<PAGE>
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Rule 497(e) - File Nos. 33-58004 and 811-7474
PROSPECTUS
[LOGO OF 1784 FUNDS APPEARS HERE]
Investment Adviser:
THE FIRST NATIONAL BANK OF BOSTON
1784 FUNDS (the "Trust") is a mutual fund consisting of several professionally
managed portfolios, or funds, of securities. The Trust provides a convenient
way to invest in one or more of these funds. This Prospectus relates to shares
of the 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND (the "Fund").
Shares of the Fund are offered primarily to institutional investors
("Institutional Investors"), including accounts for which The First National
Bank of Boston ("Bank of Boston"), its affiliates and correspondents, and other
financial institutions act in a fiduciary, agency or custodial capacity.
Investors in shares of the Fund are referred to hereinafter as "Shareholders."
Shares of the Fund are currently offered without any sales charges or
distribution fees.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, BANK OF BOSTON OR ANY OF ITS AFFILIATES. THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY AND INVOLVE INVESTMENT RISKS, INCLUDING RISK
TO PRINCIPAL.
This Prospectus sets forth concisely the information about the Trust and the
Fund that a prospective investor should know before investing in the Fund.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated October 2, 1995, as
supplemented December 4, 1995, has been filed with the Securities and Exchange
Commission (the "SEC") and is available without charge through the Distributor,
SEI Financial Services Company, 680 East Swedesford Road, Wayne, PA 19087 or by
calling 1-800-BKB-1784. The Statement of Additional Information is incorporated
into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
OCTOBER 2, 1995,
AS SUPPLEMENTED DECEMBER 4, 1995
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I784 FUNDS
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EXPENSE SUMMARY
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Following are (i) a tabular summary of expenses relating to purchases and sales
of shares of the Fund and annual operating expenses of the Fund, and (ii) an
example illustrating the dollar cost of such expenses on a hypothetical $1,000
investment in the Fund.
Shareholder Transaction Expenses
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<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering price) None
Sales Charge Imposed on Reinvested Dividends
(as a percentage of the offering price) None
Deferred Sales Charge Imposed on Redemptions (as a percentage of the of-
fering price) None
Redemption Fees(1) None
Exchange Fee None
</TABLE>
Annual Operating Expenses
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(As a percentage of average net assets)
<TABLE>
<S> <C>
Advisory Fees (after fee waiver)(2) 0.12%
Other Expenses(2) 0.20%
- ------------------------------------------
Total Operating Expenses(2) 0.32%
</TABLE>
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(1) If proceeds of a redemption of Fund shares are paid by wire transfer, a
wire transfer charge (presently $12.00) will be imposed.
(2) Bank of Boston, which serves as the Adviser for the Trust, has agreed to
waive its fee in an amount that operates to limit total operating expenses of
the Fund to not more than 0.45% of the Fund's average daily net assets on an
annualized basis; this limitation would not apply to any brokerage commissions,
interest expense or taxes or to extraordinary expense items, including but not
limited to litigation expenses. SEI Financial Management Corporation, which
acts as the Trust's Administrator, has agreed to waive its fee from certain
funds of the Trust to assist these funds in maintaining a competitive expense
ratio. Bank of Boston contributes to the Fund in order to limit other operating
expenses and to assist the Fund in maintaining a competitive expense ratio. Fee
waivers by the Adviser and the Administrator, and contributions by the Bank of
Boston, are voluntary and may be terminated at any time. From time to time the
Adviser may also waive additional portions of its fees to reduce net operating
expenses to less than that shown in the table above. Certain other parties may
also agree to waive portions of their fees from time to time on a month to
month basis. Additional information may be found under "The Adviser" and "The
Administrator." Absent waivers, the Adviser's investment advisory fee is
calculated at an annual rate of 0.20% of average daily net assets of the Fund.
Other expenses are based on actual expenses for the Fund's fiscal year ended
May 31, 1995, and include expense items described under "General Information --
The Trust." A person who purchases shares through a financial institution may
be charged separate fees by the financial institution.
Example
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An investor would pay the following expenses on a hypothetical $1,000
investment assuming a 5% annual total return and redemption at the end of each
time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------------------------------
<S> <C> <C> <C>
$3 $10 $18 $41
</TABLE>
Absent voluntary waivers by the Adviser and Administrator and contributions
made by the Bank of Boston, the amounts for this example for one year, three
years, five years and ten years would be $4, $14, $24 and $54. The example is
based on actual expenses for the Fund's fiscal year ended May 31, 1995. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
RETURN, AND ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by
investors in the Fund. Additional information may be found under "General
Information -- The Trust," "The Adviser," and "The Administrator."
SUMMARY
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The following information is qualified in its entirety by reference to the more
detailed information included
2
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I784 FUNDS
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elsewhere in this Prospectus and in the Statement of Additional Information.
1784 Funds (the "Trust") is an open-end management investment company which
provides a convenient way to invest in one or more professionally managed funds
of securities. The following provides basic information about the 1784
Institutional U.S. Treasury Money Market Fund (the "Fund"). The Fund is a
diversified fund.
What Is the Investment Objective? The investment objective of the Fund is to
preserve principal value and maintain a high degree of liquidity while
providing current income. The Fund's investment objective may be changed only
with the consent of holders of a majority of the Fund's outstanding shares.
There can be no assurance that the Fund will achieve its investment objective.
See "Investment Objective" and "Investment Limitations."
What Are the Permitted Investments? The Fund will limit its investments to
"eligible securities" under applicable SEC rules which are deemed to present
minimal credit risks. The securities in the Fund's portfolio mature or are
deemed to mature within 397 days, and the average maturity of the investments
in the Fund's portfolio (on a dollar-weighted basis) is 90 days or less. The
Fund under normal circumstances invests at least 65% of its total assets in
U.S. Treasury Obligations and repurchase agreements involving such obligations.
Under normal circumstances the Fund intends to invest the balance of its
investable assets in other securities issued or guaranteed as to principal and
interest by the U.S. Government or any of its agencies or instrumentalities
(collectively, "U.S. Government Obligations"), repurchase agreements involving
such obligations, and, to the extent permitted by the Investment Company Act of
1940, securities of registered investment companies which invest solely in U.S.
Treasury Obligations, U.S. Government Obligations and repurchase agreements
involving such obligations. Distributions of the Fund derived from interest on
obligations of the U.S. Government and certain of its agencies and
instrumentalities may be exempt from state and local taxes in certain states.
See "Taxes," "Investment Policies," "Description of Permitted Investments and
Techniques" and "Certain Investment Policies and Guidelines."
Who Is the Adviser? The First National Bank of Boston ("Bank of Boston" or the
"Adviser") serves as the Adviser for the Trust and is entitled to a fee which
is calculated daily and paid monthly at an annual rate of 0.20% of the average
daily net assets of the Fund. The Adviser has agreed for an indefinite period
of time to waive all or a portion of its fee in order to limit the total
operating expenses of the Fund on an annualized basis to not more than 0.45% of
the average daily net assets of the Fund. Bank of Boston contributes to the
Fund in order to limit operating expenses and to assist the Fund in maintaining
a competitive expense ratio. Fee waivers may be terminated at any time. See
"The Adviser."
Who Is the Administrator? SEI Financial Management Corporation serves as the
Administrator for the Trust under an Administration Agreement and is entitled
to a fee which is calculated daily and paid monthly at an annual rate 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 the
Trust's average daily net assets over $600 million. The Fund's portion of such
fee is based on the Fund's average daily net assets. The Administrator has
agreed to waive a portion of its fees on a month to month basis under certain
circumstances. See "The Administrator."
Who Are the Shareholder Servicing Agent and Transfer Agent? Boston Financial
Data Services acts as dividend disbursing agent and shareholder servicing agent
for the Trust. State Street Bank and Trust Company acts as transfer agent for
the Trust. See "The Shareholder Servicing Agent and Transfer Agent."
Who Is the Distributor? SEI Financial Services Company acts as distributor of
the Trust's shares. No compensation is paid to the Distributor for distribution
services for shares of the Fund. See "The Distributor."
3
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I784 FUNDS
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How Do I Purchase Shares? Purchases of Fund shares may be made through the
Distributor by the close of business Monday through Friday except on days when
the New York Stock Exchange or the Federal Reserve Bank of Boston is closed
("Business Days") or by noon on a Half Day. A "Half Day" is the day after
Thanksgiving and the day before Christmas during 1995, or any other day the
bond market closes at 1:00 p.m. ET. Shares may also be purchased through
broker-dealers which have established dealer agreements with the Distributor.
Purchase orders submitted through broker-dealers normally will be received by
the Distributor on the Business Day after they are received by the broker-
dealer.
Except as described below, a purchase order for shares will be effective as of
the Business Day the order is received by the Distributor if the Distributor
receives a purchase order in good form for the shares prior to 3:00 p.m.
Eastern time ("ET") on a Business Day and noon on Half Days. An order for Fund
shares may be cancelled by the Distributor, and the investor held liable for
any losses or fees incurred, if the Distributor does not receive federal funds
that Business Day. Shares purchased will begin accruing dividends on the date
of purchase.
Investors are encouraged to submit orders as early as practicable on the date
of investment; an order for Fund shares (even if otherwise timely) may be
rejected if in the Adviser's judgment appropriate investments are unavailable
when the order is received. The purchase price for Fund shares is the net asset
value per share (normally $1.00) next computed after the order is received and
accepted by the Distributor. The minimum initial investment is $100,000; all
subsequent purchases must be at least $5,000. See "Purchase of Shares."
How Do I Redeem Shares? Redemptions of shares of the Fund may be made through
the Transfer Agent on any Business Day. Redemption orders must be placed in
good form prior to 3:00 p.m. ET on any Business Day, or by noon on a Half Day,
for the order to be effective on that day. See "Redemption of Shares."
How Are Distributions Paid? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is determined and declared on each
Business Day as a dividend to shareholders of record as of the close of
business on that day. On redemption, a Shareholder will receive dividends up to
but not including the day a valid redemption request is received by the
Transfer Agent. Any capital gains will be distributed at least annually.
Distributions are paid in additional shares unless the Shareholder elects to
take the payment in cash. See "Dividends and Distributions."
How Do I Make Exchanges? Once payment for shares of the Fund has been received
by the Distributor, those shares may be exchanged for shares of one or more
other portfolios of the Trust at net asset value, provided the amount of the
exchange meets the minimum investment requirements for the other portfolio of
the Trust. There are no charges for an exchange. If an exchange request in good
order is received by the Distributor by 3:00 p.m. ET on any Business Day, or by
noon on a Half Day, the exchange usually will occur on that day. A Shareholder
must obtain and should read the prospectus of the other portfolio and consider
the differences in investment objectives and policies before making any
exchange. See "Exchanges."
CONDENSED FINANCIAL INFORMATION
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The following table provides condensed financial information about the Fund for
the period from June 14, 1993 (commencement of operations) through May 31,
1995. The information should be read in conjunction with the financial
statements appearing in the Fund's Annual Report to Shareholders, which are
incorporated by reference in the Statement of Additional Information. The
financial statements and notes, as well as the table below, covering the period
through May 31, 1995, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report is included in the Fund's Annual Report.
Copies of the Annual Report may be obtained without charge from the
Distributor.
4
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I784 FUNDS
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FINANCIAL HIGHLIGHTS
For the Period Ended May 31, 1995
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For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Ratio
Net Net Ratio of Expenses
Asset Dividends Net Assets Ratio of Net to Average
Value Net from Net Asset Value End of Expenses Income Net Assets
Beginning Investment Investment End Total of Period to Average to Average (Excluding
of Period Income Income of Period Return (000) Net Assets Net Assets Waivers)
--------- ---------- ---------- ----------- ------ --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL
U.S. TREASURY
MONEY MARKET
FUND(1)
===========================
6/14/93-5/31/94 $1.00 $0.03 (0.03) $1.00 2.99%* $181,568 0.22%** 3.16%** 0.55%**
6/1/94-5/31/95 $1.00 $0.05 (0.05) $1.00 5.05% $395,585 0.30% 5.12% 0.41%
<CAPTION>
Ratio of
Net Income
to Average
Net Assets
(Excluding
Waivers)
------------
<S> <C>
INSTITUTIONAL
U.S. TREASURY
MONEY MARKET
FUND(1)
===========================
6/14/93-5/31/94 2.83%**
6/1/94-5/31/95 5.01%
</TABLE>
* Returns are for the period indicated and have not been annualized.
** Ratios for this period have been annualized.
(1) The Institutional U.S. Treasury Money Market Fund commenced operations on
June 14, 1993.
--------------
THE TRUST
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1784 Funds (the "Trust") is an open-end management investment company that
offers units of beneficial interest ("shares") in several separate
professionally managed investment portfolios, or funds. Each share of each fund
represents an undivided, proportionate interest in that fund. This Prospectus
relates to shares of the Trust's 1784 Institutional U.S. Treasury Money Market
Fund, which is a diversified fund. Information regarding the Trust's other
funds is contained in separate prospectuses that may be obtained from the
Trust's distributor, SEI Financial Services Company (the "Distributor"), 680
East Swedesford Road, Wayne, Pennsylvania 19087, or by calling 1-800-BKB-1784.
INVESTMENT OBJECTIVE
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The investment objective of the Fund is to preserve principal value and
maintain a high degree of liquidity while providing current income.
There can be no assurance that the investment objective of the Fund will be
met. The investment objective of the Fund is a fundamental policy of the Fund,
and therefore cannot be changed without the consent of holders of a majority of
the Fund's outstanding shares. See "Investment Limitations."
INVESTMENT POLICIES
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The Fund is required to comply with regulations of the SEC applicable to money
market funds using the amortized cost method for calculating net asset value.
These regulations impose certain quality, maturity and diversification
restraints on investments by the Fund. Under these regulations, the Fund
invests only in U.S. dollar-denominated securities, maintains an average
maturity on a dollar-weighted basis of 90 days or less, and acquires only
"eligible securities" (as defined under applicable SEC rules) that have a
maturity of 397 days or less and that present minimal credit risks as
determined by or on behalf of the Board of Trustees of the Trust. In certain
circumstances, the maturity of a security will be deemed to be the period
remaining until the next interest rate adjustment date or until payment of the
security may be demanded. For a further discussion of these rules, see
"Description of Permitted Investments and Techniques -- Restraints on
Investments by the Fund."
5
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I784 FUNDS
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The Fund is a diversified fund which will under normal circumstances invest at
least 65% of its total assets in bills, notes, and bonds issued by the U.S.
Treasury and separately traded interest and principal component parts of such
obligations that are transferable through the Federal Reserve book-entry system
(such component parts of obligations are commonly referred to as "STRIPS" and
all of the foregoing obligations are referred to collectively as "U.S. Treasury
Obligations") and in repurchase agreements involving U.S. Treasury Obligations.
In addition to U.S. Treasury Obligations, the Fund may invest in other
securities issued or guaranteed as to principal and interest by the U.S.
Government or any of its agencies and instrumentalities (the foregoing
obligations are referred to collectively as "U.S. Government Obligations"),
repurchase agreements involving U.S. Government Obligations and, to the extent
permitted by the Investment Company Act of 1940, securities of registered
investment companies which invest solely in U.S. Treasury Obligations, U.S.
Government Obligations and repurchase agreements involving such obligations.
Under normal circumstances, the Fund intends to invest all of its investable
assets in U.S. Treasury Obligations, U.S. Government Obligations, repurchase
agreements involving U.S. Treasury Obligations or U.S. Government Obligations,
and securities of registered investment companies which invest solely in the
foregoing types of securities.
For more information regarding the permitted investments and investment
practices of the Fund, the purposes of these investments and investment
practices and certain risks associated with certain of these investments and
investment practices, see "Certain Investment Policies and Guidelines" and
"Description of Permitted Investments and Techniques."
CERTAIN INVESTMENT POLICIES AND GUIDELINES
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The Fund's investment in STRIPS will be limited to securities with maturities
of less than 397 days. Investing in these securities entails certain risks,
including that the interest components of these securities may be more volatile
in market value than Treasury bills of comparable maturity, as further
described in "Description of Permitted Investments and Techniques." The Fund
may not invest more than 20% of its total assets in STRIPS or actively trade
STRIPS (i.e., combine the components of STRIPS to create derivative
securities).
The Fund may invest in when-issued securities and variable rate and floating
rate obligations. When investing in when-issued securities, the Fund will not
accrue income until delivery of the securities and will invest in such
securities only for the purpose of actually acquiring the securities and not
for the purpose of leveraging. Investing in when-issued securities may have the
effect of leveraging. The Fund may invest up to 25% of its total assets in
forward commitments or commitments to purchase securities on a when-issued
basis. While awaiting delivery of securities purchased on such basis, the Fund
will establish a segregated account consisting of cash, U.S. Treasury
Obligations and U.S. Government Obligations equal to the amount of the
commitments to purchase securities on such basis.
In addition, the Fund may, from time to time, engage in securities lending;
however, loans made by the Fund of the securities it holds may not exceed 33
1/3% of the Fund's total assets.
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The investment objective of the Fund and the following investment limitations
are fundamental policies of the Fund. Fundamental policies cannot be changed
with respect to the Fund without the consent of the holders of a majority of
the Fund's outstanding shares. The term "majority of the outstanding shares"
means the vote of (i) 67% or more of the Fund's shares present at a meeting, if
more than 50% of the outstanding shares of the Fund are present or represented
by proxy, or (ii) more than 50% of the Fund's outstanding shares, whichever is
less.
6
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I784 FUNDS
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The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if as a result more than 5% of the total assets of
the Fund would be invested in the securities of such issuer or more than 10% of
the outstanding voting securities of such issuer would be owned by the Fund.
The Fund will be diversified with respect to 100% of its assets provided that
the Fund may invest up to 25% of its total assets in a single issuer for a
period of up to three business days if such
securities qualify as "first tier securities" under applicable SEC rules. For
purposes of these limitations, loan participations are considered to be issued
by both the issuing bank and the underlying corporate borrower, and a
repurchase agreement is deemed to be an acquisition of the underlying
securities, provided that the seller's obligation to repurchase the securities
from the Fund is fully collateralized.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry or securities the
interest upon which is paid from revenue of similar type of industrial
development projects, provided that this limitation does not apply to (i)
investments in obligations issued or guaranteed by the U.S. Government or any
of its agencies and instrumentalities and repurchase agreements involving such
securities; and (ii) obligations issued by domestic banks, foreign branches of
domestic banks and U.S. branches of foreign banks, to the extent that the Fund
may under the Investment Company Act of 1940, as amended, reserve freedom of
action to concentrate its investments in such securities. The Fund has reserved
its freedom of action to concentrate its investments in government securities
and bank instruments described in the foregoing clause (ii). For purposes of
these limitations, (i) loan participations are considered to be issued by both
the issuing bank and the underlying corporate borrower; (ii) utility companies
will be divided according to their services; for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; and (iii) 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.
3. Make loans, except that the Fund may (a) purchase or hold debt instruments
in accordance with its investment objective and policies, (b) enter into
repurchase agreements, and (c) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
4. Borrow, except that the Fund may borrow money from banks and may enter into
reverse repurchase agreements, in either case in an amount not to exceed 33
1/3% of the Fund's total assets and then only as a temporary measure for
extraordinary or emergency purposes (e.g., to meet Shareholder redemption
requests). The Fund will not purchase any securities for its portfolio at any
time at which its borrowings equal or exceed 5% of its total assets (taken at
market value).
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISER
- --------------------------------------------------------------------------------
The First National Bank of Boston ("Bank of Boston" or the "Adviser") manages
the assets of the Fund pursuant to an Investment Advisory Agreement (the
"Advisory Agreement") with the Trust. Subject to such policies as the Board of
Trustees of the Trust may determine, the Adviser makes investment decisions for
the Fund. For its services under the Advisory Agreement, the Adviser receives
from the Fund a fee accrued daily and paid monthly at an annual rate equal to
0.20% of the average daily net assets of the Fund. However, the Adviser has
agreed for an indefinite period of time to waive all or a portion of its fees
in order to limit the total operating expenses of the Fund on an annualized
basis to not more than 0.45% of its average daily net assets. Fee waivers may
be terminated at any time. From time to time the Adviser may also
7
<PAGE>
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I784 FUNDS
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waive additional portions of its fees to reduce net operating expenses to less
than the amount specified above. For the fiscal year ended May 31, 1995, the
fees payable to Bank of Boston under the Advisory Agreement with respect to the
Fund were $516,057, of which $231,493 was voluntarily waived (after giving
effect to such waiver, 0.11% of the Fund's average daily net assets for that
period). In addition, the Bank of Boston contributed $47,033 to the Fund to
decrease the Fund's other operating expenses and to assist the Fund in
maintaining a competitive expense ratio. Management's discussion of the Fund's
performance is included in the Fund's Annual Report to Shareholders which
investors may obtain without charge by contacting the Distributor. The Fund may
execute brokerage or other agency transactions through the Adviser or an
affiliate.
Bank of Boston, a national banking association, is the successor to a number of
banking institutions, the first of which was chartered in 1784. All of the
capital stock of Bank of Boston (except directors' qualifying shares) is owned
by Bank of Boston Corporation, a registered bank holding company. Bank of
Boston is engaged in providing a wide variety of financial services to
individuals, corporate and institutional customers, governments, and other
financial institutions throughout New England, the United States and
internationally. These services include individual and community banking,
consumer finance, mortgage origination and servicing, domestic corporate and
investment banking, leasing, international banking services, commercial real
estate lending, private banking, trust services, correspondent banking, and
securities and payments processing. Prior to the organization of the Trust in
1993, the Adviser had not served as the investment adviser for management
investment companies. The Adviser also manages the other funds comprising the
Trust.
Bank of Boston has been providing asset management services since 1890. Its
portfolio managers are responsible for investing in money market, equity, and
fixed income securities and they have earned national recognition and respect.
The investment management group within Bank of Boston which manages the Fund is
the same group which has managed Bank of Boston's collective trust funds with
similar investment objectives. As of December 31, 1994, Bank of Boston and its
affiliates managed more than $13 billion in assets worldwide.
Bank of Boston and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Bank of Boston and its
affiliates deal, trade and invest for their own account in certain types of
securities purchased on behalf of the Fund. Bank of Boston and its affiliates
may sell such securities to and purchase them from other investment companies
sponsored by SEI Financial Services Company or its affiliates. The Adviser has
informed the Trust that, in making its investment decisions, it does not obtain
or use material inside information in the possession of any division or
department of Bank of Boston or in the possession of any affiliate of Bank of
Boston.
The Glass-Steagall Act prohibits certain financial institutions, such as Bank
of Boston, from engaging in the business of underwriting securities of open-end
investment companies, such as the Fund. Bank of Boston takes the position,
based on the advice of counsel, that the investment advisory services it
provides under the Advisory Agreement do not constitute underwriting activities
and are consistent with the requirements of the Glass-Steagall Act and other
relevant federal and state legal and regulatory precedent. State laws on this
issue may differ from applicable federal law, and banks and financial
institutions may be required to register as dealers pursuant to state
securities laws. Future changes in either federal or state statutes or
regulations relating to the permissible activities of banks, as well as future
judicial or administrative decisions and interpretations of present and future
federal and state statutes and regulations, could prevent Bank of Boston from
continuing to perform such services for the Trust. If Bank of Boston were to be
prevented from acting as
8
<PAGE>
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I784 FUNDS
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the Adviser, the Trust would seek alternative means for obtaining such
services.
THE ADMINISTRATOR
- --------------------------------------------------------------------------------
SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), and the Trust are parties to an
administration agreement dated as of June 1, 1993 (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
provides the Trust with administrative services other than investment advisory
services, including all regulatory reporting, necessary office space,
equipment, personnel, and facilities.
The Administrator is entitled to a fee which is calculated daily and paid
monthly at an annual rate 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 the Trust's average daily net assets over $600 million. The
Fund's portion of such fee is based on its average daily net assets. The
Administrator has agreed to waive a portion of its fees on a month to month
basis under certain circumstances for certain of the portfolios of the Trust.
THE SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
- --------------------------------------------------------------------------------
Boston Financial Data Services acts as dividend disbursing agent and
shareholder servicing agent (the "Shareholder Servicing Agent") for the Trust,
and receives a fee for these services. The principal business address of the
Shareholder Servicing Agent is 2 Heritage Drive, North Quincy, MA 02171. State
Street Bank and Trust Company acts as transfer agent (the "Transfer Agent") for
the Trust, and receives a fee for these services. The principal business
address of the Transfer Agent is 225 Franklin Street, Boston, MA 02110-2875.
THE DISTRIBUTOR
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SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary
of SEI, and the Trust are parties to a distribution agreement (the
"Distribution Agreement") dated as of June 1, 1993. No compensation is paid to
the Distributor for distribution services for the Fund. Financial institutions
that are the record owner of shares for the accounts of their customers may
impose separate fees for the account services to their customers. The Fund may
execute brokerage or other agency transactions through the Distributor, for
which the Distributor receives compensation.
From time to time the Distributor may provide incentive compensation to
employees of banks (including Bank of Boston), broker-dealers and investment
counselors, and to its own employees, in connection with the sale of shares of
the Fund or other portfolios of the Trust. Under any such program, the
Distributor will provide promotional incentives, in the form of cash or other
compensation, including merchandise, airline vouchers, trips and vacation
packages. Such promotional incentives will be offered uniformly to all program
participants and will be predicated upon the amount of shares of the Fund and
other portfolios of the Trust sold by the participant.
PURCHASE OF SHARES
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Shares of the Fund are sold on a continuous basis and may be purchased directly
from the Trust's Distributor by telephone. Shares may also be purchased through
a broker-dealer which has established a dealer agreement with the Distributor.
Purchases of the shares of the Fund may be made Monday through Friday except on
days when the New York Stock Exchange or the Federal Reserve Bank of Boston is
closed ("Business Days"). Current holidays for the New York Stock Exchange
and/or the Federal Reserve Bank of Boston are New Year's Day, Martin Luther
King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Thanksgiving and Christmas. The minimum initial investment
in the Fund is $100,000; all subsequent purchases of the Fund's shares must be
at least $5,000. Minimum investment amounts may be waived at the Distributor's
discretion. No minimum purchase amount applies to subsequent purchases made by
reinvestment of dividends.
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I784 FUNDS
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The purchase price for shares of the Fund is their net asset value (normally
$1.00 per share) next determined after the order is received and accepted by
the Distributor. Net asset value per share of the Fund is determined as of 3:00
p.m. ET on each Business Day and as of noon on each Half Day.
A purchase order for shares of the Fund will be effective as of the Business
Day the order is received by the Distributor, and Shares purchased will be
eligible to receive dividends declared the same day if the Distributor receives
a purchase order, in good form, before 3:00 p.m. ET or before noon on a Half
Day and the Distributor receives federal funds on such day. Otherwise the
purchase order will be effective the next Business Day. An order for Fund
shares may be cancelled by the Distributor and the investor held liable for any
losses or fees incurred, if the Distributor does not receive federal funds that
Business Day. Investors are encouraged to submit orders as early as practicable
on the date of investment; an order for Fund shares (even if otherwise timely)
may be rejected if in the Adviser's judgment appropriate investments are
unavailable when the order is received.
By Telephone
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If a Shareholder has previously submitted an Account Application, that
Shareholder may purchase shares by telephone by calling the Distributor toll-
free at 1-800-BKB-1784.
Other Information Regarding Purchases
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Shares may also be purchased through financial institutions, including Bank of
Boston, which provide shareholder service or other assistance to the Trust.
Texas residents may only purchase shares through the Distributor. Shares
purchased by persons ("Customers") through financial institutions may be held
of record by the financial institution. Financial institutions may impose cut-
off times for receipt of purchase orders directed through them to allow for
processing and transmittal of these orders to the Distributor. Customers should
contact their financial institution for information as to the institution's
procedures for transmitting purchase, exchange or redemption orders to the
Distributor. The Distributor's receipt of an order may be delayed by one or
more Business Days.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change. Other Shareholders who desire to
transfer the registration of their shares should contact the Shareholder
Serving Agent.
Purchases may be made by Automated Clearing House ("ACH") transactions, as well
as by check or wire transfer.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
No certificates representing shares will be issued.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such offer. The Fund will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. These
procedures will include verification of a caller's identity by asking for the
caller's name, address, telephone number, federal taxpayer identification
number, and account number. If these or other reasonable procedures to confirm
that instructions communicated by telephone are genuine are not followed, the
Fund may be liable for any losses to a Shareholder due to unauthorized or
fraudulent instructions. Otherwise, the investor will bear all risk of loss
relating to a purchase, redemption or exchange by telephone or a wire transfer.
For all purchases, if payment is not made or a check received for purchases of
Fund shares does not clear, the purchase will be canceled and the investor
could be liable for any losses or fees incurred.
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I784 FUNDS
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The net asset value per share of the Fund is determined by dividing the value
of the Fund's investments and other assets, less any liabilities, by the total
outstanding shares of the Fund. It is anticipated that the net asset value of
each share of the Fund will remain constant at $1.00 (although there can be no
assurance that the Fund will be able to maintain this stable net asset value).
Securities of the Fund are valued based on the amortized cost method described
in the Statement of Additional Information.
REDEMPTION OF SHARES
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Shareholders may redeem their shares on any Business Day and shares may
ordinarily be redeemed by mail or telephone, with proceeds payable by check,
ACH or wire transfer. A redemption is treated, for federal and state income tax
purposes, as a sale of the Fund shares redeemed; a redemption could, therefore,
result in taxable gain or loss to the Shareholder. If proceeds are paid by wire
transfer, a wire transfer charge (presently $12.00) will be imposed.
By Mail
- --------------------------------------------------------------------------------
A written request for redemption must be received by the Shareholder Servicing
Agent in good form in order to constitute a valid request for redemption. All
account holders must sign the redemption request. Under certain circumstances,
the Shareholder Servicing Agent may require that the signatures on the request
be guaranteed by a commercial bank, by a member firm of a domestic stock
exchange, or by another eligible guarantor institution. Redemption requests may
be mailed to the Shareholder Servicing Agent, P.O. Box 8524, Boston, MA 02266-
8524 or 2 Heritage Drive, North Quincy, MA 02171.
By Telephone
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Shares may be redeemed by telephone if the Shareholder elects that option on
the Account Application (unless a written redemption request, with the
Shareholder's signature guaranteed, is required; see "Signature Guarantees"
below). Telephone redemption orders must be placed with the Shareholder
Servicing Agent prior to 3:00 p.m. ET on any Business Day or prior to noon on a
Half Day to be effective on such day. The Shareholder may have the proceeds
mailed to the Shareholder's address or wired to a commercial bank account
previously designated on the Account Application. Under most circumstances,
payments will be transmitted on the next Business Day following receipt of a
valid request for redemption. Telephone redemption requests may be made by
calling the Shareholder Servicing Agent at 1-800-BKB-1784. Shareholders may not
close their account by telephone. During periods of drastic economic or market
changes or severe weather or other emergencies, Shareholders may find it
difficult to implement a telephone redemption. If such a case should occur,
another method of redemption, such as written request sent via an overnight
delivery service, should be considered. The Fund's address for overnight
deliveries is c/o Boston Financial Data Services, 2 Heritage Drive, North
Quincy, MA 02171.
Signature Guarantees
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If a Shareholder requests a redemption for an amount in excess of $25,000, a
redemption of any amount to be payable to anyone other than the Shareholder of
record or a redemption of any amount to be sent to any address other than the
Shareholder's address of record with the Fund (or in the case of ACH or wire
transfers, other than as provided in the Shareholder's Account Application),
all account holders on the Shareholder's account must sign a written redemption
request and their signatures must be guaranteed by a commercial bank, by a
member firm of a domestic stock exchange or by another eligible guarantor
institution. The Trust and the Shareholder Servicing Agent reserve the right to
amend these requirements for the Fund at any time without notice. For questions
about the proper form of redemption requests, call 1-800-BKB-1784.
Other Information Regarding Redemptions
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All redemption orders for shares of the Fund are effected at the net asset
value per share next determined after receipt, by the Shareholder Servicing
Agent, of a valid request for redemption in good form, as described above.
Payment to Shareholders for shares
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I784 FUNDS
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redeemed will be made within seven days after receipt by the Shareholder
Servicing Agent of the request for redemption. The Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
These procedures will include verification of a caller's identity by asking for
the caller's name, address, telephone number, federal taxpayer identification
number, and account number. If these or other reasonable procedures to confirm
that instructions communicated by telephone are genuine are not followed, the
Fund may be liable for any losses to a Shareholder due to unauthorized or
fraudulent instructions. Otherwise, the investor will bear all risk of loss
relating to a purchase, redemption or exchange by telephone or a wire transfer.
Forwarding of redemption proceeds for shares purchased, or received in exchange
for shares purchased, by check (including certified or cashier's checks) may be
delayed for 15 or more days to ensure that payment has been collected for the
purchase of such shares. The Fund intends to pay cash for all shares redeemed,
but under abnormal conditions which make payment in cash unwise, payment may be
made wholly or partly in Fund securities with a market value equal to the
redemption price. In such cases, an investor may incur brokerage costs in
converting such securities to cash.
The right of any Shareholder to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed during any
period in which the New York Stock Exchange is closed (other than weekends or
holidays) or trading on such Exchange is restricted, or to the extent otherwise
permitted by the Investment Company Act of 1940 if an emergency exists. See
"Purchase and Redemption of Shares" in the Statement of Additional Information
for examples of when the right of redemption may be suspended.
EXCHANGES
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Some or all of the shares of the Fund for which payment has been received by
the Distributor (i.e., an established account) may be exchanged at their net
asset value for shares of one or more of the other portfolios of the Trust.
Exchanges will be made only after instructions in writing or by telephone are
received for an established account by the Distributor.
In the case of shares held of record by Bank of Boston or one of its affiliates
but beneficially owned by a Customer, to exchange such shares the Customer
should contact Bank of Boston or the affiliate, who will contact the
Distributor and effect the exchange on behalf of the Customer. If an exchange
request in good order is received by the Distributor by 3:00 p.m. ET on any
Business Day or by noon on any Half Day, the exchange usually will occur on
that day. Any Shareholder or Customer who wishes to make an exchange must have
received a current prospectus of the portfolio of the Trust in which such
Shareholder or Customer wishes to invest before the exchange will be effected.
Residents of any state may only exchange shares for shares of another portfolio
of the Trust if that portfolio is registered in that state.
Each exchange must involve either shares having an aggregate value of at least
$5,000 or all the shares in the account, and the amount of the exchange must
meet the minimum investment requirements for the portfolio of the Trust into
which the exchange is being made.
Exchanges may be made by telephone only if that option has been elected by the
Shareholder on the Account Application. Shares may be exchanged by telephone by
calling the Distributor toll free at 1-800-BKB-1784.
No fees are currently charged to Shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge Shareholders a nominal fee in accordance with rules
promulgated by the SEC. The Fund reserves the right to reject any exchange
request in whole or in part. The exchange privilege (or any aspect of it) may
be changed or terminated at any time.
Other portfolios of the Trust may impose distribution fees based on their net
assets.
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I784 FUNDS
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An exchange is treated, for federal or state income tax purposes, as a sale of
the Fund shares exchanged; an exchange could, therefore, result in taxable gain
or loss to the Shareholder.
PERFORMANCE
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From time to time the Trust advertises the "current yield" and "effective
yield" (also referred to as "effective compound yield") of the Fund. Both yield
figures are based on historical earnings and are not intended to indicate
future performance. The "current yield" of the Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period
will be stated in the advertisement). This income is then "annualized." That
is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment in the Fund is assumed
to be reinvested. The "effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this assumed reinvestment.
The Trust may periodically compare performance of the Fund to that of other
mutual funds tracked by mutual fund rating services, to that of broad groups of
comparable mutual funds or to that of unmanaged indices which may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs.
TAXES
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The following is a discussion of certain United States federal income tax
considerations relevant to the purchase, ownership, and disposition of shares
in the Fund. The discussion, which is based on current tax laws, regulations,
rulings, and judicial decisions (all of which are subject to change at any time
by legislative, judicial, or administrative action), is not intended to be
complete; therefore, prospective investors should consult their own tax
advisers as to the tax consequences to them of an investment in the Fund.
Additional information concerning taxes is set forth in the Statement of
Additional Information.
Tax Status of the Fund
- --------------------------------------------------------------------------------
The Fund is treated as a separate entity for federal income tax purposes, and
is not combined with the Trust's other portfolios. The Trust intends to qualify
the Fund each year as a "regulated investment company" under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), and to make
distributions to its Shareholders in accordance with the timing requirements
set out in the Code. As a result, it is expected that the Fund will not be
required to pay any federal income or excise taxes.
Tax Treatment of Shareholders
- --------------------------------------------------------------------------------
Shareholders of the Fund generally will have to pay federal income taxes and
may be subject to state or local taxes on the dividends and capital gain
distributions they receive from the Fund, whether paid in cash or in additional
shares. Fund distributions from net investment income and short-term capital
gains will be taxable to Shareholders as ordinary income, while Fund
distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) will be taxable to Shareholders as long-
term capital gains, regardless of how long the Shareholders have held their
shares.
Distributions of the Fund that are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities (but
generally not from capital gains realized upon the disposition of such
obligations) may be exempt from state and local taxes. The Fund intends to
advise Shareholders of the extent, if any, to which their respective
distributions consist of such interest.
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I784 FUNDS
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The Trust expects that none of the dividends received from the Fund will be
eligible for the dividends received deduction for corporations. Any Fund
dividend that is declared in October, November, or December of a calendar year,
payable to Shareholders of record in such a month, and that is paid the
following January will be treated as if received by the Shareholders on
December 31 of the year in which the dividend is declared.
The Trust will make annual reports to Shareholders of the federal income tax
status of all Fund distributions.
The exchange or redemption of Fund shares is a taxable event to the
Shareholder, although the Trust intends to attempt to maintain a stable share
price of $1.00 per share.
The Fund will generally withhold tax payments at the rate of 30% on dividends
and other payments that are subject to such withholding and that are made to
persons who are neither citizens nor residents of the U.S., although the 30%
rate may be reduced to the extent provided by an applicable tax treaty. The
Fund is also required in certain circumstances to withhold 31% of taxable
dividends and certain redemption proceeds paid to any Shareholder (including a
Shareholder who is neither a citizen nor a resident of the U.S.) who does not
furnish to the Fund certain information and certifications or who is otherwise
subject to backup withholding. Backup withholding will not, however, be applied
to payments that have been subject to 30% (or lower treaty rate) withholding.
GENERAL INFORMATION
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The Trust
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The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated February 5, 1993. The Declaration of Trust permits the Trust to
issue an unlimited number of shares of beneficial interest of each of the
portfolios (referred to as "series") of the Trust, each of which is a separate
fund. In addition to the Fund, the Trust includes the following funds: 1784
U.S. Government Medium-Term Income Fund, 1784 Short-Term Income Fund, 1784
Income Fund, 1784 Tax-Free Money Market Fund, 1784 U.S. Treasury Money Market
Fund, 1784 Tax-Exempt Medium-Term Income Fund, 1784 Connecticut Tax-Exempt
Income Fund, 1784 Rhode Island Tax-Exempt Income Fund, 1784 Massachusetts Tax-
Exempt Income Fund, 1784 Growth and Income Fund, 1784 Asset Allocation Fund and
1784 International Equity Fund. All consideration received by the Trust for
shares of any fund and all assets of such fund belong to that fund and would be
subject to liabilities related thereto. The Trust reserves the right to create
and issue additional series of shares, and reserves the right to create and
issue shares of additional classes of any or all series.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses and reports to Shareholders,
costs of custodian services and registering the shares of the Fund and other
series under federal and state securities laws, pricing, insurance expenses,
brokerage costs, interest charges, taxes, amortization of organization
expenses, and any extraordinary expenses including but not limited to
litigation expenses. For the fiscal year ended May 31, 1995, the total expenses
of the Fund were $1,049,163, of which $284,681 was voluntarily waived or
reimbursed by the Bank of Boston (after giving effect to such waiver, 0.30% of
the Fund's average daily net assets for that period).
Under applicable law, Shareholders could, under certain circumstances, be held
personally liable for the obligations of the Trust. However, the risk of a
Shareholder incurring financial loss on account of such Shareholder liability
is limited to circumstances in which the Trust would be unable to meet its
obligations and inadequate insurance existed. The Trust believes that the
likelihood of such circumstances is remote.
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I784 FUNDS
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Trustees of the Trust
- --------------------------------------------------------------------------------
The management and affairs of the Trust are supervised by its Board of
Trustees. The Trustees have approved contracts under which, as described above,
certain companies provide essential management, administrative and Shareholder
services to the Trust.
Voting Rights
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Each share held entitles the Shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings of Shareholders but approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the remaining Trustees
or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested, the Trust will provide appropriate
assistance and information to the Shareholders requesting the meeting.
Reporting
- --------------------------------------------------------------------------------
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
- --------------------------------------------------------------------------------
Shareholder inquiries should be directed to SEI Financial Management
Corporation, P.O. Box 1784, Wayne, Pennsylvania, 19087-8784, at 1-800-BKB-1784.
Dividends and Distributions
- --------------------------------------------------------------------------------
The net investment income (exclusive of capital gains) of the Fund is
determined and declared on each business day as a dividend for Shareholders of
record as of the close of business on that day. On redemption, a Shareholder
will receive dividends up to but not including the day a valid redemption
request is received by the Transfer Agent. Dividends are paid by the Fund in
additional shares, unless the Shareholder has elected to take such payment in
cash, on the first business day of each month. Shareholders may change their
election by providing written notice to the Administrator at least 15 days
prior to the change. Currently, capital gains of the Fund, if any, are
distributed at least annually.
If dividend payments are returned and unclaimed within 30 days, they will be
reinvested and the Shareholder will be deemed to have elected to receive future
dividend and capital gain distributions in additional shares.
Counsel and Independent Accountants
- --------------------------------------------------------------------------------
Bingham, Dana & Gould, Boston, MA, serve as counsel to the Trust. Coopers &
Lybrand L.L.P., Boston, MA, serve as the independent accountants of the Trust.
Custodian
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Bank of Boston, 100 Federal Street, Boston, MA 02110, acts as Custodian of the
Trust. The Custodian holds cash, securities and other assets of the Trust as
required by the Investment Company Act of 1940. Under a separate agreement,
Bank of Boston also provides certain accounting services for the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS AND TECHNIQUES
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The following is a description of the permitted investments and investment
techniques for the Fund.
U.S. Treasury Obligations -- U.S. Treasury obligations include bills, notes and
bonds issued by the U.S. Treasury 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
15
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I784 FUNDS
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and Principal Securities ("STRIPS"). STRIPS are sold as zero coupon securities.
These securities 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. See "Zero Coupon Securities" below for more information on
these securities. The Fund may also invest in Treasury Receipts, which are
unmatured interest coupons of U.S. Treasury bonds and notes which have been
separated and resold in a custodial receipt program administered by the U.S.
Treasury.
U.S. Government Obligations -- Certain Federal agencies such as the Government
National Mortgage Association ("GNMA") have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States (e.g., GNMA) or supported by the issuing agencies' right to borrow from
the Treasury. The issues of other agencies are supported only by the credit of
the instrumentality (e.g., Federal National Mortgage Association, "FNMA"). The
Fund may invest in securities issued by any Federal agency or instrumentality.
Variable and Floating Rate Instruments -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest and may involve a
conditional or unconditional demand feature permitting the holder to demand
payment of principal at any time, or at specified intervals. Such obligations
may include variable amount master demand notes. Such instruments bear interest
at rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a Federal Reserve composite index. A demand
instrument with a demand notice period exceeding seven days may be considered
illiquid if there is no secondary market for such security; therefore, the Fund
will not invest more than 10% of its net assets in such instruments and other
illiquid securities.
The interest rate on these securities may be reset daily, weekly, quarterly, or
some other reset period and may have a floor or ceiling on interest rate
charges. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates.
Repurchase Agreements -- A repurchase agreement is an agreement by which a
person obtains a security and simultaneously commits to return 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. The
Custodian or its agent will hold the security as collateral for the repurchase
agreement. Collateral must be maintained at a value at least equal to 100% of
the purchase price. The Fund 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. The Adviser will enter into repurchase
agreements on behalf of the Fund only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Trustees. Pursuant to
an exemptive order of the SEC, the Fund may enter into repurchase agreements on
a pooled basis with other portfolios of the Trust.
Forward Commitments or Purchases On a When-Issued Basis -- The Fund may enter
into forward commitments or purchase securities on a when-issued basis, which
means that the price of the securities is fixed at the time of commitment and
that the delivery and payment will ordinarily take 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 Fund before settlement. These
securities are subject to market fluctuation due to changes in market interest
rates and will have the effect of leveraging the Fund's assets; the securities
are also subject to fluctuation in value pending settlement based upon public
perception of the creditworthiness of the issuer of these securities.
16
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I784 FUNDS
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Securities purchased on a when-issued or forward commitment basis may expose
the Fund to risk because such securities may experience such fluctuations in
value prior to their actual delivery. Agreements to purchase securities on a
when-issued or forward commitment basis will only be made with the intention of
taking delivery and not for speculative purposes. The Fund may invest up to 25%
of its assets in forward commitments or commitments to purchase securities on a
when-issued basis. While awaiting delivery of securities purchased on such
bases, the Fund will establish a segregated account consisting of cash, U.S.
Treasury Obligations and U.S. Government Obligations equal to the amount of the
commitments to purchase securities on such bases.
Securities Lending -- In order to generate additional income, the Fund may lend
the securities in which it is invested pursuant to agreements requiring that
the loan be continuously secured by cash, U.S. Treasury Obligations, U.S.
Government Obligations or any combination of cash and such securities as
collateral equal at all times to 100% of the market value of the securities
lent. The Fund may lend up to 33 1/3% of the value of its total assets. The
Fund will continue to receive interest on the securities lent while
simultaneously earning interest on the investment of cash collateral in U.S.
Treasury Obligations or U.S. Government Obligations. Collateral is marked to
market daily to provide a level of collateral at least equal to the market
value of the securities lent. There may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will only be made to borrowers
deemed by the Adviser to be of good standing and when, in the judgment of the
Adviser, the consideration which can be earned currently from such securities
loans justifies the attendant risk.
Zero Coupon Securities -- Zero coupon securities are fixed income securities
that have been stripped of their unmatured interest coupons. A zero coupon
security pays no interest or principal to its holder during its life. A zero
coupon security is sold at a discount, frequently substantial, and redeemed at
face value at its maturity date. The amount of the discount fluctuates with the
market price of the security, and is accreted over the life of the security.
Such accretion constitutes the income earned on the security for both
accounting and tax purposes. The market prices of zero coupon securities are
generally more volatile than the market prices of securities of similar
maturity that pay interest periodically, and zero coupon securities are likely
to respond to a greater degree to interest rate changes than are non-zero
coupon securities with similar maturity and credit qualities.
Restraints on Investments by the Fund -- Investments by the Fund are subject to
limitations imposed under regulations adopted by the SEC. Under these
regulations money market funds may acquire only obligations that present
minimal credit risks and that are "eligible securities," which means they are
(i) rated, at the time of investment, by at least two nationally recognized
statistical rating organizations (one if it is the only organization rating
such obligation) in the highest short-term rating category or, if unrated,
determined to be of comparable quality (a "first tier security"), or (ii) rated
according to the foregoing criteria in the second highest short-term rating
category (or rated by one nationally recognized statistical rating organization
in the highest short-term rating category and by another organization in the
second highest short-term rating category) or, if unrated, determined to be of
comparable quality ("second tier security"). A security is not considered to be
unrated if its issuer has outstanding obligations of comparable priority and
security that have a short-term rating. The Adviser will determine that an
obligation presents minimal credit risks or that unrated instruments are of
comparable quality in accordance with guidelines established by the Trustees.
Under normal circumstances, the Fund intends to invest all of its investable
assets in U.S. Treasury Obligations, U.S. Government Obligations, repurchase
agreements involving U.S. Treasury Obligations or U.S. Government Obligations,
and securities of registered investment companies which invest solely in the
foregoing types of securities.
17
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The Board of Trustees of the Trust has certain obligations, in the event that a
security ceases to be a first-tier security or ceases to be a second-tier
security, to reassess whether such security continues to present only minimal
credit risks.
The Fund will invest only in U.S. dollar-denominated securities, will maintain
an average maturity on a dollar-weighted basis of 90 days or less and will
acquire only "eligible securities" that have or are deemed to have a maturity
of 397 days or less and that present minimal credit risks as determined by or
on behalf of the Board of Trustees of the Trust. The Fund will comply with the
various requirements of Rule 2a-7 under the Investment Company Act of 1940,
which regulates money market funds. In particular, the Fund will determine the
effective maturity of its investments (including certain variable rate
instruments, where maturity may be deemed to be the period remaining until the
next interest rate adjustment date or until payment of the security may be
demanded) according to Rule 2a-7 as in effect from time to time.
18
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
Expense Summary 2
Summary 2
Condensed Financial Information 4
The Trust 5
Investment Objective 5
Investment Policies 5
Certain Investment Policies and Guidelines 6
Investment Limitations 6
The Adviser 7
The Administrator 9
<CAPTION>
Page
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<S> <C>
The Shareholder Servicing Agent and
Transfer Agent 9
The Distributor 9
Purchase of Shares 9
Redemption of Shares 11
Exchanges 12
Performance 13
Taxes 13
General Information 14
Description of Permitted Investments and
Techniques 15
</TABLE>
Rule 497(e) - File Nos. 33-58004 and 811-7474
1784 FUNDS
1784 GROWTH AND INCOME FUND
1784 ASSET ALLOCATION FUND
1784 INTERNATIONAL EQUITY FUND
1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND
1784 SHORT-TERM INCOME FUND
1784 INCOME FUND
1784 TAX-EXEMPT MEDIUM-TERM INCOME FUND
1784 MASSACHUSETTS TAX-EXEMPT INCOME FUND
1784 RHODE ISLAND TAX-EXEMPT INCOME FUND
1784 CONNECTICUT TAX-EXEMPT INCOME FUND
1784 TAX-FREE MONEY MARKET FUND
1784 U.S. TREASURY MONEY MARKET FUND
SUPPLEMENT TO PROSPECTUSES DATED OCTOBER 2, 1995
This Supplement relates to information set forth in the
Prospectuses under the headings "Purchase of Shares,"
"Redemption of Shares" and
"The Shareholder Servicing and Transfer Agent."
The Funds' Shareholder Servicing Agent and Dividend Disbursing Agent is
Boston Financial Data Services, 2 Heritage Drive, North Quincy, MA 02171. The
Funds' Transfer Agent is State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110. The Funds pay fees for these services.
Investors purchasing Fund shares by mail should mail completed Account
Applications and checks, bank drafts or money orders to the Transfer Agent, P.O.
Box 8524, Boston, MA 02266-8524. The telephone number for purchases is
1-800-BKB-1784.
Redemption requests should be sent to the Shareholder Servicing Agent at
P.O. Box 8524, Boston, MA 02266-8524 (2 Heritage Drive, North Quincy, MA 02171,
for overnight deliveries). The telephone number for redemptions is
1-800-BKB-1784. Payment for shares redeemed will be made within seven days.
Any purchase orders or redemption requests previously sent to the address
set forth in the Prospectuses will be forwarded to the Shareholder Servicing
Agent.
Shareholders wishing to transfer the registration of Fund shares should
contact the Transfer Agent. Investors who hold Fund shares through a financial
institution should contact that institution to transfer registration.
December 4, 1995
