Acquiring Funds,
the total capitalization of each Acquiring Fund (other than the 1784 Prime
Money Market Fund) after such Reorganization is expected to be greater than the
current capitalization of the corresponding Acquired Fund. The 1784 Prime Money
Market Fund will not have any assets or liabilities before its Reorganization
with the BayFunds Money Market Portfolio. After the
<PAGE>
Reorganization with the BayFunds Money Market Portfolio, the 1784 Prime Money
Market Fund will have the same capitalization as the BayFunds Money Market
Portfolio did prior to such Reorganization. The following table sets forth as
of May 31, 1996: (a) the capitalization of each Acquired Fund and the
corresponding Acquiring Fund, and (b) the pro forma capitalization of each
Acquiring Fund as adjusted to give effect to the Reorganization proposed with
respect to such Acquiring Fund. If consummated, the capitalization of each
Acquired Fund and each Acquiring Fund is likely to be different at the
Effective Time of their Reorganization as a result of daily share purchase and
redemption activity.
<TABLE>
<CAPTION>
BAYFUNDS
U.S. TREASURY PRO FORMA
MONEY MARKET PORTFOLIO, 1784 U.S. TREASURY 1784 U.S. TREASURY
INVESTMENT SHARES MONEY MARKET FUND MONEY MARKET FUND
-------------------------- ------------------ ------------------
<S> <C> <C> <C>
Total Net Assets.............. $295,850,012 $78,998,968 $374,848,980
Shares Outstanding............ 295,850,012 79,005,171 374,848,980
Net Asset Value Per Share..... $ 1.00 $ 1.00 $ 1.00
</TABLE>
<TABLE>
<CAPTION>
BAYFUNDS PRO FORMA
U.S. TREASURY 1784 INSTITUTIONAL 1784 INSTITUTIONAL
MONEY MARKET PORTFOLIO, U.S. TREASURY U.S. TREASURY
INSTITUTIONAL SHARES MONEY MARKET FUND MONEY MARKET FUND
-------------------------- ------------------ ------------------
<S> <C> <C> <C>
Total Net Assets.............. $1,001,015,593 $644,733,563 $1,645,749,156
Shares Outstanding............ 1,001,015,593 644,617,835 1,645,749,156
Net Asset Value Per Share..... $ 1.00 $ 1.00 $ 1.00
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
BAYFUNDS 1784 PRIME 1784 PRIME
MONEY MARKET PORTFOLIO MONEY MARKET FUND MONEY MARKET FUND
-------------------------- ----------------- -----------------
<S> <C> <C> <C>
Total Net Assets.............. $207,607,677 $0.00 $207,607,677
Shares Outstanding............ 207,607,677 0 207,607,677
Net Asset Value Per Share..... $ 1.00 $0.00 $ 1.00
</TABLE>
<TABLE>
<CAPTION>
BAYFUNDS PRO FORMA
EQUITY PORTFOLIO 1784 GROWTH FUND 1784 GROWTH FUND
-------------------------- ----------------- -----------------
<S> <C> <C> <C>
Total Net Assets.............. $134,036,404 $46,025,932 $180,062,336
Shares Outstanding............ 9,050,952 4,084,644 15,977,137
Net Asset Value Per Share..... $ 14.81 $ 11.27 $ 11.27
</TABLE>
<TABLE>
<CAPTION>
BAYFUNDS PRO FORMA
SHORT TERM YIELD 1784 SHORT-TERM 1784 SHORT-TERM
PORTFOLIO INCOME FUND INCOME FUND
-------------------------- ----------------- -----------------
<S> <C> <C> <C>
Total Net Assets.............. $51,193,529 $86,383,342 $137,576,871
Shares Outstanding............ 5,631,250 8,701,935 13,854,670
Net Asset Value Per Share..... $ 9.09 $ 9.93 $ 9.93
</TABLE>
<TABLE>
<CAPTION>
BAYFUNDS PRO FORMA
BOND PORTFOLIO 1784 INCOME FUND 1784 INCOME FUND
-------------------------- ----------------- -----------------
<S> <C> <C> <C>
Total Net Assets.............. $57,747,036 $235,021,822 $292,768,858
Shares Outstanding............ 5,891,173 23,742,836 29,572,612
Net Asset Value Per Share..... $ 9.80 $ 9.90 $ 9.90
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES. The consummation of the Reorganization of
each Acquired Fund is conditioned upon the receipt of an opinion of Bingham,
Dana & Gould LLP substantially to the effect that for federal income tax
purposes, except in the case of the Reorganization of the BayFunds U.S.
Treasury Money Market Portfolio with the 1784 U.S. Treasury Money Market Fund
and the 1784 Institutional U.S. Treasury Money Market Fund: (a) the transfer of
all of the assets of such Acquired Fund, and the assumption
<PAGE>
by the corresponding Acquiring Fund of the liabilities of such Acquired
Fund, in exchange for shares of such Acquiring Fund, and the distribution of
said shares to the shareholders of such Acquired Fund, as provided in the
Reorganization Agreement, will constitute a reorganization within the meaning
of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"), and, with respect to such reorganization, the Acquired Fund and the
Acquiring Fund will each be considered "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (b) in accordance with Sections 361(a),
361(c)(1) and 357(a) of the Code, no gain or loss will be recognized by such
Acquired Fund as a result of such transactions; (c) in accordance with Section
1032 of the Code, no gain or loss will be recognized by such Acquiring Fund as
a result of such transactions; (d) in accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized by the shareholders of such Acquired
Fund on the distribution to them by such Acquired Fund of shares of any class
of such Acquiring Fund in exchange for their shares of any class of such
Acquired Fund; (e) in accordance with Section 358(a)(1) of the Code, the
aggregate basis of Acquiring Fund shares received by each shareholder of any
class of such Acquired Fund will be the same as the aggregate basis of the
shareholder's Acquired Fund shares immediately prior to the transactions; (f)
in accordance with Section 362(b) of the Code, the basis of the assets of the
Acquired Fund in the hands of such Acquiring Fund will be the same as the basis
of such assets of the Acquired Fund in the hands of such Acquired Fund
immediately prior to the exchange; (g) in accordance with Section 1223 of the
Code, a shareholder's holding period for Acquiring Fund shares will be
determined by including the period for which the shareholder held the shares of
such Acquired Fund exchanged therefor, provided that the shareholder held such
shares of such Acquired Fund as a capital asset; and (h) in accordance with
Section 1223 of the Code, the holding period of such Acquiring Fund with
respect to the assets of such Acquired Fund will include the period for which
such assets were held by such Acquired Fund.
The Reorganization of the BayFunds U.S. Treasury Money Market Portfolio
with the 1784 U.S. Treasury Money Market Fund and the 1784 Institutional U.S.
Treasury Money Market Fund (collectively, the "1784 Treasury Money Market
Funds") will not constitute a tax-free "reorganization" within the meaning of
Section 368(a)(1) of the Code. Accordingly, as a result of the Reorganization,
in accordance with Section 1001 of the Code, the BayFunds U.S. Treasury Money
Market Portfolio will recognize gain or loss to the extent (if at all) the fair
market value of the assets transferred to the 1784 Treasury Money Market Funds
exceeds or is less than, respectively, the aggregate basis of those assets in
the hands of the BayFunds U.S. Treasury Money Market Portfolio. However,
because each of the BayFunds U.S. Treasury Money Market Portfolio and the 1784
Treasury Money Market Funds value their securities at amortized cost and seek
to maintain a $1.00 net asset value per share, the Reorganization is not
expected to result in any material recognition of gain or loss. Any gain or
loss so recognized will be taken into account in determining the BayFunds U.S.
Treasury Money Market Portfolio's income and required distributions for its
final taxable year; as is generally the case, dividends of ordinary income and
distributions of net short-term capital gains will be taxable to BayFunds U.S.
Treasury Money Market Portfolio shareholders as ordinary income for federal
income tax purposes, and distributions of net capital gains (i.e., the excess
of net long-term capital gains over net short-term capital losses) will be
taxable to BayFunds U.S. Treasury Money Market Portfolio shareholders as
long-term capital gains for federal income tax purposes without regard to the
length of time such shareholders have held their shares. In addition, (a) in
accordance with Section 1001 of the Code, shareholders of the BayFunds U.S.
Treasury Money Market Portfolio who receive shares of a 1784 Treasury Money
Market Fund in exchange for their BayFunds U.S. Treasury Money Market Portfolio
shares will recognize gain (or loss) to the extent the fair market value of the
1784 Treasury Money Market Fund shares exceeds (or is less than) the aggregate
basis such shareholders had in their BayFunds U.S. Treasury Money Market
Portfolio shares, and, if their BayFunds U.S. Treasury Money Market Portfolio
shares were capital assets in their hands, the gain (or loss) will be long-term
capital gain (or loss) if they have held their interest in the BayFunds U.S.
Treasury Money Market Portfolio shares for more than one year, and short-term
capital gain (or loss) if they have held such interest for one year or less;
(b) in accordance with Section 1032 of the Code, no gain or loss will be
recognized by the 1784 Treasury Money Market Funds as a result of such
transactions; (c) in accordance with Section 1012 of the Code, the basis of the
1784 Treasury Money Market Fund shares received by each shareholder of the
BayFunds U.S. Treasury Money Market Portfolio will be the fair market value of
such 1784 Treasury Money Market Fund shares as of the time of the
Reorganization;
<PAGE>
(d) in accordance with Section 1012 of the Code, the basis of the assets
of the BayFunds U.S. Treasury Money Market Portfolio in the hands of a 1784
Treasury Money Market Fund will be the fair market value of the assets at the
time of the Reorganization; (e) in accordance with Section 1223 of the Code,
the holding period of the 1784 Treasury Money Market Fund shares received by
each shareholder of the BayFunds U.S. Treasury Money Market Portfolio will
begin on the date of the Reorganization, and will not include the period for
which that shareholder held shares of the BayFunds U.S. Treasury Money Market
Portfolio; and (f) in accordance with Section 1223 of the Code, the holding
period of each 1784 Treasury Money Market Fund with respect to the assets of
the BayFunds U.S. Treasury Money Market Portfolio will begin as of the date of
the Reorganization, and will not include the period for which the assets were
held by the BayFunds U.S. Treasury Money Market Portfolio. Bingham, Dana &
Gould LLP will also deliver an opinion regarding the matters described in this
paragraph.
1784 Funds and BayFunds have not sought a tax ruling from the Internal
Revenue Service (the "IRS"), but are acting in reliance upon the opinion of
counsel discussed above. Such opinion of counsel will rely, as to certain
factual matters, on certificates of officers of 1784 Funds and BayFunds. That
opinion is not binding on the IRS and does not preclude the IRS from adopting a
contrary position. Shareholders should consult their own advisers concerning
the potential tax consequences to them, including state and local income taxes.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Prospectus/Proxy Statement is being provided in
connection with the solicitation of proxies by the Board of Trustees of
BayFunds in connection with the Meeting. Solicitation of proxies will occur
principally by mail, but officers and service contractors of BayFunds or DF
King or its agents may also solicit proxies by telephone or personal interview.
Shareholders may also choose to vote their shares telephonically in accordance
with the procedures adopted by the BayFunds Board of Trustees. Any shareholder
giving a proxy may revoke it at any time before it is exercised by submitting
to BayFunds a written notice of revocation or a subsequently executed proxy or
by attending the Meeting and voting in person.
Only shareholders of record at the close of business on September 20, 1996
will be entitled to vote at the Meeting. On that date, there were outstanding
and entitled to be voted: 317,719,773.8 Investment Shares of the BayFunds U.S.
Treasury Money Market Portfolio, 1,009,520,130.0 Institutional Shares of the
BayFunds U.S. Treasury Money Market Portfolio, 216,221,334.7 shares of the
BayFunds Money Market Portfolio, 8,967,926.3 shares of the BayFunds Equity
Portfolio, 5,040,705.8 shares of the BayFunds Short Term Yield Portfolio, and
5,566,856.8 shares of the BayFunds Bond Portfolio. Each share or fraction
thereof is entitled to one vote or fraction thereof, and all shares will vote
separately by Acquired Fund and, with respect to the BayFunds U.S. Treasury
Money Market Portfolio, separately by classes of shares of such Acquired Fund.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting or any adjournment(s)
thereof. For information on adjournments of the Meeting, see "Quorum" below.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement (and the
transactions contemplated thereby) are being submitted for approval at the
Meeting by the holders of a majority of the outstanding voting securities of
both classes of the BayFunds U.S. Treasury Money Market Portfolio and a
majority of the outstanding voting securities of the BayFunds Money Market
Portfolio, the BayFunds Equity Portfolio, the BayFunds Short Term Yield
Portfolio and the BayFunds Bond Portfolio in accordance with the provisions of
BayFunds' Declaration of Trust and the requirements of the 1940 Act. If the
Reorganization of the BayFunds U.S. Treasury Money Market Portfolio is not
approved by a majority of the outstanding voting securities of both classes of
the BayFunds U.S. Treasury Money Market Portfolio, the Reorganization with the
1784 U.S. Treasury Money Market Fund and the 1784 Institutional U.S. Treasury
Money Market Fund will not be consummated. The term "majority of the
outstanding voting securities" of an Acquired Fund or of a class of an Acquired
Fund as used herein means the lesser of (a) 67% of the shares of the particular
Acquired Fund or of a particular class of shares of the Acquired Fund present
at the Meeting if the holders of more than 50% of the outstanding shares of the
Acquired Fund or the class of shares of the Acquired Fund are present in person
<PAGE>
or by proxy, or (b) more than 50% of the outstanding shares of such Acquired
Fund or of such class of shares of such Acquired Fund.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a
proposal because instructions have not been received from the beneficial
owners) will be counted for purposes of determining whether or not a quorum is
present for purposes of convening the meeting. With respect to each
Reorganization proposal, abstentions and broker non-votes will be considered to
be a vote against such Reorganization proposal.
The vote of the shareholders of the corresponding Acquiring Funds is not
being solicited because their approval or consent is not necessary for the
Reorganizations to be consummated.
At September 20, 1996, BayBank, N.A. and its affiliates held of record 0%,
90.5%, 69.3%, 72.3%, 64.3% and 87.3% of the Investment Shares of the BayFunds
U.S. Treasury Money Market Portfolio, the Institutional Shares of the BayFunds
U.S. Treasury Money Market Portfolio, the BayFunds Money Market Portfolio, the
BayFunds Equity Portfolio, the BayFunds Short Term Yield Portfolio and the
BayFunds Bond Portfolio, respectively. As a result BayBank, N.A. may be deemed
to be a "controlling person" of each of the Acquired Funds under the 1940 Act.
At September 20, 1996, the name, address and percentage share ownership of
the persons who beneficially owned 5% or more of any class of shares of any of
the Acquired Funds, and the percentage share ownership of the corresponding
Acquiring Fund to be owned by such person upon consummation of the
Reorganization of such Acquired Funds are as follows:
BAYFUNDS MONEY MARKET PORTFOLIO -- TRUST SHARES
<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF CORRESPONDING
ACQUIRED FUND ACQUIRING FUND
------------- --------------
<S> <C> <C>
BayBank, N.A. as Trustee for 14.4% 14.4%
BayBanks Savings, Profit Sharing
and Stock Ownership Plan-Money Market Fund
175 Federal Street
Boston, MA 02110
BayBanks, Inc. Pension Plan 8.6% 8.6%
175 Federal Street
Boston, MA 02110
</TABLE>
BAYFUNDS EQUITY PORTFOLIO -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
PERCENT OF
CORRESPONDING
PERCENT ACQUIRING FUND
------- --------------
<S> <C> <C>
BayBank, N.A. as Trustee for 26.7% 12.0%
BayBanks Savings, Profit Sharing
and Stock Ownership Plan-Equity Fund
175 Federal Street
Boston, MA 02110
BayBank Trustee for F.W. Webb 5.8% Less than
Savings Equity Fund 5%
200 Middlesex Turnpike
Burlington, MA 01803
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
CORRESPONDING
PERCENT ACQUIRING FUND
------- --------------
<S> <C> <C>
BayBank Agent - Electro Switch Comp. 5.0% Less than 5%
Retirement Plan
775-1 Pleasant Street
Weymouth, MA 02189
</TABLE>
<TABLE>
BAYFUNDS SHORT TERM YIELD PORTFOLIO -- INSTITUTIONAL SHARES
<CAPTION>
PERCENT OF
PERCENT OF CORRESPONDING
ACQUIRED FUND ACQUIRING FUND
------------- --------------
<S> <C> <C>
BayBank, N.A. as Trustee for 62.2% 13.3%
BayBanks Savings, Profit Sharing
and Stock Ownership Plan-Short Term Fund
175 Federal Street
Boston, MA 02110
</TABLE>
<TABLE>
BAYFUNDS BOND PORTFOLIO -- INSTITUTIONAL SHARES
<CAPTION>
PERCENT OF
CORRESPONDING
PERCENT ACQUIRING FUND
------- --------------
<S> <C> <C>
BayBank, N.A. as Trustee for 13.7% Less than 5.%
BayBanks Savings, Profit Sharing
and Stock Ownership Plan-Bond Fund
175 Federal Street
Boston, MA 02110
BayBank Trustee for Universal Fasteners- 8.2% Less than 5.%
Lawrenceburg Salaried Pension Plan
Capp Turner c/o Universal Fasteners
PO Box 240
Lawrenceburg, KY 40342
BayBank Agent - Electro Switch Corp. 7.5% Less than 5.%
Retirement Plan
775-1 Pleasant Street
Weymouth, MA 02189
BayBank Trustee for F.W. Webb 5.5% Less than 5.%
Savings Bond Fund
200 Middlesex Turnpike
Burlington, MA 01803
</TABLE>
<TABLE>
BAYFUNDS BOND PORTFOLIO -- INVESTMENT SHARES
<CAPTION>
PERCENT OF
PERCENT OF CORRESPONDING
ACQUIRED FUND ACQUIRING FUND
------------- --------------
<S> <C> <C>
Power Curve Corporation 5.6% Less than 5.%
2000 West Park Drive
Westboro, MA 01581
</TABLE>
At September 20, 1996, the trustees and officers of BayFunds, as a group,
owned less than 1% of the outstanding shares of each of the Acquired Funds. At
September 20, 1996, the trustees and officers of 1784 Funds owned less than 1%
of the outstanding shares of each of the Acquiring Funds.
<PAGE>
As of September 20, 1996, National Financial Services Corp., 200 Liberty
Street, New York, NY 10281, owned of record the following percentages of the
outstanding shares of the following Acquiring Funds:
1784 U.S. Treasury Money Market Fund -- 30.8%
1784 Institutional U.S. Treasury Money Market Fund -- 6.1%
1784 Short-Term Income Fund -- 19.4%
After giving effect to the Reorganizations, National Financial Services
Corp., 200 Liberty Street, New York, NY 10281, will own of record the following
percentages of the outstanding shares of the following Acquiring Funds:
1784 U.S. Treasury Money Market Fund -- 19.9%
1784 Institutional U.S. Treasury Money Market Fund -- 5.1%
1784 Short-Term Income Fund -- 12.9%
As of September 20, 1996, The First National Bank of Boston, 100 Federal
Street, Boston, Massachusetts 02110, and its affiliates, owned of record the
following percentages of the outstanding shares of the following Acquiring
Funds:
1784 Institutional U.S. Treasury Money Market Fund -- 32.6%
1784 Short-Term Income Fund -- 60.3%
1784 Income Fund -- 93.9%
1784 Growth Fund -- 93.3%
After giving effect to the Reorganizations, The First National Bank of
Boston, 100 Federal Street, Boston, Massachusetts 02110, and its affiliates,
will own of record the following percentages of the outstanding shares of the
following Acquiring Funds:
1784 Institutional U.S. Treasury Money Market Fund -- 27.4%
1784 Short-Term Income Fund -- 40.2%
1784 Income Fund -- 76.8%
1784 Growth Fund -- 35.9%
APPRAISAL RIGHTS. Shareholders are not entitled to any rights of share
appraisal under the BayFunds' Declaration of Trust or under the laws of the
Commonwealth of Massachusetts in connection with the Reorganizations.
Shareholders do have the right to redeem their shares of an Acquired Fund from
BayFunds at net asset value until the Effective Time of the Reorganization of
such Acquired Fund and thereafter may redeem from 1784 Funds the shares of the
Acquiring Fund acquired by them in the Reorganization of such Acquired Fund at
net asset value.
QUORUM. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Reorganization Agreement and the transactions contemplated thereby
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those shares
affected by the adjournment that are represented at the Meeting in person or by
proxy. If a quorum is present, the persons named as proxies will vote those
proxies which they are entitled to vote FOR the Reorganization Agreement in
favor of such adjournments, and will vote those proxies required to be voted
AGAINST such proposal against any adjournment. A shareholder vote may be taken
with respect to one or more Acquired Funds or classes of shares of an Acquired
Fund prior to any such adjournment if sufficient votes have been received for
approval with respect to any such Acquired Fund or class of shares. A quorum is
constituted with respect to a Acquired Fund (or of a class of shares of an
Acquired Fund) by the presence in person or by proxy of the holders of more
than 50% of the outstanding shares of the Acquired Fund (or of such class, as
the case may be) entitled to vote at the Meeting. Proxies properly executed and
marked with a negative vote or an abstention will be considered to be present
at the Meeting for the purposes of determining the existence of a quorum for
the transaction of business.
<PAGE>
ANNUAL MEETINGS. 1784 Funds does not presently intend to hold annual
meetings of shareholders for the election of trustees and other business unless
and until such time as less than a majority of the trustees holding office have
been elected by the shareholders, at which time the trustees then in office
will call a shareholders' meeting for the election of trustees. Shareholders
have the right to call a meeting of shareholders to consider the removal of one
or more trustees or for other matters and such meetings will be called when
requested in writing by the holders of record of 10% or more of 1784 Funds'
outstanding shares of common stock. To the extent required by law, 1784 Funds
will assist in shareholder communications on such matters.
ADDITIONAL INFORMATION ABOUT 1784 FUNDS
Additional information about each of the Acquiring Funds is included in
the Prospectus of 1784 Funds which accompanies this Prospectus/Proxy Statement
and is incorporated by reference herein. Additional information may also be
obtained from the Statement of Additional Information of 1784 Funds and the
Annual Reports for the fiscal year ended May 31, 1996, which have been filed
with the SEC. A copy of the Statement of Additional Information and the Annual
Reports for the fiscal year ended May 31, 1996 may be obtained without charge
by calling 1784 Funds at 1-800-252-1784. 1784 Funds is subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, as applicable, and in accordance with such requirements must file reports,
proxy statements and other information with the SEC. These materials can be
inspected and copied at the Public Reference Facilities maintained by the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. and at the SEC's
Regional Offices at 7 World Trade Center, Suite 1300, New York New York 10048
and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549 at prescribed rates.
The current trustees and officers of 1784 Funds will continue as trustees
and officers following the Reorganizations. Following the Reorganizations, Sara
L. Johnson and Alvin J. Silk, currently trustees of BayFunds, will become
trustees of 1784 Funds. The name of each trustee and officer as well as
information concerning his or her principal occupations during the past five
years are set forth below (their titles may have varied during the period).
Information regarding Sara L. Johnson and Alvin J. Silk is provided under the
heading "Additional Information about BayFunds" below. An asterisk indicates a
trustee who may be deemed to be an "interested person" (as defined in the 1940
Act) of 1784 Funds.
DAVID H. CARTER -- Trustee -- 224 Polpis Road, Nantucket, Massachusetts
02554 (date of birth March 21, 1933). Trustee, St. James Portfolios, since
June, 1994; Main Board Director, Touche Remnant & Co. (investment advisor),
1982-1988; Managing Director, Bearbull (UK) Ltd., London (investment advisor),
1988-January 1993.
TARRANT CUTLER -- Trustee -- 5 Masconomo Street, Manchester, Massachusetts
01944 (date of birth June 12, 1926). Senior Executive Vice President,
Massachusetts Financial Services Company, retired in 1991.
KENNETH A. FROOT -- Trustee -- Harvard University Graduate School of
Business, Boston, Massachusetts 02163 (date of birth July 5, 1957). The
Industrial Bank of Japan Professor of Finance and Director of Research, Harvard
University Graduate School of Business, since 1993; Thomas Henry Carroll-Ford
Visiting Professor of Business Administration, Harvard University Graduate
School of Business, 1991-1993; Associate Professor of Management with Tenure,
Sloan School of Management, Massachusetts Institute of Technology, 1991-May
1992; Ford International Development Chair, Sloan School, 1987-1990; Research
Associate, National Bureau of Economic Research, 1990-present.
KATHRYN F. MUNCIL -- Trustee -- c/o Fort William Henry Corporation, Canada
Street, Lake George, New York 12845 (date of birth November 30, 1958). Chief
Financial Officer, Fort William Henry Corporation, since 1993; Treasurer,
Spaulding Investment Company (property management) 1985-1993.
*ROBERT A. NESHER -- Trustee, President & Chief Executive Officer -- 680
East Swedesford Road, Wayne, Pennsylvania 19087 (date of birth August 17,
1946). Retired since 1994. Director and Executive Vice President of SEI 1986 to
July, 1994. Director and Executive Vice President of the Administrator and
Distributor 1981 to July, 1994.
<PAGE>
ROGER P. JOSEPH -- Secretary -- 150 Federal Street, Boston, Massachusetts
02110 (date of birth October 3, 1951). Partner, Bingham, Dana & Gould LLP,
counsel to 1784 Funds, since 1983.
MARC H. CAHN -- Vice President and Assistant Secretary -- 680 East
Swedesford Road, Wayne, Pennsylvania 19087 (date of birth June 19, 1957). Vice
President and Assistant Secretary of SEI, the Administrator and Distributor,
since May, 1996. Associate General Counsel Barclays Bank PLC (May 1995-May
1996). ERISA counsel, First Fidelity Bancorporation (1994-1995). Associate,
Morgan, Lewis & Bockius (1989-1994).
TODD CIPPERMAN -- Vice President, Assistant Secretary -- 680 East
Swedesford Road, Wayne, Pennsylvania 19087 (date of birth February 14, 1966).
Vice President and Assistant Secretary of SEI, the Administrator and
Distributor, since 1995. Associate, Dewey Ballantine (law firm) (1994-1995).
Associate, Winston & Strawn (law firm) (1991-1994).
DAVID G. LEE -- Senior Vice President and Assistant Secretary -- 680 East
Swedesford Road, Wayne, Pennsylvania 19087 (date of birth April 16, 1952).
Senior Vice President of SEI, the Administrator and the Distributor, since
1993. Vice President of SEI, the Administrator and the Distributor, from 1991
to 1993. President of GW Sierra Trust Funds before 1991.
JOSEPH M. LYDON -- Vice President and Assistant Secretary -- 680 East
Swedesford Road, Wayne, Pennsylvania 19087 (date of birth September 27, 1959).
Director of Business Administration of Fund Resources, SEI Corporation since
1995. Vice President of Fund Group and Vice President of the Advisor, Dreman
Value Management and President of Dreman Financial Services, Inc. prior to 1995.
STEPHEN G. MEYER -- Controller -- 680 East Swedesford Road, Wayne,
Pennsylvania 19087 (date of birth July 12, 1965). Vice President and
Controller, Chief Accounting Officer of SEI since 1992. Senior Associate,
Coopers & Lybrand L.L.P. from 1990 to 1992. Internal Audit, Vanguard Group of
Investments prior to 1990.
BARBARA A. NUGENT -- Vice President and Assistant Secretary -- 680 East
Swedesford Road, Wayne, Pennsylvania 19087 (date of birth June 18, 1956). Vice
President and Assistant Secretary of SEI, the Administrator and Distributor,
since April, 1996. Associate with Drinker, Biddle & Reath, from 1994 to 1996.
Assistant Vice President/Administration, Delaware Service Company, Inc., from
1992 to 1993. Assistant Vice President-Operations, Delaware Service Company,
Inc., from 1988 to 1992.
SANDRA K. ORLOW -- Vice President and Assistant Secretary -- 680 East
Swedesford Road, Wayne, Pennsylvania 19087 (date of birth October 18, 1953).
Vice President and Assistant Secretary of the Administrator and Distributor
since 1983.
KEVIN P. ROBINS -- Vice President and Assistant Secretary -- 680 East
Swedesford Road, Wayne, Pennsylvania 19087 (date of birth April 15, 1961).
Senior Vice President of SEI, the Administrator and the Distributor since 1994.
Vice President of SEI, the Administrator and the Distributor, from 1992 to
1994. Associate, Morgan, Lewis & Bockius (law firm) prior to 1992.
KATHRYN L. STANTON -- Vice President and Assistant Secretary -- 680 East
Swedesford Road, Wayne, Pennsylvania 19087 (date of birth November 18, 1958).
Vice President and Assistant Secretary of SEI, the Administrator and
Distributor, since 1994. Associate, Morgan, Lewis & Bockius (law firm) prior to
1992.
ADDITIONAL INFORMATION ABOUT BAYFUNDS
Additional information about each of the Acquired Funds is included in the
Prospectuses of BayFunds which accompany this Prospectus/Proxy Statement and
are incorporated by reference herein. Additional information may also be
obtained from the Combined Statements of Additional Information of BayFunds,
the Annual Reports for the fiscal year ended December 31, 1995 and the
Semi-Annual Reports for the six-month period ended June 30, 1996, which have
been filed with the SEC. Copies of the Combined Statements of Additional
Information, the Annual Reports and the Semi-Annual Reports may be obtained
without charge by calling BayFunds at 1-800-BAY-FUND. BayFunds is subject to
the informational requirements of the Securities Exchange Act of 1934 and the
1940 Act, as applicable, and in accordance with such requirements
<PAGE>
must file reports, proxy statements and other information with the SEC.
These materials can be inspected and copied at the Public Reference Facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
and at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York
New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, D.C. 20549 at prescribed rates.
The name of each trustee and officer of BayFunds as well as information
concerning his or her principal occupations during the past five years are set
forth below. An asterisk indicates a trustee who may be deemed to be an
"interested person" (as defined in the 1940 Act) of BayFunds.
*KENNETH G. CONDON -- Trustee -- 11 Dudley Road, Sudbury, Massachusetts
(date of birth August 14, 1947). Treasurer, (since June 1992) and Vice
President for Financial Affairs (1984 through present), Boston University;
Member, BayBank Trust Advisory Board; Member, Regional Strategic Planning
Committee, BayBanks, Inc.; Director, Seragen, Inc.; Director, WABU-TV; Trustee
and Chairman of the Finance/Audit Committee, Newbury College; formerly,
Director and Member of Audit Committee, BayBank Harvard Trust Co.; Director and
Treasurer of the Boston Chapter of the Financial Executives Institute.
ROBERT W. EISENMENGER -- Trustee -- 92 Woodland Street, Natick,
Massachusetts (date of birth June 30, 1926). Consultant; formerly, First Vice
President of the Federal Reserve Bank of Boston, and Executive Director for
Priced Services for the Federal Reserve System; Trustee, Massachusetts
Congregational Fund; Trustee and Consultant, Cape Cod Five Cents Savings Bank.
SARA L. JOHNSON -- Trustee -- 30 Eaton Court, Wellesley Hills,
Massachusetts (date of birth November 16, 1951). Chief Regional Economist
(since 1995) and principal (since 1992), Director of Regional Forecasting,
Managing Economist for Regional Information Group's Eastern Regions (1988-1991)
and Senior Economist, U.S. Economic Service (1983-1988), DRI/McGraw Hill.
ERNEST R. MAY -- Trustee -- John F. Kennedy School of Government,
Cambridge, Massachusetts (date of birth November 19, 1928). Charles Warren
Professor of History, Harvard University; Chair, Board of Visitors, Joint
Military Intelligence College; Chair, Board of Control, John Anson Kittredge
Educational Fund; Director, Charles Warren Center for Studies in American
History, Harvard University.
ALVIN J. SILK -- Trustee -- Graduate School of Business Administration,
Harvard University, Soldiers Field Road, Boston, Massachusetts (date of birth
December 31, 1935). Co-Chairman, Marketing Area and Lincoln Filene Professor of
Business Administration, Graduate School of Business Administration, Harvard
University (1988-present); formerly, Erwin H. Schell Professor of Management,
Sloan School of Management, Massachusetts Institute of Technology; formerly,
Director, BayBank Systems, Inc.; Trustee, Marketing Science Institute;
Director, Reed and Barton, Inc.
GLEN R. JOHNSON -- President and Treasurer -- Federated Investors Tower,
Pittsburgh, Pennsylvania (date of birth May 2, 1929). Trustee, Federated
Investors; President and/or Trustee of certain investment companies distributed
by Federated Securities Corp.; staff member, Federated Securities Corp. and
Federated Administrative Services.
C. CHRISTINE THOMSON -- Vice President and Assistant Treasurer --
Federated Investors Tower, Pittsburgh, Pennsylvania (date of birth September 1,
1957). Vice President, Federated Administrative Services and Vice President and
Assistant Treasurer of certain investment companies distributed by Federated
Securities Corp.
VICTOR R. SICLARI -- Secretary -- Federated Investors Tower, Pittsburgh,
Pennsylvania (date of birth November 17, 1961). Vice President and Corporate
Counsel, Federated Administrative Services; formerly, Attorney, Morrison &
Foerster (law firm).
<PAGE>
LITIGATION
Neither BayFunds nor 1784 Funds is involved in any litigation that would
have any material adverse financial effect upon any of the Acquired Funds or
the Acquiring Funds.
FINANCIAL HIGHLIGHTS
BAYFUNDS FINANCIAL HIGHLIGHTS. The tables below provide financial
information for the Investment Shares and Institutional Shares of each of the
BayFunds U.S. Treasury Money Market Portfolio, the BayFunds Equity Portfolio,
the BayFunds Short Term Yield Portfolio and the BayFunds Bond Portfolio, and
the information for the Investment Shares and the Trust Shares for the BayFunds
Money Market Portfolio. This information is derived from the BayFunds'
unaudited financial statements for the six-month period ended June 30, 1996.
This data should be read in conjunction with the unaudited financial statements
and related notes which are included in the Statement of Additional Information
related to this Prospectus/Proxy Statement. The financial highlights for the
Acquired Funds for prior periods are contained in BayFunds' Prospectuses dated
March 1, 1996, as supplemented August 16, 1996 and September 26, 1996. The
financial statements for the Acquired Funds' prior periods are contained in
BayFunds Money Market Portfolios' Annual Report to Shareholders and the
BayFunds Income & Equity Portfolios' Annual Report to Shareholders and are
incorporated by reference into BayFunds' Combined Statements of Additional
Information dated March 1, 1996, which are incorporated herein by reference.
<TABLE>
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
<CAPTION>
INVESTMENT SHARES INSTITUTIONAL SHARES
----------------- --------------------
<S> <C> <C>
Net Asset Value, beginning of period...................... $ 1.00 $ 1.00
Net Investment Income..................................... 0.02 0.02
Net Realized and Unrealized Gain/(Loss) on Investments.... -- --
Total from Investment Operations.......................... 0.02 0.02
Dividends to Shareholders from Net Investment Income...... (0.02) (0.02)
Distributions to Shareholders from Net Realized Gain on
Investment Transactions................................. -- --
Total Distributions....................................... (0.02) (0.02)
Net Asset Value, end of period............................ $ 1.00 $ 1.00
Total Return.............................................. 2.39% 2.52%
Expenses.................................................. 0.62% 0.37%
Net Investment Income..................................... 4.76% 5.01%
Expense Waiver/Reimbursement.............................. -- --
Net Assets, end of period (000 omitted)................... $295,076 $986,971
Portfolio turnover rate................................... -- --
</TABLE>
<PAGE>
<TABLE>
BAYFUNDS MONEY MARKET PORTFOLIO
<CAPTION>
INVESTMENT SHARES TRUST SHARES
----------------- ------------
<S> <C> <C>
Net Asset Value, beginning of period...................... $ 1.00 $ 1.00
Net Investment Income..................................... 0.02 0.02
Net Realized and Unrealized Gain/(Loss) on Investments.... -- --
Total from Investment Operations.......................... 0.02 0.02
Dividends to Shareholders from Net Investment Income...... (0.02) (0.02)
Distributions to Shareholders from Net Realized Gain on
Investment Transactions................................. -- --
Total Distributions....................................... (0.02) (0.02)
Net Asset Value, end of period............................ $ 1.00 $ 1.00
Total Return.............................................. 2.35% 2.48%
Expenses.................................................. 0.85% 0.60%
Net Investment Income..................................... 4.69% 4.95%
Expense Waiver/Reimbursement.............................. -- --
Net Assets, end of period (000 omitted)................... $44,794 $169,894
Portfolio turnover rate................................... -- --
</TABLE>
<TABLE>
BAYFUNDS EQUITY PORTFOLIO
<CAPTION>
INVESTMENT SHARES INSTITUTIONAL SHARES
----------------- --------------------
<S> <C> <C>
Net Asset Value, beginning of period...................... $ 13.04 $ 13.04
Net Investment Income..................................... 0.02 0.04
Net Realized and Unrealized Gain/(Loss) on Investments.... 1.53 1.52
Total from Investment Operations.......................... 1.55 1.56
Dividends to Shareholders from Net Investment Income...... (0.02) (0.03)
Distributions to Shareholders from Net Realized Gain on
Investment Transactions................................. -- --
Total Distributions....................................... (0.02) (0.03)
Net Asset Value, end of period............................ $ 14.57 $ 14.57
Total Return.............................................. 11.87% 12.00%
Expenses.................................................. 1.24% 0.99%
Net Investment Income..................................... 0.30% 0.55%
Expense Waiver/Reimbursement.............................. -- --
Net Assets, end of period (000 omitted)................... $35,684 $91,020
Portfolio turnover rate................................... 27% 27%
</TABLE>
<PAGE>
<TABLE>
BAYFUNDS SHORT TERM YIELD PORTFOLIO
<CAPTION>
INVESTMENT SHARES INSTITUTIONAL SHARES
----------------- --------------------
<S> <C> <C>
Net Asset Value, beginning of period...................... $ 9.28 $ 9.28
Net Investment Income..................................... 0.26 0.27
Net Realized and Unrealized Gain/(Loss) on Investments.... (0.16) (0.16)
Total from Investment Operations.......................... 0.10 0.11
Dividends to Shareholders from Net Investment Income...... (0.26) (0.27)
Distributions to Shareholders from Net Realized Gain on
Investment Transactions................................. -- --
Total Distributions....................................... (0.26) (0.27)
Net Asset Value, end of period............................ $ 9.12 $ 9.12
Total Return.............................................. 1.06% 1.19%
Expenses.................................................. 1.12% 0.87%
Net Investment Income..................................... 5.57% 5.81%
Expense Waiver/Reimbursement.............................. -- --
Net Assets, end of period (000 omitted)................... $17,240 $30,984
Portfolio turnover rate................................... 48% 48%
</TABLE>
<TABLE>
BAYFUNDS BOND PORTFOLIO
<CAPTION>
INVESTMENT SHARES INSTITUTIONAL SHARES
----------------- --------------------
<S> <C> <C>
Net Asset Value, beginning of period...................... $10.31 $10.31
Net Investment Income..................................... .29 .30
Net Realized and Unrealized Gain/(Loss) on Investments.... (0.44) (0.44)
Total from Investment Operations.......................... (0.15) (0.14)
Dividends to Shareholders from Net Investment Income...... (0.29) (0.30)
Distributions to Shareholders from Net Realized Gain on
Investment Transactions................................. -- --
Total Distributions....................................... (0.29) (0.30)
Net Asset Value, end of period............................ $ 9.87 $ 9.87
Total Return.............................................. (1.48%) (1.36)%
Expenses.................................................. 1.12% 0.87%
Net Investment Income..................................... 5.86% 6.12%
Expense Waiver/Reimbursement.............................. -- --
Net Assets, end of period (000 omitted)................... $5,951 $50,661
Portfolio turnover rate................................... 93% 93%
</TABLE>
<PAGE>
1784 FUNDS FINANCIAL HIGHLIGHTS. The tables below provide financial
information for the Class A Shares of the 1784 U.S. Treasury Money Market Fund,
the 1784 Institutional U.S. Treasury Money Market Fund, the 1784 Growth Fund,
the 1784 Short-Term Income Fund, and the 1784 Income Fund. This information is
derived from 1784 Funds' audited financial statements for the fiscal year ended
May 31, 1996. The financial highlights and financial statements for the
Acquiring Funds for prior periods are contained in the 1784 Funds' Prospectus
dated October 1, 1996 which accompanies this Prospectus/Proxy Statement and is
incorporated herein by reference and 1784 Funds' Annual Reports to Shareholders
which are incorporated by reference into the 1784 Funds' Statement of
Additional Information dated October 1, 1996, which is incorporated herein by
reference.
<TABLE>
1784 U.S. TREASURY MONEY MARKET FUND
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
Net Asset Value, beginning of period........................................... $ 1.00
Net Investment Income.......................................................... 0.05
Net Realized and Unrealized Gain/(Loss) on Investments......................... --
Total from Investment Operations............................................... 0.05
Dividends to Shareholders from Net Investment Income........................... (0.05)
Distributions to Shareholders from Net Realized Gain on Investment
Transactions................................................................. --
Total Distributions............................................................ (0.05)
Net Asset Value, end of period................................................. $ 1.00
Total Return................................................................... 5.16%
Expenses....................................................................... 0.64%
Net Investment Income.......................................................... 5.02%
Expense Waiver/Reimbursement................................................... 0.11%
Net Assets, end of period (000 omitted)........................................ $ 78,999
Portfolio turnover rate........................................................ --
1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
Net Asset Value, beginning of period........................................... $ 1.00
Net Investment Income.......................................................... 0.05
Net Realized and Unrealized Gain/(Loss) on Investments......................... --
Total from Investment Operations............................................... 0.05
Dividends to Shareholders from Net Investment Income........................... (0.05)
Distributions to Shareholders from Net Realized Gain on Investment
Transactions................................................................. --
Total Distributions............................................................ (0.05)
Net Asset Value, end of period................................................. $ 1.00
Total Return................................................................... 5.45%
Expenses....................................................................... 0.32%
Net Investment Income.......................................................... 5.29%
Expense Waiver/Reimbursement................................................... 0.07%
Net Assets, end of period (000 omitted)........................................ $644,733
Portfolio turnover rate
</TABLE>
<PAGE>
1784 GROWTH FUND
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
Net Asset Value, beginning of period........................................... $ 10.00
Net Investment Income.......................................................... 0.02
Net Realized and Unrealized Gain/(Loss) on Investments......................... 1.25
Total from Investment Operations............................................... 1.27
Dividends to Shareholders from Net Investment Income........................... --
Distributions to Shareholders from Net Realized Gain on Investment
Transactions................................................................. --
Total Distributions............................................................ --
Net Asset Value, end of period................................................. $ 11.27
Total Return................................................................... 12.70%*
Expenses....................................................................... 0.20%
Net Investment Income.......................................................... 1.75%
Expense Waiver/Reimbursement................................................... 1.53%
Net Assets, end of period (000 omitted)........................................ $ 46,026
Portfolio turnover rate........................................................ 0%
<FN>
- ---------------
* From commencement of operations (3/28/96). Not annualized.
</TABLE>
1784 SHORT-TERM INCOME FUND
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
Net Asset Value, beginning of period........................................... $ 10.09
Net Investment Income.......................................................... 0.06
Net Realized and Unrealized Gain/(Loss) on Investments......................... (0.12)
Total from Investment Operations............................................... 0.48
Dividends to Shareholders from Net Investment Income........................... (0.60)
Distributions to Shareholders from Net Realized Gain on Investment
Transactions................................................................. (0.40)
Total Distributions............................................................ (0.64)
Net Asset Value, end of period................................................. $ 9.93
Total Return................................................................... 4.87%
Expenses....................................................................... 0.63%
Net Investment Income.......................................................... 5.87%
Expense Waiver/Reimbursement................................................... 0.43%
Net Assets, end of period (000 omitted)........................................ $ 86,383
Portfolio turnover rate........................................................ 95.06%
</TABLE>
<PAGE>
1784 INCOME FUND
<TABLE>
<S> <C>
Net Asset Value, beginning of period........................................... $ 10.39
Net Investment Income.......................................................... 0.65
Net Realized and Unrealized Gain/(Loss) on Investments......................... (0.37)
Total from Investment Operations............................................... 0.28
Dividends to Shareholders from Net Investment Income........................... (0.65)
Distributions to Shareholders from Net Realized Gain on Investment
Transactions................................................................. (0.12)
Total Distributions............................................................ (0.77)
Net Asset Value, end of period................................................. $ 9.90
Total Return................................................................... 2.64%
Expenses....................................................................... 0.80%
Net Investment Income.......................................................... 6.17%
Expense Waiver/Reimbursement................................................... 0.40%
Net Assets, end of period (000 omitted)........................................ $235,022
Portfolio turnover rate........................................................ 100.51%
</TABLE>
FINANCIAL STATEMENTS
The financial highlights and financial statements for shares of the
Acquiring Funds (other than the 1784 Prime Money Market Fund) for the fiscal
year ended May 31, 1996 are contained in 1784 Funds' Prospectus dated October
1, 1996 and incorporated by reference in 1784 Funds' Statement of Additional
Information dated October 1, 1996, which Prospectus and Statement of Additional
Information are incorporated by reference in this Prospectus/Proxy Statement.
The financial statements and financial highlights for shares of the Acquired
Funds for the fiscal year ended December 31, 1995 are contained in BayFunds'
Prospectuses dated March 1, 1996, as supplemented August 16, 1996 and September
26, 1996, and incorporated by reference in BayFunds' Combined Statements of
Additional Information dated March 1, 1996, which Prospectuses and Combined
Statements of Additional Information are incorporated by reference in this
Prospectus/Proxy Statement.
The statements of assets and liabilities of the Acquiring Funds (other
than the 1784 Prime Money Market Fund), including the portfolios of investments
as of May 31, 1996, and the related statements of operations, statements of
changes in net assets and financial highlights for the periods indicated in the
financial statements that are included in the 1784 Funds' Prospectus and
incorporated by reference in the 1784 Funds' Statement of Information and
incorporated by reference in this Prospectus/Proxy Statement, have been
incorporated by reference herein in reliance on the reports of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The statements of assets and liabilities of the Acquired Funds, including
the portfolio investments as of December 31, 1995, and the related statements
of operations, statements of changes in net assets and financial highlights for
the periods indicated in the financial statements that are included in
BayFunds' Prospectuses and incorporated by reference in BayFunds' Combined
Statements of Additional Information and incorporated by reference in this
Prospectus/Proxy Statement, have been incorporated herein in reliance on the
reports of Ernst & Young LLP, given on the authority of that firm as experts in
accounting and auditing.
<PAGE>
MANAGEMENT'S DISCUSSION OF ACQUIRING FUND PERFORMANCE
THE 1784 SHORT-TERM INCOME FUND. Since its inception in July 1994,
the 1784 Short-Term Income Fund has grown to a total of $86.4 million in
assets. For the year ended May 31, 1996, the 1784 Short-Term Income Fund had a
total return of 4.87%, compared with 5.01% for the Lehman Brothers Mutual Fund
1-5 Year Corporate Government Index, and 4.92% for the Lipper Short
Investment-Grade Debt Funds Average. Based on total return, the 1784 Short-Term
Income Fund ranked among the top half (46 out of 92) of the Lipper Short
Investment-Grade Debt Funds for the period June 1, 1995 to May 31, 1996. The
1784 Short-Term Income Fund's return and resulting ranking are net of waiver of
management fees and certain expenses.
The 1784 Short-Term Income Fund's performance can be attributed
primarily to the 1784 Short-Term Income Fund's average-weighted-maturity and
duration, which were slightly longer than the average for the Lehman Brothers
index. While this strategy benefited the 1784 Short-Term Income Fund during the
first eight months of the period, it had a negative impact on performance from
February through April, when interest rates increased.
All bonds currently held by the 1784 Short-Term Income Fund are
investment grade and on May 31, 1996, 36% of these bonds were rated AA or
higher by either Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group. The assets of the 1784 Short-Term Income Fund are diversified on a
quality basis and among government, corporate, asset-backed and taxable
municipal securities. On May 31, 1996, the average-weighted-maturity of the
portfolio was approximately 2.7 years, and the 1784 Short-Term Income Fund had
a duration of 1.7 years.
[Line Chart: 1784 SHORT-TERM INCOME FUND]
The graphic presentation displayed here consists of a chart
representing the growth of a $10,000 investment in the 1784 Short-Term Income
Fund since its inception on July 31, 1994. The chart features three distinct
rows, shaded black for the 1784 Short-Term Income Fund shares, gray for the
Lehman Brothers Mutual Fund 1-5 Year Corporate/Government Bond Index, and white
for the Lipper Short Investment Grade Debt Funds Average, as described in a
legend appearing below the chart. The chart shows how a $10,000 investment in
shares of the 1784 Short-Term Income Fund in 1994 would have grown to $11,118
in 1996 and compares such growth to the Lehman Brothers Mutual Fund 1-5 Year
Corporate/Government Bond Index and the Lipper Short Investment-Grade Debt
Funds Average, the results of which, for a short-term bond fund for that
period, show that a $10,000 investment in 1994 would have grown to $11,236 in
and $11,060 respectively, 1996. The annualized total return of the 1784
Short-Term Income Fund since July 1, 1994 is 6.06%. The annual total return for
the period from June 1, 1995 through May 31, 1996 is 4.87%.
<PAGE>
THE 1784 INCOME FUND. Since its inception in July 1994, the 1784
Income Fund has grown to a total of $235.0 million in assets. For the year
ended May 31, 1996, the 1784 Income Fund had a total return of 2.64%, compared
with 4.38% for the Lehman Brothers Aggregate Bond Index, and 3.43% for the
Lipper Corporate Debt A-Rated Funds Average. The 1784 Income Fund's return is
net of waiver of management fees and certain expenses.
The 1784 Income Fund's underperformance can be attributed in large
measure to its focus on credit quality -- the average quality of the 1784
Income Fund's portfolio is AA+. Year-to-date, higher quality issues have
underperformed non-investment grade securities.
The assets of the 1784 Income Fund are diversified among government,
corporate, asset-backed and taxable municipal securities. On May 31, 1996 the
average-weighted-maturity of the 1784 Income Fund was approximately 14 years
with a duration of approximately 6 years.
During the past year, average-weighted-maturity that was maintained
was longer than that of the Lehman Brothers index in the belief that the
economic weakness of forth quarter 1995 would extend into 1996. As a result,
the 1784 Income Fund was more sensitive to changing interest rates during the
past five months.
[LINE CHART: 1784 INCOME FUND]
The graphic presentation displayed here consists of a chart
representing the growth of a $10,000 investment in the 1784 Income Fund since
its inception on July 31, 1994. The chart features three distinct rows, shaded
black for the 1784 Income Fund shares, gray for the Lehman Brothers Aggregate
Bond Index, and white for the Lipper Corporate Debt A-Rated Funds Average, as
described in a legend appearing below the chart. The chart shows how a $10,000
investment in shares of the 1784 Income Fund in 1994 would have grown to
$11,222 in 1996 and compares such growth to Lehman Brothers Aggregate Bond
Index and the Lipper Corporate Debt A-Rated Funds Average, the results of
which, for a short-term bond fund for that period, show that a $10,000
investment in 1994 would have grown to $11,435 and $11,269, respectively,
in 1996. The annualized total return of the 1784 Income Fund since
July 1, 1994 is 6.89%. The annual total reutrn for the period from
June 1, 1995 through May 31, 1996 is 2.64%.
<PAGE>
THE 1784 GROWTH FUND. The 1784 Growth Fund began on March 28, 1996,
and on May 31, 1996, its assets were $46.0 million. The 1784 Growth Fund
posted a strong one-month total return of 4.06%, compared with a one-month
total return of 3.94% for the Russell 2000 Index, and 2.65% for the Lipper
Growth Average during the same period.
The 1784 Growth Fund is a diversified portfolio invested primarily
in the stocks of small- and mid-capitalization companies. Currently, the 1784
Growth Fund's holdings emphasize the technology, consumer non-durables, and
healthcare sectors. More than 20% of the 1784 Growth Fund is invested in
foreign securities, which may enhance performance as well as diversification.
Since inception, strong returns in the technology sector have been
the driving force in the 1784 Growth Fund's performance. Representative
investments include Security Dynamics, Cambridge Technology Partners, and
Intel. Other strong performers have been Chesapeake Energy, Geotek
Communications, and Arterial Vascular Engineering.
In the coming year, the 1784 Growth Fund will continue to invest
primarily in high growth stocks, focusing on emerging growth companies with
strong revenue and earnings increases. Bank of Boston, as the investment
adviser, expects good results from technology and cyclical companies. Bank of
Boston plans to maintain the 1784 Growth Fund's high exposure to international
equities. Despite the weak performance of foreign stocks compared with
U.S. markets in the past 12 months -- 10.55% total return for the EAFE index
compared to 28.43% for the S&P 500 -- Bank of Boston believes valuations are
attractive in these markets and that they will begin to outperform U.S.
equities.
[LINE CHART: 1784 GROWTH FUND]
The graphic presentation displayed here consists of a chart
representing the growth of a $10,000 investment in the 1784 Growth Fund since
its inception on March 28, 1996. The chart features three distinct rows, shaded
black for the 1784 Growth Fund shares, gray for the Lipper Growth Average, and
white for the Russell 2000 Index, as described in a legend appearing below the
chart. The chart shows how a $10,000 investment in shares of the 1784 Growth
Fund on March 31, 1996 would have grown to $11,270 in May, 1996 and compares
such growth to the Lipper Growth Average and the Russell 2,000 Index, the
results of which, for an equity growth fund for that period, show that a
$10,000 investment on March 31, 1996 would have grown to $10,600 and $10,950,
respectively, in May 1996. The cumulative total return of the 1784 Growth Fund
since March 28, 1996 is 12.70%.
<PAGE>
OTHER BUSINESS
BayFunds' Board of Trustees knows of no other business to be brought
before the Meeting. However, if any other matters come before the Meeting, it
is the intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to BayFunds in writing at the
address on the cover page of this Prospectus/Proxy Statement or by telephoning
1-800-BAY-FUND.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, made as of September 26, 1996,
between BayFunds, a Massachusetts business trust established under a
Declaration of Trust dated April 1, 1991 ("BayFunds"), and 1784 Funds, a
Massachusetts business trust established under a Declaration of Trust dated
February 5, 1993 ("1784 Funds").
WHEREAS, the parties hereto desire that substantially all of the assets
and balance sheet liabilities of each of the series of BayFunds be transferred
to, and be acquired and assumed by, certain series of 1784 Funds in exchange
for shares of such series of 1784 Funds which shall thereafter be distributed
by BayFunds to the holders of the shares of its series, all as described in
this Agreement (each such transaction of a series of BayFunds with the
corresponding series of 1784 Funds, a "Reorganization"); and
WHEREAS, the parties intend that the 1784 Prime Money Market Fund, a
series of 1784 Funds, will have nominal assets and liabilities before the
Reorganization between it and the BayFunds Money Market Portfolio and will
continue the investment operations of the BayFunds Money Market Portfolio after
such Reorganization; and
WHEREAS, the parties intend that, in connection with the Reorganizations,
BayFunds and each of the series of BayFunds shall be terminated and BayFunds
shall be deregistered as described in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and subject to the terms and conditions hereof, and intending
to be legally bound hereby, BayFunds and 1784 Funds hereby agree as follows:
[SECTION] 1. TRANSFER OF THE ASSETS OF THE SERIES OF BAYFUNDS.
[Section]1.1. (a) At the Effective Time (as defined in [Section]7 hereof)
of the Reorganization of such series, all property of every description, and
all interests, rights, privileges and powers of each of the series of BayFunds
(each, an "Acquired Fund") other than cash in an amount necessary to pay any
unpaid dividends and distributions declared as provided in [Section]4.1(h)
hereof (such assets, the "Acquired Fund Assets") shall be transferred and
conveyed by BayFunds on behalf of such Acquired Fund to 1784 Funds on behalf of
one of its series (or, in the case of the BayFunds U.S. Treasury Money Market
Portfolio, on behalf of the 1784 U.S. Treasury Money Market Fund and the 1784
Institutional U.S. Treasury Money Market Fund) as set forth in [Section]1.2
hereof (each, an "Acquiring Fund"), and shall be accepted by 1784 Funds on
behalf of such Acquiring Fund or Acquiring Funds and 1784 Funds, on behalf of
such Acquiring Fund or Acquiring Funds, shall assume all liabilities of such
Acquired Fund reflected on a balance sheet of the Acquired Fund as of the
Valuation Time (as defined in [Section]3 hereof) of the Reorganization of that
Acquired Fund and reflected in the calculation of such Acquired Fund's net
asset value as of such Valuation Time (the "Acquired Fund Liabilities"), so
that at and after the Effective Time of the Reorganization of that Acquired
Fund: (i) all Acquired Fund Assets of such Acquired Fund shall become and be
the assets of its Acquiring Fund or Acquiring Funds; and (ii) all Acquired Fund
Liabilities of such Acquired Fund shall attach to its Acquiring Fund or
Acquiring Funds as aforesaid and may thenceforth be enforced against such
Acquiring Fund or Acquiring Funds to the extent as if the same had been
incurred by it or them. Without limiting the generality of the foregoing, the
Acquired Fund Assets of an Acquired Fund shall include all property and assets
of any nature whatsoever, including, without limitation, all cash, cash
equivalents, securities, claims and receivables (including dividend and
interest receivables) owned by that Acquired Fund, and, subject to
[Section]1.1(b) hereof, any deferred or prepaid expenses shown as an asset on
that Acquired Fund's books at the Effective Time of the Reorganization of such
Acquired Fund, and all good will, all other intangible property and all books
and records belonging to that Acquired Fund. Recourse by any person for the
Acquired Fund Liabilities of an Acquired Fund assumed by an Acquiring Fund
shall, at and after the Effective Time of the Reorganization of such Acquired
Fund, be limited to such Acquiring Fund.
<PAGE>
(b) Notwithstanding [Section]1.1(a) hereof, unamortized organizational
expenses of the Acquired Funds listed in [Section]1.2 hereof and the
liabilities of the Acquired Funds listed in [Section]1.2 hereof to service
providers who will not provide services to the Acquiring Funds after the
Reorganizations shall not be transferred or assumed hereunder. The parties have
been advised that the amounts of such expenses and liabilities will be paid by
one or more third parties and will not be reflected on the balance sheets of
such Acquired Funds as of the Valuation Times or the Effective Times of the
Reorganizations.
[Section]1.2. The assets of each Acquired Fund shall be acquired by the
Acquiring Fund or Acquiring Funds identified below opposite its name, and the
holders of each class of shares of such Acquired Fund shall receive the shares
(which shall be of the class, if any, specified) of the Acquiring Fund
identified below opposite the name of such class:
<TABLE>
<CAPTION>
BAYFUNDS SERIES AND CLASSES 1784 FUNDS SERIES AND CLASSES
- --------------------------- -----------------------------
<S> <C>
BayFunds U.S. Treasury Money Market 1784 U.S. Treasury Money Market Fund
Portfolio Class A Shares
Investment Shares
BayFunds U.S. Treasury Money Market 1784 Institutional U.S. Treasury Money
Portfolio Market Fund
Institutional Shares
BayFunds Money Market Portfolio 1784 Prime Money Market Fund
Investment Shares
Trust Shares
BayFunds Equity Portfolio 1784 Growth Fund
Investment Shares
Institutional Shares
BayFunds Short Term Yield Portfolio 1784 Short-Term Income Fund
Investment Shares
Institutional Shares
BayFunds Bond Portfolio 1784 Income Fund
Investment Shares
Institutional Shares
</TABLE>
In the case of the BayFunds U.S. Treasury Money Market Portfolio, the
Investment Class Percentage (as defined below) of the Acquired Fund Assets of
such Acquired Fund and of the Acquired Fund Liabilities of such Acquired Fund
shall be transferred to and assumed by the 1784 U.S. Treasury Money Market
Fund, and the Institutional Class Percentage (as defined below) of the Acquired
Fund Assets and of the Acquired Fund Liabilities of such Acquired Fund shall be
transferred to and assumed by the 1784 Institutional U.S. Treasury Money Market
Fund. As used herein, the term "Investment Class Percentage" and the term
"Institutional Class Percentage" shall mean the ratios expressed as
percentages, calculated at the Valuation Time of the Reorganization of the
BayFunds U.S. Treasury Money Market Portfolio, of (a) the net asset value of
the BayFunds U.S. Treasury Money Market Portfolio attributable to,
respectively, its Investment Shares and its Institutional Shares to (b) the net
asset value of the BayFunds U.S. Treasury Money Market Portfolio attributable
to all shares of such Acquired Fund. Subject to the foregoing, the specific
Acquired Fund Assets and Acquired Fund Liabilities to be transferred by the
BayFunds U.S. Treasury Money Market Portfolio to the 1784 U.S. Treasury Money
Market Fund and the 1784 Institutional U.S. Treasury Money Market Fund shall be
as identified in writing by the parties at the Effective Time of the
Reorganization of the BayFunds U.S. Treasury Money Market Portfolio with such
Acquiring Funds, with the parties intending that, to the extent practicable and
consistent with maintaining round lot denominations, each item of the Acquired
Fund Assets of such Acquired Fund shall be transferred pro rata to the 1784
U.S. Treasury Money Market Fund and the 1784 Institutional U.S. Treasury Money
Market Fund in accordance with, respectively, the Investment Class Percentage
and the Institutional Class Percentage.
[Section]1.3. In exchange for the transfer of the Acquired Fund Assets and
the assumption of the Acquired Fund Liabilities, 1784 Funds will simultaneously
issue at the Effective Time of the Reorganization to each Acquired Fund a
number of full and fractional shares of the Acquiring Fund or Acquiring Funds
as set forth in [Section]1.2
<PAGE>
hereof (to the third decimal place), all determined and adjusted as
provided in this Agreement. The number of shares of the Acquiring Funds so
issued will have an aggregate net asset value equal to the value of the
Acquired Fund Assets that are represented by the class of shares of the
Acquired Fund, the holders of which shall receive such shares of the Acquiring
Fund, as specified in [Section]1.2 hereof, all determined and adjusted as
provided in this Agreement.
[Section]1.4. The net asset value of shares of each of the Acquiring Funds
and the net asset value of each class of shares of the Acquired Funds shall be
determined as of the Valuation Time specified in [Section]3 hereof.
[Section]1.5. The net asset value of the shares of each Acquiring Fund
shall be computed in the manner set forth in such Acquiring Fund's then current
prospectus under the Securities Act of 1933, as amended (the "1933 Act"). In
determining the value of the securities transferred by each Acquired Fund to an
Acquiring Fund, each security shall be priced in accordance with the policies
and procedures of 1784 Funds as described in its then current prospectus for
such Acquiring Fund. The net asset values of each class of shares of the
Acquired Funds and of shares of the Acquiring Funds, excluding the BayFunds
U.S. Treasury Money Market Portfolio, the BayFunds Money Market Portfolio, the
1784 U.S. Treasury Money Market Fund, the 1784 Institutional U.S. Treasury
Money Market Fund and the 1784 Prime Money Market Fund, will be computed as of
the Valuation Time by pricing each security at its market value as of the
Valuation Time. For such purposes, price quotations and the security
characteristics relating to establishing such quotations shall be determined by
1784 Funds. The net asset values of each class of shares of the BayFunds U.S.
Treasury Money Market Portfolio and the BayFunds Money Market Portfolio and of
shares of the 1784 U.S. Treasury Money Market Fund, the 1784 Institutional U.S.
Treasury Money Market Fund and the 1784 Prime Money Market Fund will be
computed as of the Valuation Time in accordance with amortized cost procedures
in accordance with Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act").
[SECTION]2. LIQUIDATING DISTRIBUTIONS AND TERMINATION OF BAYFUNDS. At the
Effective Time of the Reorganization of an Acquired Fund, such Acquired Fund
shall liquidate and distribute pro rata to the record holders of each class of
its shares at such Effective Time the shares of the Acquiring Fund identified
in [Section]1.2 hereof to be received by the holders of such class of such
Acquired Fund. In addition, each shareholder of record of an Acquired Fund
shall have the right to receive from that Acquired Fund any unpaid dividends or
other distributions which were declared before the Effective Time of the
Reorganization of such Acquired Fund with respect to the shares of such
Acquired Fund that are held by the shareholder at the Effective Time of such
Reorganization. In accordance with instructions it receives from BayFunds, 1784
Funds shall record on its books the ownership of shares of each Acquiring Fund
by the record holders of the class of shares of the Acquired Fund identified in
[Section]1.2 hereof. No redemption or repurchase of an Acquiring Fund's shares
credited to former shareholders of BayFunds with respect to an Acquired Fund's
shares represented by unsurrendered share certificates shall be permitted until
such certificates have been surrendered to 1784 Funds' transfer agent for
cancellation. The holder of any certificate or certificates representing a
class of shares of an Acquired Fund shall immediately notify 1784 Funds of any
loss, destruction or mutilation of such certificate or certificates, and the
Board of Trustees of 1784 Funds, in its discretion, may require such owner or
his or her legal representative to give to 1784 Funds a bond in such sum,
limited or unlimited, and in such form and with such surety or sureties, as the
Board of Trustees of 1784 Funds shall determine, to indemnify 1784 Funds
against any claim that may be made against it or on account of the alleged loss
or destruction of any such certificate or certificates. All of the issued and
outstanding shares of each class of each Acquired Fund shall be canceled on the
books of BayFunds at the Effective Time of the Reorganization of that Acquired
Fund and shall thereafter represent only the right to receive the class of
shares of the Acquiring Fund identified in [Section]1.2 hereof, and the
Acquired Fund's transfer book shall be closed permanently. As soon as
practicable after the Reorganizations, counsel to BayFunds shall make all
filings and take all other steps as shall be necessary and proper to effect its
complete dissolution, and shall file an application pursuant to Section 8(f) of
the 1940 Act for an order declaring that it has ceased to be an investment
company. After the Effective Time of the Reorganization of an Acquired Fund,
BayFunds shall not conduct any business on behalf of that Acquired Fund, and
after all of the Reorganizations have been consummated, BayFunds shall not
conduct any business, except in connection with the liquidation and dissolution
of the Acquired Funds, the termination of the Acquired Funds and BayFunds, and
the deregistration of BayFunds.
<PAGE>
[SECTION]3. VALUATION TIME. Subject to [Section]1.5 hereof, the Valuation
Time for the Reorganization of an Acquired Fund with the corresponding
Acquiring Fund are Acquiring Funds shall be 4:00 p.m., Eastern Time, on such
date as may be agreed in writing by the authorized officers of both parties
hereto, which date shall be no later than May 29, 1997.
[SECTION]4. REPRESENTATIONS AND WARRANTIES.
[Section]4.1. BayFunds, on behalf of itself and each Acquired Fund,
represents and warrants to 1784 Funds as follows:
(a) It is a Massachusetts business trust duly created pursuant to its
Declaration of Trust for the purpose of acting as a management investment
company under the 1940 Act and is validly existing under the laws of, and
duly authorized to transact business in, the Commonwealth of
Massachusetts. It is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
1940 Act and such registration is in full force and effect.
(b) It has power to own all of its properties and assets and, subject
to the approvals of shareholders referred to herein, to carry out and
consummate the transactions contemplated herein, and has all necessary
federal, state and local authorizations to carry on its business as now
being conducted and to consummate the transactions contemplated by this
Agreement.
(c) This Agreement has been duly authorized, executed and delivered
by BayFunds and represents BayFunds' valid and binding contract,
enforceable in accordance with its terms. The execution, delivery, and
consummation of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement will not, violate any
provision of BayFunds' Declaration of Trust or By-Laws or any agreement or
undertaking of any nature to which it is a party or by which it is bound.
(d) Each Acquired Fund has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), as of and since its first
taxable year; has been a regulated investment company under such Part of
the Code at all times since the end of its first taxable year when it so
qualified; and qualifies and shall continue to qualify as a regulated
investment company until the Effective Time of the Reorganization of such
Acquired Fund.
(e) All federal, state, local and foreign income, profits, franchise,
sales, withholding, customs, transfer and other taxes, including interest,
additions to tax and penalties (collectively, "Taxes") relating to the
Acquired Fund Assets due or properly shown to be due on any return filed
by any Acquired Fund with respect to taxable periods ending on or prior
to, and the portion of any interim period up to, the date hereof have been
fully and timely paid or provided for; and there are no levies, liens, or
other encumbrances relating to Taxes existing, threatened or pending with
respect to the Acquired Fund Assets of any Acquired Fund.
(f) The financial statements for each of the Acquired Funds for the
fiscal year ended December 31, 1995, audited by Ernst & Young LLP, copies
of which have been previously furnished to 1784 Funds, present fairly the
financial position of each Acquired Fund as of the respective dates
indicated and the results of its operations for the periods indicated, in
conformity with generally accepted accounting principles.
(g) The unaudited financial statements for each Acquired Fund for the
six month period ended June 30, 1996, copies of which have been previously
furnished to 1784 Funds, present fairly the financial position of such
Acquired Fund as of such date and the results of its operations for the
periods indicated, in conformity with generally accepted accounting
principles.
(h) Prior to its Valuation Date, each of the Acquired Funds shall
have declared a dividend or dividends, with a record date and ex-dividend
date prior to the Valuation Time, which, together with all previous
dividends, shall have the effect of distributing to its shareholders all
of its net investment company income, if any, for the taxable periods or
years ended on or before December 31, 1995 and for the period from said
date to and including the Effective Time of the Reorganization of such
Acquired
<PAGE>
Fund (computed without regard to any deduction for dividends paid), and
all of its net capital gain, if any, realized in taxable periods or years
ended on or before December 31, 1995 and in the period from said date to
and including such Effective Time.
(i) At both the Valuation Time and the Effective Time of the
Reorganization of an Acquired Fund, there shall be no known liabilities of
such Acquired Fund, whether accrued, absolute, contingent or otherwise,
not reflected on its balance sheet prepared as of such Valuation Time and
in the net asset values per share of its outstanding shares.
(j) There are no legal, administrative or other proceedings pending
or, to BayFunds' knowledge threatened, against BayFunds or an Acquired
Fund which could result in liability on the part of BayFunds or an
Acquired Fund.
(k) Subject to the approvals of shareholders referred to herein, at
both the Valuation Time and the Effective Time of the Reorganization of
each Acquired Fund, BayFunds shall have full right, power and authority to
sell, assign, transfer and deliver the Acquired Fund Assets of such
Acquired Fund and, upon delivery and payment for the Acquired Fund Assets
to be acquired by it as contemplated herein, an Acquiring Fund shall
acquire good and marketable title thereto, free and clear of all liens and
encumbrances, and subject to no restrictions on the ownership or transfer
thereof (except as imposed by federal or state securities laws).
(l) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by BayFunds of the
transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 Act"), the 1940 Act, the rules and regulations under those
Acts, or state securities laws.
(m) Insofar as the following relate to BayFunds or any of the
Acquired Funds, (i) the registration statement filed or to be filed by
1784 Funds on Form N-14 relating to the shares of the Acquiring Funds
(other than the 1784 Prime Money Market Fund) that will be registered with
the SEC pursuant to this Agreement, which, without limitation, shall
include a combined proxy statement of BayFunds with respect to the
Acquired Funds being reorganized with such Acquiring Funds and prospectus
of 1784 Funds with respect to the transactions contemplated by this
Agreement, and any supplement or amendment thereto and the documents
contained or incorporated therein by reference (the "N-14 Registration
Statement"), on the effective date of the N-14 Registration Statement, at
the time of any shareholders' meetings referred to herein of such Acquired
Funds and at the Effective Times of the Reorganizations of such Acquired
Funds, and (ii) the proxy statement filed or to be filed by BayFunds
relating to the Reorganization of the BayFunds Money Market Portfolio with
the 1784 Prime Money Market Fund, and any supplement or amendment thereto
and the documents contained or incorporated therein by reference (the
"Money Market Portfolio Proxy Statement"), on the date the same is mailed
to shareholders of the BayFunds Money Market Portfolio, at the time of any
shareholders' meetings of the BayFunds Money Market Portfolio referred to
herein and at the Effective Time of the Reorganization of the BayFunds
Money Market Portfolio: (x) shall comply in all material respects with the
provisions of the 1933 Act (in the case of the N-14 Registration
Statement), the 1934 Act and the 1940 Act, the rules and regulations under
those Acts, and state securities laws, and (y) shall not contain any
untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
(n) All of the issued and outstanding shares of each Acquired Fund
have been duly and validly issued, are fully paid and non-assessable, and
were offered for sale and sold in conformity with all applicable federal
and state securities laws, and no shareholder of an Acquired Fund has any
preemptive right of subscription or purchase in respect of such shares.
(o) BayFunds shall not sell or otherwise dispose of any shares of an
Acquiring Fund to be received in the transactions contemplated herein,
except in distribution to its shareholders as contemplated herein.
<PAGE>
[Section]4.2. 1784 Funds, on behalf of itself and each Acquiring Fund,
represents and warrants to BayFunds as follows:
(a) It is a Massachusetts business trust duly created pursuant to its
Declaration of Trust for the purpose of acting as a management investment
company under the 1940 Act and is validly existing under the laws of, and
duly authorized to transact business in, the Commonwealth of
Massachusetts. It is registered with the SEC as an open-end management
investment company under the 1940 Act and such registration is in full
force and effect.
(b) It has power to own all of its properties and assets and to carry
out and consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its business
as now being conducted and to consummate the transactions contemplated by
this Agreement.
(c) This Agreement has been duly authorized, executed and delivered
by 1784 Funds and represents 1784 Funds' valid and binding contract,
enforceable in accordance with its terms. The execution, delivery, and
consummation of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement will not, violate any
provision of 1784 Funds' Declaration of Trust or By-Laws, or any agreement
or undertaking of any nature to which it is a party or by which it is
bound.
(d) Each Acquiring Fund has elected (or in the case of the 1784 Prime
Money Market Fund will elect) to qualify and each of the Acquiring Funds
(other than the 1784 Prime Money Market Fund) has qualified as a regulated
investment company under Part I of Subchapter M of the Code, as of and
since its first taxable year; each of the Acquiring Funds (other than the
1784 Prime Money Market Fund) has been a regulated investment company
under such Part of the Code at all times since the end of its first
taxable year when it so qualified; and intends to continue to qualify as a
regulated investment company.
(e) The financial statements of each of the Acquiring Funds (other
than the 1784 Prime Money Market Fund) for the fiscal year ended May 31,
1996, audited by Coopers & Lybrand LLP, copies of which have been
previously furnished to BayFunds, present fairly the financial position of
each Acquiring Fund as of the dates indicated and the results of its
operations for the periods indicated, in conformity with generally
accepted accounting principles.
(f) At both the Valuation Time and the Effective Time of the
Reorganization of an Acquiring Fund, there shall be no known liabilities
of such Acquiring Fund, whether accrued, absolute, contingent or
otherwise, not reflected on its balance sheet prepared as of such
Valuation Time and in the net asset values per share of its outstanding
shares to be issued pursuant to this Agreement.
(g) There are no legal, administrative or other proceedings pending
or, to 1784 Funds' knowledge, threatened, against 1784 Funds or an
Acquiring Fund which could result in liability on the part of 1784 Funds
or an Acquiring Fund.
(h) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by 1784 Funds of
the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those Acts, or state securities laws.
(i) Insofar as the following relate to 1784 Funds or any of the
Acquiring Funds, (i) the N-14 Registration Statement on its effective
date, at the time of any shareholders' meetings referred to herein and at
the Effective Times of the Reorganizations of such Acquiring Funds, and
(ii) the Money Market Portfolio Proxy Statement, on the date the same is
mailed to shareholders of the BayFunds Money Market Portfolio, at the time
of any shareholders' meetings of the BayFunds Money Market Portfolio
referred to herein and at the Effective Time of the Reorganization of the
BayFunds Money Market Portfolio: (x) shall comply in all material respects
with the provisions of the 1933 Act (in the case of the N-14 Registration
Statement), the 1934 Act and the 1940 Act, the rules and regulations under
those Acts, and state securities laws, and (y) shall not contain any
untrue statement of material fact or omit to
<PAGE>
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(j) The shares of each class of each Acquiring Fund to be issued and
delivered to an Acquired Fund for the account of record holders of shares
of such Acquired Fund, pursuant to the terms hereof, shall have been duly
authorized as of the Effective Time of the Reorganization of such
Acquiring Fund and Acquired Fund and, when so issued and delivered, shall
be registered under the 1933 Act and under applicable state securities
laws (assuming, in the case of the Reorganization of the BayFunds Money
Market Portfolio and the 1784 Prime Money Market Fund, due registration of
the outstanding shares of BayFunds Money Market Portfolio under the 1933
Act and such state securities laws), duly and validly issued, fully paid
and non-assessable, and no shareholder of 1784 Funds shall have any
preemptive right of subscription or purchase in respect of such shares.
[SECTION].5. SHAREHOLDER ACTION ON BEHALF OF THE ACQUIRED FUNDS.
[Section]5.1. As soon as practicable after the effective date of the N-14
Registration Statement in the case of each of the Acquired Funds other than the
BayFunds Money Market Portfolio and as soon as practicable after the date when
the Money Market Portfolio Proxy Statement can first be mailed to shareholders
in the case of the BayFunds Money Market Portfolio, but in any event prior to
the Effective Time of the Reorganization of each Acquired Fund and as a
condition thereto, the Board of Trustees of BayFunds shall call, and BayFunds
shall hold, a meeting of the shareholders of such Acquired Fund for the purpose
of considering and voting upon:
(a) approval of this Agreement and the transactions contemplated
hereby, including, without limitation:
(i) the transfer of the Acquired Fund Assets and Acquired Fund
Liabilities of such Acquired Fund to an Acquiring Fund or Acquiring
Funds in exchange for shares of such Acquiring Fund or Acquiring Funds,
as set forth in [Section]1.2 hereof; and
(ii) the liquidation of such Acquired Fund through the
distribution to its record holders of shares of such Acquiring Fund or
Acquiring Funds as described in this Agreement; and
(b) such other matters as may be determined by the Boards of Trustees
or authorized officers of the parties hereto.
[Section]5.2. Approval of this Reorganization Agreement by the
shareholders of an Acquired Fund shall constitute the waiver of the application
of any fundamental policy of such Acquired Fund that might be deemed to prevent
BayFunds from taking the actions necessary to effectuate the Reorganization of
such Acquired Fund as described herein, and such policies, if any, shall be
deemed to have been amended accordingly.
[SECTION]6. N-14 REGISTRATION STATEMENT AND PROXY SOLICITATION MATERIALS.
1784 Funds shall file the N-14 Registration Statement under the 1933 Act, and
BayFunds shall file the combined prospectus/proxy statement contained therein
and the Money Market Portfolio Proxy Statement under the 1934 Act and 1940 Act
proxy rules, with the SEC as promptly as practicable. Each of 1784 Funds and
BayFunds has cooperated and shall continue to furnish the other with the
information relating to itself that is required by the 1933 Act, the 1934 Act,
1940 Act, the rules and regulation under each of those Acts and state
securities laws, to be included in the N-14 Registration Statement and the
Money Market Portfolio Proxy Statement.
[SECTION]7. EFFECTIVE TIMES OF REORGANIZATIONS. Delivery of the Acquired
Fund Assets and the shares of each Acquiring Fund to be issued pursuant to
[Section]1 hereof and the liquidation of such Acquired Fund pursuant to
[Section]2 hereof shall occur at the opening of business on the next business
day following the Valuation Time for such Reorganization, or on such other
date, and at such place and time and date, agreed to by the Boards of Trustees
or authorized officers of the parties hereto. The date and time at which such
actions are taken in connection with a Reorganization are referred to herein as
the "Effective Time" of such Reorganization. To the extent any Acquired Fund
Assets of any Acquired Fund are, for any reason, not transferred at the
Effective
<PAGE>
Time of the Reorganization of such Acquired Fund, BayFunds shall cause such
Acquired Fund Assets to be transferred in accordance with this Agreement at the
earliest practicable date thereafter.
[SECTION]8. BAYFUNDS CONDITIONS. The obligation of BayFunds to consummate
the Reorganization of each Acquired Fund hereunder shall be subject to the
following conditions precedent:
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders of such Acquired
Fund in the manner required by law.
(b) All representations and warranties of 1784 Funds made in this
Agreement (except for such as do not pertain to the Acquiring Fund or
Acquiring Funds with which such Acquired Fund is to be reorganized) shall
be true and correct in all material aspects as if made at and as of the
Valuation Time and the Effective Time of such Reorganization. As of the
Valuation Time and the Effective Time of such Reorganization there shall
have been no material adverse change in the financial condition of any
such Acquiring Fund since the date of the financial statements referred to
in [Section]4.2(e) hereof other than those changes incurred in the
ordinary course of business as an investment company. No action, suit or
other proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit, or
obtain damages or other relief in connection with such Reorganization.
(c) BayFunds shall have received an opinion of Bingham, Dana & Gould
LLP, addressed to BayFunds in form reasonably satisfactory to it and dated
the Effective Time of such Reorganization, substantially to the effect
that: (i) 1784 Funds is a Massachusetts business trust duly organized and
legally existing under the laws of the Commonwealth of Massachusetts; (ii)
the shares of each class of each Acquiring Fund to be delivered to such
Acquired Fund as provided for by this Agreement are duly authorized and
upon delivery will be validly issued, fully paid and nonassessable by such
Acquiring Fund (except as otherwise disclosed in the Registration
Statement of 1784 Funds on Form N-1A filed with the SEC pursuant to the
1933 Act and the 1940 Act), and to such counsel's knowledge, no
shareholder of any such Acquiring Fund has any option, warrant or
preemptive right to subscription or purchase in respect thereof; (iii)
this Agreement has been duly authorized, executed and delivered by 1784
Funds and represents a legal, valid and binding contract, enforceable in
accordance with its terms, subject as to enforceability to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto and the application of equitable principles in any
proceeding, whether at law or in equity, and such counsel shall express no
opinion with respect to the provisions of this Agreement intended to limit
liability for particular matters to an Acquiring Fund and its assets; (iv)
the execution and delivery of this Agreement did not, and the consummation
of the transactions contemplated by this Agreement in connection with such
Reorganization will not, violate the Declaration of Trust or By-Laws of
1784 Funds or any material agreement known to such counsel to which 1784
Funds is a party or by which 1784 Funds is bound; and (v) to such
counsel's knowledge, no consent, approval, authorization or order of any
court or governmental authority is required for the consummation of the
transactions contemplated by this Agreement in connection with such
Reorganization by 1784 Funds, except such as have been obtained under the
1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under
those Acts and such as may be required under state securities laws. Such
opinion may rely on a certificate of a trustee or the President or a Vice
President of 1784 Funds as to factual matters. Such opinion may also rely
on the opinion of other counsel to the extent set forth in such opinion,
provided such other counsel is reasonably acceptable to BayFunds.
(d) BayFunds shall have received an opinion of Bingham, Dana & Gould
LLP, addressed to BayFunds and 1784 Funds in form reasonably satisfactory
to them and dated the Effective Time of such Reorganization, substantially
to the effect that for federal income tax purposes, (i) except in the case
of the Reorganization of the BayFunds U.S. Treasury Money Market Portfolio
with the 1784 U.S. Treasury Money Market Fund and the 1784 Institutional
U.S. Treasury Money Market Fund, (A) the transfer of all of the Acquired
Fund Assets of such Acquired Fund hereunder, and the assumption by each
Acquiring Fund of Acquired Fund Liabilities of such Acquired Fund, in
exchange for shares of each such Acquiring Fund, and the distribution of
said shares to the shareholders of such Acquired Fund, as
<PAGE>
provided in this Agreement, will constitute a reorganization within the
meaning of Section 368(a)(1) of the Code and, with respect to such
reorganization, the Acquired Fund and the Acquiring Fund will each be
considered "a party to a reorganization" within the meaning of Section
368(b) of the Code; (B) in accordance with Sections 361(a), 361(c)(1) and
357(a) of the Code, no gain or loss will be recognized by such Acquired
Fund as a result of such transactions; (C) in accordance with Section 1032
of the Code, no gain or loss will be recognized by such Acquiring Fund as
a result of such transactions; (D) in accordance with Section 354(a)(1) of
the Code, no gain or loss will be recognized by the shareholders of such
Acquired Fund on the distribution to them by such Acquired Fund of shares
of any class of such Acquiring Fund in exchange for their shares of any
class of such Acquired Fund; (E) in accordance with Section 358(a)(1) of
the Code, the aggregate basis of Acquiring Fund shares received by each
shareholder of any class of such Acquired Fund will be the same as the
aggregate basis of the shareholder's Acquired Fund shares immediately
prior to the transactions; (F) in accordance with Section 362(b) of the
Code, the basis of the Acquired Fund Assets to such Acquiring Fund will be
the same as the basis of such Acquired Fund Assets in the hands of such
Acquired Fund immediately prior to the exchange; (G) in accordance with
Section 1223 of the Code, a shareholder's holding period for Acquiring
Fund shares will be determined by including the period for which the
shareholder held the shares of such Acquired Fund exchanged therefor,
provided that the shareholder held such shares of such Acquired Fund as a
capital asset; and (H) in accordance with Section 1223 of the Code, the
holding period of such Acquiring Fund with respect to the Acquired Fund
Assets will include the period for which such Acquired Fund Assets were
held by such Acquired Fund, and (ii) in the case of the Reorganization of
the BayFunds U.S. Treasury Money Market Portfolio with the 1784 U.S.
Treasury Money Market Fund and the 1784 Institutional U.S. Treasury Money
Market Fund (collectively, the "1784 Treasury Money Market Funds"), (A)
the Reorganization will not constitute a reorganization under Section
368(a) of the Code, and neither the BayFunds U.S. Treasury Money Market
Portfolio nor either of the 1784 Treasury Money Market Funds will be a
"party to a reorganization" within the meaning of Section 368(b) of the
Code; (B) upon the transfer of all of its assets to the 1784 Treasury
Money Market Funds solely in exchange for the shares of the 1784 Treasury
Money Market Funds and the assumption of its liabilities by the 1784
Treasury Money Market Funds, the BayFunds U.S. Treasury Money Market
Portfolio will recognize gain or loss to the extent the fair market value
of the assets exceeds or is less than, respectively, the aggregate basis
of those assets in the hands of the BayFunds U.S. Treasury Money Market
Portfolio; (C) no gain or loss will be recognized by either of the 1784
Treasury Money Market Funds upon the receipt of the assets of the BayFunds
U.S. Treasury Money Market Portfolio solely in exchange for the shares of
such 1784 Treasury Money Market Fund and the assumption of the liabilities
of the BayFunds U.S. Treasury Money Market Portfolio by such 1784 Treasury
Money Market Fund; (D) the basis of the assets of the BayFunds U.S.
Treasury Money Market Portfolio acquired by the 1784 Treasury Money Market
Funds will be, in each instance, the fair market value of those assets at
the time of the Reorganization; (E) the holding period of the assets of
the BayFunds U.S. Treasury Money Market Portfolio in the hands of each of
the 1784 Treasury Money Market Funds will begin on the date of the
Reorganization, and will not include the holding period of such assets in
the hands of the BayFunds U.S. Treasury Money Market Portfolio; (F) upon
the exchange of all of their BayFunds U.S. Treasury Money Market Portfolio
shares solely for shares of a 1784 Treasury Money Market Fund as part of
the Reorganization, the shareholders of the BayFunds U.S. Treasury Money
Market Portfolio will recognize gain (or loss) to the extent the fair
market value of such 1784 Treasury Money Market Fund shares exceeds (or is
less than) the aggregate basis such shareholders had in their BayFunds
U.S. Treasury Money Market Portfolio shares and, if their BayFunds U.S.
Treasury Money Market Portfolio shares were capital assets in their hands,
the gain (or loss) will be long-term capital gain (or loss) if they have
held their interest in the BayFunds U.S. Treasury Money Market Portfolio
shares for more than one year, and short-term capital gain (or loss) if
they have held such interest for one year or less; (G) the basis of the
1784 Treasury Money Market Funds shares to be received by the BayFunds
U.S. Treasury Money Market Portfolio shareholders will be, in each
instance, the fair market value of those shares at the time of the
Reorganization; and (H) the holding period of the 1784 Treasury Money
Market Fund shares to be received by any BayFunds U.S. Treasury Money
Market Portfolio shareholder will begin on the date of the Reorganization,
and will not include the period for which any such shareholder held
BayFunds
<PAGE>
U.S. Treasury Money Market Portfolio shares surrendered in exchange
therefor. Such opinion may rely on a certificate of a trustee or the
President or a Vice President of BayFunds and on a certificate of a
trustee or the President or a Vice President of 1784 Funds as to factual
matters.
(e) (i) (A) except in the case of the Reorganization of the BayFunds
Money Market Portfolio with the 1784 Prime Money Market Fund, the N-14
Registration Statement shall have become effective under the 1933 Act and
no stop order suspending such effectiveness shall have been instituted or,
to the best knowledge of 1784 Funds, contemplated by the SEC, and (B) in
the case of the Reorganization of the BayFunds Money Market Portfolio with
the 1784 Prime Money Market Fund, the period specified in paragraph (a) of
Rule 14a-6 under the 1934 Act shall have elapsed following the filing of
the Money Market Portfolio Proxy Statement in preliminary form with the
SEC pursuant to such Rule 14a-6, and (ii) with respect to such
Reorganization the parties hereto shall have received all permits and
other authorizations necessary under state securities laws to consummate
the transactions contemplated by this Agreement in connection with such
Reorganization.
(f) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin the consummation of the transactions contemplated by this
Agreement with respect to such Reorganization under Section 25(c) of the
1940 Act.
(g) The President or a Vice President of 1784 Funds shall have
certified that it has performed and complied in all material respects with
each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Valuation Time and the
Effective Time of such Reorganization.
[SECTION]9. 1784 FUNDS CONDITIONS. The obligation of 1784 Funds to
consummate the Reorganization with respect to each Acquiring Fund hereunder
shall be subject to the following conditions precedent:
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders of the Acquired
Fund to be organized with such Acquiring Fund in the manner required by
law.
(b) BayFunds shall have duly executed and delivered to 1784 Funds
such bills of sale, assignments, certificates and other documents of
transfer (the "Transfer Documents") as 1784 Funds may deem necessary or
desirable to transfer to such Acquiring Fund all right, title and interest
of BayFunds and the applicable Acquired Fund in and to the Acquired Fund
Assets to be transferred to such Acquiring Fund. Such Acquired Fund Assets
shall be accompanied by all necessary state stock transfer stamps or cash
for the appropriate purchase price thereof.
(c) All representations and warranties of BayFunds made in this
Agreement (except for such as do not pertain to the Acquired Fund to be
reorganized with such Acquiring Fund) shall be true and correct in all
material aspects as if made at and as of the Valuation Time and Effective
Time of such Reorganization. As of the Valuation Time and the Effective
Time of such Reorganization there shall have been no material adverse
change in the financial condition of such Acquired Fund since the date of
the financial statements referred to in [Section]4.1(f) hereof other than
those changes incurred in the ordinary course of business as an investment
company. No action, suit or other proceeding shall be threatened or
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with
such Reorganization.
(d) 1784 Funds shall have received an opinion of Ropes & Gray,
addressed to 1784 Funds in form reasonably satisfactory to it and dated
the Effective Time of such Reorganization, substantially to the effect
that: (i) BayFunds is a Massachusetts business trust duly organized and
legally existing under the laws of the Commonwealth of Massachusetts; (ii)
the shares of each class of such Acquired Fund outstanding at the
Effective Time of such Reorganization are duly authorized, validly issued,
fully paid and non-assessable by such Acquired Fund (except as otherwise
disclosed in the Registration Statement of BayFunds on Form N-1A filed
with the SEC pursuant to the 1933 Act and the 1940 Act), and to such
counsel's knowledge, no shareholder of such Acquired Fund has any option,
warrant or preemptive right to subscription or purchase in respect
thereof; (iii) this Agreement and the Transfer Documents with
<PAGE>
respect to such Reorganization have been duly authorized, executed and
delivered by BayFunds and represent legal, valid and binding contracts,
enforceable and, in the case of such Transfer Documents, effective in
accordance with their terms, subject as to enforceability to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto and the application of equitable principles in any
proceeding, whether at law or in equity, and such counsel shall express no
opinion with respect to the provisions of this Agreement intended to limit
liability for particular matters to an Acquired Fund and its assets; (iv)
the execution and delivery of this Agreement did not, and the consummation
of the transactions contemplated by this Agreement in connection with such
Reorganization will not, violate the Declaration of Trust or By-Laws of
BayFunds or any material agreement known to such counsel to which BayFunds
is a party by which BayFunds is bound; and (v) to such counsel's
knowledge, no consent, approval, authorization or order of any court or
governmental authority is required for the consummation of the
transactions contemplated by this Agreement in connection with such
Reorganization by BayFunds, except such as have been obtained under the
1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under
those Acts and such as may be required under state securities laws. Such
opinion may rely on a certificate of a trustee or the President or a Vice
President of BayFunds as to factual matters. Such opinion may also rely on
the opinion of other counsel to the extent set forth in such opinion,
provided such other counsel is reasonably acceptable to 1784 Funds.
(e) 1784 Funds have received an opinion from Bingham, Dana & Gould
LLP, addressed to BayFunds and 1784 Funds in form reasonably satisfactory
to them and dated the Effective Time of such Reorganization and
substantially to the effect set forth in [Section]8(d) hereof. Such
opinion may rely on a certificate of a trustee or the President or a Vice
President of BayFunds and a certificate of a trustee or the President or a
Vice President of 1784 Funds as to factual matters.
(f) (i) (A) except in the case of the Reorganization of the BayFunds
Money Market Portfolio with the 1784 Prime Money Market Fund, the N-14
Registration Statement shall have become effective under the 1933 Act and
no stop order suspending such effectiveness shall have been instituted or,
to the best knowledge of BayFunds, contemplated by the SEC, and (B) in the
case of the Reorganization of the BayFunds Money Market Portfolio with the
1784 Prime Money Market Fund, the period specified in paragraph (a) of
Rule 14a-6 under the 1934 Act shall have elapsed following the filing of
the Money Market Portfolio Proxy Statement in preliminary form with the
SEC pursuant to such Rule 14a-6, and (ii) with respect to such
Reorganization the parties hereto shall have received all permits and
other authorizations necessary under state securities laws to consummate
the transactions contemplated by this Agreement in connection with such
Reorganization.
(g) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin the consummation of the transactions contemplated by this
Agreement with respect to such Reorganization under Section 25(c) of the
1940 Act.
(h) The President or a Vice President of BayFunds shall have
certified that it has performed and complied in all material respects with
each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Valuation Time and the
Effective Time of such Reorganization.
[SECTION]10. TAX DOCUMENTS. BayFunds shall furnish to 1784 Funds at the
Effective Time of each Reorganization confirmations or other adequate evidence
as to the adjusted tax basis of the Acquired Fund Assets then being delivered
to an Acquiring Fund in accordance with the terms of this Agreement.
[SECTION]11. FINDER'S FEES. Each party represents and warrants to each
other party hereto that there is no person who is entitled to any finder's or
other similar fee or commission arising out of the transactions contemplated by
this Agreement.
[SECTION]12. ANNOUNCEMENTS. Any announcements or similar publicity with
respect to this Agreement or the transactions contemplated herein shall be at
such time and in such manner as the parties shall agree; provided, that nothing
herein shall prevent any party upon notice to the other party from making such
public
<PAGE>
announcements as such party's counsel may consider advisable in order to
satisfy the party's legal and contractual obligations in such regard.
[SECTION]13. FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto shall use its best efforts to take,
or cause to be taken, such action to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments and to do, or
cause to be done, all things necessary, proper or advisable under the
provisions of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this Agreement, including without
limitation, delivering and/or causing to be delivered to 1784 Funds, each
account, book, record or other document of BayFunds required to be maintained
by Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3 thereunder
(regardless of what person possesses the same). BayFunds has instructed its
service contractors to provide 1784 Funds with access to and copies of all
documents belonging to BayFunds.
[SECTION]14. TERMINATION OF REPRESENTATIONS AND WARRANTIES. Upon the
delivery of the Acquired Fund Assets to an Acquiring Fund or Acquiring Funds
and the issuance of the shares of such Acquiring Fund or Acquiring Funds at the
Effective Time of each Reorganization, the representations and warranties of
the parties set forth in this Agreement will terminate insofar as such
representations and warranties pertain to such Acquired Fund, such Acquiring
Fund or Acquiring Funds or such Reorganization.
[SECTION]15. TERMINATION OF AGREEMENT.
[Section]15.1. This Agreement may be terminated with respect to a
Reorganization at any time at or prior to the Effective Time of such
Reorganization, as provided below:
(a) by 1784 Funds by a vote of its Board of Trustees if the
conditions set forth in sec.9 hereof with respect to such Reorganization
are not satisfied as specified in said Section on or prior to May 30,
1997;
(b) by BayFunds by a vote of its Board of Trustees if the conditions
set forth in sec.8 hereof with respect to such Reorganization are not
satisfied as specified in said Section on or prior to May 30, 1997; or
(c) by the mutual consent of the parties.
[Section]15.2. If a party terminates this Agreement because one or more of
its conditions precedent have not been fulfilled, or if this Agreement is
terminated by mutual consent, this Agreement will become null and void without
any liability of either party or any of their series to the other; provided,
however, that if such termination is by 1784 Funds pursuant to [Section]15.1(a)
hereof as a result of a breach by BayFunds of any of its representations,
warranties or covenants in this Agreement, or such termination is by BayFunds
pursuant to [Section]15.1(b) hereof as a result of a breach by 1784 Funds of
any of its representations, warranties or covenants in this Agreement, nothing
herein shall affect the nonbreaching party's right to damages on account of
such other party's breach.
[SECTION]16. AMENDMENT AND WAIVER. At any time prior to or (to the
fullest extent permitted by law) after approval of this Agreement by the
shareholders of BayFunds, (a) the parties hereto may, by written agreement
authorized by their respective Boards of Trustees or authorized officers and
with or without the approval of their shareholders, amend any of the provisions
of this Agreement, and (b) either party may waive any breach by the other party
or the failure to satisfy any of the conditions to its obligations (such waiver
to be in writing and authorized by the President or Vice President of the
waiving party with or without the approval of such party's shareholders).
[SECTION]17. GOVERNING LAW. This Agreement and the transactions
contemplated hereby shall be governed, construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts, without giving effect to
the conflicts of laws principles otherwise applicable therein.
[SECTION]18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by either party without the consent of the other party.
[SECTION]19. BENEFICIARIES. Nothing contained in this Agreement shall be
deemed to create rights in persons not parties hereto, other than the
successors and permitted assigns of the parties.
<PAGE>
[Section]20. 1784 FUNDS LIABILITY.
[Section]20.1. The names "1784 Funds" and "Trustees of 1784 Funds" refer
respectively to the trust created and the trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated February 5, 1993, which is hereby referred to and a copy of which
is on file at the office of the Secretary of State of the Commonwealth of
Massachusetts and at the principal office of 1784 Funds. The obligations of
1784 Funds entered into in the name or on behalf thereof by any of the
trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the trustees, shareholders or
representatives of 1784 Funds personally, but bind only the trust property, and
all persons dealing with any series of shares of 1784 Funds must look solely to
the trust property belonging to such series for the enforcement of any claims
against 1784 Funds.
[Section]20.2. Both parties specifically acknowledge and agree that any
liability of 1784 Funds under this Agreement with respect to an Acquiring Fund,
or in connection with the transactions contemplated herein with respect to an
Acquiring Fund, shall be discharged only out of the assets of that Acquiring
Fund and that no other series of 1784 Funds shall be liable with respect
thereto.
[Section]21. BAYFUNDS LIABILITY.
[Section]21.1. The names "BayFunds" and "Trustees of BayFunds" refer
respectively to the trust created and the trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated April 1, 1991, which is hereby referred to and a copy of which is
on file at the office of the Secretary of State of the Commonwealth of
Massachusetts and at the principal office of BayFunds. The obligations of
BayFunds entered into in the name or on behalf thereof by any of the trustees,
representatives or agents are made not individually, but in such capacities,
and are not binding upon any of the trustees, shareholders or representatives
of BayFunds personally, but bind only the trust property, and all persons
dealing with any series of shares of BayFunds must look solely to the trust
property belonging to such series for the enforcement of any claims against
BayFunds.
[Section]21.2. Both parties specifically acknowledge and agree that any
liability to BayFunds under this Agreement with respect to an Acquired Fund, or
in connection with the transactions contemplated herein with respect to an
Acquired Fund, shall be discharged only out of the assets of that Acquired Fund
and that no other series of BayFunds shall be liable with respect thereto.
[Section]22. NOTICES. All notices required or permitted herein shall be in
writing and shall be deemed to be properly given when delivered personally or
by telecopier to the party entitled to receive the notice or when sent by
certified or registered mail, postage prepaid, or delivered to a nationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number
stated below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:
If to 1784 Funds: c/o SEI Corporation
680 East Swedesford Road
Wayne, Pennsylvania 19087
Attention: President
Telecopy: (610) 254-1040
With copies to: Roger P. Joseph, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
<PAGE>
<TABLE>
<S> <C> <C>
If to BayFunds: c/o Federated Administrative Services
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attention: Victor R. Siclari,
Secretary
Telecopy: (412) 288-8141
With copies to: Martin E. Lybecker, Esq. John A. Dudley, Esq.
Ropes & Gray Sullivan & Worcester LLP
1301 K Street, N.W. 1025 Connecticut Avenue, N.W.
Suite 800 East Suite 1000
Washington, D.C. 20005 Washington, D.C. 20036
</TABLE>
[SECTION]23. EXPENSES. Each party represents to the other that it, or a
third party on its behalf, will pay its expenses incurred in connection with
each Reorganization, whether or not the transactions contemplated herein are
consummated.
[SECTION]24. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto and supersedes any and all
prior agreements, arrangements and understandings relating to matters provided
for herein.
[SECTION]25. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date
first written above.
ATTEST: 1784 FUNDS
/s/ Kathryn L. Stanton By: /s/ Robert A. Nesher
- ---------------------------------- ----------------------------------
Title: President
ATTEST: BAYFUNDS
/s/ William J. Flaherty By: /s/ Kenneth G. Condon
- ---------------------------------- ----------------------------------
Title: Chairman
***
<PAGE>
1784 FUNDS(R)
680 SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
BAYFUNDS(R)
1001 LIBERTY AVENUE
PITTSBURGH, PENNSYLVANIA 15222-3779
STATEMENT OF ADDITIONAL INFORMATION
(Special Meeting of Shareholders of BayFunds)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Prospectus/Proxy Statement dated September 27,
1996 for the Special Meeting of Shareholders of BayFunds, to be held on
November 6, 1996. Copies of the Prospectus/Proxy Statement may be obtained at
no charge by calling BayFunds at 1-800-BAY-FUND.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the
Prospectus/Proxy Statement.
Further information about the Acquiring Funds is contained in and
incorporated by reference in the 1784 Funds' Statement of Additional
Information dated October 1, 1996, a copy of which is included herewith. The
audited financial statements and related independent accountant's report for
the Acquiring Funds contained in the Annual Reports for the fiscal year ended
May 31, 1996 are hereby incorporated herein by reference. No other parts of the
Annual Reports are incorporated by reference herein.
Further information about the Acquired Funds is contained in and
incorporated by reference to said the BayFunds' Combined Statements of
Additional Information dated March 1, 1996, copies of which are included
herewith. The audited financial statements and related independent accountant's
report for the Acquired Funds contained in the respective Annual Reports for
the fiscal year ended December 31, 1995 are hereby incorporated herein by
reference. The unaudited financial statements for the Acquired Funds for the
six months ended June 30, 1996 contained in the respective Semi-Annual Reports
are hereby incorporated herein by reference. No other parts of the Semi-Annual
Reports are incorporated by reference herein.
The date of this Statement of Additional Information is September 27,
1996.
<PAGE>
TABLE OF CONTENTS
Page
General Information.................................................... 1
Pro Forma Financial Statements......................................... 2
<PAGE>
GENERAL INFORMATION
The shareholders of BayFunds(R) ("BayFunds") are being asked to approve
or disapprove an Agreement and Plan of Reorganization (the "Reorganization
Agreement") dated as of September 26, 1996 between BayFunds and 1784 Funds(R)
("1784 Funds"), and the transactions contemplated thereby. The Reorganization
Agreement contemplates the transfer of substantially all of the assets and
balance sheet liabilities of each of the BayFunds U.S. Treasury Money Market
Portfolio, the BayFunds Money Market Portfolio, the BayFunds Equity Portfolio,
the BayFunds Short Term Yield Portfolio and the BayFunds Bond Portfolio (each,
an "Acquired Fund" and collectively, the "Acquired Funds") to one or more
corresponding portfolios of 1784 Funds (each, an "Acquiring Fund" and
collectively, the "Acquiring Funds") in exchange for full and fractional shares
representing interests in such corresponding Acquiring Fund or Acquiring Funds
(each such transaction, a "Reorganization" and collectively, the
"Reorganizations"). In the case of the BayFunds U.S. Treasury Money Market
Portfolio (a) the assets and balance sheet liabilities attributable to the
Investment Shares of BayFunds U.S. Treasury Money Market Portfolio will be
transferred to the 1784 U.S. Treasury Money Market Fund and (b) the assets and
balance sheet liabilities attributable to the Institutional Shares of the
BayFunds U.S. Treasury Money Market Portfolio will be transferred to the 1784
Institutional U.S. Treasury Money Market Fund. The shares issued by 1784 Funds
will have an aggregate net asset value equal to the aggregate net asset value
of the shares of the respective Acquired Funds that are outstanding immediately
before the Effective Time (as defined in the Reorganization Agreement) of the
Reorganizations.
Following the exchange, each of the Acquired Funds will make a
liquidating distribution of the corresponding Acquiring Fund shares to their
shareholders. Each shareholder owing shares of a particular Acquired Fund of a
particular class of shares at the Effective Time of the Reorganization of such
Acquired Fund will receive shares of the corresponding Acquiring Fund of equal
value, plus the right to receive any unpaid dividends and distributions that
were declared before the Effective Time of the Reorganization of such Acquired
Fund on shares in such Acquired Fund. Upon completion of the Reorganizations,
BayFunds will be terminated under state law and deregistered under the
Investment Company Act of 1940.
The Special Meeting of Shareholders of BayFunds to consider the
Reorganization Agreement and the related transactions will be held at 2:00 p.m.
Eastern Time on November 6, 1996, at BayBank Systems, Inc., One BayBank
Technology Place, Waltham, Massachusetts 02154. For further information about
the transaction, see the Prospectus/Proxy Statement.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the insurance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as shares of the Acquiring Funds, but do not prohibit such a bank holding
company or its affiliates or banks generally from acting as investment adviser,
transfer agent, or custodian to such an investment company or from purchasing
shares of such a investment company as agent for and upon the order of
customers. Banks and bank affiliates which agree to provide shareholder support
services are subject to such banking laws and regulations. Should legislative,
judicial, or administrative action prohibit or restrict the activities of any
such banks or bank affiliates, including The First National Bank of Boston in
connection with its services to the Acquiring Funds, 1784 Funds might be
required to alter materially or discontinue its arrangement with such companies
and change its method of operation. It is anticipated, however, that any
resulting change in 1784 Funds' method of operation would not affect an
Acquiring Fund's net asset value per share or result in financial loss to any
shareholder.
<PAGE>
1784 U.S. Treasury Money Market Fund
BayFund U.S. Treasury Money Market Portfolio
Introduction to Proposed Reorganization
May 31, 1996
The accompanying unaudited Pro Forma Combining Schedule of Portfolio
Investments, Statement of Assets and Liabilities and Statement of Operations
reflect the accounts of the 1784 U.S. Treasury Money Market Fund and the
BayFund U.S. Treasury Money Market Portfolio at May 31, 1996. These statements
have been derived from each Fund's books and records utilized in calculating
daily net asset value at May 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
1784 US Treasury Money Market Fund
BayFunds U.S. Treasury Money Market Portfolio
Pro Forma Combining Schedule of Portfolio Investments (Unaudited)
May 31, 1996
Shares/Par (000) Value (000)
1784 BayFund Pro Forma Security Description 1784 BayFund Pro Forma
US Treasury Treasury Combined US Treasury Treasury Combined
Money Market Money Market Money Market Money Market
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Obligations - 25.8%
5,000 5,000 U.S. Treasury Bill, 06/27/96 4,980 4,980
5,000 5,000 U.S. Treasury Bill, 4.79%, 06/20/96 * 4,987 4,987
1,000 1,000 U.S. Treasury Bill, 4.95%, 02/06/97 * 967 967
4,000 4,000 U.S. Treasury Bill, 4.98%, 07/25/96 * 3,970 3,970
2,000 2,000 U.S. Treasury Bill, 5.16%, 11/14/96 * 1,953 1,953
1,000 1,000 U.S. Treasury Bill, 5.32%, 08/22/96 * 988 988
1,000 1,000 U.S. Treasury Bill, 5.38%, 10/17/96 * 980 980
2,000 2,000 U.S. Treasury Bill, 5.40%, 03/07/97 * 1,919 1,919
3,000 3,000 U.S. Treasury Bill, 5.48%, 04/03/97 * 2,866 2,866
1,000 1,000 U.S. Treasury Bill, 5.55%, 05/01/97 * 951 951
325,500 325,500 U.S. Treasury Notes, 4.75%-8.00%, 327,550 327,550
07/31/96 - 04/30/97
1,000 1,000 U.S. Treasury Note, 4.375%, 08/15/96 997 997
1,000 1,000 U.S. Treasury Note, 4.375%, 11/15/96 995 995
1,000 1,000 U.S. Treasury Note, 6.50%, 09/30/96 1,002 1,002
Total U.S. Treasury Obligations 22,575 332,530 355,105
U.S. Government Agency Obligations - 1.6%
2,500 2,500 Federal Farm Credit Bank Discount Note, 4.86%, 2,496 2,496
06/11/96*
1,000 1,000 Federal Farm Credit Bank Discount Note, 5.03%, 996 996
07/01/96*
1,500 1,500 Federal Farm Credit Bank Discount Note, 5.18%, 1,485 1,485
08/07/96*
250 250 Federal Farm Credit Bank, 5.60% 11/01/96 250 250
2,500 2,500 Federal Home Loan Bank Discount Note, 4.94%, 2,496 2,496
06/13/96
250 250 Federal Home Loan Bank, 4.86%, 02/07/97 249 249
4,000 4,000 Federal Home Loan Mortgage Corporation 3,998 3,998
Discount Note, 4.16%, 06/05/96*
8,000 8,000 Federal Home Loan Mortgage Corporation 7,949 7,949
Discount Note, 5.11%, 07/15/96*
2,000 2,000 Federal National Mortgage Association Discount 1,999 1,999
Note, 4.33%, 06/06/96*
250 250 Student Loan Marketing Association, 5.51%, 250 250
06/04/96*
Total U.S. Government Agency Obligations 22,168 0 22,168
Cash Equivalents - 0.1%
715 715 Dreyfus U.S. Treasury Cash Management Money 715 715
Market Fund
714 714 Lehman Brothers Institutional U.S. Treasury 714 714
Instrument Money Market Fund
Total Cash Equivalents 1,429 0 1,429
<PAGE>
Repurchase Agreements - 72.5% (A)
35,000 35,000 Aubrey G. Lanston and Co., Inc., 5.28%, dated 35,000 35,000
05/30/96, due 06/02/96
50,000 50,000 Dean Witter Reynolds, Inc., 5.30%, dated 50,000 50,000
05/30/96, due 06/02/96
45,000 45,000 First Chicago Capital Markets, Inc., 5.30%, 45,000 45,000
dated, 05/30/96, due 06/02/96
11,000 11,000 Goldman Sachs, 5.30%, dated 05/31/96, 11,000 11,000
matures 06/03/96, repurchase price $11,004,858
75,000 75,000 Greenwich Capital Markets, Inc., 5.33%, dated 75,000 75,000
05/30/96, due 06/02/96
135,000 135,000 HSBC Securities, Inc., 5.30%, dated 05/30/96, 135,000 135,000
due 06/02/96
11,000 11,000 J.P. Morgan 5.30%, dated 05/31/96, matures 11,000 11,000
06/03/96, repurchase price $11,004,858
10,830 10,830 Lehman Brothers, 5.22%, dated 05/31/96, 10,830 10,830
matures 06/03/96, repurchase price $10,834,884
150,000 150,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 150,000 150,000
5.24%, dated 05/30/96, due 06/06/96
150,000 150,000 PaineWebber Group, Inc., 5.32%, dated 150,000 150,000
05/30/96, due 06/02/96
135,735 135,735 Salomon Brothers, Inc., 5.30%, dated 135,735 135,735
05/30/96, due 06/02/96
150,000 150,000 Smith Barney, Inc., 5.25%-5.26%, dated 150,000 150,000
05/29/96-05/30/96, due 06/05/96
40,000 40,000 State Street Bank and Trust Co., 5.28%, 40,000 40,000
dated 05/30/96, due 06/02/96
Total Repurchase Agreements 32,830 965,735 998,565
Total Investments - 100% (Cost $1,377,267)** $79,002 $1,298,265 $1,377,267
* Effective yield in effect on May 31, 1996
** Aggregate cost for Federal Tax purposes
(A) The repurchase agreements are fully collateralized by U.S.
government and/or agency obligations based on market
prices at the date of the portfolio
STRIPS - Separate Trading of Registered Interest and Principal
of Securities
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1784 U.S. TREASURY MONEY MARKET FUND
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (000)
May 31, 1996 (Unaudited)
BayFunds
1784 U.S.
U.S. Treasury
Treasury Money Pro Forma
Money Market Pro Forma Combined
Market Fund Portfolio Adjustments (Note 1)
<S> <C> <C> <C> <C>
Investments in securities, at value $46,172 $ 332,530 $(256,671)D $122,031
Investments in repurchase agreements 32,830 965,735 (745,425)D 253,140
Cash - 2 (2)D
Income receivable 43 3,972 (3,066)D 949
Receivable for shares sold 290 290
Other assets 24 68 (68)A 24
Receivable from investment advisor - 16A 16
_______ __________ ___________ ________
Total assets 79,359 1,302,307 (1,005,216) 376,450
Liabilities:
Income distribution payable 303 5,216 (4,026)D 1,493
Accrued expenses 57 225 (174)D 108
Total liabilities 360 5,441 (4,200) 1,601
_______ __________ ____________ ________
Net assets $78,999 $1,296,866 (1,001,016) $374,849
======= ========== ============ ========
Net assets consist of:
Paid in capital 79,005 1,296,866 (1,001,016)D 374,855
Net realized loss on investments (6) (6)
_______ __________ _____________ ________
Total net assets $78,999 $1,296,866 $(1,001,016) $374,849
======= ========== ============ ========
Net assets:
Class A shares 78,999 - 295,850 374,849
======= ========== ============ ========
Investment shares - $295,850 $(295,850) -
======= ========== ============ ========
Institutional shares - $1,001,016 $(1,001,016) $ -
======= ========== ============ ========
NAV, offer and redemption price per share -
Class A shares 1.00 - - 1.00
======= ========== ============ ========
NAV, offer and redemption price per share -
Investment - 1.00 - -
======= ========== ============ ========
NAV, offer and redemption price per share -
Institutional - 1.00 - -
======= ========== ============ ========
Shares outstanding:
Class A shares 79,005 - 295,850 374,855
======= ========== ============ ========
Investment shares - 295,850 (295,850) -
======= ========== ============ ========
Institutional shares - 1,001,016 $(1,001,016) -
======= ========== ============ ========
</TABLE>
See Notes to Pro-forma Financial Statements
<PAGE>
<TABLE>
<CAPTION>
1784 U.S. TREASURY MONEY MARKET FUND
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS (000)
for the twelve month period ending May 31, 1996 (Unaudited)
1784 BayFunds
U.S. U.S.
Treasury Treasury
Money Money Pro Forma
Market Market Pro Forma Combined
Fund Portfolio Adjustments (Note 1)
<S> <C> <C> <C> <C>
Investment income:
Interest $3,906 $62,303 $(48,090)D $18,119
______ _______ _________ _______
Total income 3,906 62,303 (48,090) 18,119
Expenses:
Investment advisory fee 276 2,202 (1,219)B 1,259
Reimbursement of expenses by advisor - - (176)E (176)
Administration and fund accounting fee 105 1,243 (987)C 361
Waiver of administrator fees (75) - 75 C -
Transfer and dividend disbursing agent fee 55 316 (243)D 128
Registration fee 6 115 (89)D 32
Directors' and Trustees' fee 2 41 (41)F 2
Printing and postage 8 27 (21)D 14
Amortization of deferred organization costs 12 - - 12
Professional fee 15 56 (45)C 26
Shareholder services fee - 615 (300)C 315
Custodian fee 30 66 (43)C 53
Other expenses 7 59 (46)D 20
______ _______ _________ _______
Total expenses 441 4,740 (3,135) 2,046
Net Investment Income 3,465 57,563 (44,955) 16,073
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 3 3
______ _______ _________ _______
Change in net assets resulting from operations $3,468 $57,563 $(44,955) $16,076
====== ======= ========= =======
See Notes to Pro-forma Financial Statements
<PAGE>
1784 U.S. TREASURY MONEY MARKET FUND ("Acquiring Fund")
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO ("Acquired Fund")
for the twelve-month period ended
May 31, 1996 (Unaudited)
A) Adjustment for the reimbursement of deferred organization expense of
the Acquired Fund.
B) Adjustment to reflect investment advisory fee computed based on the
Acquiring Fund's fee structure at an annual rate of 0.40% of average daily
net assets.
C) Adjustment to reflect the Acquiring Fund's fee structure.
D) Adjustment to eliminate those amounts associated with Institutional shares.
E) Adjustment to reflect the advisor's intended voluntary fee waiver limiting
net operating expenses to 0.25% of average daily net assets.
F) Adjustment to eliminate Acquired Fund's Trustee fees.
<PAGE>
1784 U.S. TREASURY MONEY MARKET FUND
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF COMBINATION:
For the BayFunds U.S. Treasury Money Market Portfolio; the assets and
balance sheet liabilities attributable to the Investment Shares of the
BayFunds U.S. Treasury Money Market Portfolio will be transferred to the
1784 U.S. Treasury Money Market Fund; and the assets and balance sheet
liabilities attributable to the Institutional Shares of the BayFunds U.S.
Treasury Money Market Portfolio will be transferred to the 1784
Institutional U.S. Treasury Money Market Fund. The Unaudited Pro Forma
Combining Schedule of Portfolio Investments, the Statement of Assets and
Liabilities and the Statement of Operations reflect the accounts of the
1784 U.S. Treasury Money Market Fund, ("1784 Fund") one of fourteen
investment portfolios offered by the 1784 Funds ("1784" or the "Trust")
and the BayFunds U.S. Treasury Money Market Portfolio ("BayFunds
Portfolio"), one of five investment portfolios offered by the BayFunds
("BayFunds") as of and for the year-ended May 31, 1996. These statements
have been derived from the books and records of each Fund utilized in
calculating daily net asset value at May 31, 1996.
The 1784 Fund consists of a single class of currently outstanding shares,
Class A Shares. The Pro Forma statements give effect to the proposed
transfer of the assets and stated liabilities of the BayFunds Portfolio in
exchange for shares of the 1784 Fund. BayFunds Portfolio record date
shareholders of Investment Shares will receive Class A Shares at closing.
Under generally accepted accounting principles, the 1784 Fund will be the
surviving entity for accounting purposes and the historical cost of
investment securities will be carried forward. In addition, the results of
operations of the 1784 Fund will be carried forward and the pre-combined
periods will not be restated.
The Pro Forma financial statements have been adjusted to reflect the
following: the transfer of net assets of the Investment Shares of the
BayFunds Portfolio to the 1784 Fund; and the anticipated fee arrangements
for the surviving entity, including anticipated voluntary fee waivers.
The Pro Forma Combining Schedule of Portfolio Investments of BayFunds
U.S. Treasury Money Market Portfolio is presented in aggregate for
classes of shares. At the date of reorganization, the securities in the
BayFunds Portfolio will be transferred to the 1784 Fund in accordance
with the Agreement and Plan of Reorganization. The Pro Forma financial
statements do not reflect the expenses of either Fund in carrying out its
obligations under the Agreement and Plan of Reorganization. Management
not anticipate the need to liquidate any assets of the BayFunds U.S.
Treasury Money Market Portfolio due to any possible conflict with the
investment policies and restrictions of the corresponding 1784 U.S.
Treasury Money Market Fund.
The Pro Forma Combining Schedule of Portfolio Investments, Statement of
Assets and Liabilities and Statement of Operations should be read in
conjunction with the historical financial statements of the Funds
incorporated by reference in the Statement of Additional Information.
The First National Bank of Boston ("FNBB") is party to an investment
advisory agreement under which FNBB provides services for a fee, computed
daily and paid monthly, at the annual rate of 0.20% of the average daily
<PAGE>
net assets of the 1784 Fund. In addition, FNBB and the Trust are party to
a custodial agreement. FNBB is entitled to receive an annual fee of
0.0100% for the Trust's first $100 million in average daily net assets,
0.0075% for the Trust's next $100 million and 0.0050% for the Trust's
average daily net assets over $200 million.
For the period ended May 31, 1996, BayBanks, N.A. ("BayBank") served as
investment advisor to BayFunds Portfolio and was entitled to receive a
fee for its services computed at the annual rate of 0.20% of the average
daily net assets of the BayFunds Portfolio.
Pursuant to an administrative agreement dated June 7, 1993, as amended
November 17, 1995, SEI Financial Management Corporation ("SEI") acts as
the Trust's Administrator. Under the terms of such agreement, SEI is
entitled to receive an annual fee of 0.12% of the Trust's first $300
million of average daily net assets, 0.12% of the Trust's second $300
million of average daily net assets, and 0.10% of average daily net
assets over $600 million. Such fee is computed daily and paid monthly.
For the year ended May 31, 1996, SEI agreed to waive a portion of its fee
to maintain a competitive expense ratio for the 1784 Fund.
Federated Administrative Services ("FAS") was the administrator for
BayFunds for the twelve months ended May 31, 1996. Fees charged by FAS
for its services were based on the level of aggregate net assets of
BayFunds.
2. PORTFOLIO VALUATION:
The BayFunds Portfolio values investment securities at amortized cost,
which approximates fair value.
The 1784 Fund values investment securities at their amortized cost. Under
this valuation method purchase discounts and premiums are accreted and
amortized ratably to maturity and are included in interest income.
The proposed Agreement and Plan of Reorganization specifies that the
portfolio securities of the BayFunds Portfolio will be valued in
accordance with the generally employed valuation procedures of the 1784
Fund for the purposes of determining the number of 1784 Fund shares to be
issued in the reorganization. The combined Pro Forma Schedule of
Portfolio Investments gives effect to the valuation of the assets of the
BayFunds Portfolio under the valuation procedures of the 1784 Fund.
<PAGE>
3. SERIES SPECIFIC EXPENSES:
BayFunds Portfolio entered into a Shareholder Services Agreement with
BayBank Systems, Inc. to obtain certain services for shareholders and
maintain shareholder accounts. This agreement provided that the BayFunds
Portfolio would incur fees up to 0.25 of 1% of the average net assets of
the Fund's Investment Shares. In addition, Federated Services Company
("FServ") maintained the Fund's accounting records for a fee based on the
level of the Fund's average daily net assets plus out-of-pocket expenses.
The Pro forma Combining Statement of Operations has been adjusted to
reflect the elimination of these fees.
4. CAPITAL SHARES:
The Pro Forma net asset value per share assumes the issuance of shares of
the 1784 Fund which would have been issued at May 31, 1996 had the
proposed reorganization taken place on such date. The amount of additional
shares assumed to be issued was calculated based on the net assets at
May 31, 1996 of the BayFunds Portfolio Investment Shares ($295,850) and
the per share net asset value of the 1784 Fund Shares ($1.00).
<PAGE>
1784 Institutional U.S. Treasury Money Market Fund
BayFunds U.S. Treasury Money Market Portfolio
Introduction to Proposed Reorganization
May 31, 1996
The accompanying unaudited Pro Forma Combining Schedule of Portfolio
Investments, Statement of Assets and Liabilities and Statement of Operations
reflect the accounts of the 1784 Institutional U.S. Treasury Money Market Fund
and the BayFunds U.S. Treasury Money Market Portfolio at May 31, 1996. These
statements have been derived from each Fund's books and records utilized in
calculating daily net asset value at May 31, 1996.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
1784 INSTITUTIONAL U.S. MONEY MARKET FUND
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
MAY 31, 1996
SHARES/PAR (000) VALUE (000)
1784 Institutional BayFunds
US Treasury US Treasury 1784 Institutional BayFund
Money Market Money Market ProForma US Treasury US Treasury ProForma
Fund Portfolio Combined Security Description Money Fund Money Portfolio Combined
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 25.7%
5,000 5,000 U.S. Treasury Bill, 06/27/96 4,980 4,980
65,000 65,000 U.S. Treasury Bill, 4.80%, 06/20/96 * 64,827 64,827
3,000 3,000 U.S. Treasury Bill, 4.95%, 02/06/97 * 2,900 2,900
18,000 18,000 U.S. Treasury Bill, 5.16%, 11/14/96 * 17,579 17,579
11,000 11,000 U.S. Treasury Bill, 5.26%, 07/25/96 * 10,912 10,912
5,000 5,000 U.S. Treasury Bill, 5.32%, 08/22/96 * 4,940 4,940
5,000 5,000 U.S. Treasury Bill, 5.38%, 10/17/96 * 4,898 4,898
18,000 18,000 U.S. Treasury Bill, 5.40%, 03/07/97 * 17,275 17,275
17,000 17,000 U.S. Treasury Bill, 5.48%, 04/03/97 * 16,241 16,241
17,000 17,000 U.S. Treasury Bill, 5.56%, 05/01/97 * 16,164 16,164
9,000 9,000 U.S. Treasury Note, 4.375%, 08/15/96 8,974 8,974
2,000 2,000 U.S. Treasury Note, 4.375%, 11/15/96 1,991 1,991
325,500 325,500 U.S. Treasury Note, 4.75% - 8.00%, 327,550 327,550
07/31/96 - 04/30/97
Total U.S. Treasury Obligations 166,701 332,530 499,231
U.S. GOVERNMENT AGENCY OBLIGATIONS - 9.6%
5,500 5,500 Federal Farm Credit Bank Discount Note, 5,492 5,492
4.86%, 06/11/96*
9,500 9,500 Federal Farm Credit Bank Discount Note, 9,459 9,459
5.03%, 07/01/96*
15,300 15,300 Federal Farm Credit Bank Discount Note, 15,152 15,152
5.18%, 08/07/96*
20,000 20,000 Federal Farm Credit Bank, 5.30%, 08/01/96 20,000 20,000
1,500 1,500 Federal Farm Credit Bank, 5.60%, 11/01/96 1,501 1,501
13,440 13,440 Federal Home Loan Bank Discount Note, 13,417 13,417
4.94%, 06/13/96*
1,000 1,000 Federal Home Loan Bank, 4.860%, 02/07/97 995 995
28,000 28,000 Federal Home Loan Mortgage Corporation 27,984 27,984
Discount Note, 4.16%, 06/05/96*
25,000 25,000 Federal Home Loan Mortgage Corporation 24,841 24,841
Discount Note, 5.11%, 07/15/96*
23,000 23,000 Federal National Mortgage Association 22,983 22,983
Discount Note 4.33%, 06/06/96*
12,000 12,000 Federal National Mortgage Association, 11,999 11,999
5.47%, 11/14/96
5,000 5,000 Student Loan Marketing Association, 5.31%, 5,000 5,000
06/04/96*
<PAGE>
10,000 10,000 Student Loan Marketing Association, 5.33%, 10,002 10,002
06/04/96*
500 500 Student Loan Marketing Association, 5.36%, 499 499
06/04/96*
3,000 3,000 Student Loan Marketing Association, 5.51%, 3,008 3,008
06/04/96*
5,000 5,000 Student Loan Marketing Association, 5.56%, 5,005 5,005
06/04/96*
9,825 9,825 Tennessee Valley Authority, 6.00%, 01/15/97 9,847 9,847
Total U.S. Government Agency Obligation 187,184 0 187,184
REPURCHASE AGREEMENTS - 64.7% (A)
35,000 35,000 Aubrey G. Lanson and Co., Inc., 5.28%, dated 35,000 35,000
05/30/96, due 06/02/96
50,000 50,000 Dean Whitter Reynolds, Inc., 5.30%, dated 50,000 50,000
05/30/96, due 06/02/96
45,000 45,000 First Chicago Capital Markets, Inc., 5.30%, 45,000 45,000
dated 05/30/96, due 06/02/96
95,000 95,000 Goldman Sachs, 5.30%, dated 05/31/96, 95,000 95,000
matures 06/03/96, repurchase price
$95,041,958
75,000 75,000 Greenwich Capital Markets, Inc., 5.33%, 75,000 75,000
dated 05/30/96, due 06/02/96
135,000 135,000 HSBC Securities, Inc., 5.30%, dated 135,000 135,000
05/30/96, due 06/02/96
92,570 92,570 J.P. Morgan, 5.30%, dated 05/31/96, 92,570 92,570
due 06/03/96, repurchase price $92,611,065
104,174 104,174 Lehman Brothers, 5.22%, dated 05/31/96, 104,174 104,174
due 06/03/96, repurchase price $104,218,945
150,000 150,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 150,000 150,000
5.24%, dated 05/30/96, due 06/06/96
150,000 150,000 Paine Webber Group, Inc., 5.32%, dated 150,000 150,000
05/30/96, due 06/02/96
135,735 135,735 Salomon Brothers, Inc., 5.30%, dated 135,735 135,735
05/30/96, due 06/02/96
150,000 150,000 Smith Barney, Inc., 5.25% - 5.26%, 150,000 150,000
dated 05/29/96 - 05/30/96, due 06/05/96
40,000 40,000 State Street Bank and Trust Co., 5.28%, 40,000 40,000
dated 05/30/96, due 06/02/96
Total Repurchase Agreements 291,744 965,735 1,257,479
TOTAL INVESTMENTS - 100% 645,629 1,298,265 1,943,894
(COST $1,943,894)**
* Effective yield in effect on May 31, 1996
** Aggregate cost for Federal Tax Purposes
(A) The repurchase agreements are fully collateralized
by U.S. government and/or agency obligations
based on maarket prices at the date of the portfolio
STRIPS - Separate Trading of Registered Interest and
Principal of Securities
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (000)
May 31, 1996 (Unaudited)
1784 BayFunds
Institutional U.S.
U.S. Treasury
Treasury Money Pro Forma
Money Market Pro Forma Combined
Market Fund Portfolio Adjustments (Note 1)
<S> <C> <C> <C> <C>
Investments in securities, at value $ 353,885 $ 332,530 $ (75,859)D $ 610,556
Investments inrepurchase agreements 291,744 965,735 (220,310)D 1,337,169
Cash 2 2
Income receivable 615 3,972 (906)D 3,681
Receivable for shares sold 1,388 - 1,388
Other assets 32 68 (68)D 32
Receivable from investment advisor - 52 A 52
---------- ---------- ---------- ----------
Total assets 647,664 1,302,307 (297,091) 1,652,880
Liabilities:
Income distribution payable 2,657 5,216 (1,190)D 6,683
Accrued expenses 274 225 (51)D 448
---------- ---------- ---------- ----------
Total liabilities 2,931 5,441 (1,241) 7,131
---------- ---------- ---------- ----------
Net assets $ 644,733 $1,296,866 (295,850) 1,645,749
========== ========== ========== ==========
Net assets consist of:
Paid in capital 644,618 1,296,866 (295,850)D 1,645,634
Net realized gain on investments 115 115
---------- ---------- ---------- ----------
Total net assets $ 644,733 $1,296,866 (295,850) $1,645,749
========== ========== ========== ==========
Net assets:
Shares 644,733 - 1,001,016 1,645,749
========== ========== ========== ==========
Investment shares - 295,850 (295,850) -
========== ========== ========== ==========
Institutional shares - 1,001,016 1,001,016 -
========== ========== ========== ==========
NAV, offer and redemption price
per share - Shares 1.00 - - 1.00
========== ========== ========== ==========
NAV, offer and redemption price
per share - Investment - 1.00 - -
========== ========== ========== ==========
NAV, offer and redemption price
per share - Institutional - 1.00 - -
========== ========== ========== ==========
Shares outstanding:
Shares 644,618 - 1,001,016 1,645,634
========== ========== ========== ==========
Investment shares - 295,850 (295,850) -
========== ========== ========== ==========
Institutional shares - 1,001,016 (1,001,016) -
========== ========== ========== ==========
See Notes to Pro-forma Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS (000)
for the twelve month period ending May 31, 1996 (Unaudited)
1784 BayFunds
Institutional U.S.
U.S. Treasury
Treasury Money Pro Forma
Money Market Pro Forma Combined
Market Fund Portfolio Adjustments (Note 1)
<S> <C> <C> <C> <C>
Investment income:
Interest $ 29,028 $ 62,303 (14,213)D $ 77,118
Total income 29,028 62,303 (14,213) 77,118
-------- ---------- ---------- ---------
Expenses:
Investment advisory fee 1,032 2,202 (491)B 2,743
Waiver of investment advisory fee (381) 381 B -
Administration and fund accounting fee 589 1,243 (361)C 1,471
Transfer and dividend disbursing agent fee 68 316 (73)D 311
Registration fee 110 115 (26)D 199
Directors' and Trustees' fee 19 41 (41)E 19
Printing and postage 23 27 (29)D 21
Amortization of deferred organization costs 10 - - 10
Professional fee 91 56 (19)C 128
Shareholder services fee - Investment Shares - 615 (615)C -
Custodian fee 68 66 (22)C 112
Other expenses 34 59 (13)D 80
-------- ---------- ---------- ---------
Total expenses 1,663 4,740 (1,309) 5,094
Net Investment Income 27,365 57,563 (12,904) 72,024
Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments 130 130
-------- ---------- ---------- ---------
Change in net assets resulting from operations $ 27,495 $ 57,563 $ (12,904) $ 72,154
======== ========== ========== =========
See Notes to Pro-forma Financial Statements
</TABLE>
<PAGE>
1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND ("Acquiring Fund")
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO ("Acquired Fund")
for the twelve-month period ended
May 31, 1996 (Unaudited)
A) Adjustment for the reimbursement of deferred organization expense
of the Acquired Fund.
B) Adjustment to reflect investment advisory fee computed based on the
Acquiring Fund's fee structure at an annual rate of 0.20% of
average daily net assets.
C) Adjustment to reflect the Acquiring Fund's fee structure
D) Adjustment to eliminate the Investment Share portion of activity.
E) Adjustment to eliminate Acquired Fund's Trustee fees.
<PAGE>
1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF COMBINATION:
For the BayFunds U.S. Treasury Money Market Portfolio, the assets and
balance sheet liabilities attributable to the Investment Shares of the
BayFunds U.S. Treasury Money Market Portfolio will be transferred to the
1784 U.S. Treasury Money Market Fund, and the assets and balance sheet
liabilities attributable to the Institutional Shares of the BayFunds U.S.
Treasury Money Market Portfolio will be transferred to the 1784
Institutional U.S. Treasury Money Market Fund. The Unaudited Pro Forma
Combining Schedule of Portfolio Investments, the Statement of Assets and
Liabilities and the Statement of Operations reflect the accounts of the
1784 Institutional U.S. Treasury Money Market Fund, ("1784 Fund") one of
fourteen investment portfolios offered by the 1784 Funds ("1784" or the
"Trust") and the BayFunds U.S. Treasury Money Market Portfolio ("BayFunds
Portfolio"), one of five investment portfolios offered by the BayFunds
("BayFunds") as of and for the year-ended May 31, 1996. These statements
have been derived from the books and records of each Fund utilized in
calculating daily net asset value at May 31, 1996.
The 1784 Fund consists of a single class of currently outstanding
shares. The Pro Forma statements give effect to the proposed transfer of
the assets and stated liabilities of the BayFunds Portfolio Institutional
Shares in exchange for shares of the 1784 Fund. BayFunds Portfolio record
date shareholders of Institutional Shares will receive 1784 Fund Shares
at closing. Under generally accepted accounting principles, the 1784 Fund
will be the surviving entity for accounting purposes and the historical
cost of investment securities will be carried forward. In addition, the
results of operations of the 1784 Fund will be carried forward and the
pre-combined periods will not be restated.
The Pro Forma financial statements have been adjusted to reflect the
following: the transfer of net assets of the Institutional shares of the
BayFunds Portfolio to the 1784 Fund; and the anticipated fee arrangements
for the surviving entity, including anticipated voluntary fee waivers.
The Pro Forma Combining Schedule of Portfolio Investments of BayFunds
U.S. Treasury Money Market Portfolio is presented in aggregate for both
classes of shares. At the date of reorganization, the securities in the
Bayfunds Portfolio will be transferred to the 1784 Fund in accordance
with the Agreement and Plan of Reorganization. The Pro Forma financial
statements do not reflect the expenses of either Fund in carrying out its
obligations under the Agreement and Plan of Reorganization. Management
does not anticipate the need to liquidate any assets of the BayFunds U.S.
Treasury Money Market Portfolio due to any possible conflict with the
investment policies and restrictions of the corresponding 1784
Institutional U.S. Treasury Money Market Fund.
The Pro Forma Combining Schedule of Portfolio Investments, Statement of
Assets and Liabilities and Statement of Operations should be read in
conjunction with the historical financial statements of the Funds
incorporated by reference in the Statement of Additional Information.
The First National Bank of Boston ("FNBB") is party to an investment
advisory agreement under which FNBB provides services for a fee, computed
daily and paid monthly, at the annual rate of 0.40% of the average daily
net assets of the 1784 Fund. In addition, FNBB and the Trust are party to
<PAGE>
a custodial agreement. FNBB is entitled to receive an annual fee of
0.0100% for the Trust's first $100 million in average daily net assets,
0.0075% for the Trust's next $100 million and 0.0050% for the Trust's
average daily net assets over $200 million.
For the period ended May 31, 1996, BayBanks, N.A. ("BayBank") served as
investment advisor to the BayFunds Portfolio and was entitled to receive a
fee for its services computed at the annual rate of 0.20% of the average
daily net assets of the BayFunds Portfolio.
Pursuant to an administrative agreement dated June 7, 1993, as amended
November 17, 1995, SEI Financial Management Corporation ("SEI") acts as
the Trust's Administrator. Under the terms of such agreement, SEI is
entitled to receive an annual fee of 0.15% of the Trust's first $300
million of average daily net assets, 0.12% of the Trust's second $300
million of average daily net assets, and 0.10% of average daily net
assets over $600 million. Such fee is computed daily and paid monthly.
Federated Administrative Services ("FAS") was the administrator for
BayFunds for the twelve months ended May 31, 1996. Fees charged by FAS
for its services were based on the level of aggregate net assets of
BayFunds.
For the year-ended May 31, 1996, FNBB and BayBanks voluntarily agreed to
waive a portion of their respective fees and to reimburse 1784 and
BayFunds, respectively, so that the total expenses for each Fund would
not exceed annual expense limitations.
2. PORTFOLIO VALUATION:
The BayFunds Portfolio values investment securities at amortized cost,
which approximates fair value.
The 1784 Fund values investment securities at their amortized cost. Under
this valuation method purchase discounts and premiums are accreted and
amortized ratably to maturity and are included in interest income.
The proposed Agreement and Plan of Reorganization specifies that the
portfolio securities of the BayFunds Portfolio will be valued in
accordance with the generally employed valuation procedures of the 1784
Fund for the purposes of determining the number of 1784 Fund shares to be
issued in the reorganization. The combined Pro Forma Schedule of
Portfolio Investments gives effect to the valuation of the assets of the
BayFunds Portfolio under the valuation procedures of the 1784 Fund.
<PAGE>
3. SERIES SPECIFIC EXPENSES:
BayFunds Portfolio entered into a Shareholder Services Agreement with
BayBank Systems, Inc. to obtain certain services for shareholder and
maintain shareholder accounts. This agreement provided that the BayFunds
Portfolio would incur fees up to 0.25 of 1% of the average net assets of
the Fund's Investment Shares. In addition, Federated Services Company
("FServ") maintained the Fund's accounting records for a fee based on the
level of the Fund's average daily net assets plus out-of-pocket expenses.
The Pro forma Combining Statement of Operations has been adjusted to
reflect the elimination of these fees.
4. CAPITAL SHARES:
The Pro Forma net asset value per share assumes the issuance of shares of
the 1784 Fund which would have been issued at May 31, 1996 had the
proposed reorganization taken place on such date. The amount of
additional shares assumed to be issued was calculated based on the net
assets at May 31, 1996 of the BayFunds Portfolio Institutional Shares
($1,001,016) and the per share net asset value of the 1784 Fund Shares
($1.00).
<PAGE>
1784 Short-Term Income Fund
BayFunds Short Term Yield Portfolio
Introduction to Proposed Reorganization
May 31, 1996
The accompanying unaudited Pro Forma Combining Schedule of Portfolio
Investments, Statement of Assets and Liabilities and Statement of Operations
reflect the accounts of the 1784 Short-Term Income Fund and the BayFunds
Short Term Yield Portfolio at May 31, 1996. These statements have been derived
from each Fund's books and records utilized in calculating daily net asset
value at May 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
1784 SHORT-TERM INCOME FUND
BAYFUND SHORT TERM YIELD PORTFOLIO
PRO FORMA COMBINING SCHEDULE OF PORTFOLIO INVESTMENTS
(UNAUDITED)
MAY 31, 1996
PAR (000) VALUE (000)
1784 BayFund 1784 BayFund
Short-Term Short Term Pro Forma Security Description Short Term Short Term Pro Forma
Income Fund Yield Portfolio Combined Income Fund Yield Portfolio Combined
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 13.5%
1,500 1,500 United States Treasury Note, 7.25%, 05/15/04 1,537 1,537
5,250 5,250 United States Treasury Note, 8.50%, 07/15/97 5,393 5,393
1,000 1,000 U.S. Treasury Note, 5.00%, 01/31/99 966 966
1,500 1,500 U.S. Treasury Note, 6.00%, 08/31/97 1,499 1,499
2,500 2,500 U.S. Treasury Note, 6.125%, 07/31/00 2,454 2,454
2,000 2,000 U.S. Treasury Note, 6.875%, 07/31/99 2,020 2,020
2,500 2,500 U.S. Treasury Note, 7.875%, 01/15/98 2,565 2,565
1,200 1,200 U.S. Treasury Note, 7.125%, 02/29/00 1,220 1,220
1,000 1,000 U.S. Treasury Note, 6.875%, 08/31/99 1,010 1,010
Total US Treasury Obligations 11,734 6,930 18,664
US GOVERNMENT AGENCY OBLIGATIONS - 5.0%
1,000 1,000 Federal Home Loan Bank, 6.20%, 09/29/99 978 978
1,000 1,000 Federal Home Loan Mortgage Corp., 5.40%,
11/01/00 943 943
1,000 1,000 Federal National Mortgage Association, 6.85%,
05/26/00 993 993
1,000 1,000 Federal National Mortgage Association, 6.08%,
09/25/00 972 972
2,000 2,000 Federal National Mortgage Association, 6.16%,
03/29/01 1,942 1,942
1,000 1,000 Federal National Mortgage Association, 9.550%, 1,054 1,054
12/10/97
Total US Government Agency Obligations 3,968 2,914 6,882
US GOVERNMENT MORTGAGE-BACKED BONDS - 2.4%
470 470 Federal Home Loan Mortgage Corporation REMIC, 472 472
Series 1360, Class VA, 7.50% 05/15/97
247 247 Federal Home Loan Mortgage Corporation REMIC, 246 246
Series 1575, Class PB, 5.00%, 02/15/00
1,596 1,596 Federal Home Loan Mortgage Corporation REMIC, 1,647 1,647
Series 1988-10, Class B, 8.95%, 05/25/03
1,000 1,000 Federal Home Loan Mortgage Corporation REMIC, 1,003 1,003
Series 41, Class B, 7.25%, 04/25/24
Total US Government Mortgage-Backed Bonds 3,368 0 3,368
MUNICIPAL BONDS -5.9%
1,400 1,400 Alaska State Housing Finance Authority Revenue 1,400 1,400
Bond, Series C, 9.250%, 06/01/01
2,000 2,000 New York, New York, GO, Series F, 10.00%, 2,030 2,030
11/15/96
1,600 1,600 Providence, Rhode Island, Note, Series A, 1,604 1,604
6.28%, 08/01/97
1,100 1,100 Richmond County, Georgia, Development Authority 1,100 1,100
Revenue Bond, Monsanto Company Project 6.27%,
06/01/20
2,000 2,000 Rochester, New York, BAN, Series II, 5.50% 1,988 1,988
03/11/97
Total Municipal Bonds 8,122 0 8,122
<PAGE>
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS -0.9%
264 264 Advanta Home Equity Loan Trust, Series 1993-2, 250 250
6.150%, 10/25/09
850 850 Green Tree Financial Corporation, Series 1993-3, 838 838
5.20%, 10/15/18
94 94 Security Pacific Acceptance Corporation, 94 94
Series 1991-3, 7.25%, 12/15/11
Total Non-Agency
Mortgage-Backed Obligations 1,183 0 1,183
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.9%
1,350 1,350 Prudential Home Mortgage Securities,
Series 1993-91, Class A7, 6.00%, 08/25/00 1,306 1,306
Total Collateralized Mortgage Obligations 0 1,306 1,306
MORTGAGE PASS THRU BALLOON - 0.6%
874 874 Federal National Mortgage Association, 896 896
8.50%, 07/01/98
Total Mortgage Pass Thru Balloon 0 896 896
ASSET BACKED SECURITIES - 23.5%
729 729 CIT RV Owners Trust, Series 1995-A, 721 721
6.250%, 01/15/11
1,000 1,000 Citibank Credit Card Master Trust, 721 721
Series 1996-1, 0.00 02/07/01**
2,000 2,000 Corestates Home Equity Trust 1996-A, Class A1, 1,985 1,985
6.20%, 11/15/98
1,853 1,853 Fifth Third Auto Grantor Trust 1996-A, Class A, 1,841 1,841
6.20%, 04/15/00
1,638 1,638 Fleetwood Credit Corporation Grantor Trust, 1,627 1,627
Series 1995-B, 6.55%, 05/15/11
2,566 2,566 Ford Credit Gtd. Trust 1994-B, Class A, 7.30%, 2,593 2,593
10/15/99
1,708 1,708 Ford Motor Credit Corp. 1994-A, Class A, 6.35%, 1,711 1,711
05/15/99
523 523 General Motors Acceptance Corp., 7.150%, 528 528
03/15/00
1,348 1,348 Green Tree Recreational Equipment & Consumer 1,317 1,317
Trust Series 1996-A, Class A1, 5.55%, 07/15/00
2,000 2,000 Green Tree Series 1996-1, Class A2, 5.85%, 1,894 1,894
07/15/02
698 698 Honda Auto Receivables Grantor Trust, 699 699
Series 1995-A, 6.20% 12/15/00
1,453 1,453 MS Auto Grantor Trust, Series 1995-1, 1,449 1,449
6.20% 07/01/01
1,544 1,544 NAFCO Auto Trust, Series 2, 7.00%, 1,548 1,548
12/31/01
1,563 1,563 Olympic Automobile Receivables Trust, 1,556 1,556
Series 1995-C, 6.20%, 01/15/02
5,000 5,000 Premier Auto Trust 1994-4, Class A4, 6.45%, 5,014 5,014
05/02/98
<PAGE>
1,225 1,225 Signet Credit Card Master Trust, Series 1993-3, 1,213 1,213
5.25%, 04/15/00
4,000 4,000 Standard Credit Card Master Trust, Series 4,007 4,007
1995-6-B, 6.90%, 06/07/00**
138 138 University Support Services, 1993-A, 7.87%, 139 139
08/20/08
1,905 1,905 World Omni Automobile Lease Securitization 1,904 1,904
Trust, Class A, 6.45%, 09/25/00
Total Asset Backed Securities 14,206 18,259 32,465
CORPORATE OBLIGATIONS - 44.8%
2,000 2,000 Associates Corporation of North America, 2,017 2,017
6.75%, 06/13/97
2,000 2,000 Associates Corporation of North America, 1,983 1,983
6.75%, 08/29/00
2,000 2,000 BankAmerica 9.625%, 02/13/01 2,195 2,195
450 450 Caterpillar Finance, 5.59219%, 08/30/96** 450 450
1,000 1,000 Chrysler Financial Corp., 6.23%, 08/07/97 1,002 1,002
3,000 3,000 Colgate Palmolive, 6.43% 12/01/97 3,008 3,008
2,000 2,000 Countrywide Home Loans, Inc., Company
Guarantee, 6.05%, 03/01/01 1,918 1,918
1,500 1,500 Dean Witter Discover, 5.62969%, 06/19/96** 1,500 1,500
2,000 2,000 Dean Witter Discover, 6.750%, 08/15/00 1,980 1,980
1,500 1,500 Eaton Corporation, 6.375%, 04/01/99 1,481 1,481
1,000 1,000 Electronic Data Systems, 6.85%, 05/15/00 990 990
1,500 1,500 Equitable Companies, 6.750%, 12/01/00 1,494 1,494
2,000 2,000 Exxon Capital, 6.50%, 07/15/99 1,985 1,985
2,000 2,000 First USA Bank, Unsecured Note, 5.75%, 01/15/99 1,940 1,940
4,000 4,000 Ford Motor Credit, 6.85%, 08/15/00 3,970 3,970
2,000 2,000 Franklin Universal Trust, 5.625%, 09/01/98 1,963 1,963
1,500 1,500 General Motors Acceptance Corp., 5.60938%, 1,500 1,500
07/24/96**
1,000 1,000 General Motors Acceptance Corp., 6.50%, 07/25/97 1,004 1,004
2,000 2,000 General Motors Acceptance Corp., 7.875%, 03/07/01 2,060 2,060
1,000 1,000 General Motors Acceptance Corp., 9.125%, 07/15/01 1,080 1,080
1,000 1,000 General Motors Acceptance Corp., 9.375%, 04/01/00 1,078 1,078
2,000 2,000 General Motors Acceptance Corp., Deb., 9.375%,
04/01/00 2,155 2,155
2,000 2,000 Heller Financial, 7.875%, 11/01/99 2,055 2,055
1,000 1,000 Hertz, 8.30%, 02/02/98 1,026 1,026
1,000 1,000 Ingersoll-Rand Co., 6.45%, 08/28/98 998 998
3,000 3,000 J.B. Hunt Transport Services, 6.00% 12/12/00 2,880 2,880
1,650 1,650 Lehman Brothers Holdings, Inc., Note,
Series MTN, 6.25%, 06/29/98 1,634 1,634
1,500 1,500 Manufacturers Hanover Corporation, 8.50%,
02/15/99 1,556 1,556
1,000 1,000 Merrill Lynch, 6.80% 04/26/01 984 984
1,948 1,948 Middletown Trust, 10.875%, 07/15/98 2,023 2,023
2,500 2,500 Nabisco, 8.00%, 01/15/00 2,566 2,566
2,000 2,000 Salomon, Inc., Sr. Note, 8.69%, 03/01/99 2,060 2,060
1,000 1,500 2,500 Smith Barney Holdings, 7.875%, 10/01/99 1,028 1,541 2,569
1,250 1,250 Sunamerica, Inc., 6.58%, 01/15/02 1,209 1,209
600 600 Sunamerica, Inc., 9.00%, 01/15/99 628 628
1,000 1,000 Travelers/Aetna, 6.75%, 04/15/01 985 985
Total Corporate Obligations 42,384 19,539 61,923
<PAGE>
REPURCHASE AGREEMENTS - 2.5% (a)
1,030 1,030 Fifth Third Bancorp, 5.25%, dated 05/31/96,
due 06/03/96 1,030 1,030
2,440 2,440 Lehman Brothers 5.22%, dated 05/31/96,
due 06/03/96, repurchase price $2,440,784 2,440 2,440
Total Repurchase Agreements 2,440 1,030 3,470
TOTAL INVESTMENTS - 100% (COST $ 139,602) 87,406 50,874 138,280
* Aggregate cost for Federal Tax purposes
** Effective yield in effect on May 31, 1996
(a) The repurchase are fully collateralized by
U.S. government and/or agency obligations
based on market prices at the date of the
portfolio
BAN Bond Anticipation Note
GO General Obligation
REMIC Real Estate Mortgage Investment Conduit
</TABLE>
<PAGE>
1784 SHORT-TERM INCOME FUND
BAYFUNDS SHORT TERM YIELD PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (000)
MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
1784 BayFunds
Short-Term Short-Term Pro Forma
Income Yield Pro Forma Combined
Fund Portfolio Adjustments (Note 1)
<S> <C> <C> <C> <C>
Investments in securities, at value $ 87,406 $ 50,873 $ 1 E $ 138,280
Cash 5 5
Income receivable 1,602 581 2,183
Receivable for shares sold 250 250
Deferred expenses 30 (30) A -
Receivable from investment advisor 30 A 30
Other assets 6 6
Total assets 89,264 51,489 1 140,754
Liabilities:
2,017 2,017
Payable for shares redeemed 370 370
Income distribution payable 406 254 661
Accrued expenses 87 41 128
Total liabilities 2,881 295 3,176
Net assets 86,383 51,194 1 137,578
========= ========= ======= =========
Net assets consist of:
Paid in capital 87,155 63,730 150,885
Net unrealized depreciation of (622) (700) 1 E (1,321)
investments
Accumulated net realized gain/ -168 (11,836) (12,004)
loss on investment
Undistributed net investment 18 - 18
income ---------- --------- -------- ---------
Total net assets 86,383 51,194 1 137,578
========== ========= ======== =========
Net assets:
Shares 86,393 - 51,195 137,578
========== ========= ======== =========
Investment shares - 17,984 (17,984) -
========== ========= ======== =========
Institutional shares - 33,210 (33,210) -
========== ========= ======== =========
NAV, offer and redemption
price per share - Shares 9.93 - - 9.93
NAV, offer and redemption
price per share - Investment - 9.09 - -
NAV, offer and redemption
price per share -
Institutional - 9.09 - -
Shares outstanding:
Shares 8,702 - 5,153 13,855
Investment shares - 1,978 (1,978) -
Institutional shares - 3,653 (3,653) -
See notes to pro-forma financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1784 SHORT-TERM INCOME FUND
BAYFUNDS SHORT TERM YIELD PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS (000)
FOR THE TWELVE MONTH PERIOD ENDING MAY 31, 1996 (UNAUDITED)
1784 BayFunds
Short-Term Short Term Pro Forma
Income Yield Pro Forma Combined
Fund (1) Portfolio Adjustments (Note 1)
<S> <C> <C> <C> <C>
Investment income:
Dividends
Interest $ 4,773 $ 4,227 $ 9,000
-------- -------- ---------
Total income $ 4,773 $ 4,227 $ 9,000
-------- -------- ---------
Expenses:
Investment advisory fee 367 314 681
Waiver of investment advisory fee (19) - 19 C -
Reimbursement of expenses by
advisor - - (114)B (114)
Administration and fund
accounting fee 109 120 (56)C 173
Waiver of administrator fees (79) - 79 C -
12b-1 fees 184 - 156 C 340
Waiver of 12b-1 fees (184) - (156) C (340)
Transfer and dividend disbursing
agent fee 55 21 76
Waiver of transfer agent fees -29 - 29 C -
Registration fee 5 28 33
Directors' and Trustees' fee 2 2 (2) D 2
Printing and postage 12 19 31
Amortization of deferred
organizational costs 1 - 1
Professional fees 14 18 (11) C 21
Shareholder services fee -
Investment Shares - 54 (54) C -
Custodian fee 20 16 (10) C 26
Other expenses 7 16 23
-------- -------- --------- ---------
Total expenses 465 608 (120) 953
Net Investment Income 4,308 3,619 120 8,047
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) on 101 363 464
investments
Change in unrealized (1,448) (1,061) (2,509)
depreciation on investments -------- -------- --------- ---------
Net realized and unrealized gain (1,347) (698) (2,045)
(loss) on investments -------- -------- --------- ---------
Change in net assets resulting 2,961 2,921 120 6,002
from operations ======== ======== ========= =========
See notes to pro-forma financial statements.
</TABLE>
<PAGE>
1784 SHORT-TERM INCOME FUND ("ACQUIRING FUND")
BAYFUNDS SHORT TERM YIELD PORTFOLIO ("ACQUIRED FUND")
FOR THE TWELVE-MONTH PERIOD ENDED
MAY 31, 1996 (UNAUDITED)
A) Adjustment for the reimbursement of deferred organization expense of the
Acquired Fund.
B) Adjustment to reflect the advisor's intended voluntary fee waiver
limiting net operating expenses to 0.20% of average daily net assets.
C) Adjustment to reflect the Acquiring Fund's fee structure
D) Adjustment to eliminate Acquired Fund's Trustee fees.
E) Adjustment to reflect pricing of Acquired Fund's assets under Acquiring
Fund's pricing policies.
<PAGE>
1784 SHORT-TERM INCOME FUND
BAYFUNDS SHORT TERM YIELD PORTFOLIO
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF COMBINATION:
The Unaudited Pro Forma Combining Schedule of Portfolio Investments, the
Statement of Assets and Liabilities and the Statement of Operations
reflect the accounts of the 1784 Short-Term Income Fund, one of fourteen
investment portfolios offered by the 1784 Funds ("1784" or the "Trust")
and the BayFunds Short Term Yield Portfolio, one of five investment
portfolios offered by the BayFunds ("BayFunds") as of and for the
year-ended May 31, 1996. These statements have been derived from the
books and records of each Fund utilized in calculating daily net asset
value at May 31, 1996.
The 1784 Short-Term Income Fund consists of a single class of shares.
The Pro Forma statements give effect to the proposed transfer of the
assets and stated liabilities of the BayFunds Short Term Yield Portfolio
in exchange for shares of the 1784 Short-Term Income Fund. BayFunds Short
Term Yield Portfolio shareholders of both Investment Shares and
Institutional Shares will receive 1784 Short-Term Income Fund Shares at
closing. Under generally accepted accounting principles, the 1784
Short-Term Income Fund will be the surviving entity for accounting
purposes and the historical cost of investment securities will be carried
forward. In addition, the results of operations of the 1784 Short-Term
Income Fund will be carried forward and the pre-combined periods will not
be restated.
The Pro Forma financial statements have been adjusted to reflect the
anticipated fee arrangements for the surviving entity, including
anticipated voluntary fee waivers. The Pro Forma financial statements do
not reflect the expenses of either Fund in carrying out its obligations
under the Agreement and Plan of Reorganization. Management does not
anticipate the need to liquidate any assets of the BayFunds Short Term
Yield Portfolio due to any possible conflict with the investment policies
and restrictions of the corresponding 1784 Short-Term Income Fund.
The Pro Forma Combining Schedule of Portfolio Investments, Statement of
Assets and Liabilities and Statement of Operations should be read in
conjunction with the historical financial statements of the Funds
incorporated by reference in the Statement of Additional Information.
The First National Bank of Boston ("FNBB") is party to an investment
advisory agreement under which FNBB provides services for a fee, computed
daily and paid monthly, at the annual rate of 0.50% of the average daily
net assets of the 1784 Short-Term Income Fund. In addition, FNBB and the
Trust are party to a custodial agreement. FNBB is entitled to receive an
annual fee of 0.0100% for the Trust's first $100 million in average daily
net assets, 0.0075% for the Trust's next $100 million and 0.0050% for the
Trust's average daily net assets over $200 million.
For the period ended May 31, 1996, BayBanks Investment Management, Inc.
("Baybanks Investment Management"), a wholly-owned subsidiary of
Baybanks, Inc. ("Baybanks"), served as investment advisor to BayFunds
Short Term Yield Portfolio and was entitled to receive a fee for its
services computed at the annual rate of 0.50% of the average daily net
assets of the BayFunds Short Term Yield Portfolio.
<PAGE>
Pursuant to an administrative agreement dated June 7, 1993, as amended
November 17, 1995, SEI Financial Management Corporation ("SEI") acts as
the Trust's Administrator. Under the terms of such agreement, SEI is
entitled to receive an annual fee of 0.15% of the Trust's first $300
million of average daily net assets, 0.12% of the Trust's second $300
million of average daily net assets and 0.10% of average daily net assets
over $600 million. Such fee is computed daily and paid monthly. For the
year ended May 31, 1996, SEI agreed to waive it's fee to maintain a
competitive expense ratio for the 1784 Short-Term Income Fund .
Federated Administrative Services ("FAS") was the administrator for
BayFunds for the twelve months ended May 31, 1996. Fees charged by FAS
for its services were based on the level of aggregate net assets of
BayFunds.
For the year ended May 31, 1996, FNBB voluntarily agreed to waive a
portion of it's fees and to reimburse 1784 Short-Term Income Fund to
maintain a competitive expense ratio.
2. PORTFOLIO VALUATION:
The BayFunds Short Term Yield Portfolio values U.S. Government securities
at the bid prices as furnished by an independent pricing service. Listed
corporate bonds (and other fixed-income and asset-backed securities),
unlisted securities (and other fixed-income and asset-backed securities
and/or private placements) and short-term securities are generally valued
at the prices provided by an independent pricing service. Short-term
securities with maturity values of 60 days or less at the time of
purchase may be valued at amortized cost, which approximates fair value.
The 1784 Short-Term Income Fund values investment securities which are
listed on a securities exchange for which market quotations are available
by an independent pricing service at the last quoted sales price for such
securities on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are
readily available are valued at the most recent bid price using
procedures determined in good faith by the Board of Trustees. Debt
obligations with sixty days or less remaining until maturity may be
valued at their amortized cost. Under this valuation method purchase
discounts and premiums are accrued and amortized ratably to maturity and
are included in interest income.
The proposed Agreement and Plan of Reorganization specifies that the
portfolio securities of the BayFunds Short Term Yield Portfolio will be
valued in accordance with the generally employed valuation procedures of
the 1784 Short-Term Income Fund for the purposes of determining the
number of 1784 Short-Term Income Fund shares to be issued in the
reorganization. The combined Pro Forma Schedule of Portfolio Investments
gives effect to the valuation of the assets of the BayFunds Short Term
Yield Portfolio under the valuation procedures of the 1784 Short-Term
Income Fund.
<PAGE>
3. SERIES SPECIFIC EXPENSES:
BayFunds Short Term Yield Portfolio entered into a Shareholder Services
Agreement with BayBank Systems, Inc. to obtain certain services for
shareholders and maintain shareholder accounts for investment shares.
This agreement provided that the BayFunds Short Term Yield Portfolio
would incur fees up to 0.25 of 1% of the average net assets of the Fund's
Investment Shares. In addition, Federated Services Company ("FServ")
maintained the Fund's accounting records for a fee based on the level of
the Fund's average daily net assets plus out-of-pocket expenses. The Pro
forma Combining Statement of Operations has been adjusted to reflect the
elimination of these fees.
4. CAPITAL SHARES:
The Pro Forma net asset value per share assumes the issuance of shares of
the 1784 Short-Term Income Fund which would have been issued at May 31,
1996 had the proposed reorganization taken place on such date. The amount
of additional shares assumed to be issued was calculated based on the net
assets at May 31, 1996 of the BayFunds Short Term Yield Portfolio
Investment Shares ($17,984) and Institutional Shares ($33,210) and the
per share net asset value of the 1784 Short-Term Income Fund Shares
($9.93).
<PAGE>
1784 Growth Fund
BayFunds Equity Portfolio
Introduction to Proposed Reorganization
May 31, 1996
The accompanying unaudited Pro Forma Combining Schedule of Portfolio
Investments, Statement of Assets and Liabilities and Statement of Operations
reflect the accounts of the 1784 Growth Fund and the BayFunds Equity Portfolio
at May 31, 1996. These statements have been derived from each Fund's books
and records utilized in calculating daily net asset value at May 31, 1996
<PAGE>
<TABLE>
<CAPTION>
1784 GROWTH FUND
BAYFUND EQUITY PORTFOLIO
PRO FORMA COMBINING SCHEDULE OF PORTOLIO INVESTMENTS
MAY 31, 1996
(UNAUDITED)
SHARE/PAR (000) VALUE (000)
1784 BayFund Pro Forma 1784 BayFund Pro Form
Growth Fund Equity Portfolio Combined Security Description Growth Fund Equity Portfolio Combined
<S> <C> <C> <C> <C> <C> <C>
AGRICULTURE - .7%
4 4 Conagra, Inc. 171 171
13 13 Dekalb Genetics Corp., Class B 367 367
27 27 Northland Cranberries 756 756
Total Agriculture 756 538 1,294
BASIC - 3.4%
15 15 AK Steel Holding 649 649
5 5 Aluminum Co. 293 293
28 28 Cabot Corp. 767 767
3 3 Champion International Corp. 132 132
14 14 Hercules, Inc. 795 795
5 5 Kimberly-Clark Corp. 364 364
10 10 Nucor 550 550
16 16 Raychem Corp. 1,196 1,196
13 13 Sigma-Aldrich Corp. 728 728
7 7 Union Carbide 302 302
6 6 Willamette Industries, Inc. 387 387
Total Basic 1,199 4,964 6,163
BEVERAGES - 1.7%
37 37 Coca Cola Co 1,648 1,648
43 43 PepsiCo, Inc. 1,430 1,430
Total Beverages 0 3,078 3,078
CAPITAL GOODS - 4.7%
10 10 Crane Co. 400 400
24 24 Dover Corp. 1,140 1,140
20 20 Hardinge 609 609
16 16 Ionics, Inc. (A) 792 792
7 7 McDonnell-Douglas Corp. 707 707
22 22 Morton International, Inc. 836 836
23 23 NN Ball and Roller 540 540
38 38 Pall Corp. 1,017 1,017
29 29 Praxair, Inc. 1,178 1,178
32 32 Robotic Vision Sys Inc (A) 608 608
15 15 UCAR International (A) 641 641
Total Capital Goods 2,398 6,070 8,468
CONSUMER NON-DURABLES - 1.6%
8 8 Applebee's International, Inc. 227 227
24 24 Gillette Co. 1,419 1,419
6 6 Philip Morris Cos., Inc. 596 596
17 17 UST, Inc. 561 561
Total Consumer Non-Durables 0 2,803 2,803
DURABLES - 5.6%
12 12 Avery Dennison Corp. 684 684
<PAGE>
35 35 Black & Decker Corp. 1,439 1,439
25 25 Bolder Technologies (A) 322 322
24 24 Callaway Golf Co. 723 723
19 19 Champion Enterprises, Inc. (A) 770 770
8 8 Danaher Corp. 332 332
11 11 Deere & Co. 458 458
30 30 GTS Duratek (A) 510 510
11 11 Harley Davidson, Inc. 527 527
8 8 Jones Apparel Group, Inc. (A) 408 408
37 37 Miller Herman, Inc. 1,142 1,142
27 27 Oakwood Homes Corp. 1,310 1,310
150 150 Rentokil Group 953 953
8 8 Snap-On Tools Corp. 385 385
Total Durables 1,785 8,178 9,963
ENERGY - 8.2%
7 7 Amoco Corp. 508 508
12 12 Baker Hughes, Inc. 377 377
6 6 British Petroleum Co. PLC, ADR 669 669
11 11 Chesapeake Energy (A) 844 844
15 15 Coastal Corp. 615 615
5 5 Exxon Corp. 424 424
40 40 GeoScience (A) 810 810
33 33 Global Marine, Inc. (A) 404 404
32 32 Halliburton Co. 1,780 1,780
8 8 Louisiana Land & Exploration Co. 409 409
50 50 Maverick Tube (A) 656 656
10 10 Mobil Corp. 1,129 1,129
22 22 Nabors Industries, Inc. (A) 338 338
20 20 Nuevo Energy (A) 620 620
30 30 Panenergy Corp. 964 964
2 2 Royal Dutch Petroleum Co., ADR 360 360
13 13 Smith International, Inc. (A) 410 410
8 8 Sonat Offshore Drilling Co. 398 398
29 29 Tidewater, Inc. 1,196 1,196
7 7 Tosco Corp. 347 347
10 10 USX Marathon Group 219 219
23 23 Williams Cos., Inc. (The) 1,156 1,156
Total Energy 2,930 11,704 14,634
ENTERTAINMENT - .6%
170 170 Q-Zar (A) 1,063 1,063
Total Entertainment 1,063 0 1,063
FINANCE - 10.8%
20 20 Advanta Corp., Class A 1,130 1,130
10 10 AFLAC, Inc. 288 288
11 11 American International Group, Inc. 1,037 1,037
16 16 BankAmerica Corp. 1,204 1,204
67 67 Equifax, Inc. 1,658 1,658
9 9 Fifth Third Bancorp 491 491
11 11 Finova Group, Inc. 583 583
13 13 First Tennessee National Corp. 437 437
7 7 First USA, Inc. 406 406
<PAGE>
46 46 Green Tree Financial Corp. 1,507 1,507
13 13 Household International, Inc. 900 900
21 21 MBNA Corp. 643 643
24 24 MGIC Investment Corp. 1,410 1,410
22 22 Money Stores, Inc. 578 578
8 8 NationsBank Corp. 649 649
14 14 Primark Corp. (A) 494 494
17 17 Quick & Reilly Group, Inc. 576 576
11 11 Star Banc Corp. 765 765
9 9 Student Loan Marketing Association 669 669
26 26 Sunamerica, Inc. 1,456 1,456
35 35 Synovus Financial Corp. 805 805
11 11 Travelers Group, Inc. 457 457
8 8 T. Rowe Price Associates 224 224
1 1 Wells Fargo & Co. 349 349
8 8 Zions Bancorp 592 592
Total Finance 0 19,309 19,309
HEALTHCARE - 9.9%
28 28 Amgen, Inc. (A) 1,666 1,666
20 20 Arterial Vascular (A) 844 844
7 7 Becton, Dickinson & Co. 595 595
20 7 27 Boston Scientific Corp. (A) 858 279 1,137
7 7 Cardinal Health, Inc. 447 447
15 15 Cardiogenesis (A) 259 259
20 20 Dentsply International 860 860
15 15 Elan ADR (A) 941 941
20 20 General Surgical Innovations (A) 400 400
14 10 24 Healthcare Compare Corp. (A) 677 460 1,137
35 35 Healthsource (A) 792 792
11 11 HEALTHSOUTH Rehabilitation (A) 385 385
23 23 Invacare Corp. 598 598
10 10 Johnson & Johnson 974 974
15 26 41 Medtronic 844 1,463 2,307
11 11 Merck & Co., Inc. 711 711
3 3 Nellcor Puritan Bennett, Inc. 164 164
11 11 Omnicare, Inc. 613 613
21 21 Pfizer, Inc. 1,486 1,486
18 18 Schering Plough Corp. 1,055 1,055
10 10 Sonus Pharmaceuticals (A) 201 201
3 3 Stryker Corp. 138 138
Total Healthcare 6,676 11,034 17,710
MERCHANDISE STORES - 5.5%
10 36 46 Bed Bath & Beyond Inc (A) 281 1,013 1,294
1 1 Carrefour Supermarche (A) 739 739
12 12 CompUSA, Inc. (A) 525 525
23 23 Consolidated Stores Corp. (A) 871 871
18 18 Dollar General Corp. 500 500
25 25 Gap (The), Inc. 841 841
8 8 Grand Optical - Photoservice (A) 1,077 1,077
7 7 Loews Corp. 558 558
20 20 Moebel Walther (A) 773 773
69 69 Staples, Inc. (A) 1,380 1,380
17 17 TJX Cos., Inc. 599 599
22 22 Walgreen Co. 701 701
<PAGE>
Total Merchandise Stores 2,870 6,988 9,858
PACKAGING - .6%
30 30 Sealed Air Corp. (A) 1,065 1,065
Total Packaging 0 1,065 1,065
PRINTING AND PUBLISHING - 1.5%
60 60 Applied Graphics Technologies 885 885
70 70 IVI Publishing (A) 674 674
26 26 Meredith Corp. 1,193 1,193
Total Printing and Publishing 1,559 1,193 2,752
RESTAURANTS - 3.2%
72 72 J.D. Weatherspoon 1,049 1,049
18 18 Lone Star Steakhouse & Saloon 707 707
23 23 McDonald's Corp. 1,107 1,107
8 8 Outback Steakhouse, Inc. (A) 303 303
15 15 Papa John's International (A) 739 739
150 150 Pizza Express (A) 860 860
15 15 Rainforest Cafe (A) 607 607
15 15 Sbarro, Inc. 399 399
Total Restaurant's 3,962 1,809 5,771
RETAIL - FOOD - 2.3%
39 39 Casey's General Stores, Inc. 921 921
15 15 Great Atlantic & Pacific Tea Co., Inc. 514 514
58 58 Safeway, Inc. (A) 1,958 1,958
20 20 Vons Companies, Inc. 730 730
Total Retail Food 0 4,123 4,123
SERVICES - 2.6%
13 13 CDI Corp. (A) 442 442
10 10 Cintas Corp. 535 535
19 19 CUC International, Inc. (A) 703 703
16 16 EG & G, Inc. 348 348
25 25 Olsten Corp. 769 769
20 20 Robert Half International, Inc. (A) 1,123 1,123
12 12 Service Corp. International 671 671
Total Services 0 4,591 4,591
TECHNOLOGY - 15.7%
23 23 3Com Corp. (A) 1,133 1,133
38 38 Andrew Corp. (A) 2,062 2,062
12 12 Applied Materials, Inc. (A) 447 447
4 4 Avnet, Inc. 206 206
20 20 Baan ADR (A) 720 720
15 15 Cabletron Systems, Inc. (A) 1,091 1,091
<PAGE>
8 8 Cadence Design Systems, Inc. (A) 454 454
13 13 Cambridge Technology Partners (A) 956 956
20 22 42 Cisco Systems, Inc. (A) 1,095 1,205 2,300
13 13 Coherent, Inc. (A) 635 635
9 9 Computer Associates International, Inc. 655 655
4 4 Computer Sciences Corp. (A) 341 341
15 15 Diebold, Inc. 572 572
10 10 I2 Technologies (A) 403 403
10 10 Intel 755 755
8 8 International Business Machines Corp. 848 848
50 50 Lanvision Systems (A) 863 863
16 16 Linear Technology Corp. 552 552
4 4 Microsoft Corp. (A) 422 422
14 14 MTS Systems Corp. 256 256
19 19 National Data Corp. 717 717
23 34 57 Oracle Corp. (A) 745 1,126 1,871
22 22 Parametric Technology Corp. (A) 1,007 1,007
14 14 Park Electrochemical Corp. 338 338
4 4 SAP AG (A) 553 553
13 13 Security Dynamics Technologies 1,109 1,109
11 11 Sterling Software, Inc. (A) 886 886
32 32 Sun Microsystems, Inc. (A) 2,004 2,004
15 15 Teradyne, Inc. (A) 302 302
4 4 Texas Instruments, Inc. 208 208
20 20 Thermo Electron Corp. (A) 1,275 1,275
25 25 Thermo Instrument Systems, Inc. (A) 975 975
12 12 Varian Association, Inc. 684 684
6 6 Vishay Intertechnology, Inc. (A) 166 166
9 9 Wyle Electronics 383 383
Total Technology 7,199 20,950 28,149
TELECOMMUNICATIONS - 4.1%
9 9 Alltel Corp. 284 284
42 42 Cincinnati Bell, Inc. 2,231 2,231
65 65 Geotek Communications (A) 902 902
6 6 GTE Corp. 257 257
19 19 MCI Communications Corp. 553 553
6 6 NYNEX Corp. 277 277
22 22 Sprint Corp. 932 932
7 7 Telecom Corp. of New Zealand, ADR 491 491
17 17 U.S. Long Distance Corp. (A) 610 610
16 16 WorldCom, Inc. (A) 782 782
Total Telecommunications 902 6,417 7,319
TRANSPORTATION - .7%
14 14 Airborne Freight Corp. 354 354
11 11 Burlington Northern Santa Fe 932 932
Total Transportation 0 1,286 1,286
UTILITIES - 1.4%
15 15 American Electric Power Co., Inc. 602 602
8 8 FPL Group, Inc. 342 342
16 16 General Public Utilities 536 536
58 58 Noram Energy Corp. 616 616
21 21 Ohio Edison Co. 459 459
<PAGE>
Total Utilities 0 2,555 2,555
MISC. CONSUMER SERVICES - 4.8%
33 33 Liz Claiborne, Inc. 1,225 1,225
16 16 Mattel, Inc. 436 436
22 22 Nautica Enterprise, Inc. (A) 550 550
16 16 Nike, Inc., Class B 1,606 1,606
15 15 Omnicom Group, Inc. 654 654
28 28 Richfood Holdings, Inc. 985 985
26 26 Tommy Hilfiger Corp. (A) 1,430 1,430
5 5 Wolford (A) 1,163 1,163
15 15 Wolverine World Wide, Inc. 499 499
Total Misc. Consumer Services 1,163 7,385 8,548
REPURCHASE AGREEMENTS - 10.4% (B)
7,145 7,145 Fifth Third Bancorp, 5.25%, dated 7,145 7,145
5/31/1996, due 6/31/1996
5,700 5,700 Goldman Sachs 5.30% dated 5/31/96 5,700 5,700
5,700 5,700 Lehman Brothers 5.22% dated 5,700 5,700
05/31/96, matures 06/03/96,
repurchase price $5,702,140
Total Repurchase Agreements 11,400 7,145 18,545
TOTAL INVESTMENTS $45,862 $133,184 $179,046
(COST $138,925)*
* Aggregate cost for Federal Tax Purposes
(A)Non-income producing security
(B)The repurchase agreements are fully collateralized
by U.S. Government and/or agency obligations
based on market prices at the date of the portfolio.
ADR - American Depository Receipt
STRIPS - Separate Trading of Registered Interest and
Principal of Securities
</TABLE>
<PAGE>
1784 GROWTH FUND
BAYFUNDS EQUITY PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (000)
May 31, 1996 (Unaudited)
1784 BayFunds Pro Forma
Growth Equity Pro Forma Combined
Fund Portfolio Adjustments (Note 1)
Investments in securities, at
value $45,862 $133,200 (16)E $179,046
Cash 8 8
Income receivable 12 176 188
Receivable for shares sold 1,015 1,015
Deferred expenses 23 $(23A) -
Receivable for investments sold 737 737
Receivable from investment advisor 23A 23
______ _______ ____ _______
Total assets 46,889 134,144 (16) 181,017
Liabilities:
Payable for investment
securities purchased 838 838
Accrued expenses 25 107 132
______ _______ ____ _______
Total liabilities 863 107 970
______ _______ ____ _______
Net assets $46,026 $134,037 (16) $180,047
======= ======== ==== ========
Net assets consist of:
Paid in capital 42,546 91,041 133,587
Net unrealized appreciation
of investments 3,390 36,748 (16) 40,122
Accumulated net realized
gain/loss on investment 90 6,147 6,237
Undistributed net investment
income - 101 101
______ _______ ____ _______
Total net assets $46,026 $134,037 (16) $180,047
======= ======== ==== ========
Net assets:
Shares $46,026 - $134,037 $180,047
======= ======== ======== ========
Investment shares - $ 36,362 $(36,362) -
======= ======== ========= ========
<PAGE>
Institutional shares - $ 97,675 $(97,675) -
======= ======== ========= ========
NAV, offer and redemption
price per share - Shares $ 11.27 - - $ 11.27
======= ======== ========= ========
NAV, offer and redemption
price per share - - $ 14.81 - -
Investment ======= ======== ========= ========
NAV, offer and redemption price
per share - Institutional - $ 14.81 - -
======= ======== ========= ========
Shares outstanding:
Shares 4,085 - 11,891 15,976
======= ======== ========= ========
Investment shares - 2,455 (2,455) -
======= ======== ========= ========
Institutional shares - 6,596 (6,596) -
======= ======== ========= ========
See notes to pro-forma financial statements.
<PAGE>
1784 GROWTH FUND
BAYFUNDS EQUITY PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS (000)
for the period ending May 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
1784 BayFunds Pro Forma
Growth Equity Pro Forma Combined
Fund (1) Portfolio (2) Adjustments (Note 1) (2)
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 23 $ 239 $262
Interest 78 68 146
Less: foreign taxes withheld (1) - (1)
_______ ______ ____
Total income 100 307 407
_______ ______ ____
Expenses:
Investment advisory fee 37 154 $ (5)B 186
Waiver of investment advisory fee (37) - 37 B -
Reimbursement of expenses by advisor (23) - (12)D (35)
Administration and fund accounting fee 10 27 (6)C 31
Waiver of administrator fees (5) - 5 C -
12b-1 fees 15 - 50 C 63
Waiver of 12b-1 fees (13) - (50)C (63)
Transfer and dividend disbursing
agent fee 6 6 12
Registration fee 14 5 19
Directors' and Trustees' fee - 2 2
Printing and postage 1 7 8
Professional fee 2 5 (2)C 5
Shareholder services fee - Investment
Shares - 15 (15)C -
Custodian fee 4 6 (6)C 4
Other expenses 1 3 4
_______ ______ ________ ____
Total expenses 10 230 (4) 236
Net Investment Income 90 77 4 171
Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on investments - 3,851 3,851
Change in unrealized appreciation
on investments 3,390 2,651 6,041
_______ ______ ________ ____
Net realized and unrealized gain (loss)
on investments 3,390 6,502 - 9,892
_______ ______ ________ ____
Change in net assets resulting
from operations $ 3,480 $6,579 $ 4 $10,063
======= ====== ======= =======
</TABLE>
1) Fund commenced operations March 28, 1996
2) For the period from March 28, 1996 to May 31, 1996
See notes to pro-forma financial statements.
<PAGE>
1784 GROWTH FUND ("Acquiring Fund")
BAYFUNDS EQUITY PORTFOLIO ("Acquired Fund")
for the period from March 28, 1996 to
May 31, 1996 (Unaudited)
A) Adjustment for the reimbursement of deferred organization expense of
the Acquired Fund.
B) Adjustment to reflect investment advisory fee computed
based on the Acquiring Fund's fee structure at an annual rate of 0.74%
of average net assets.
C) Adjustment to reflect the Acquiring Fund's fee structure
D) Adjustment to reflect the advisor's intended voluntary fee waiver
limiting net operating expenses to 0.20% of average daily net assets.
E) Adjustment to reflect pricing of Acquired Fund's assets under Acquiring
Fund's pricing policies.
1784 GROWTH FUND
BAYFUNDS EQUITY PORTFOLIO
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Combination:
The Unaudited Pro Forma Combining Schedule of Portfolio Investments, the
Statement of Assets and Liabilities and the Statement of Operations
reflect the accounts of the 1784 Growth Fund, one of fourteen investment
portfolios offered by the 1784 Funds ("1784" or the "Trust") and the
BayFunds Equity Portfolio, one of five investment portfolios offered by
the BayFunds ("BayFunds") as of and for the period from March 28, 1996
(commencement of operations of the 1784 Growth Fund) to May 31, 1996.
These statements have been derived from the books and records of each
Fund utilized in calculating daily net asset value at May 31, 1996. The
BayFunds Equity Portfolio was in operation for the entire twelve-month
period ended May 31, 1996; however, the Statement of Operations is
only presented for the period March 28, 1996 to May 31, 1996 to reflect
the same period as the surviving entity.
The 1784 Growth Fund consists of a single class of shares. The Pro Forma
statements give effect to the proposed transfer of the assets and stated
liabilities of the BayFunds Equity Portfolio in exchange for shares of
the 1784 Growth Fund. BayFunds Equity Portfolio shareholders of both
Investment Shares and Institutional Shares will receive 1784 Growth Fund
Shares at closing. Under generally accepted accounting principles, the
1784 Growth Fund will be the surviving entity for accounting purposes and
the historical cost of investment securities will be carried forward. In
addition, the results of operations of the 1784 Growth Fund will be
carried forward and the pre-combined periods will not be restated.
The Pro Forma financial statements have been adjusted to reflect the
anticipated fee arrangements for the surviving entity, including
anticipated voluntary fee waivers. The Pro Forma financial statements do
not reflect the expenses of either Fund in carrying out its obligations
under the Agreement and Plan of Reorganization. Management does not
anticipate the need to liquidate any assets of the BayFunds Equity
Portfolio due to any possible conflict with the investment policies and
restrictions of the corresponding 1784 Growth Fund.
The Pro Forma Combining Schedule of Portfolio Investments, Statement of
Assets and Liabilities and Statement of Operations should be read in
conjunction with the historical financial statements of the Funds
incorporated by reference in the Statement of Additional Information.
The First National Bank of Boston ("FNBB") is party to an investment
advisory agreement under which FNBB provides services for a fee, computed
daily and paid monthly, at the annual rate of 0.74% of the average daily
net assets of the 1784 Growth Fund. In addition, FNBB and the Trust are
party to a custodial agreement. FNBB is entitled to receive an annual fee
of 0.0100% for the Trust's first $100 million in average daily net
assets, 0.0075% for the Trust's next $100 million and 0.0050% for the
Trust's average daily net assets over $200 million. For the period ended
<PAGE>
May 31, 1996, BayBanks Investment Management, Inc. ("BayBanks Investment
Management"), a wholly-owned subsidiary of BayBanks, Inc. ("BayBanks"),
served as investment advisor to BayFunds Equity Portfolio and was
entitled to receive a fee for its services computed at the annual rate of
0.70% of the average daily net assets of the BayFunds Equity Portfolio.
Pursuant to an administrative agreement dated June 7, 1993, as amended
November 17, 1995, SEI Financial Management Corporation ("SEI") acts as
the Trust's Administrator. Under the terms of such agreement, SEI is
entitled to receive an annual fee of 0.15% of the Trust's first $300
million of average daily net assets, 0.12% of the Trust's second $300
million of average daily net assets and 0.10% of average daily net assets
over $600 million. Such fee is computed daily and paid monthly. For the
period ended May 31, 1996, SEI agreed to waive a portion of its fee to
maintain a competitive expense ratio for the 1784 Growth Fund.
Federated Administrative Services ("FAS") was the administrator for
BayFunds for the twelve months ended May 31, 1996. Fees charged by FAS
for its services were based on the level of aggregate net assets of
BayFunds.
For the period from March 28, 1996 to May 31, 1996, FNBB voluntarily
agreed to waive a portion of its fee and to reimburse 1784 Growth Fund to
maintain a competitive expense ratio.
2. Portfolio Valuation:
The BayFunds Equity Portfolio values listed equity securities of the last
sale price reported on national securities exchanges if available.
Short-term securities with maturity values of 60 days or less at the time
of purchase may be valued at amortized cost, which approximated fair
value.
The 1784 Growth Fund values investment securities which are listed on a
securities exchange for which market quotations are available by an
independent pricing service at the last quoted sales price for such
securities on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recent bid price using procedures
determined in good faith by the Board of Trustees. Debt obligations with
sixty days or less remaining until maturity may be valued of their
amortized cost.
The proposed Agreement and Plan of Reorganization specifies that the
portfolio securities of the BayFunds Equity Portfolio will be valued in
accordance with the generally employed valuation procedures of the 1784
Growth Fund for the purposes of determining the number of 1784 Growth Fund
shares to be issued in the reorganization. The combined Pro Forma Schedule
of Portfolio Investments gives effect to the valuation of the assets of
the BayFunds Equity Portfolio under the valuation procedures of the 1784
Growth Fund.
<PAGE>
3. Series Specific Expenses:
BayFunds Equity Portfolio entered into a Shareholder Services Agreement
with BayBank Systems, Inc. to obtain certain services for shareholder and
maintain shareholder accounts. This agreement provided that the BayFunds
Equity Portfolio would incur fees up to 0.25 of 1% of the average net
assets of the Fund's Investment Shares. In addition, Federated Services
Company ("FServ") maintained the Fund's accounting records for a fee based
on the level of the Fund's average daily net assets plus out-of-pocket
expenses. The Pro forma Combining Statement of Operations has been
adjusted to reflect the elimination of these fees.
4. Capital Shares:
The Pro Forma net asset value per share assumes the issuance of shares of
the 1784 Growth Fund which would have been issued at May 31, 1996 had the
proposed reorganization taken place on such date. The amount of additional
shares assumed to be issued was calculated based on the net assets at
May 31, 1996 of the BayFunds Equity Portfolio Investment Shares ($36,362)
and Institutional Shares ($97,675) and the per share net asset value of
the 1784 Growth Fund Shares ($11.27).
<PAGE>
1784 Income Fund
BayFunds Bond Portfolio
Introduction to Proposed Reorganization
May 31, 1996
The accompanying unaudited Pro Forma Combining Schedule of Portfolio
Investments, Statement of Assets and Liabilities and Statement of Operations
reflect the accounts of the 1784 Income Fund and the BayFunds Bond Portfolio at
May 31, 1996. These statements have been derived from each Fund's books and
records utilized in calculating daily net asset value at May 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
1784 Income Fund
BayFunds Bond Portfolio
Pro Forma Combining Schedule of Portfolio Investments
(UNAUDITED)
Par (000) May 31, 1996 Value (000)
1784 BayFund 1784 BayFund
Income Bond Pro Forma Security Description Income Bond Pro Forma
Fund Portfolio Combined Fund Portfolio Combined
<S> <C> <C> <C> <C> <C> <C>
U.S Government Agency Obligations - 7.3%
$8,000 $8,000 Federal Home Loan Bank, $7,604 $7,604
6.500%, 11/29/05
5,000 5,000 Federal Home Loan Mortgage Corporation, 4,675 4,675
6.600%, 02/02/06 (A)
5,000 5,000 Federal Home Loan Mortgage Corporation, 5,195 5,195
8.530%, 02/20/05
$2,000 2,000 Federal Home Loan Mortgage Corp., Note, $2,012 2,012
7.740%, 06/01/04
7,005 7,005 Financing Corporation STRIPS, 1,666 1,666
7.740%, 05/02/15 **
Total U.S. Government Agency Obligations 19,140 2,012 21,152
U.S. Treasury Obligations - 12.7%
1,010 1,010 United States Treasury Bond, 1,055 1,055
7.500%, 11/15/24
4,000 4,000 United States Treasury Note, 3,821 3,821
5.500%, 12/31/00
2,000 2,000 United States Treasury Note, 2,052 2,052
7.875%, 01/15/98
1,000 1,000 United States Treasury Note, 1,059 1,059
9.250%, 08/15/98
2,000 2,000 United States Treasury Note, 1,936 1,936
4.750%, 08/31/98
1,990 1,990 United States Treasury Note, 1,912 1,912
5.625%, 11/30/00
1,000 1,000 United States Treasury Note, 991 991
5.625%, 01/31/98
3,200 3,200 United States Treasury Note, 3,112 3,112
6.250%, 02/15/03
4,850 4,850 United States Treasury Note, 4,848 4,848
6.375%, 01/15/99
2,770 2,770 United States Treasury Note, 2,803 2,803
7.500%, 01/31/97
4,000 4,000 United States Treasury Note, 4,162 4,162
7.500%, 02/15/05
510 510 United States Treasury Note, 536 536
7.875%, 08/15/01
9,000 9,000 United StatesTreasury Note, 8,698 8,698
5.750%, 10/31/00
Total U.S. Treasury Obligations 17,566 19,419 36,985
U.S. Agency Mortgage-Backed Obligations - 9.2%
1,224 1,224 Federal Home Loan Mortgage Corporation, 1,218 1,218
7.750%, 09/01/05
1,510 1,510 Federal Home Loan Mortgage Corp., Series 1480, 1,404 1,404
Class H, 6.500%, 07/15/20
3,000 3,000 Federal National Mortgage Association REMIC, 2,703 2,703
6.000%, 12/25/16
725 725 Federal National Mortgage Association REMIC, 725 725
7.000%, 03/25/19
4,806 4,806 Federal National Mortgage Association REMIC, 4,337 4,337
7.000%, 10/25/23
4,976 4,976 Federal National Mortgage Association, 4,781 4,781
6.500%, 05/01/11
1,782 1,782 Government National Mortgage Association, 1,702 1,702
7.000%, 10/15/23
5,206 5,206 Government National Mortgage Association, 4,995 4,995
7.125%, 01/15/29
4,996 4,996 Government National Mortgage Association, 4,893 4,893
7.500%, 04/15/26
Total U.S. Agency Mortgage-Backed Obligation 25,354 1,404 26,758
<PAGE>
Asset Backed Securities - 11.1%
2,020 2,020 Circuit City Credit Card Master Trust 1994-2, 2,090 2,090
Class A, 8.000%, 11/15/03
5,000 5,000 Discover Card Master Trust, Series 1993-1, 4,792 4,792
Class B, 5.3000%, 10/16/01
1,275 1,275 Discover Card Master Trust, Series 1993-2, 1,234 1,234
Class B, 5.750%, 11/16/01
1,000 1,000 First Deposit Master Trust 1993-2, 986 986
Class A, 5.750%, 06/15/01
2,458 2,458 Fleetwood Credit Corporation Grantor Trust, 2,440 2,440
Series 1995B, 6.550%, 05/15/11
5,500 5,500 Green Tree Financial Corporation, 5,159 5,159
Series 95-7, 7.350%, 12/15/25
39 39 Merrill Lynch & Co. Asset Backed Corp., 1993-1, 39 39
Class A2, 5.125%, 07/15/98
2,317 2,317 NAFCO Auto Trust, 2,322 2,322
7.000%, 12/31/01
4,040 4,040 Oakwood Mortgage Investors Series 1995-B, 3,760 3,760
Class A3, 6.900%, 01/15/21
2,020 2,020 Premier Auto Trust 1996-1, 1,995 1,995
Class A3, 6.000%, 10/06/99
5,000 5,000 Prime Credit Card Master Trust Series 1992-1, 5,034 5,034
Class A1, 7.050%, 12/15/97
2,020 2,020 Sears Credit Account Master Trust 1995-4, 2,001 2,001
Class A, 6.250%, 01/15/03
10 10 Shawmut National Grantor Trust 1992-A, 10 10
Class A, 5.550%, 11/15/97
500 500 Standard Credit Card Master Trust 1993-3, 485 485
Class A, 5.500%, 02/07/00
Total Asset Backed Securities 24,741 7,606 32,347
Non-Agency Mortgage-Backed Obligations - 7.1%
2,000 2,000 Capstead Securities IV, Series 1992-5, 2,033 2,033
Class E, 8.500%, 10/25/21
4,927 4,927 CS First Boston Series 1995 - WF1, 4,634 4,634
Class A-1, 6.452%, 12/21/27
3,760 3,760 Merrill Lynch Mortgage Investor Series 1989H, 3,957 3,957
Class B, 10.000%, 01/15/10
5,000 5,000 Merrill Lynch Mortgage Investor Series 1994G, 5,042 5,042
Class A3, 8.350%, 05/15/14
5,000 5,000 Nomura Asset Securities Corp. Serieis 1996-MD5 , 4,835 4,835
Class A1B, 7.120%, 04/13/36
Total Non-Agency Mortgage-Backed Obligations 20,501 0 20,501
<PAGE>
Corporate Obligations - 28.4%
5,000 5,000 Auburn Hills Trust, 12.000%, 05/01/20 7,150 7,150
1,970 1,970 Caterpillar, Inc., Deb., 9.750%,06/01/19 2,189 2,189
5,000 5,000 Champion International, 6.400%, 02/15/26 4,581 4,581
2,500 2,500 Chase Manhattan Corporation, 5.500%, 02/15/01 2,353 2,353
1,840 1,840 Chrysler Corp., 10.950%, 08/01/17 2,006 2,006
1,000 1,000 Chrysler Financial Corp. Sr. Note, 8.125%, 12/15/96 1,013 1,013
4,500 4,500 CIT Group Holdings, 8.950%, 08/15/20 4,621 4,621
5,000 5,000 Equitable Life Assurance Society, 7.240%, 05/15/06 4,975 4,975
1,235 1,235 First Union Corp., Sub. Note, 7.500%, 04/15/35 1,264 1,264
2,500 2,500 First Union, 6.550%, 10/15/35 (A) 2,372 2,372
5,000 5,000 Ford Motor, 8.875% 01/15/22 5,519 5,519
5,000 5,000 General Motors Acceptance Corporation, 8.250%, 02/28/02 5,219 5,219
5,000 5,000 General Motors, 9.125%, 07/15/01 5,400 5,400
5,000 5,000 Green Tree financial Corporation, 7.650%, 10/15/25 4,596 4,596
1,970 1,970 Industrial Finance Corporation of Thailand, 1,904 1,904
Sr. Note, 6.875%, 04/01/03 (C)
500 500 Ingersoll-Rand Co., 6.875%, 02/01/03 488 488
1,000 1,000 ITT Hartford Group, Inc., Note, 7.300%, 11/01/15 946 946
400 400 J.P. Morgan & Co., Inc., 7.250%, 10/01/10 388 388
1,500 1,500 Korea Development Bank, 6.500%, 11/15/02 1,433 1,433
4,000 4,000 Mayne Nickless Limited, 6.250%, 02/01/06 3,645 3,645
1,610 1,610 Morgan Stanley Group, Inc., Note, 5.625%, 03/01/99 1,562 1,562
3,000 3,000 Municipal Bond Investor Assurance, 8.200%, 10/01/22 3,176 3,176
610 610 News America Holdings, Inc., Deb., 7.700%, 10/30/25 551 551
1,000 1,000 Norwest Corp., 6.00%, 3/15/00 969 969
1,000 1,000 Ryder Systems, Inc., 8.375%, 02/15/17 981 981
1,610 1,610 Salomon, Inc., Sr. Note, 8.690%, 03/01/99 1,658 1,658
2,030 2,030 Sears Roebuck Acceptance Corp., Note, 2,005 2,005
6.110%, 10/26/98
500 500 Sears, Roebuck & Co., Medium Term Note, 541 541
9.460%, 06/20/00
1,000 1,000 Travelers Group, 6.875%, 06/01/25 (A) 964 964
5,000 5,000 Travelers Group, 7.000%, 12/01/25 4,494 4,494
2,060 2,060 USX Corp., Deb., 9.125%, 01/15/13 2,217 2,217
1,340 1,340 Vesta Insurance Group, Inc., Deb., 1,313 1,313
8.750%, 07/15/25
Total Corporate Obligations 59,065 23,428 82,493
Foreign Bonds - 11.3%
6,200 6,200 Bank China, 8.250, 03/15/14 5,596 5,596
5,000 5,000 Chilgener S.A., 6.500%, 01/15/06 4,569 4,569
5,000 5,000 Endesa - Chile Overseas, 7.200%, 04/01/06 4,819 4,819
5,000 5,000 Hydro-Quebec, 8.050%, 07/07/24 (A) 5,244 5,244
10,000 10,000 Midland Bank, 7.650%, 05/01/25 10,175 10,175
2,500 2,500 Noranda, 7.000%, 07/15/05 2,381 2,381
Total Foreign Bonds 32,784 0 32,784
Shares (000) Preferred Stocks - 3.3%
200 200 MCI Capital, 8.000%, 06/30/26 4,760 4,760
200 200 Travelers P&C , 8.080%, 04/30/36 4,925 4,925
Total Preferred Stocks 9,685 0 9,685
<PAGE>
Par (000) Repurchase Agreements - 9.6% (B)
3,155 3,155 Fifth Third Bancorp, 5.25%, dated 5/31/1996, 3,155 3,155
due 06/03/96
24,788 24,788 Goldman Sachs Repurchase Agreement, 24,788 24,788
5.300%, due 06/03/96
Total Repurchase Agreements 24,788 3,155 27,943
Total Investments 100% (Cost $297,874)* $233,624 $57,024 $290,648
* Aggregate cost for Federal Tax purposes
** Effective yield in effect on May 31, 1996
(A) Put or demand features exist requiring the issuer
to repurchase the instrument prior to maturity.
(B) The repurchase agreements are fully collateralized
by U.S. agency obligations based on market prices
at the date of the portfolio.
(C) Restricted security which is subject to restrictions
on resale under Federal Securities laws.
REMIC - Real Estate Mortgage Investment Conduit
STRIPS - Seperate Trading of Registered Interest and Principal
of Securities
</TABLE>
<PAGE>
1784 INCOME FUND
BAYFUNDS BOND PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (000)
MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
1784 BayFunds Pro Forma
Income Bond Pro Forma Combined
Fund Portfolio Adjustments (Note 1)
<S> <C> <C> <C> <C>
Investments in securities, at value $233,624 $ 57,141 (117)G $290,648
Cash 4 4
Income receivable 2,492 971 3,463
Receivable for shares sold 490 490
Deferred expenses 20 $ (20)A -
Receivable from investment advisor 20 A 20
Other assets 15 15
-------- -------- ---------- --------
Total assets 236,621 58,136 (117) 294,640
Liabilities:
Payable for shares redeemed 208 208
Income distribution payable 1,205 344 1,549
Accrued expenses 186 45 231
-------- -------- ---------- --------
Total liabilities 1,599 389 1,988
-------- -------- ---------- --------
Net assets $235,022 $ 57,747 $(117) $292,652
Net assets consist of:
Paid in capital 237,792 59,946 297,738
Net unrealized depreciation on investments (5,568) (1,541) (117)G (7,226)
Accumulated net realized gain/loss on
investment 2,801 (658) 2,143
Distributions in excess of net investment
income (3) (3)
-------- -------- ---------- --------
Total net assets $235,022 $ 57,747 $ (117) $292,652
======== ======== ========= ========
Net assets:
Shares 235,022 - 57,630 292,652
======== ======== ========= ========
Investment shares - 6,112 (6,112) -
======== ======== ========= ========
Institutional shares - 51,635 (51,635) -
======== ======== ========= ========
NAV, offer and redemption price per share
- Shares 9.90 - - 9.90
======== ======== ========= ========
NAV, offer and redemption price per share
- Investment - 9.80 - -
======== ======== ========= ========
NAV, offer and redemption price per share
- Institutional - 9.80 - -
======== ======== ========= ========
Shares outstanding:
Shares 23,743 - 5,817 29,560
======== ======== ========= ========
Investment shares - 624 (624) -
======== ======== ========= ========
Institutional shares - 5,268 (5,268) -
See notes to pro-forma financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1784 INCOME FUND
BAYFUNDS BOND PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS (000)
FOR THE TWELVE MONTHPERIOD ENDING MAY 31, 1996 (UNAUDITED)
1784 BayFunds Pro Forma
Income Bond Pro Forma Combined
Fund Portfolio Adjustments (Note 1)
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 4 $ 4
Interest 14,590 $ 4,257 18,847
--------- --------- ---------- ---------
Total income 14,594 4,257 18,851
--------- --------- ---------- ---------
Expenses:
Investment advisory fee 1,550 367 85 B 2,002
Waiver of investment advisory fee (293) - (86)B (379)
Reimbursement of expenses by advisor (27) - (7)F (34)
Administration and fund accounting fee 257 123 (66)C 314
12b-1 fees 524 - 153 E 677
Waiver of 12b-1 fees (524) - (153)E (677)
Transfer and dividend disbursing agent fee 55 12 67
Registration fee 13 24 37
Directors' and Trustees' fee 7 2 (2)D 7
Printing and postage 27 26 53
Amortization of deferred organizational costs 1 - 1
Professional fee 40 16 (13)C 43
Shareholder services fee - Investment Shares - 16 (16)C -
Custodian fee 28 8 (3)C 33
Other expenses 9 11 20
--------- --------- ---------- ---------
Total expenses 1,667 605 (108) 2,164
Net Investment Income 12,927 3,652 108 16,687
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments 6,246 2,108 8354
Change in unrealized app/dep on investments (14,855) (3,403) (18,258)
--------- --------- ---------- ---------
Net realized and unrealized gain (loss) on
investments (8,609) (1,295) - (9,904)
--------- --------- ---------- ---------
Change in net assets resulting from operations $ 4,318 $ 2,357 $ 108 $ 6,783
========= ========= ========== =========
See notes to pro-forma financial statements.
</TABLE>
<PAGE>
1784 INCOME FUND ("ACQUIRING FUND")
BAYFUNDS BOND PORTFOLIO ("ACQUIRED FUND")
FOR THE TWELVE-MONTH PERIOD ENDED
MAY 31, 1996 (UNAUDITED)
A) Adjustment for the reimbursement of deferred organization expense of the
Acquired Fund.
B) Adjustment to reflect investment advisory fee computed based on the
Acquiring Fund's fee structure at an annual rate of 0.74% of average daily
net assets and a voluntary waiver of advisory fees at an annual rate of
0.14% of average daily net assets.
C) Adjustment to reflect the Acquiring Fund's fee structure.
D) Adjustment to eliminate Acquired Fund's Trustee fees.
E) Adjustments to reflect the elimination of the Acquired Fund's
distribution fees.
F) Adjustment to reflect the advisor's intended voluntary fee waiver
limiting net operating expenses to 0.20% of average daily net assets.
G) Adjustment to reflect pricing of Acquired Fund's assets under Acquiring
Fund's pricing policies.
<PAGE>
1784 INCOME FUND
BAYFUNDS BOND PORTFOLIO
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Combination:
The Unaudited Pro Forma Combining Schedule of Portfolio Investments, the
Statement of Assets and Liabilities and the Statement of Operations
reflect the accounts of the 1784 Income Fund, one of fourteen investment
portfolios offered by the 1784 Funds ("1784" or the "Trust") and the
BayFunds Bond Portfolio, one of five investment portfolios offered by the
BayFunds ("BayFunds") as of and for the year-ended May 31, 1996. These
statements have been derived from the books and records of each Fund
utilized in calculating daily net asset value at May 31, 1996.
The 1784 Income Fund consists of a single class of currently outstanding
shares. The Pro Forma statements give effect to the proposed transfer of
the assets and stated liabilities of the BayFunds Bond Portfolio in
exchange for shares of the 1784 Income Fund. BayFunds Bond Portfolio
shareholders of both Investment Shares and Institutional shares will
receive 1784 Income Fund shares at closing. Under generally accepted
accounting principles, the 1784 Income Fund will be the surviving entity
for accounting purposes and the historical cost of investment securities
will be carried forward. In addition, the results of operations of the
1784 Income Fund will be carried forward and the pre-combined periods
will not be restated.
The Pro Forma financial statements have been adjusted to reflect the
anticipated fee arrangements for the surviving entity, including
anticipated voluntary fee waivers. The Pro Forma financial statements do
not reflect the expenses of either Fund in carrying out its obligations
under the Agreement and Plan of Reorganization. Management does not
anticipate the need to liquidate any assets of the BayFunds Bond
Portfolio due to any possible conflict with the investment policies and
restrictions of the corresponding 1784 Income Fund.
The Pro Forma Combining Schedule of Portfolio Investments, Statement of
Assets and Liabilities and Statement of Operations should be read in
conjunction with the historical financial statements of the Funds
incorporated by reference in the Statement of Additional Information.
The First National Bank of Boston ("FNBB") is party to an investment
advisory agreement under which FNBB provides services for a fee, computed
daily and paid monthly, at the annual rate of 0.74% of the average daily
net assets of the 1784 Income Fund. In addition, FNBB and the Trust are
party to a custodial agreement. FNBB is entitled to receive an annual fee
of 0.0100% for the Trust's first $100 million in average daily net
assets, 0.0075% for the Trust's next $100 million and 0.0050% for the
Trust's average daily net assets over $200 million.
For the period ended May 31, 1996, BayBanks Investment Managment, Inc.
("BayBanks Investment Managment"), a wholly-owned subsidiary of BayBanks,
Inc. ("BayBanks"), served as investment advisor to BayFunds Bond
Portfolio and was entitled to receive a fee for its services computed at
<PAGE>
the annual rate of 0.60% of the average daily net assets of the BayFunds
Bond Portfolio. Pursuant to an administrative agreement dated June 7,
1993, as amended November 17, 1995, SEI Financial Management Corporation
("SEI") acts as the Trust's Administrator. Under the terms of such
agreement, SEI is entitled to receive an annual fee of 0.15% of the
Trust's first $300 million of average daily net assets, 0.12% of the
Trust's second $300 million of average daily net assets, and 0.10% of
average daily net assets over $600 million. Such fee is computed daily
and paid monthly.
Federated Administrative Services ("FAS") was the administrator for
BayFunds for the twelve months ended May 31, 1996. Fees charged by FAS
for its services were based on the level of aggregate net assets of
BayFunds.
For the year-ended May 31, 1996, FNBB voluntarily agreed to waive a
portion of its respective fee and to reimburse 1784 Income Fund to
maintain a competitive expense ratio.
2. Portfolio Valuation:
The BayFunds Bond Portfolio values U.S. Government securities at the bid
prices as furnished by an independent pricing service. Listed corporate
bonds (and other fixed-income and asset-backed securities), unlisted
securities (and other fixed-income and asset-backed securities and/or
private placements) and short-term securities are generally valued at
prices provided by an independent pricing service. Short-term securities
with maturity values of 60 days or less at the time of purchase may be
valued at amortized cost, which approximated fair value.
The 1784 Income Fund values are valued by an independent pricing service
at the last quoted sales price for such securities on each business day.
If there is no such reported sale, these securities and unlisted
securities for which market quotations are readily available are valued
at the most recent bid price using procedures determined in good faith by
the Board of Trustees. Debt obligations with sixty days or less remaining
until maturity may be valued at their amortized cost. Under this
valuation method purchase discounts and premiums are accreted and
amortized ratably to maturity and are included in interest income.
The proposed Agreement and Plan of Reorganization specifies that the
portfolio securities of the BayFunds Bond Portfolio will be valued in
accordance with the generally employed valuation procedures of the 1784
Income Fund for the purposes of determining the number of 1784 Income
Fund shares to be issued in the reorganization. The combined Pro Forma
Schedule of Portfolio Investments gives effect to the valuation of the
assets of the BayFunds Bond Portfolio under the valuation procedures of
the 1784 Income Fund.
<PAGE>
3. Series Specific Expenses:
BayFunds Bond Portfolio entered into a Shareholder Services Agreement
with BayBank Systems, Inc. to obtain certain services for shareholder and
maintain shareholder accounts. This agreement provided that the BayFunds
Bond Portfolio would incur fees up to 0.25 of 1% of the average net
assets of the Fund's Investment Shares. In addition, Federated Services
Company ("FServ") maintained the Fund's accounting records for a fee
based on the level of the Fund's average daily net assets plus
out-of-pocket expenses. The Pro forma Combining Statement of Operations
has been adjusted to reflect the elimination of these fees.
4. Capital Shares:
The Pro Forma net asset value per share assumes the issuance of shares of
the 1784 Income Fund which would have been issued at May 31, 1996 had the
proposed reorganization taken place on such date. The amount of
additional shares assumed to be issued was calculated based on the net
assets at May 31, 1996 of the BayFunds Bond Portfolio Investment Shares
($6,112) and Institutional Shares ($51,635) and the per share net asset
value of the 1784 Income Fund Shares ($9.90).
<PAGE>
BAYFUNDS
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
INVESTMENT SHARES
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF BAYFUNDS (THE
"COMPANY") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT BAYBANK
SYSTEMS, INC., ONE BAYBANK TECHNOLOGY PLACE, WALTHAM, MASSACHUSETTS 02154 ON
NOVEMBER 6, 1996 AT 2:00 P.M.
EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS KENNETH G. CONDON, VICTOR R. SICLARI AND
C. TODD GIBSON, AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES
OF THE UNDERSIGNED TO VOTE AT THE ABOVE-STATED SPECIAL MEETING, AND AT ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF, ALL INVESTMENT SHARES EVIDENCING
INTERESTS IN THE BAYFUNDS U.S TREASURY MONEY MARKET PORTFOLIO HELD OF RECORD BY
THE UNDERSIGNED ON SEPTEMBER 20, 1996, THE RECORD DATE FOR THE MEETING, UPON
THE FOLLOWING MATTER AND UPON ANY OTHER MATTER THAT MAY COME BEFORE THE
MEETING, IN THEIR DISCRETION.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON
AND, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1. CONSUMMATION OF THE TRANSACTION DESCRIBED IN PROPOSAL 1
IS CONDITIONED UPON, AMONG OTHER THINGS, APPROVAL OF THE PROPOSAL BY A MAJORITY
OF THE HOLDERS OF THE INSTITUTIONAL SHARES OF THE BAYFUNDS U.S. TREASURY MONEY
MARKET PORTFOLIO.
TO VOTE MARK AN X IN BLUE OR BLACK INK ON THE PROXY CARD BELOW. KEEP
THIS PORTION FOR YOUR RECORDS.
- -------------------------------------------------------------------------------
(DETACH HERE AND RETURN THIS PORTION ONLY)
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
INVESTMENT SHARES
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. PROPOSAL TO APPROVE AN
AGREEMENT AND PLAN OF
REORGANIZATION AND THE
TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE TRANSFER
OF SUBSTANTIALLY ALL OF THE
ASSETS ATTRIBUTABLE TO THE
INVESTMENT SHARES OF THE
BAYFUNDS U.S. TREASURY MONEY
MARKET PORTFOLIO (THE
"ACQUIRED FUND"), A PORTFOLIO OF
BAYFUNDS, TO THE 1784 U.S.
TREASURY MONEY MARKET FUND
<PAGE>
(THE "ACQUIRING FUND"), A
PORTFOLIO OF 1784 FUNDS, IN
EXCHANGE FOR CLASS A SHARES OF
THE ACQUIRING FUND, THE
DISTRIBUTION OF THE ACQUIRING
FUND'S SHARES SO RECEIVED TO
HOLDERS OF INVESTMENT SHARES OF
THE ACQUIRED FUND AND THE
TERMINATION UNDER STATE LAW OF
BAYFUNDS.
2. IN THEIR DISCRETION, THE PROXIES
ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- ----------------------------- -------------------------------------------
SIGNATURE DATE SIGNATURE (JOINT OWNERS) (DATE)
<PAGE>
BAYFUNDS
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
INSTITUTIONAL SHARES
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF BAYFUNDS (THE
"COMPANY") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT BAYBANK
SYSTEMS, INC., ONE BAYBANK TECHNOLOGY PLACE, WALTHAM, MASSACHUSETTS 02154 ON
NOVEMBER 6, 1996 AT 2:00 P.M.
EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS KENNETH G. CONDON, VICTOR R. SICLARI AND
C. TODD GIBSON, AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES
OF THE UNDERSIGNED TO VOTE AT THE ABOVE-STATED SPECIAL MEETING, AND AT ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF, ALL INSTITUTIONAL SHARES EVIDENCING
INTERESTS IN THE BAYFUNDS U.S TREASURY MONEY MARKET PORTFOLIO HELD OF RECORD BY
THE UNDERSIGNED ON SEPTEMBER 20, 1996, THE RECORD DATE FOR THE MEETING, UPON
THE FOLLOWING MATTER AND UPON ANY OTHER MATTER THAT MAY COME BEFORE THE
MEETING, IN THEIR DISCRETION.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON
AND, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1. CONSUMMATION OF THE TRANSACTION DESCRIBED IN PROPOSAL 1
IS CONDITIONED UPON, AMONG OTHER THINGS, APPROVAL OF THE PROPOSAL BY A MAJORITY
OF THE HOLDERS OF THE INVESTMENT SHARES OF THE BAYFUNDS U.S. TREASURY MONEY
MARKET PORTFOLIO.
TO VOTE MARK AN X IN BLUE OR BLACK INK ON THE PROXY CARD BELOW. KEEP
THIS PORTION FOR YOUR RECORDS.
- -------------------------------------------------------------------------------
(DETACH HERE AND RETURN THIS PORTION ONLY)
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
INSTITUTIONAL SHARES
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. PROPOSAL TO APPROVE AN
AGREEMENT AND PLAN OF
REORGANIZATION AND THE
TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE TRANSFER
OF SUBSTANTIALLY ALL OF THE
ASSETS ATTRIBUTABLE TO THE
INSTITUTIONAL SHARES OF THE
BAYFUNDS U.S. TREASURY MONEY
MARKET PORTFOLIO (THE
"ACQUIRED FUND"), A PORTFOLIO OF
BAYFUNDS, TO THE 1784
<PAGE>
INSTITUTIONAL U.S. TREASURY
MONEY MARKET FUND (THE
"ACQUIRING FUND"), A PORTFOLIO OF
1784 FUNDS, IN EXCHANGE FOR
SHARES OF THE ACQUIRING FUND,
THE DISTRIBUTION OF THE
ACQUIRING FUND'S SHARES SO
RECEIVED TO HOLDERS OF
INSTITUTIONAL SHARES OF THE
ACQUIRED FUND AND THE
TERMINATION UNDER STATE LAW OF
BAYFUNDS.
2. IN THEIR DISCRETION, THE PROXIES
ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- ----------------------------- --------------------------------------------
SIGNATURE DATE SIGNATURE (JOINT OWNERS) (DATE)
<PAGE>
BAYFUNDS
BAYFUNDS MONEY MARKET PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF BAYFUNDS (THE
"COMPANY") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT BAYBANK
SYSTEMS, INC., ONE BAYBANK TECHNOLOGY PLACE, WALTHAM, MASSACHUSETTS 02154 ON
NOVEMBER 6, 1996 AT 2:00 P.M.
EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS KENNETH G. CONSON, VICTOR R. SICLARI AND
C. TODD GIBSON, AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES
OF THE UNDERSIGNED TO VOTE AT THE ABOVE-STATED SPECIAL MEETING, AND AT ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF, ALL SHARES OF BENEFICIAL INTEREST
EVIDENCING INTERESTS IN THE BAYFUNDS MONEY MARKET PORTFOLIO HELD OF RECORD BY
THE UNDERSIGNED ON SEPTEMBER 20, 1996, THE RECORD DATE FOR THE MEETING, UPON
THE FOLLOWING MATTER AND UPON ANY OTHER MATTER THAT MAY COME BEFORE THE
MEETING, IN THEIR DISCRETION.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON
AND, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1.
TO VOTE MARK AN X IN BLUE OR BLACK INK ON THE PROXY CARD BELOW. KEEP
THIS PORTION FOR YOUR RECORDS.
- -------------------------------------------------------------------------------
(DETACH HERE AND RETURN THIS PORTION ONLY)
BAYFUNDS MONEY MARKET PORTFOLIO
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. PROPOSAL TO APPROVE AN
AGREEMENT AND PLAN OF
REORGANIZATION AND THE
TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE TRANSFER
OF SUBSTANTIALLY ALL OF THE
ASSETS OF THE BAYFUNDS MONEY
MARKET PORTFOLIO (THE
"ACQUIRED FUND"), A PORTFOLIO OF
BAYFUNDS, TO THE 1784 PRIME
MONEY MARKET FUND (THE
"ACQUIRING FUND"), A PORTFOLIO OF
1784 FUNDS, IN EXCHANGE FOR
SHARES OF THE ACQUIRING FUND,
THE DISTRIBUTION OF THE
ACQUIRING FUND'S SHARES SO
RECEIVED TO HOLDERS OF SHARES OF
THE ACQUIRED FUND AND THE
<PAGE>
TERMINATION UNDER STATE LAW OF
BAYFUNDS.
2. IN THEIR DISCRETION, THE PROXIES
ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- ----------------------------- ------------------------------------------
SIGNATURE DATE SIGNATURE (JOINT OWNERS) (DATE)
<PAGE>
BAYFUNDS
BAYFUNDS EQUITY PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF BAYFUNDS (THE
"COMPANY") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT BAYBANK
SYSTEMS, INC., ONE BAYBANK TECHNOLOGY PLACE, WALTHAM, MASSACHUSETTS 02154 ON
NOVEMBER 6, 1996 AT 2:00 P.M.
EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS KENNETH G. CONDON, VICTOR R. SICLARI AND
C. TODD GIBSON, AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES
OF THE UNDERSIGNED TO VOTE AT THE ABOVE-STATED SPECIAL MEETING, AND AT ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF, ALL SHARES OF BENEFICIAL INTEREST
EVIDENCING INTERESTS IN THE BAYFUNDS EQUITY PORTFOLIO HELD OF RECORD BY THE
UNDERSIGNED ON SEPTEMBER 20, 1996, THE RECORD DATE FOR THE MEETING, UPON THE
FOLLOWING MATTER AND UPON ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING, IN
THEIR DISCRETION.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON
AND, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1.
TO VOTE MARK AN X IN BLUE OR BLACK INK ON THE PROXY CARD BELOW. KEEP
THIS PORTION FOR YOUR RECORDS.
- -------------------------------------------------------------------------------
(DETACH HERE AND RETURN THIS PORTION ONLY)
BAYFUNDS EQUITY PORTFOLIO
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. PROPOSAL TO APPROVE AN
AGREEMENT AND PLAN OF
REORGANIZATION AND THE
TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE TRANSFER
OF SUBSTANTIALLY ALL OF THE
ASSETS OF THE BAYFUNDS EQUITY
PORTFOLIO (THE "ACQUIRED FUND"),
A PORTFOLIO OF BAYFUNDS, TO THE
1784 GROWTH FUND (THE "ACQUIRING
FUND"), A PORTFOLIO OF 1784 FUNDS,
IN EXCHANGE FOR SHARES OF THE
ACQUIRING FUND, THE DISTRIBUTION
OF THE ACQUIRING FUND'S SHARES SO
RECEIVED TO HOLDERS OF SHARES OF
THE ACQUIRED FUND AND THE
TERMINATION UNDER STATE LAW OF
BAYFUNDS.
<PAGE>
2. IN THEIR DISCRETION, THE PROXIES
ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- ----------------------------- ------------------------------------------
SIGNATURE DATE SIGNATURE (JOINT OWNERS) (DATE)
<PAGE>
BAYFUNDS
BAYFUNDS SHORT TERM YIELD PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF BAYFUNDS (THE
"COMPANY") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT BAYBANK
SYSTEMS, INC., ONE BAYBANK TECHNOLOGY PLACE, WALTHAM, MASSACHUSETTS 02154 ON
NOVEMBER 6, 1996 AT 2:00 P.M.
EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS KENNETH G. CONDON, VICTOR R. SICLARI AND
C. TODD GIBSON, AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES
OF THE UNDERSIGNED TO VOTE AT THE ABOVE-STATED SPECIAL MEETING, AND AT ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF, ALL SHARES OF BENEFICIAL INTEREST
EVIDENCING INTERESTS IN THE BAYFUNDS SHORT TERM YIELD PORTFOLIO HELD OF RECORD
BY THE UNDERSIGNED ON SEPTEMBER 20, 1996, THE RECORD DATE FOR THE MEETING, UPON
THE FOLLOWING MATTER AND UPON ANY OTHER MATTER THAT MAY COME BEFORE THE
MEETING, IN THEIR DISCRETION.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON
AND, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1.
TO VOTE MARK AN X IN BLUE OR BLACK INK ON THE PROXY CARD BELOW. KEEP
THIS PORTION FOR YOUR RECORDS.
- -------------------------------------------------------------------------------
(DETACH HERE AND RETURN THIS PORTION ONLY)
BAYFUNDS SHORT TERM YIELD PORTFOLIO
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. PROPOSAL TO APPROVE AN
AGREEMENT AND PLAN OF
REORGANIZATION AND THE
TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE TRANSFER
OF SUBSTANTIALLY ALL OF THE
ASSETS OF THE BAYFUNDS SHORT
TERM YIELD PORTFOLIO (THE
"ACQUIRED FUND"), A PORTFOLIO OF
BAYFUNDS, TO THE 1784 SHORT-TERM
INCOME FUND (THE "ACQUIRING
FUND"), A PORTFOLIO OF 1784 FUNDS,
IN EXCHANGE FOR SHARES OF THE
ACQUIRING FUND, THE DISTRIBUTION
OF THE ACQUIRING FUND'S SHARES SO
RECEIVED TO HOLDERS OF SHARES OF
THE ACQUIRED FUND AND THE
<PAGE>
TERMINATION UNDER STATE LAW
OF BAYFUNDS.
2. IN THEIR DISCRETION, THE PROXIES
ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- ----------------------------- ------------------------------------------
SIGNATURE DATE SIGNATURE (JOINT OWNERS) (DATE)
<PAGE>
BAYFUNDS
BAYFUNDS BOND PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF BAYFUNDS (THE
"COMPANY") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT BAYBANK
SYSTEMS, INC., ONE BAYBANK TECHNOLOGY PLACE, WALTHAM, MASSACHUSETTS 02154 ON
NOVEMBER 6, 1996 AT 2:00 P.M. EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS KENNETH G. CONDON, VICTOR R. SICLARI AND
C. TODD GIBSON, AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES
OF THE UNDERSIGNED TO VOTE AT THE ABOVE-STATED SPECIAL MEETING, AND AT ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF, ALL SHARES OF BENEFICIAL INTEREST
EVIDENCING INTERESTS IN THE BAYFUNDS BOND PORTFOLIO HELD OF RECORD BY THE
UNDERSIGNED ON SEPTEMBER 20, 1996, THE RECORD DATE FOR THE MEETING, UPON THE
FOLLOWING MATTER AND UPON ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING, IN
THEIR DISCRETION.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON
AND, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1.
TO VOTE MARK AN X IN BLUE OR BLACK INK ON THE PROXY CARD BELOW. KEEP
THIS PORTION FOR YOUR RECORDS.
- -------------------------------------------------------------------------------
(DETACH HERE AND RETURN THIS PORTION ONLY)
BAYFUNDS BOND PORTFOLIO
VOTE ON PROPOSAL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 1. PROPOSAL TO APPROVE AN
AGREEMENT AND PLAN OF
REORGANIZATION AND THE
TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE TRANSFER
OF SUBSTANTIALLY ALL OF THE
ASSETS OF THE BAYFUNDS BOND
PORTFOLIO (THE "ACQUIRED FUND"),
A PORTFOLIO OF BAYFUNDS, TO THE
1784 INCOME FUND (THE "ACQUIRING
FUND"), A PORTFOLIO OF 1784 FUNDS,
IN EXCHANGE FOR SHARES OF THE
ACQUIRING FUND, THE DISTRIBUTION
OF THE ACQUIRING FUND'S SHARES SO
RECEIVED TO HOLDERS OF SHARES OF
THE ACQUIRED FUND AND THE
TERMINATION UNDER STATE LAW OF
BAYFUNDS.
<PAGE>
2. IN THEIR DISCRETION, THE PROXIES
ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- ----------------------------- --------------------------------------------
SIGNATURE DATE SIGNATURE (JOINT OWNERS) (DATE)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section 240.14a-12
BayFunds
(Name of Registrant as Specified In Its Charter)
Roger P. Joseph
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
______________________________________________________________________
2. Aggregate number of securities to which transaction applies:
______________________________________________________________________
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
______________________________________________________________________
4. Proposed maximum aggregate value of transaction:
______________________________________________________________________
5. Total fee paid:
______________________________________________________________________
[X] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
______________________________________________________________________
2. Form, Schedule or Registration Statement No.:
______________________________________________________________________
3. Filing Party:
______________________________________________________________________
4. Date Filed:
______________________________________________________________________
