BAYFUNDS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 28, 1996
A special meeting of the shareholders of BayFunds (the "Trust") will be held
at 10:00 a.m. at the offices of Federated Administrative Services, 19th Floor,
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, on
June 28, 1996, for the following purposes:
(1) To consider a new Investment Advisory Agreement. This new Investment
Advisory Agreement is required because the pending merger (the "Merger")
of Boston Merger Corp., a wholly-owned subsidiary of Bank of Boston
Corporation ("BKBC"), with and into BayBanks, Inc. will cause a legal
termination of the existing Investment Advisory Agreements between the
Trust and BayBank, N.A. ("BBNA") and BayBanks Investment Management,
Inc. ("BBIM"), respectively. Upon the consummation of the Merger, and
contingent upon the approval of the new Investment Advisory Agreement,
The First National Bank of Boston, a subsidiary of BKBC, will serve as
Investment Adviser to the Trust. It is contemplated that, on or after
the date of the Merger, BBNA will merge with The First National Bank of
Boston (the "Bank Merger"), and the surviving bank will be named BayBank
of Boston, N.A. The effectiveness of the new Investment Advisory
Agreement is contingent upon the Merger but is not contingent upon the
Bank Merger. The terms of the new Investment Advisory Agreement are the
same as the terms of the existing Investment Advisory Agreements with
BBNA and BBIM, except for the identity of the Investment Adviser.
(2) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Trustees has fixed May 10, 1996 as the record date for
determination of shareholders entitled to vote at this meeting.
By Order of the Trustees
VICTOR R. SICLARI
Secretary
May 31, 1996
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS
TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE
TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO
THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL MEETING. THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BAYFUNDS
1001 LIBERTY AVENUE
PITTSBURGH, PA 15222-3779
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Trustees (the
"Trustees") of BayFunds (the "Trust"). The proxy is revocable at any time before
it is voted by sending written notice of the revocation to the Trust or by
appearing personally at the June 28, 1996 special meeting of shareholders of the
Trust (the "Special Meeting"). The cost of preparing and mailing the notice of
meeting, the proxy card, this proxy statement and any additional proxy material
has been or is to be borne by BayBank of Boston (as defined under Proposal (1)),
the Trust's proposed investment adviser, unless the Merger (as hereinafter
defined) is not consummated, in which case such expenses will be borne by
BayBank, N.A. ("BBNA"). Proxy solicitations will be made primarily by mail, but
may also be made by telephone, telegraph, fax or personal interview conducted by
certain officers or employees of the Trust or of BayBank Systems, Inc. (the
Trust's shareholder servicing agent) or Federated Administrative Services (the
Trust's administrator) or, if necessary, a commercial firm retained for this
purpose. In the event that a shareholder signs and returns the proxy ballot, but
does not indicate a choice as to any of the proposals on the proxy ballot, the
proxy attorneys will vote those shares in favor of such proposal(s).
Only shareholders of record at the close of business on May 10, 1996 will
be entitled to vote at the Special Meeting. On May 10, 1996, the Trust had
outstanding 1,452,169,690.8 shares of beneficial interest ("Shares"), each Share
being entitled to one vote, and each fractional Share being entitled to a
proportionate fractional vote. On the same date, the BayFunds Money Market
Portfolio (the "Money Market Fund") had outstanding 208,556,175.4 Shares, the
BayFunds U.S. Treasury Money Market Portfolio (the "U.S. Treasury Fund") had
outstanding 1,222,022,061.1 Shares, the BayFunds Short Term Yield Portfolio (the
"Short Term Yield Fund") had outstanding 5,958,130.4 Shares, the BayFunds Bond
Portfolio (the "Bond Fund") had outstanding 6,390,498.9 Shares, and the BayFunds
Equity Portfolio (the "Equity Fund") had outstanding 9,242,825 Shares.
For purposes of determining the presence of a quorum and counting votes on
the matters presented, Shares represented by abstentions and "broker non-votes"
will be counted as present, but not as votes cast, at the Special Meeting. Under
the Investment Company Act of 1940 (the "1940 Act"), the affirmative vote
necessary to approve the matter under consideration may be determined with
reference to a percentage of votes present at the Special Meeting, which would
have the effect of treating abstentions and non-votes as if they were votes
against the proposal.
The Trust's executive offices are located at Federated Investors Tower,
1001 Liberty Avenue, Pittsburgh, PA 15222-3779. This proxy statement and the
enclosed notice of meeting and proxy card are first being mailed on or about May
31, 1996.
A COPY OF THE TRUST'S ANNUAL REPORT DATED DECEMBER 31, 1995 IS AVAILABLE,
WITHOUT CHARGE, UPON REQUEST AND MAY BE OBTAINED BY CALLING 1-800-BAYFUND OR BY
WRITING THE TRUST AT THE ADDRESS ABOVE.
SUMMARY OF PROPOSALS
This Special Meeting is being called for the following purposes: (1) to
approve or disapprove a new investment advisory agreement between the Trust and
BayBank of Boston (the "New Investment Advisory Agreement"); and (ii) to
transact such other business as may properly come before the meeting or any
adjournment thereof. The New Investment Advisory Agreement will be dated the
later of (i) approval of the New Investment Advisory Agreement by shareholders
and Trustees of the Trust or (ii) the consummation of the merger (the "Merger")
of Boston Merger Corp. ("Merger Corp."), a wholly-owned subsidiary of Bank of
Boston Corporation ("BKBC"), with and into BayBanks, Inc. ("BayBanks").
Approval of Proposal (1) with respect to any of the five separate
investment portfolios of the Trust (each a "Fund," or collectively, the "Funds")
requires the affirmative vote of: (a) 67% or more of the Shares of such Fund
present at the Special Meeting, if the holders of more than 50% of the
outstanding Shares are present or represented by proxy, or (b) more than 50% of
the outstanding Shares of such Fund, whichever is less (hereinafter, a "Majority
Shareholder Vote").
PROPOSAL (1)
APPROVAL OR DISAPPROVAL OF THE NEW
INVESTMENT ADVISORY AGREEMENT
THE NEW INVESTMENT ADVISORY AGREEMENT
Consideration of the New Investment Advisory Agreement is being requested
because of the pending Merger. Upon the consummation of the Merger, and
contingent upon the approval of the New Investment Advisory Agreement, The First
National Bank of Boston ("FNBB"), a subsidiary of BKBC, will serve as investment
adviser to the Trust. It is contemplated that, on or after the date of the
Merger, BayBank, N.A. ("BBNA") will merge with FNBB (the "Bank Merger"), and the
surviving bank will be named BayBank of Boston, N.A. "BayBank of Boston" is
sometimes used herein to refer to FNBB, whether before or after the Bank Merger.
The effectiveness of the New Investment Advisory Agreement is contingent upon
the Merger but is not contingent upon the Bank Merger. The terms of the New
Investment Advisory Agreement are the same as the terms of the Present
Investment Advisory Agreements (as hereinafter defined) with BBNA and BayBanks
Investment Management, Inc. ("BBIM"), except for the identity of the Investment
Adviser.
Here are some of the factors you should consider in determining whether to
approve the New Investment Advisory Agreement:
The Board of Trustees has unanimously approved the New Investment
Advisory Agreement;
There will be no change in the Funds' investment objectives or
investment policies or in the duties of the investment adviser as a result
of approval of the New Investment Advisory Agreement;
There will be no change in the fees payable by the Funds to BayBank of
Boston for advisory services as a result of approval of the New Investment
Advisory Agreement; and
The Board of Trustees has been advised that FNBB management currently
intends that the persons currently responsible for providing daily
investment advice to the Funds will become employees of BayBank of Boston
following the consummation of the Merger and no significant changes will be
made in their responsibilities to the Funds.
BBIM, 155 Federal Street, Boston, MA 02110, a wholly-owned subsidiary of
BBNA, serves as investment adviser to (i) the Money Market Fund pursuant to an
investment advisory agreement dated June 6, 1991; and (ii) the Short Term Yield
Fund, the Bond Fund, and the Equity Fund pursuant to an investment advisory
agreement dated September 1, 1992 (each a "Present Investment Advisory
Agreement"). BBNA, 175 Federal Street, Boston, MA 02110, a wholly-owned
subsidiary of BayBanks, serves as investment adviser to the U.S. Treasury Fund
pursuant to an investment advisory agreement dated September 1, 1992, as amended
March 1, 1996 (a "Present Investment Advisory Agreement" and, together with the
investment advisory agreements between the Trust and BBIM, the "Present
Investment Advisory Agreements").
Bank of Boston Corporation and BayBanks, Inc. have entered into an
Agreement and Plan of Merger, dated as of December 12, 1995 (the "Merger
Agreement"). BECAUSE THE MERGER WILL EFFECT A CHANGE IN CONTROL OF BBIM AND
BBNA, THE PRESENT INVESTMENT ADVISORY AGREEMENTS WILL AUTOMATICALLY TERMINATE IN
ACCORDANCE WITH THE TERMS OF EACH AS REQUIRED BY THE 1940 ACT. THUS, APPROVAL OF
THE NEW INVESTMENT ADVISORY AGREEMENT BY SHAREHOLDERS OF EACH FUND IS BEING
SOUGHT IN ORDER TO AVOID ANY INTERRUPTION IN THE PROVISION OF ADVISORY SERVICES
TO EACH FUND.
At meetings held on February 15 and May 16, 1996, the Trustees, including a
majority of the Trustees who are not interested persons (as defined in the 1940
Act) of the Trust, FNBB, BBNA or BBIM, considered and approved the New
Investment Advisory Agreement with BayBank of Boston, pursuant to which BayBank
of Boston will act as the Trust's investment adviser. THE TERMS OF THE NEW
INVESTMENT ADVISORY AGREEMENT ARE IDENTICAL TO THOSE OF THE PRESENT INVESTMENT
ADVISORY AGREEMENTS WITH RESPECT TO DUTIES, FEES AND THE STANDARD OF CARE. The
effective date of the New Investment Advisory Agreement will be the later of (i)
approval by shareholders of the New Investment Advisory Agreement or (ii) the
date of the consummation of the Merger (the "Closing Date"). It is currently
expected that the Closing Date will occur during the third quarter of 1996.
BayBank of Boston will be headquartered at 100 Federal Street, Boston,
Massachusetts.
Copies of the Present Investment Advisory Agreements and the New Investment
Advisory Agreement appear as Exhibits A, B, C, and D, respectively, to this
proxy statement and the descriptions of such agreements contained herein are
qualified in their entirety by the provisions of such agreements as set forth in
such exhibits.
The Present Investment Advisory Agreement with respect to the Money Market
Fund was approved by the Board of Trustees, including a majority of the Trustees
who are not interested persons of the Trust or BBIM (or its affiliates), as
defined in the 1940 Act (the "Requisite Vote of the Board of Trustees"), on May
17, 1991, and was most recently reapproved on May 16, 1996. The Present
Investment Advisory Agreement with respect to the Money Market Fund was last
submitted to a vote of its shareholders on August 21, 1992, for the purpose of
complying with the requirements of Section 15 of the 1940 Act.
The Present Investment Advisory Agreement with respect to the Short Term
Yield Fund, the Bond Fund, and the Equity Fund was approved by the Requisite
Vote of the Board of Trustees on August 28, 1992, and was most recently
reapproved on May 16, 1996. The present Investment Advisory Agreement with
respect to the Short Term Yield Fund, the Bond Fund, and the Equity Fund was
last submitted to a vote of their respective shareholders on January 18, 1993,
for the purpose of complying with the requirements of Section 15 of the 1940
Act.
The initial form of the Present Investment Advisory Agreement with respect
to the U.S. Treasury Fund was approved by the Requisite Vote of the Board of
Trustees on August 28, 1992. The current form of the Present Investment Advisory
Agreement with respect to the U.S. Treasury Fund (as amended to reflect the
reorganization of certain BayBanks subsidiaries into BBNA) was approved by the
Requisite Vote of the Board of Trustees on February 15, 1996, and was most
recently reapproved, in its current form, on May 16, 1996. The Present
Investment Advisory Agreement with respect to the U.S. Treasury Fund was last
submitted to a vote of its shareholders on January 18, 1993, for the purpose of
complying with the requirements of Section 15 of the 1940 Act.
The terms of the New Investment Advisory Agreement (which are materially
unchanged from the Present Investment Advisory Agreements) provide that BayBank
of Boston, subject to the direction of the Board of Trustees, will provide a
continuous investment program for each Fund, including investment research and
management with respect to all securities and investments and cash equivalents
in said Funds. BayBank of Boston will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Trust with respect to the Funds.
For its services under the Present Investment Advisory Agreements, BBIM is
entitled to receive a fee computed and paid daily at the annual rate of (i)
forty one-hundredths of one percent (.40%) of the Money Market Fund's average
daily net assets, (ii) fifty one-hundredths of one percent (.50%) of the Short
Term Yield Fund's average daily net assets, (iii) sixty one-hundredths of one
percent (.60%) of the Bond Fund's average daily net assets, and (iv) seventy
one-hundredths of one percent (.70%) of the Equity Fund's average daily net
assets. BBIM may voluntarily reduce such fee from time to time by notice to the
Trust. For its services under the Present Investment Advisory Agreement, BBNA is
entitled to receive from the U.S. Treasury Fund a fee computed and paid daily at
the annual rate of twenty one-hundredths of one percent (.20%) of the Fund's
average daily net assets. BBNA may voluntarily reduce such fee from time to time
by notice to the Trust.
These fees are identical in amount to the fees to which each of the Funds
will be contractually subject under the New Investment Advisory Agreement.
The Present Investment Advisory Agreements and the New Investment Advisory
Agreement each provides that BBIM, BBNA, or BayBank of Boston, respectively,
may, from time to time and for such periods as it deems appropriate, further
reduce its compensation by voluntarily reimbursing certain expenses of the
Funds. During the fiscal year ended December 31, 1995, BBNA earned investment
advisory fees from the U.S. Treasury Fund of $1,978,781. During the fiscal year
ended December 31,
1995, BBIM earned aggregate investment advisory fees of $2,374,966, and was paid
on a Fund by Fund basis as follows:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FUND FEES PAID
--------------------------------------------- ----------
<S> <C>
Money Market Fund $869,240
Short Term Yield Fund $361,786
Bond Fund $360,071
Equity Fund $783,869
</TABLE>
BayBank Systems, Inc., a subsidiary of BayBanks, provides shareholder
services to the Trust pursuant to a Shareholder Services Agreement dated
December 1, 1992. For its services under the Shareholder Services Agreement,
BayBank Systems, Inc. is entitled to receive a fee computed monthly at an annual
rate of twenty-five one-hundredths of one percent (.25%) of the average daily
net assets held during the month of the Investment Shares of each Fund. During
the fiscal year ended December 31, 1995, BayBank Systems, Inc. earned aggregate
shareholder service fees of $633,979.
If approved by shareholders at this Special Meeting, the New Investment
Advisory Agreement will continue for two years from the effective date, unless
terminated, and may be renewed from year to year thereafter by the Board of
Trustees. The continuation of the New Investment Advisory Agreement must be
approved (a) by a majority vote of the Trustees, including a majority of the
Trustees who are not parties to the New Investment Advisory Agreement or
interested persons (as defined in the 1940 Act) of the Trust, BBIM, BBNA, or
BayBank of Boston, cast in person at a meeting called for that purpose or (b) by
a Majority Shareholder Vote of a Fund. The New Investment Advisory Agreement may
be terminated as to a particular Fund at any time on sixty days' written notice,
without the payment of any penalty, by the Trust (by vote of the Trust's Board
of Trustees or by a Majority Shareholder Vote of such Fund) or by BayBank of
Boston. The New Investment Advisory Agreement may not be assigned and shall
terminate automatically in the event of its assignment, as defined in the 1940
Act.
As do the Present Investment Advisory Agreements, the New Investment
Advisory Agreement provides that, in the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties on the
part of the investment adviser in the performance of its duties under the
investment advisory agreement, the investment adviser shall not be liable to the
Trust or any of the Funds or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any losses that
may be sustained in the purchase, holding or sale of any security.
The Trustees of the Trust, including the Trustees who are not interested
persons (as defined in the 1940 Act) of the Trust, or of FNBB, reviewed and
unanimously approved the New Investment Advisory Agreement in person at meetings
on February 15 and May 16, 1996, and have directed that it be submitted to the
shareholders of the Trust for their approval.
If the New Investment Advisory Agreement is approved by Fund shareholders
and the Merger is thereafter consummated, the New Investment Advisory Agreement
will be executed and become effective on the Closing Date. In the event the
Merger is not consummated, the Present Investment Advisory Agreements will
continue in accordance with their terms. In the event the Merger is
consummated and the New Investment Advisory Agreement is not approved by Fund
shareholders, the Board of Trustees will consider what further actions should be
taken.
PROPOSED MERGER
The Merger Agreement provides for the merger of Merger Corp. (a
wholly-owned subsidiary of BKBC) with and into BayBanks with BayBanks surviving
as a wholly-owned subsidiary of BKBC. It is contemplated that on or after the
date of the Merger their subsidiaries, FNBB and BBNA, will combine to become
BayBank of Boston, N.A.
Consummation of the Merger is subject to the satisfaction of certain
conditions, including the receipt of all necessary regulatory approvals. In
addition, approval of the Merger by the shareholders of BKBC and BayBanks was
obtained on April 25, 1996. Shareholders of the Trust are not being asked to
vote on the Merger. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Closing Date by the mutual consent of the
parties or upon the occurrence of other events specified in the Merger
Agreement. Completion of the Merger will occur as soon as practicable after
satisfaction or waiver of the applicable conditions, which the parties currently
anticipate will occur in the third quarter of 1996. However, the consummation of
the Merger could be delayed as a result of delays in obtaining the necessary
governmental regulatory approvals.
TRUSTEES' RECOMMENDATIONS AND OTHER INFORMATION
The New Investment Advisory Agreement was considered and approved by the
Board of Trustees of the Trust, including a majority of the Trustees who are not
interested persons (as defined in the 1940 Act) of the Trust or of FNBB, at
meetings held on February 15 and May 16, 1996.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS OF THE TRUST VOTE FOR THE
PROPOSED NEW INVESTMENT ADVISORY AGREEMENT. In making this recommendation, the
Trustees have considered information relating to BayBank of Boston's status
following the completion of the Merger, including present capabilities and
expertise in serving as investment adviser to the Trust. They have reviewed the
terms of the New Investment Advisory Agreement, including the fact that no
effective net change to the Trust's investment advisory fees is being proposed.
Pursuant to the New Investment Advisory Agreement, BayBank of Boston will
determine, subject to the general supervision of the Board of Trustees of the
Trust and in accordance with each Fund's investment objective and restrictions,
which securities are to be purchased and sold by a Fund, and which brokers are
to be eligible to execute its portfolio transactions. While BayBank of Boston
will generally seek competitive spreads or commissions on behalf of each of the
Funds, the Trust may not necessarily pay the lowest spread or commission
available on each transaction. Allocation of transactions to various dealers
will be determined by BayBank of Boston in its best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
BayBank of Boston may receive orders for transactions by the Trust. Information
so received will be in addition to and not in lieu of services required to be
performed by BayBank of Boston and will not reduce the advisory fees payable to
BayBank of Boston by the Trust. Such information may be useful to BayBank of
Boston in serving both the Trust and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may be useful
to BayBank of Boston in carrying out its obligations to the Trust.
In connection with their recommendations to shareholders to vote for the
New Investment Advisory Agreement, the Trustees were advised by BBIM and BBNA
that the persons currently responsible for providing daily investment advice to
the Trust will become employees of BayBank of Boston following consummation of
the Merger and no significant changes will be made in their responsibilities to
the Funds. BBIM and BBNA also advised the Trustees that they intend to examine
all mutual fund activities of the combined entities subsequent to consummation
of the Merger, and that management of the Trust would be advised regarding the
findings of the examination of these activities. Accordingly, BBIM and BBNA have
advised the Trustees that they are unable currently to predict whether changes
will be recommended which would materially impact the Trust's operations or when
such changes, if recommended, would be proposed. Nevertheless, the Trustees,
including all members of the Board of Trustees who are not interested persons of
the Trust, BBIM and BBNA, or FNBB concluded that BayBank of Boston will be fully
capable of performing the services contemplated by the New Investment Advisory
Agreement and recommended that the New Investment Advisory Agreement be approved
by the shareholders of the Trust.
With regard to the New Investment Advisory Agreement, the 1940 Act provides
that, in connection with the sale of any interest in an investment adviser which
results in the "assignment" of an investment advisory contract, an investment
adviser of a registered investment company, or an affiliated person of such
investment adviser, may receive any amount or benefit if (i) for a period of
three years after the sale, at least 75% of the members of the Board of Trustees
of the investment company are not interested persons of the investment adviser
or the predecessor adviser, and (ii) there is no "unfair burden" imposed on the
investment company as a result of such sale or any express or implied terms,
conditions or understanding applicable thereto. For this purpose, "unfair
burden" is defined to include any arrangement during the two-year period after
the transaction, whereby the investment adviser or its predecessor or successor
investment advisers, or any interested persons of any such adviser, receives or
is entitled to receive any compensation directly or indirectly (i) from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company other than bona fide ordinary
compensation as principal underwriter for such company, or (ii) from the
investment company or its security holders for other than bona fide investment
advisory or other services. This provision of the 1940 Act was enacted by
Congress in 1975 to make it clear that an investment adviser (or an affiliated
person of the adviser) can realize a profit on the sale of the adviser's
business subject to the two safeguards described above. In accordance with the
safeguards imposed by the 1940 Act, at least 75% of the members of the Board of
Trustees of the Trust currently are not comprised of interested persons of BBIM,
BBNA, or FNBB. Also, for at least three years after the Merger, the Trustees
must continue to meet this composition percentage in order for BayBank of Boston
to continue to serve as investment adviser to the Funds. Additionally, the Board
of Trustees of the Trust has received assurance from BBIM, BBNA and FNBB that no
"unfair burden" will be imposed on the Trust as a result of the proposed
transaction.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE
NEW INVESTMENT ADVISORY AGREEMENT.
------------------------
INFORMATION ABOUT BAYBANKS, BBNA AND BBIM
BAYBANKS
BayBanks, established in 1928, is a registered bank holding company and
savings and loan holding company that provides a complete range of banking,
investment, and related financial services, with particular emphasis on consumer
and middle market business customers. BayBanks' largest subsidiary is BayBank,
N.A., a national bank based in Boston with branches in Massachusetts and
Connecticut. BayBanks also has national bank and savings association
subsidiaries in New Hampshire. BayBanks is well known for its use of advanced
banking technology, featuring state-of-the-art computer and telecommunications
technology to process customer transactions, provide customer information, and
increase the efficiency of its data processing activities. BayBanks is a
recognized leader in consumer banking, with the largest consumer market share in
Massachusetts.
BBNA
BBNA, a wholly-owned subsidiary of BayBanks, is the adviser to the U.S.
Treasury Fund and manages approximately $1.1 billion of assets (as of December
31, 1995) in the U.S. Treasury Fund. BBNA, through its Capital Markets Division,
manages more than $2.6 billion of assets in the investment portfolios of
BayBanks. BBNA is the successor to BayBank Boston, N.A., the former adviser to
the U.S. Treasury Fund. BBNA was created in order to restructure the
Massachusetts and Connecticut banking subsidiaries of BayBanks into a single
national bank, effective October 31, 1995.
BBIM
BBIM, a wholly-owned subsidiary of BBNA, is the adviser for the Money
Market, Short Term Yield, Bond and Equity Funds and is a registered investment
adviser that provides investment advisory services for trust and other managed
assets. BBIM was established as a separate subsidiary of BayBanks in 1985, but
its predecessor division and personnel have been providing investment advisory
services to BayBanks' customers for more than 65 years. As of December 31, 1995,
the Trust Division of BBNA acted as custodian for assets totaling $5.4 billion.
Of this amount, BBIM managed $1.7 billion of discretionary assets. BBIM and BBNA
have been managing commingled funds for over twenty years. At the present time
BBIM serves as adviser to six such commingled funds with total assets of
approximately $308 million. BBIM has managed mutual funds since August 1991 and
manages approximately $448 million of assets (as of December 31, 1995) in
various portfolios of the Trust.
The principal executive offices of BayBanks and BBNA are located at 175
Federal Street, Boston, MA 02110. BBIM's principal executive offices are located
at 155 Federal Street, Boston, MA 02110.
INFORMATION ABOUT BKBC AND FNBB
BKBC
BKBC is a registered bank holding company, organized in 1970 under
Massachusetts law, which, through its subsidiaries and joint ventures, is
engaged in providing a wide variety of retail, corporate and international
financial services to individuals, corporate and institutional customers,
governments, and other financial institutions. These services include retail
banking, consumer finance, private banking, trust, mortgage origination and
servicing, domestic corporate and investment banking,
leasing, international banking, commercial real estate lending, correspondent
banking, and securities and payments processing. BKBC's principal subsidiary is
FNBB, a national banking association. Other major banking subsidiaries of BKBC
include Bank of Boston Connecticut and Rhode Island Hospital Trust National
Bank.
BKBC's and FNBB's principal executive offices are located at 100 Federal
Street, Boston, Massachusetts 02110.
FNBB
FNBB is the successor to a number of banking institutions, the first of
which was chartered in 1784. All of the capital stock of FNBB (except directors'
qualifying shares) is owned directly or indirectly by BKBC. FNBB has been
providing asset management services since 1890. The Private Bank Division of
FNBB is the investment management group within FNBB that will advise the Trust.
As of December 31, 1995, The Private Bank was responsible for the investment
management of approximately $16 billion of individual, institutional, endowment
and corporate assets, including $2.5 billion in assets of 1784 Funds, in money
market, equity, and fixed income securities. The Private Bank has earned
national recognition and respect as investment managers.
FNBB presently serves as investment adviser to 1784 Funds, an open-end
management investment company consisting of 14 portfolios. The following table
shows the name of each portfolio having an investment objective similar to a
portfolio of the Trust, the portfolio's assets under management at March 31,
1996 (in millions of dollars), the contractual investment advisory fee as an
annual percentage of assets under management, and the investment advisory fee
after voluntary waivers by FNBB:
<TABLE>
<CAPTION>
CONTRACTUAL FEE AFTER
FUND ASSETS FEE WAIVER
-------------------------------------------------- ------ ----------- ---------
<S> <C> <C> <C>
1784 U.S. Treasury Money Market Fund $ 71.1 0.40 0.40
1784 Institutional U.S. Treasury Money Fund 656.6 0.20 0.12
1784 Short-Term Income Fund 86.9 0.50 0.50
1784 Income Fund 223.4 0.74 0.60
1784 Growth Fund NA 0.74 0.74
1784 Growth and Income Fund 288.0 0.74 0.74
</TABLE>
The principal executive officer and directors of FNBB (prior to the Merger)
are:*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME FNBB AND BUSINESS ADDRESS
- ------------------------- ----------------------- -----------------------------------------
<S> <C> <C>
Charles K. Gifford Principal Executive Chairman, President and Chief Executive
Officer, Director Officer of BKBC and of FNBB,
100 Federal Street, Boston, MA 02110.
Wayne A. Budd Director Senior Vice President, NYNEX,
Governmental & Regulatory Affairs, Room
1800, 185 Franklin Street, Boston, MA
02107.
</TABLE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME FNBB AND BUSINESS ADDRESS
- ------------------------- ----------------------- -----------------------------------------
<S> <C> <C>
Alice F. Emerson Director Senior Fellow, The Andrew W. Mellon
Foundation, 140 East 62nd St., New York,
NY 10021.
Paul C. O'Brien Director President of The O'Brien Group, Inc., One
International Place-30th Floor, Boston,
MA 02110.
John W. Rowe Director President and Chief Executive Officer of
New England Electric System,
25 Research Drive, Westborough, MA 01582.
Gary L. Countryman Director Chairman and Chief Executive Officer of
Liberty Mutual Insurance Company, 175
Berkeley Street, Boston, MA 02117.
J. Donald Monan, S.J. Director President of Boston College,
18 Old Colony Road,
Chestnut Hill, MA 02167.
Richard A. Smith Director Chairman of the Board of Harcourt
General, Inc. and the Nieman-Marcus
Group, Inc.; Chairman and Chief Executive
Officer of GC Companies, Inc.,
27 Boylston Street,
Chestnut Hill, MA 02167.
William C. VanFaasen Director President and Chief Executive Officer of
Blue Cross and Blue Shield of
Massachusetts, Inc.,
100 Summer Street-01-31,
Boston, MA 02110.
William F. Connell Director Chairman and Chief Executive Officer of
Connell Limited Partnership, One
International Place, 31st Floor,
Boston, MA 02110.
Thomas J. May Director Chairman, President and Chief Executive
Officer of Boston Edison Company, 800
Boylston Street, Boston, MA 02199.
Donald F. McHenry Director University Research Professor of
Diplomacy and International Relations,
Georgetown University, Washington, D.C.
20057-1052.
</TABLE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME FNBB AND BUSINESS ADDRESS
- ------------------------- ----------------------- -----------------------------------------
<S> <C> <C>
Thomas B. Wheeler Director President and Chief Executive Officer of
Massachusetts Mutual Life Insurance
Company, 1295 State Street, Springfield,
MA 01111.
Alfred M. Zeien Director Chairman of the Board and Chief Executive
Officer of The Gillette Company,
Prudential Tower Building, Boston, MA
02199.
</TABLE>
* From and after the Merger, the BayBank of Boston Board will be expanded by
four members, and William M. Crozier, Jr., John A. Cervieri Jr., Thomas R.
Piper, and Glenn P. Strehle, will be appointed as members of the BayBank of
Boston Board.
AFFILIATED BROKER TRANSACTIONS
In the fiscal year ended December 31, 1995, no brokerage commissions were
paid to affiliated brokers of the Trust or of BBIM or BBNA on account of trading
for the Funds.
OTHER MATTERS AND DISCRETION
OF PERSONS NAMED IN THE PROXY
The Trust is not required, and does not intend, to hold annual meetings of
shareholders. Shareholders wishing to submit proposals for consideration for
inclusion in a proxy statement for the next meeting of shareholders should send
their written proposals to BayFunds, Federated Investors Tower, Pittsburgh, PA
15222-3779, so that they are received within a reasonable time before any such
meeting.
While the Special Meeting is called to act upon any other business that may
properly come before it, at the date of this proxy statement the only business
which the management intends to present or knows that others will present is the
business stated in the Notice of Meeting. If any other matters lawfully come
before the Special Meeting, and in all procedural matters at said Special
Meeting, it is the intention that the enclosed proxy shall be voted in
accordance with the best judgment of the persons named as proxies therein, or
their substitutes, present and acting at the Special Meeting.
If at the time any session of the Special Meeting is called to order, a
quorum is not present, in person or by proxy, the persons named as proxies may
vote those proxies that have been received to adjourn the Special Meeting to a
later date. In the event that a quorum is present but sufficient votes in favor
of one or more of the proposals have not been received, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the Shares
present in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote those proxies that they are
entitled to vote in favor of the proposal, in favor of such an adjournment, and
will vote those proxies required to be voted against the proposal, against any
such adjournment. A vote may be taken on one or more of the proposals in this
proxy
statement prior to any such adjournment if sufficient votes for its or their
approval have been received and it is otherwise appropriate.
As of May 10, 1996, the Trust believes that BBNA and its affiliates were
the shareholder of record of 142,245,308.1 (68.2%) Shares of the Money Market
Fund, 847,159,298.3 (69.3%) Shares of the U.S. Treasury Fund, 3,923,996.3
(65.8%) Shares of the Short Term Yield Fund, 5,600,346.7 (87.6%) Shares of the
Bond Fund, and 6,736,597.2 (73.8%) Shares of the Equity Fund. As a result, BBNA
may be deemed to be a "controlling person" of each of the Funds under the 1940
Act.
The following list indicates the beneficial ownership of the shareholders
who, to the best knowledge of the Trust, are the beneficial owners of more than
5% of the outstanding Shares of a Fund as of May 10, 1996:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES BENEFICIAL
NAME AND ADDRESS BENEFICIALLY OWNED OWNERSHIP
------------------------------------------ ------------------ -------------
<S> <C> <C>
BOND FUND
BayBank, N.A. as Trustee for 685,342.3 10.7%
BayBanks Savings,Profit Sharing and
Stock Ownership Plan-Bond Fund
175 Federal St.
Boston, MA 02110
BayBank Trustee for Universal Fasteners 523,813.9 8.2%
Lawrenceburg Salaried Pension Plan
Capp Turner c/o Universal Fasteners
P.O. Box 240
Lawrenceburg, KY 40342
Marine Midland Bank TTEEU/A DTD 472,635.6 7.4%
4/24/92 FBO BayBanks Def. Pymt. SERP Fund
P.O. Box 1329
Buffalo, NY 14240
BayBank Agent-Electro Switch Corp. 366,222.9 5.7%
Retirement Plan
775-1 Pleasant St.
Weymouth, MA 02189
EQUITY FUND
BayBank, N.A. as Trustee for 1,618,879.7 17.5%
BayBanks Savings, Profit Sharing and
Stock Ownership Plan-Equity Fund
175 Federal St.
Boston, MA 02110
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PERCENTAGE OF
NUMBER OF SHARES BENEFICIAL
NAME AND ADDRESS BENEFICIALLY OWNED OWNERSHIP
------------------------------------------ ------------------ -------------
SHORT TERM YIELD FUND
BayBank, N.A. as Trustee for 2,244,307.5 37.7%
BayBanks Savings, Profit Sharing and
Stock Ownership Plan-Short Term Fund
175 Federal St.
Boston, MA 02110
MONEY MARKET FUND
BayBank, N.A. as Trustee for 23,601,582.3 11.3%
BayBanks Savings, Profit Sharing and
Stock Ownership Plan-Money Market Fund
175 Federal St.
Boston, MA 02110
BayBanks, Inc. Pension Plan 13,726,787.8 6.6%
175 Federal St. Boston, MA 02110
U.S. TREASURY FUND
None
</TABLE>
As of May 10, 1996, the Officers and Trustees of the Trust owned less than
1% of a Fund's outstanding Shares.
INFORMATION ABOUT THE TRUST'S ADMINISTRATOR AND PRINCIPAL UNDERWRITER
The Trust's administrator is Federated Administrative Services ("FAS"),
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The
Trust's principal distributor is Federated Securities Corp., Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, a Pennsylvania
corporation organized on November 14, 1969. Federated Securities Corp. and FAS
each are subsidiaries of Federated Investors. Federated Securities Corp. is also
the principal distributor for a number of other investment companies. The
following persons are officers of the Trust and may be deemed to have an
interest in FAS or Federated Securities Corp. by virtue of their status as
employees and/or executive officers of Federated Investors or its subsidiaries:
<TABLE>
<CAPTION>
NAME POSITION WITH TRUST
- ------------------------ ---------------------------------------
<S> <C>
Glen R. Johnson President and Treasurer
C. Christine Thomson Vice President and Assistant Treasurer
Victor R. Siclari Secretary
</TABLE>
BBIM and BBNA have dealer agreements with Federated Securities Corp.
pursuant to which BBIM and BBNA are authorized to place orders with the Trust's
Transfer Agent for the purchase of Shares and tender Shares to the Transfer
Agent for redemption.
If you do not expect to attend the Special Meeting, please sign your proxy
card promptly and return it in the enclosed envelope to avoid unnecessary
expense and delay. No postage is necessary.
May 31, 1996
EXHIBIT A TO PROXY STATEMENT
BAYFUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 6TH DAY OF JUNE, 1991, between BAYBANKS
INVESTMENT MANAGEMENT, INC., an investment adviser registered under the
Investment Advisers Act of 1940, having its principal place of business in
Boston, Massachusetts (the "Adviser"), and BAYFUNDS, a Massachusetts business
trust having its principal place of business in Pittsburgh, Pennsylvania (the
"Trust").
WHEREAS, the Trust is an "open-end company" as that term is defined in the
Investment Company Act of 1940 (the "Act") and is registered as such with
the Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of the
portfolios ("Funds") of the Trust on whose behalf the Trust executes an exhibit
to this Contract, and Adviser, by its execution of each such exhibit, accepts
the appointments. Subject to the direction of the Trustees of the Trust, Adviser
shall provide investment research and supervision of the investments of each of
the Funds and conduct a continuous program of investment evaluation and of
appropriate sale or other disposition and reinvestment of each Fund's assets.
The Adviser shall determine the securities to be purchased or sold by the Fund
and will place orders pursuant to its determinations with or through such
brokers or dealers in conformity with such policies with respect to brokerage as
the Trust shall establish from time to time and convey to the Adviser.
2. Adviser, in its supervision of the investments of each of the Funds will
be guided by each Fund's fundamental investment policies and the provisions and
restrictions contained in the Declaration of Trust and By-Laws of the Trust and
as set forth in the Trust's Registration Statement (as hereinafter defined) and
exhibits thereto as may be on file with the Securities and Exchange Commission.
The Trust shall deliver copies of all such investment policies and of the
Declaration of Trust and By-Laws of the Trust, as amended from time to time, and
the Registration Statements to the Adviser, promptly upon such documents
becoming available.
3. The Trust shall pay or cause to be paid, on behalf of each Fund, all of
the Fund's expenses and the Fund's allocable share of Trust expenses, including
without limitation, the expenses of organizing the Trust and continuing its
existence; fees and expenses of officers and Trustees of the Trust; fees for
investment advisory services and administrative personnel and services; fees and
expenses of preparing and filing its Registration Statements under the
Securities Act of 1933 and the Act and any amendments thereto (collectively, the
"Registration Statements"); expenses of registering and qualifying the Trust,
the Funds and shares of the Funds ("Shares") under Federal and state laws and
regulations; expenses of preparing, printing and distributing prospectuses (and
any amendments thereto) and sales literature; interest expense, taxes, fees and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase and redemption of Shares, including expenses
attributable to a
program of periodic issue; charges and expenses of custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents and registrars;
printing and mailing costs, auditing, accounting and legal expenses; reports to
shareholders and governmental officers and commissions; expenses of meetings of
Trustees and shareholders and proxy solicitations therefor; insurance expenses;
association membership dues; and such nonrecurring items as may arise, including
all losses and liabilities incurred in administering the Trust and the Funds.
The Trust will also pay each Fund's allocable share of such extraordinary
expenses as may arise, including expenses incurred in connection with
litigation, proceedings, and claims and the legal obligations of the Trust to
indemnify its officers, Trustees, employees, distributors, and agents with
respect thereto.
4. The Trust, on behalf of each of the Funds, shall pay to Adviser, for all
services rendered to such Fund by Adviser hereunder, the fees set forth in the
exhibits attached hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such lower
expense limitation as the Adviser may, by notice to the Fund, voluntarily
declare to be effective.
7. This Contract shall begin for each Fund as of the date of execution of
the applicable exhibit and shall continue in effect with respect to each Fund
presently set forth on an exhibit (and any subsequent Funds added pursuant to an
exhibit during the initial term of this contact) for two years from the date of
this contract set forth above and thereafter for successive periods of one year,
subject to the provisions for termination and all of the other terms and
conditions hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust, including
a majority of the Trustees who are not parties to this Contract or interested
persons of any such party (other than as Trustees of the Trust), cast in person
at a meeting called for that purpose; and (b) Adviser shall not have notified a
Fund in writing at least sixty (60) days prior to the anniversary date of this
Contract in any year thereafter that it does not desire such continuation with
respect to that Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as to that Fund
upon execution of the applicable exhibit and will continue in effect until the
next annual approval of this Contract by the Trustees and thereafter for
successive periods of one year, subject to approval as described above.
8. Notwithstanding any provision in this Contract, it may be terminated at
any time with respect to any Fund, without the payment of any penalty, by the
Trustees of the Trust or by a vote of a majority of the outstanding voting
securities of that Fund, as defined in Section 2(a)(42) of the Act on sixty (60)
days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser may employ or contract with
such other person, persons, corporation or corporations at its own cost and
expense as it shall determine in order to assist it in carrying out this
Contract.
10. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties under this Contract on the part of
Adviser, Adviser shall not be liable to the Trust
or to any of the Funds or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any losses that
may be sustained in the purchase, holding or sale of any security.
11. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved both by the vote of a majority of
the Trustees of the Trust, including a majority of Trustees who are not parties
to this Contract or interested persons of any such party to this Contract (other
than as Trustees of the Trust), cast in person at a meeting called for that
purpose, and on behalf of a Fund by a majority of the outstanding voting
securities of such Fund as defined in Section 2(a)(42) of the Act.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Adviser agrees to submit any proposed sales literature for the Trust (or any
Fund) or for itself or its affiliates which mentions the Trust (or any Fund) to
the Trust's distributor for review and filing with the appropriate regulatory
authorities prior to the public release of any such sales literature. The Trust
agrees to cause its distributors to promptly review all such sales literature to
ensure compliance with relevant requirements, to promptly advise Adviser of any
deficiencies contained in such sales literature, to promptly file complying
sales literature with the relevant authorities, and to cause such sales
literature to be distributed to prospective investors in the Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees that
the obligations pursuant to this Contract of a particular Fund and of the Trust
with respect to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any such obligation
from the assets of any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Trust, or any of them.
14. This Contract shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania, provided, however, that nothing herein
shall be construed in a manner inconsistent with the Act, the Investment
Advisers Act of 1940, or the rules and regulations promulgated pursuant to such
respective Acts.
15. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
INVESTMENT ADVISORY CONTRACT
EXHIBIT A
BAYFUNDS MONEY MARKET PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .40 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .40 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this 6th day of June, 1991.
Attest:
/s/ JUDITH BENSON
- ------------------------------------------------------
Clerk
Attest:
/s/ JOHN W. MCGONIGLE
- ------------------------------------------------------
Secretary
BAYBANKS INVESTMENT MANAGEMENT, INC.
By: /s/ RICHARD J. REDICK
- --------------------------------------------------
Managing Director
BAYFUNDS
By: /s/ EDWARD C. GONZALES
- --------------------------------------------------
President
EXHIBIT B TO PROXY STATEMENT
BAYFUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 1ST DAY OF SEPTEMBER, 1992, between BAYBANKS
INVESTMENT MANAGEMENT, INC., an investment adviser registered under the
Investment Advisers Act of 1940, having its principal place of business in
Cambridge, Massachusetts (the "Adviser"), and BAYFUNDS, a Massachusetts business
trust having its principal place of business in Pittsburgh, Pennsylvania (the
"Trust").
WHEREAS, the Trust is an "open-end company" as that term is defined in the
Investment Company Act of 1940 (the "Act") and is registered as such with
the Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of the
portfolios ("Funds") of the Trust on whose behalf the Trust executes an exhibit
to this Contract, and Adviser, by its execution of each such exhibit, accepts
the appointments. Subject to the direction of the Trustees of the Trust, Adviser
shall provide investment research and supervision of the investments of each of
the Funds and conduct a continuous program of investment evaluation and of
appropriate sale or other disposition and reinvestment of each Fund's assets.
The Adviser shall determine the securities to be purchased or sold by the Fund
and will place orders pursuant to its determinations with or through such
brokers or dealers in conformity with such policies with respect to brokerage as
the Trust shall establish from time to time and convey to the Adviser.
2. Adviser, in its supervision of the investments of each of the Funds will
be guided by each Fund's fundamental investment policies and the provisions and
restrictions contained in the Declaration of Trust and By-Laws of the Trust and
as set forth in the Trust's Registration Statement (as hereinafter defined) and
exhibits thereto as may be on file with the Securities and Exchange Commission.
The Trust shall deliver copies of all such investment policies and of the
Declaration of Trust and By-Laws of the Trust, as amended from time to time, and
the Registration Statements to the Adviser, promptly upon such documents
becoming available.
3. The Trust shall pay or cause to be paid, on behalf of each Fund, all of
the Funds' expenses and the Funds' allocable share of Trust expenses, including
without limitation, the expenses of organizing the Trust and continuing its
existence; fees and expenses of officers and Trustees of the Trust; fees for
investment advisory services and administrative personnel and services; fees and
expenses of preparing and filing its Registration Statements under the
Securities Act of 1933 and the Act and any amendments thereto (collectively, the
"Registration Statements"); expenses of registering and qualifying the Trust,
the Funds and shares of the Funds ("Shares") under Federal and state laws and
regulations; expenses of preparing, printing and distributing prospectuses (and
any amendments thereto) and sales literature; interest expense, taxes, fees and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase and redemption of Shares, including expenses
attributable to a
program of periodic issue; charges and expenses of custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents and registrars;
printing and mailing costs, auditing, accounting and legal expenses; reports to
shareholders and governmental officers and commissions; expenses of meetings of
Trustees and shareholders and proxy solicitations therefor; insurance expenses;
association membership dues; and such nonrecurring items as may arise, including
all losses and liabilities incurred in administering the Trust and the Funds.
The Trust will also pay each Fund's allocable share of such extraordinary
expenses as may arise, including expenses incurred in connection with
litigation, proceedings, and claims and the legal obligations of the Trust to
indemnify its officers, Trustees, employees, distributors, and agents with
respect thereto.
4. The Trust, on behalf of each of the Funds, shall pay to Adviser, for all
services rendered to such Fund by Adviser hereunder, the fees set forth in the
exhibits attached hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such lower
expense limitation as the Adviser may, by notice to the Fund, voluntarily
declare to be effective.
7. This Contract shall begin for each Fund as of the date of execution of
the applicable exhibit and shall continue in effect with respect to each Fund
presently set forth on an exhibit (and any subsequent Funds added pursuant to an
exhibit during the initial term of this Contract) for two years from the date of
this Contract set forth above and thereafter for successive periods of one year,
subject to the provisions for termination and all of the other terms and
conditions hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust, including
a majority of the Trustees who are not parties to this Contract or interested
persons of any such party (other than as Trustees of the Trust), cast in person
at a meeting called for that purpose; and (b) Adviser shall not have notified a
Fund in writing at least sixty (60) days prior to the anniversary date of this
Contract in any year thereafter that it does not desire such continuation with
respect to that Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as to that Fund
upon execution of the applicable exhibit and will continue in effect until the
next annual approval of this Contract by the Trustees and thereafter for
successive periods of one year, subject to approval as described above.
8. Notwithstanding any provision in this Contract, it may be terminated at
any time with respect to any Fund, without the payment of any penalty, by the
Trustees of the Trust or by a vote of a majority of the outstanding voting
securities of that Fund, as defined in Section 2(a)(42) of the Act on sixty (60)
days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. For purposes of this Contract,
"assignment" shall have the meaning assigned to that term in Section 2(a)(4) of
the Act. Adviser may employ or contract with such other person, persons,
corporation or corporations at its own cost and expense as it shall determine in
order to assist it in carrying out this Contract.
10. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties under this Contract on the part of
Adviser, Adviser shall not be liable to the Trust or to any of the Funds or to
any shareholder for any act or omission in the course of or connected in any way
with rendering services or for any losses that may be sustained in the purchase,
holding or sale of any security.
11. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved by the vote of a majority of the
Trustees of the Trust, including a majority of Trustees who are not parties to
this Contract or interested persons of any such party to this Contract (other
than as Trustees of the Trust), cast in person at a meeting called for that
purpose, and, where required by Section 15(a)(2) of the Act, on behalf of a Fund
by a majority of the outstanding voting securities of such Fund as defined in
Section 2(a)(42) of the Act.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Trust agrees to cause its distributor to promptly review all such sales
literature to ensure compliance with relevant requirements, to promptly advise
Adviser of any deficiencies contained in such sales literature, to promptly file
complying sales literature with the relevant authorities, and to cause such
sales literature to be distributed to prospective investors in the Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees that
the obligations pursuant to this Contract of a particular Fund and of the Trust
with respect to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any such obligation
from the assets of any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Trust, or any of them.
14. This Contract shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania, provided, however, that nothing herein
shall be construed in a manner inconsistent with the Act, the Investment
Advisers Act of 1940, or the rules and regulations promulgated pursuant to such
respective Acts.
15. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
16. The parties hereto acknowledge that BayBanks, Inc. has reserved the
right to grant the non-exclusive use of the name "BayFunds" or any derivative
thereof to any other investment company, investment company portfolio,
investment adviser, distributor or other business enterprise pursuant to the
terms of a Service Mark License Agreement, dated June 6, 1991.
INVESTMENT ADVISORY CONTRACT
EXHIBIT A
BAYFUNDS SHORT TERM YIELD PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .50 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .50 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this 1ST DAY OF SEPTEMBER, 1992.
---------------------------------------------
INVESTMENT ADVISORY CONTRACT
EXHIBIT B
BAYFUNDS EQUITY PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .70 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .70 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this 1ST DAY OF SEPTEMBER, 1992.
---------------------------------------------
INVESTMENT ADVISORY CONTRACT
EXHIBIT C
BAYFUNDS BOND PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .60 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .60 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this 1ST DAY OF SEPTEMBER, 1992.
Attest:
/s/ JUDITH K. BENSON
- ------------------------------------------------------
Clerk
Attest:
/s/ J. W. MCGONIGLE
- ------------------------------------------------------
Secretary
BAYBANKS INVESTMENT MANAGEMENT, INC.
By: /s/ JOHN J. ARENA
- --------------------------------------------------
President
BAYFUNDS
By: /s/ E. C. GONZALES
- --------------------------------------------------
President
EXHIBIT C TO PROXY STATEMENT
BAYFUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 1ST DAY OF SEPTEMBER, 1992, between BAYBANK
BOSTON, N.A., having its principal place of business in Boston, Massachusetts
(the "Adviser"), and BAYFUNDS, a Massachusetts business trust having its
principal place of business in Pittsburgh, Pennsylvania (the "Trust").
WHEREAS, the Trust is an "open-end company" as that term is defined in the
Investment Company Act of 1940 (the "Act") and is registered as such with
the Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of the
portfolios ("Funds") of the Trust on whose behalf the Trust executes an exhibit
to this Contract, and Adviser, by its execution of each such exhibit, accepts
the appointments. Subject to the direction of the Trustees of the Trust, Adviser
shall provide investment research and supervision of the investments of each of
the Funds and conduct a continuous program of investment evaluation and of
appropriate sale or other disposition and reinvestment of each Fund's assets.
The Adviser shall determine the securities to be purchased or sold by the Fund
and will place orders pursuant to its determinations with or through such
brokers or dealers in conformity with such policies with respect to brokerage as
the Trust shall establish from time to time and convey to the Adviser.
2. Adviser, in its supervision of the investments of each of the Funds will
be guided by each Fund's fundamental investment policies and the provisions and
restrictions contained in the Declaration of Trust and By-Laws of the Trust and
as set forth in the Trust's Registration Statement (as hereinafter defined) and
exhibits thereto as may be on file with the Securities and Exchange Commission.
The Trust shall deliver copies of all such investment policies and of the
Declaration of Trust and By-Laws of the Trust, as amended from time to time, and
the Registration Statements to the Adviser, promptly upon such documents
becoming available.
3. The Trust shall pay or cause to be paid, on behalf of each Fund, all of
the Funds' expenses and the Funds' allocable share of Trust expenses, including
without limitation, the expenses of organizing the Trust and continuing its
existence; fees and expenses of officers and Trustees of the Trust; fees for
investment advisory services and administrative personnel and services; fees and
expenses of preparing and filing its Registration Statements under the
Securities Act of 1933 and the Act and any amendments thereto (collectively, the
"Registration Statements"); expenses of registering and qualifying the Trust,
the Funds and shares of the Funds ("Shares") under Federal and state laws and
regulations; expenses of preparing, printing and distributing prospectuses (and
any amendments thereto) and sales literature; interest expense, taxes, fees and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase and redemption of Shares, including expenses
attributable to a program of periodic issue; charges and expenses of custodians,
transfer agents, dividend disbursing
agents, shareholder servicing agents and registrars; printing and mailing costs,
auditing, accounting and legal expenses; reports to shareholders and
governmental officers and commissions; expenses of meetings of Trustees and
shareholders and proxy solicitations therefor; insurance expenses; association
membership dues; and such nonrecurring items as may arise, including all losses
and liabilities incurred in administering the Trust and the Funds. The Trust
will also pay each Fund's allocable share of such extraordinary expenses as may
arise, including expenses incurred in connection with litigation, proceedings,
and claims and the legal obligations of the Trust to indemnify its officers,
Trustees, employees, distributors, and agents with respect thereto.
4. The Trust, on behalf of each of the Funds, shall pay to Adviser, for all
services rendered to such Fund by Adviser hereunder, the fees set forth in the
exhibits attached hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such lower
expense limitation as the Adviser may, by notice to the Fund, voluntarily
declare to be effective.
7. This Contract shall begin for each Fund as of the date of execution of
the applicable exhibit and shall continue in effect with respect to each Fund
presently set forth on an exhibit (and any subsequent Funds added pursuant to an
exhibit during the initial term of this Contract) for two years from the date of
this Contract set forth above and thereafter for successive periods of one year,
subject to the provisions for termination and all of the other terms and
conditions hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust, including
a majority of the Trustees who are not parties to this Contract or interested
persons of any such party (other than as Trustees of the Trust), cast in person
at a meeting called for that purpose; and (b) Adviser shall not have notified a
Fund in writing at least sixty (60) days prior to the anniversary date of this
Contract in any year thereafter that it does not desire such continuation with
respect to that Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as to that Fund
upon execution of the applicable exhibit and will continue in effect until the
next annual approval of this Contract by the Trustees and thereafter for
successive periods of one year, subject to approval as described above.
8. Notwithstanding any provision in this Contract, it may be terminated at
any time with respect to any Fund, without the payment of any penalty, by the
Trustees of the Trust or by a vote of a majority of the outstanding voting
securities of that Fund, as defined in Section 2(a)(42) of the Act on sixty (60)
days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. For purposes of this Contract,
"assignment" shall have the meaning assigned to that term in Section 2(a)(4) of
the Act. Adviser may employ or contract with such other person, persons,
corporation or corporations at its own cost and expense as it shall determine in
order to assist it in carrying out this Contract.
10. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties under this Contract on the part of
Adviser, Adviser shall not be liable to the Trust
or to any of the Funds or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any losses that
may be sustained in the purchase, holding or sale of any security.
11. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved by the vote of a majority of the
Trustees of the Trust, including a majority of Trustees who are not parties to
this Contract or interested persons of any such party to this Contract (other
than as Trustees of the Trust), cast in person at a meeting called for that
purpose, and, where required by Section 15(a)(2) of the Act, on behalf of a Fund
by a majority of the outstanding voting securities of such Fund as defined in
Section 2(a)(42) of the Act.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Trust agrees to cause its distributor to promptly review all such sales
literature to ensure compliance with relevant requirements, to promptly advise
Adviser of any deficiencies contained in such sales literature, to promptly file
complying sales literature with the relevant authorities, and to cause such
sales literature to be distributed to prospective investors in the Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees that
the obligations pursuant to this Contract of a particular Fund and of the Trust
with respect to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any such obligation
from the assets of any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Trust, or any of them.
14. This Contract shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania, provided, however, that nothing herein
shall be construed in a manner inconsistent with the Act, the Investment
Advisers Act of 1940, or the rules and regulations promulgated pursuant to such
respective Acts.
15. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
16. The parties hereto acknowledge that BayBanks, Inc. has reserved the
right to grant the non-exclusive use of the name "BayFunds" or any derivative
thereof to any other investment company, investment company portfolio,
investment adviser, distributor or other business enterprise pursuant to the
terms of a Service Mark License Agreement, dated June 6, 1991.
INVESTMENT ADVISORY CONTRACT
EXHIBIT A
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .20 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .20 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this 1ST DAY OF SEPTEMBER, 1992.
Attest:
/s/ ILENE BEAL
- ------------------------------------------------------
Clerk
Attest:
/s/ J. W. MCGONIGLE
- ------------------------------------------------------
Secretary
BAYBANK BOSTON, N.A.
By: /s/ JOHN J. ARENA
- --------------------------------------------------
Vice Chairman BayBanks,Inc.
BAYFUNDS
By: /s/ E. C. GONZALES
- --------------------------------------------------
President
AMENDMENT NO. 1
TO THE
INVESTMENT ADVISORY CONTRACT
DATED SEPTEMBER 1, 1992
BETWEEN BAYBANK BOSTON, N.A. AND BAYFUNDS
WHEREAS, BayBank Boston, N.A. has been reorganized and merged into BayBank,
N.A., effective October 31, 1995, as reflected in discussions recorded in the
Minutes of the Board of Trustees' Meeting of BayFunds held November 9, 1995.
WHEREAS, this event does not constitute an "assignment" under the
Investment Company Act of 1940, as amended, of the Investment Advisory Contract
("Contract") dated September 1, 1992 between BayBank Boston, N.A. and BayFunds,
and that no other changes to the Contract relating to this event are warranted.
THEREFORE, the Contract is hereby amended, effective March 1, 1996, as
follows.
The entity named "BayBank Boston, N.A." in the Contract is hereby replaced
with the entity named "BayBank, N.A."
In all other respects, the terms and fees under the Contract remain
unchanged.
Witness the due execution hereof this 1st day of March, 1996.
Attest:
/s/ WILLIAM W. ABENDROTH
- ------------------------------------------------------
Assistant Secretary
Attest:
/s/ VICTOR R. SICLARI
- ------------------------------------------------------
Secretary
BAYBANK, N.A.
By: /s/ RICHARD F. POLLARD
- --------------------------------------------------
Vice Chairman
BAYFUNDS
By: /s/ GLEN R. JOHNSON
- --------------------------------------------------
President
EXHIBIT D TO PROXY STATEMENT
BAYFUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this DAY OF , 1996, between BAYBANK OF
BOSTON, N.A., having its principal place of business in Boston, Massachusetts
(the "Adviser"), and BAYFUNDS, a Massachusetts business trust having its
principal place of business in Pittsburgh, Pennsylvania (the "Trust").
WHEREAS, the Trust is an "open-end company" as that term is defined in the
Investment Company Act of 1940 (the "Act") and is registered as such with
the Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of the
portfolios ("Funds") of the Trust on whose behalf the Trust executes an exhibit
to this Contract, and Adviser, by its execution of each such exhibit, accepts
the appointments. Subject to the direction of the Trustees of the Trust, Adviser
shall provide investment research and supervision of the investments of each of
the Funds and conduct a continuous program of investment evaluation and of
appropriate sale or other disposition and reinvestment of each Fund's assets.
The Adviser shall determine the securities to be purchased or sold by the Fund
and will place orders pursuant to its determinations with or through such
brokers or dealers in conformity with such policies with respect to brokerage as
the Trust shall establish from time to time and convey to the Adviser.
2. Adviser, in its supervision of the investments of each of the Funds will
be guided by each Fund's fundamental investment policies and the provisions and
restrictions contained in the Declaration of Trust and By-Laws of the Trust and
as set forth in the Trust's Registration Statement (as hereinafter defined) and
exhibits thereto as may be on file with the Securities and Exchange Commission.
The Trust shall deliver copies of all such investment policies and of the
Declaration of Trust and By-Laws of the Trust, as amended from time to time, and
the Registration Statements to the Adviser, promptly upon such documents
becoming available.
3. The Trust shall pay or cause to be paid, on behalf of each Fund, all of
the Funds' expenses and the Funds' allocable share of Trust expenses, including
without limitation, the expenses of organizing the Trust and continuing its
existence; fees and expenses of officers and Trustees of the Trust; fees for
investment advisory services and administrative personnel and services; fees and
expenses of preparing and filing its Registration Statements under the
Securities Act of 1933 and the Act and any amendments thereto (collectively, the
"Registration Statements"); expenses of registering and qualifying the Trust,
the Funds and shares of the Funds ("Shares") under Federal and state laws and
regulations; expenses of preparing, printing and distributing prospectuses (and
any amendments thereto) and sales literature; interest expense, taxes, fees and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase and redemption of Shares, including expenses
attributable to a program of periodic issue; charges and expenses of custodians,
transfer agents, dividend disbursing
agents, shareholder servicing agents and registrars; printing and mailing costs,
auditing, accounting and legal expenses; reports to shareholders and
governmental officers and commissions; expenses of meetings of Trustees and
shareholders and proxy solicitations therefor; insurance expenses; association
membership dues; and such nonrecurring items as may arise, including all losses
and liabilities incurred in administering the Trust and the Funds. The Trust
will also pay each Fund's allocable share of such extraordinary expenses as may
arise, including expenses incurred in connection with litigation, proceedings,
and claims and the legal obligations of the Trust to indemnify its officers,
Trustees, employees, distributors, and agents with respect thereto.
4. The Trust, on behalf of each of the Funds, shall pay to Adviser, for all
services rendered to such Fund by Adviser hereunder, the fees set forth in the
exhibits attached hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such lower
expense limitation as the Adviser may, by notice to the Fund, voluntarily
declare to be effective.
7. This Contract shall begin for each Fund as of the date of execution of
the applicable exhibit and shall continue in effect with respect to each Fund
presently set forth on an exhibit (and any subsequent Funds added pursuant to an
exhibit during the initial term of this Contract) for two years from the date of
this Contract set forth above and thereafter for successive periods of one year,
subject to the provisions for termination and all of the other terms and
conditions hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust, including
a majority of the Trustees who are not parties to this Contract or interested
persons of any such party (other than as Trustees of the Trust), cast in person
at a meeting called for that purpose; and (b) Adviser shall not have notified a
Fund in writing at least sixty (60) days prior to the anniversary date of this
Contract in any year thereafter that it does not desire such continuation with
respect to that Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as to that Fund
upon execution of the applicable exhibit and will continue in effect until the
next annual approval of this Contract by the Trustees and thereafter for
successive periods of one year, subject to approval as described above.
8. Notwithstanding any provision in this Contract, it may be terminated at
any time with respect to any Fund, without the payment of any penalty, by the
Trustees of the Trust or by a vote of a majority of the outstanding voting
securities of that Fund, as defined in Section 2(a)(42) of the Act on sixty (60)
days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. For purposes of this Contract,
"assignment" shall have the meaning assigned to that term in Section 2(a)(4) of
the Act. Adviser may employ or contract with such other person, persons,
corporation or corporations at its own cost and expense as it shall determine in
order to assist it in carrying out this Contract.
10. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties under this Contract on the part of
Adviser, Adviser shall not be liable to the Trust
or to any of the Funds or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any losses that
may be sustained in the purchase, holding or sale of any security.
11. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved by the vote of a majority of the
Trustees of the Trust, including a majority of Trustees who are not parties to
this Contract or interested persons of any such party to this Contract (other
than as Trustees of the Trust), cast in person at a meeting called for that
purpose, and, where required by Section 15(a)(2) of the Act, on behalf of a Fund
by a majority of the outstanding voting securities of such Fund as defined in
Section 2(a)(42) of the Act.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Trust agrees to cause its distributor to promptly review all such sales
literature to ensure compliance with relevant requirements, to promptly advise
Adviser of any deficiencies contained in such sales literature, to promptly file
complying sales literature with the relevant authorities, and to cause such
sales literature to be distributed to prospective investors in the Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees that
the obligations pursuant to this Contract of a particular Fund and of the Trust
with respect to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any such obligation
from the assets of any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Trust, or any of them.
14. This Contract shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania, provided, however, that nothing herein
shall be construed in a manner inconsistent with the Act, the Investment
Advisers Act of 1940, or the rules and regulations promulgated pursuant to such
respective Acts.
15. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
16. The parties hereto acknowledge that Bank of Boston Corporation has
reserved the right to grant the non-exclusive use of the name "BayFunds" or any
derivative thereof to any other investment company, investment company
portfolio, investment adviser, distributor or other business enterprise pursuant
to the terms of a Service Mark License Agreement, dated , 1996.
INVESTMENT ADVISORY CONTRACT
EXHIBIT A
BAYFUNDS MONEY MARKET PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .40 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .40 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this day of , 1996.
---------------------------------------------
INVESTMENT ADVISORY CONTRACT
EXHIBIT B
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .20 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .20 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this day of , 1996.
---------------------------------------------
INVESTMENT ADVISORY CONTRACT
EXHIBIT C
BAYFUNDS SHORT TERM YIELD PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .50 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .50 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this day of , 1996.
---------------------------------------------
INVESTMENT ADVISORY CONTRACT
EXHIBIT D
BAYFUNDS EQUITY PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .70 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .70 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this day of , 1996.
---------------------------------------------
INVESTMENT ADVISORY CONTRACT
EXHIBIT E
BAYFUNDS BOND PORTFOLIO
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .60 of 1% of the
average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .60 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The right of the Adviser as set forth in Paragraph 6 of this Contract to
assume expenses of one or more of the Funds shall also apply as to any classes
of shares of the above-named Fund.
Witness the due execution hereof this day of , 1996.
Attest:
- ------------------------------------------------------
Clerk
Attest:
- ------------------------------------------------------
Secretary
BAYBANK OF BOSTON, N.A.
By:
- --------------------------------------------------
President
BAYFUNDS
By:
- --------------------------------------------------
President
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