1784
ANNUAL
REPORT
TO SHAREHOLDERS
[LOGO]
1784 FUNDS
1784 Institutional
U.S. Treasury Money Market Fund
MAY 31, 1996
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TABLE OF CONTENTS
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Letter to Shareholders 1
Investment Adviser's Report 2
Management's Discussion
of Fund Performance 4
Report of Independent Accountants 5
Financial Statements 6
Notice to Shareholders 14
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THE 1784 FUNDS:
(ARROW HEAD) are not insured by the FDIC or any other governmental agency;
(ARROW HEAD) are not guaranteed by The First National Bank of Boston or any
of its affiliates;
(ARROW HEAD) are not deposits or other obligations of The First National Bank
of Boston or any of its affiliates;
(ARROW HEAD) involve investment risks, including possible loss of the
principal amount invested.
The First National Bank of Boston serves as investment adviser, custodian and
fund accountant for the 1784 Funds. The 1784 Funds are distributed by SEI
Financial Services Company, a party independent of The First National Bank of
Boston or any of its affiliates.
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[LOGO]
1784 FUNDS
SOUND CHOICES. STRAIGHT TALK.
INVESTMENT MANAGEMENT STRENGTH.
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1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
LETTER TO SHAREHOLDERS
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[GRAPHIC OMITTED]
Photo of ALLEN CROESSMANN MANAGING DIRECTOR AND ROBERT NESHER PRESIDENT
DURING THE PAST YEAR, THE MONEY MARKETS PRODUCED STRONG RETURNS IN EXCESS OF
5.00%, COMPARING FAVORABLY WITH SHORT-TERM BONDS. INVESTORS IN THE 1784
INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND BENEFITED FROM THIS CLIMATE --
AND FROM STRATEGIC POSITIONING THAT ANTICIPATED THE FEDERAL RESERVE BOARD'S
THREE INTEREST RATE REDUCTIONS DURING THE PERIOD.
FOR THE YEAR ENDED MAY 31, 1996, THE FUND PRODUCED A TOTAL RETURN OF 5.45%,
OUTPERFORMING BOTH THE IBC/DONOGHUE AND LIPPER BENCHMARKS, AND RANKING IN THE
TOP 35% (33 OUT OF 95) OF THE LIPPER INSTITUTIONAL U.S. TREASURY MONEY MARKET
FUNDS. YOU'LL FIND MORE COMPLETE INFORMATION ON THE 1784 INSTITUTIONAL U.S.
TREASURY MONEY MARKET FUND IN THE MANAGEMENT'S DISCUSSION SECTION OF THIS
REPORT.
WE NOTE, TOO, THAT THE FUND ACHIEVED THESE RESULTS WHILE MAINTAINING STRINGENT
CREDIT STANDARDS AND AN `AAAM' RATING FROM STANDARD & POORS, WHICH IS BASED ON
THE FUND'S CREDIT QUALITY, MARKET PRICE EXPOSURE AND MANAGEMENT.
THANK YOU FOR SELECTING THE 1784 FUNDS. PLEASE CALL YOUR INVESTMENT COUNSELOR OR
CALL 1-800-252-1784 WITH ANY QUESTIONS ABOUT YOUR ACCOUNT. WE LOOK FORWARD TO
HELPING YOU MANAGE YOUR CASH RESERVES.
/s/Robert Nesher
Robert Nesher
President
1784 Funds
/s/Allen Croessmann
Allen Croessmann
Managing Director, Investment Services
The First National Bank of Boston
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MAY 31, 1996
INVESTMENT ADVISER'S REPORT
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PHOTO OF EDWARD G. RILEY, JR.
CHIEF INVESTMENT OFFICER
In recent years, changes in interest rates have been the pivotal factor
affecting the performance of the economy. Over the fiscal year, that performance
has varied widely. Recently, the economic sluggishness that was caused by a
harsh winter has given way to a period of rapid economic growth. In our view,
however, the economy is not as strong as it appears, and we expect to see
signals of slower growth later this summer and in the fall.
The most important reason for the slowdown will be a decline in consumer
spending, which accounts for two-thirds of all U.S. economic activity. The
economy benefited last year from a surge in mortgage refinancings on the part of
consumers, who responded to attractive interest rates. By lowering their monthly
payments, these consumers freed up cash for discretionary purchases. With recent
increases in mortgage rates, refinancing activity has declined 75% from 1995's
peaks. In addition, the 8% rate on 30-year home mortgages will have a negative
impact on home sales and the economic activity that goes along with them.
In some senses, however, slower economic growth is simply to be expected in
an economic recovery that has spanned six years. Any pent-up consumer demand has
already been satisfied. We are also seeing other indicators of a mature
recovery, including rising levels of consumer debt and bankruptcies. When these
trends are accompanied by job insecurity, as they are now, consumer spending is
likely to slow even more.
Fortunately, inflation is likely to remain low. While the abnormally cold
winter pushed up energy and food costs, core inflation rates, which do not
include these costs, have remained subdued at 2% to 3%. Although the second half
of 1996 could see some evidence of rising labor costs, slower economic growth
should help keep inflation well under control.
Federal Funds Rate
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5/31/95 5/31/96
6.00% 5.25%
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1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
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MONEY MARKET REVIEW
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The stop-and-start nature of economic activity during the past twelve months has
resulted in concern about the sustainability of 2.5% real economic growth. In
response to weak economic data, the Federal Reserve Board lowered interest rates
three times during the course of the fiscal year -- from 6.00% in June 1995 to
5.25% on May 31, 1996.
Note, however, that the last rate reduction occurred on January 31, 1996.
Improved economic news this spring has caused the Federal Reserve to hold off on
further rate reductions. As a result, short-term investors can still earn rates
in the 5.25% range, which compares favorably with rates available to bond
investors. Assuming that the economy continues to weaken as expected in 1996,
the Federal Reserve may be forced to lower rates toward year-end to forestall a
recession.
Because we anticipated the decline in short-term interest rates, our
strategy called for lengthening maturities in the 1784 Institutional U.S.
Treasury Money Market Fund. As a result, the Fund performed well and ended the
year in the top 35% of its Lipper peer group. For further performance
information, please see the Management's Discussion of Fund Performance section.
/s/Edward G. Riley, Jr.
Edward G. Riley, Jr.
Chief Investment Officer
The First National Bank of Boston
3
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
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THE 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
The objective of the 1784 Institutional U.S. Treasury Market Fund is to preserve
principal value and maintain a high degree of liquidity while providing current
income. As of May 31, 1996, the Fund had grown to $644.7 million in assets.
For the year ended May 31, 1996, the Fund had a total return of 5.45%
compared with 5.38% for the IBC/Donoghue Government-Only Institutional-Only
Average, and 5.29% for the Lipper Institutional U.S. Treasury Money Market Funds
Average. Based on total return, the Fund ranked among the top 35% (33 out of 95)
of the Lipper Institutional U.S. Treasury Money Market Funds for the period June
1, 1995 to May 31, 1996. The 7-day yield as of May 31, 1996, was 4.86%. The
Fund's return and resulting ranking are net of waiver of management fees. (See
Financial Highlights.)
On December 8, 1995, the Fund's 'AAAm' rating was again confirmed by
Standard & Poor's. The rating is based on an analysis of the Fund's credit
quality, market price exposure and management. The rating signifies that in the
opinion of Standard & Poor's, the Fund offers excellent safety of investment
principal and superior capacity to maintain a $1.00 per share net asset value at
all times. The Fund attempts to maintain these characteristics through
conservative investment practices and strict internal controls. The Fund is
reviewed on a weekly basis by Standard & Poor's.
The Fund invests primarily in U.S. Government agency securities and U.S.
Treasury obligations. The most important factor influencing the Fund's
performance in the past fiscal year was the reduction of interest rates by the
Federal Reserve Board in its effort to forestall economic recession. By the end
of the year, the Federal Funds rate had been lowered three times, from 6.00% in
June 1995 to 5.25% on May 31, 1996. The Fund anticipated these reductions and
extended maturities when possible.
The Fund's average-weighted-maturity, currently 47 days, remains shorter
than similar funds measured by IBC/Donoghue Money Fund Averages. As current
holdings mature, the Fund will be managed with the goal of maintaining its
'AAAm' rating.
THE 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
Comparison of Change in the Value of a $10,000 Investment
in the 1784 Institutional U.S. Treasury Money Market Fund versus the
IBC/Donoghue Government-Only Institutional-Only Average and the
Lipper Institutional U.S. Treasury Money Market Funds Average
Annualized
One Year Inception to
Return Date
5.45% 4.55%
Initial Investment Date 6/30/93 May-94 May-95 May-96
1784 Institutional U.S. Treasury $10,000 $10,286 $10,805 $11,394
Money Market Fund
IBC/Donoghue Government-Only $10,000 $10,275 $10,784 $11,364
Institutional-Only Average
Lipper Institutional U.S. Treasury
Money Market Funds Average $10,000 $10,270 $10,770 $11,340
Past performance of the Fund is not predictive of future performance.
4
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Trustees of 1784 Institutional
U.S. Treasury Money Market Fund:
We have audited the accompanying statement of net assets of the 1784
Institutional U.S. Treasury Money Market Fund including the investment
portfolio, as of May 31, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the two
years in the period then ended and for the period from June 14, 1993
(commencement of operations) to May 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
1784 Institutional U.S. Treasury Money Market Fund as of May 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the two years in the period then ended and for the period from June
14, 1993 (commencement of operations) to May 31, 1994, in conformity with
generally accepted accounting principles.
Boston Massachusetts COOPERS & LYBRAND L.L.P.
July 19, 1996
5
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MAY 31, 1996
STATEMENT OF NET ASSETS
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THE 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
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DESCRIPTION PAR (000) VALUE (000)
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U.S. TREASURY OBLIGATIONS -- 25.9%
U.S. Treasury Bills(DAGGER)
4.800%, 06/20/96 $ 65,000 $ 64,827
5.260%, 07/25/96 11,000 10,912
5.320%, 08/22/96 5,000 4,940
5.380%, 10/17/96 5,000 4,898
5.160%, 11/14/96 18,000 17,579
4.950%, 02/06/97 3,000 2,900
5.400%, 03/07/97 18,000 17,275
5.480%, 04/03/97 17,000 16,241
5.560%, 05/01/97 17,000 16,164
U.S. Treasury Notes
4.375%, 08/15/96 9,000 8,974
4.375%, 11/15/96 2,000 1,991
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TOTAL U.S. TREASURY OBLIGATIONS
(Cost $166,701) 166,701
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U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 29.0%
Federal Farm Credit Bank
Discount Notes(DAGGER)
4.860%, 06/11/96 5,500 5,492
5.030%, 07/01/96 9,500 9,459
5.180%, 08/07/96 15,300 15,152
Federal Farm Credit Bank
5.300%, 08/01/96 20,000 20,000
5.600%, 11/01/96 1,500 1,501
Federal Home Loan Bank
Discount Notes(DAGGER)
4.940%, 06/13/96 13,440 13,417
Federal Home Loan Bank
4.860%, 02/07/97 1,000 995
Federal Home Loan Mortgage
Corporation Discount Notes(DAGGER)
4.160%, 06/05/96 28,000 27,984
5.110%, 07/15/96 25,000 24,841
Federal National Mortgage
Association Discount Notes(DAGGER)
4.330%, 06/06/96 23,000 22,983
Federal National Mortgage
Association
5.470%, 11/14/96 12,000 11,999
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DESCRIPTION PAR (000) VALUE (000)
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Student Loan Marketing
Association (A)
5.310%, 06/04/96 $ 5,000 $ 5,000
5.330%, 06/04/96 10,000 10,002
5.360%, 06/04/96 500 499
5.510%, 06/04/96 3,000 3,008
5.560%, 06/04/96 5,000 5,005
Tennessee Valley Authority
6.000%, 01/15/97 9,825 9,847
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TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $187,184) 187,184
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REPURCHASE AGREEMENTS -- 45.2%
Goldman Sachs
5.30%, dated 05/31/96,
matures 06/03/96, repurchase
price $95,041,958
(collateralized by various
U.S. Treasury Bonds ranging
in par value $1,500,000 -
$10,000,000, 6.25% - 13.875%,
11/15/02 - 11/15/24;
U.S. Treasury Notes ranging
in par value $975,000 -
$10,000,000, 5.75% - 7.875%,
05/31/97 - 11/15/04;
U.S. Treasury STRIPS par
value 280,530,000, 11/15/18;
total market value
$96,900,000) 95,000 95,000
J. P. Morgan
5.30%, dated 05/31/96,
matures 06/03/96, repurchase
price $92,611,065
(collateralized by various
U.S. Treasury Notes ranging
in par value $20,583,808 -
$100,000,000, 4.75% - 8.875%,
08/31/98 - 11/15/98; total
market value $94,422,878) 92,570 92,570
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
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1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
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THE 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
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DESCRIPTION PAR (000) VALUE (000)
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REPURCHASE AGREEMENTS (continued)
Lehman Brothers
5.22%, dated 05/31/96,
matures 06/03/96, repurchase
price $104,218,945
(collateralized by various
U.S. Treasury Bonds ranging
in par value $340,000 -
$16,585,000, 6.0% - 8.125%,
02/15/21 - 02/15/26;
U.S. Treasury Notes ranging
in par value $97,355 -
$44,415,000, 5.5% -8.875%,
01/31/00 - 07/31/00;
total market value
$106,223,808) $ 104,174 $ 104,174
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TOTAL REPURCHASE AGREEMENTS
(Cost $291,744) $ 291,744
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TOTAL INVESTMENTS -- 100.1%
(Cost $645,629) 645,629
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TOTAL OTHER ASSETS AND LIABILITIES,
NET -- (0.1%) (896)
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DESCRIPTION VALUE (000)
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NET ASSETS:
Capital Shares (unlimited authorization --
no par value) based on 644,617,835
outstanding shares of beneficial interest $644,618
Accumulated net realized gain on
investments 115
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TOTAL NET ASSETS-- 100.0% $644,733
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE $1.00
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(DAGGER) EFFECTIVE YIELD IN EFFECT ON MAY 31, 1996.
(A) VARIABLE RATE SECURITY -- THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON MAY 31, 1996.
STRIPS -- SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
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FOR THE YEAR ENDED MAY 31, 1996
STATEMENT OF OPERATIONS (000)
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1784 INSTITUTIONAL
U.S. TREASURY
MONEY MARKET FUND
==================
INTEREST INCOME: $29,028
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EXPENSES:
INVESTMENT ADVISORY FEES 1,032
WAIVER OF INVESTMENT ADVISORY FEES (381)
ADMINISTRATOR FEES 559
REGISTRATION FEES 110
TRANSFER AGENT FEES & EXPENSES 68
PROFESSIONAL FEES 91
FUND ACCOUNTING FEES 30
PRINTING 23
CUSTODIAN FEES 68
AMORTIZATION OF DEFERRED ORGANIZATIONAL COSTS 10
TRUSTEE FEES 19
OTHER EXPENSES 34
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TOTAL EXPENSES, NET OF WAIVERS 1,663
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NET INVESTMENT INCOME 27,365
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NET REALIZED GAIN ON INVESTMENTS 130
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $27,495
=======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
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1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS (000)
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1784 INSTITUTIONAL
U.S. TREASURY
MONEY MARKET FUND
=============================
6/1/95 6/1/94
TO TO
5/31/96 5/31/95
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INVESTMENT ACTIVITIES:
NET INVESTMENT INCOME $ 27,365 $ 13,209
NET REALIZED GAIN ON INVESTMENTS 130 4
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 27,495 13,213
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DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME (27,365) (13,209)
REALIZED CAPITAL GAINS -- --
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TOTAL DISTRIBUTIONS (27,365) (13,209)
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SHARE TRANSACTIONS:
PROCEEDS FROM SHARES ISSUED 3,313,925 3,035,609
REINVESTMENT OF CASH DISTRIBUTIONS 14,121 5,500
COST OF SHARES REDEEMED (3,079,028) (2,827,096)
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INCREASE IN NET ASSETS FROM SHARE
TRANSACTIONS 249,018 214,013
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TOTAL INCREASE IN NET ASSETS 249,148 214,017
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NET ASSETS:
BEGINNING OF PERIOD 395,585 181,568
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NET ASSETS:
END OF PERIOD $ 644,733 $ 393,585
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CAPITAL SHARES TRANSACTIONS:
SHARES ISSUED 3,313,925 3,035,609
SHARES ISSUED IN LIEU OF CASH DISTRIBUTIONS 14,121 5,500
SHARES REDEEMED (3,079,028) (2,827,096)
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NET INCREASE IN CAPITAL SHARE TRANSACTIONS 249,018 214,013
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
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FOR THE YEAR ENDED MAY 31, 1996
FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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RATIO RATIO OF
NET NET NET RATIO OF EXPENSES NET INCOME
ASSET DISTRIBUTIONS ASSET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET VALUE END OF OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1784 INSTITUTIONAL
U.S. TREASURY
MONEY MARKET FUND
FOR THE YEAR ENDED
MAY 31, 1996 $1.00 0.05 (0.05) $1.00 5.45% $644,733 0.32% 5.29% 0.39% 5.22%
FOR THE YEAR ENDED
MAY 31, 1995 $1.00 0.05 (0.05) $1.00 5.05% $395,585 0.30% 5.12% 0.41% 5.01%
FOR THE PERIOD ENDED
MAY 31, 1994 (1) $1.00 0.03 (0.03) $1.00 2.99%* $181,568 0.22% 3.16% 0.55% 2.83%
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<FN>
* RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(1) THE 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND COMMENCED OPERATIONS
ON JUNE 14, 1993. ALL RATIOS FOR THE PERIOD HAVE BEEN ANNUALIZED.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
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MAY 31, 1996 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
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1. ORGANIZATION
The 1784 Institutional U.S. Treasury Money Market Fund is a portfolio of the
1784 Funds (the "Trust"), an open-end investment company registered under the
Investment Company Act of 1940, as amended. The Trust is presently offering
shares in 14 separate portfolios (the "Funds"):
MONEY MARKET FUNDS:
1784 U.S. TREASURY MONEY MARKET FUND
1784 TAX-FREE MONEY MARKET FUND
1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
BOND FUNDS:
1784 SHORT-TERM INCOME FUND
1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND
1784 INCOME FUND
1784 TAX-EXEMPT MEDIUM-TERM INCOME FUND
1784 CONNECTICUT TAX-EXEMPT INCOME FUND
1784 MASSACHUSETTS TAX-EXEMPT INCOME FUND
1784 RHODE ISLAND TAX-EXEMPT INCOME FUND
STOCK FUNDS:
1784 ASSET ALLOCATION FUND
1784 GROWTH AND INCOME FUND
1784 GROWTH FUND
1784 INTERNATIONAL EQUITY FUND
The Funds' prospectuses provide a description of each Fund's investment
objectives, policies and strategies.
The financial statements of the 1784 Institutional U.S. Treasury Money Market
Fund are included herein. The financial statements of the remaining Funds are
presented separately. The assets of each Fund are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. The
financial statements have been prepared in accordance with generally accepted
accounting principles which requires the use of estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
1784 Institutional U.S. Treasury Money Market Fund (the "Fund").
SECURITY VALUATION --
Investment securities of the Fund are stated at amortized cost which
approximates market value. Under this valuation method, purchase discounts and
premiums are accreted and amortized ratably to maturity and are included in
interest income.
SECURITY TRANSACTIONS AND INVESTMENT INCOME --
Security transactions are accounted for on the trade date of the security
purchase or sale. Costs used in determining net realized capital gains and
losses on the sale of securities are those of the specific securities sold,
adjusted for the accretion and amortization of the purchase discounts and
premiums during the respective holding period. Interest income is recorded on
the accrual basis.
REPURCHASE AGREEMENTS --
Securities pledged as collateral for Repurchase Agreements are held by the
Fund's custodian bank until maturity of the
11
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MAY 31, 1996
NOTES TO FINANCIAL STATEMENTS
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Repurchase Agreements. Provisions of the Repurchase Agreements and procedures
adopted by the Adviser are intended to ensure that the market value of the
collateral, including accrued interest thereon, is sufficient in the event of
default by the counterparty. If the counterparty defaults and the value of the
collateral declines or if the counterparty enters into insolvency proceedings,
realization of the collateral by the Fund may be delayed or limited.
EXPENSES --
Expenses that are directly related to the Fund are charged directly to the Fund.
Other operating expenses of the Trust are prorated to the Funds on the basis of
relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income are declared on a daily basis and are
payable on the first business day of the following month. Any net realized
capital gains on sales of securities for the Fund are distributed to its
shareholders at least annually.
Federal Income Taxes --
The Trust's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Accordingly, no provision for Federal income
taxes is required in the financial statements.
ORGANIZATION COSTS --
These costs have been deferred in the accounts of the Fund and are being
amortized on a straight line basis over a period of sixty months commencing with
operations. If any or all of the shares representing initial capital of the Fund
are redeemed by any holder thereof prior to the end of the amortization period,
the proceeds will be reduced by the unamortized organization cost balance in the
same proportion as the number of shares redeemed bears to the initial shares
outstanding immediately preceding the redemption.
3. INVESTMENT ADVISORY, CUSTODIAL AND ACCOUNTING SERVICES
Pursuant to an investment advisory agreement dated June 1, 1993, investment
advisory services are provided to the Trust by The First National Bank of Boston
(the "Adviser"). The Adviser is entitled to receive a fee of 0.20% of the
average daily net assets of the 1784 Institutional U.S. Treasury Money Market
Fund. Such fee is computed daily and paid monthly.
The Trust and The First National Bank of Boston (the "Custodian") are
parties to a custodial agreement dated June 1, 1993 under which the Custodian
holds cash, securities and other assets of the Trust as required by the
Investment Company Act of 1940. The
12
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1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
(CONCLUDED)
================================================================================
Custodian is entitled to receive an annual fee, to be paid monthly, of 0.01% for
the first $100 million in average daily net assets, 0.0075% for the next $100
million and 0.005% for the next $800 million in average daily net assets. In its
capacity as custodian to the Trust, the Custodian plays no role in determining
the investment policies of the Trust or which securities are to be purchased or
sold by the Fund.
Under a separate agreement, The First National Bank of Boston also provides
certain accounting services for the Trust and is entitled to receive an annual
fee of $30,000 for its services to the Fund per year.
The First National Bank of Boston voluntarily waives a portion of its
advisory fees. In addition, the The First National Bank of Boston reimburses
certain other expenses incurred by the Fund in order to help the Fund maintain a
competitive expense ratio.
4. ADMINISTRATIVE, DISTRIBUTION AND
TRANSFER AGENT SERVICES
Pursuant to an administrative agreement dated June 7, 1993, SEI Financial
Management Corporation ("SEI") acts as the Trust's Administrator. Under the
terms of such agreement, SEI is entitled to receive an annual fee of 0.15% of
the Trust's first $300 million of average daily net assets, 0.12% of the Trust's
second $300 million of average daily net assets and 0.10% of the Trust's average
daily net assets over $600 million. Such fee is computed daily and paid monthly.
For the period June 1, 1995 to November 17, 1995, SEI Financial Management
Corporation acted as the Transfer Agent of the Fund. Pursuant to an agreement
dated November 17, 1995, State Street Bank and Trust Company acts as the
Transfer Agent of the Fund. As such, State Street Bank and Trust Company
provides transfer agency, dividend disbursing, shareholder servicing and
administrative services for the Fund.
SEI Financial Services Company ("SFS"), a wholly owned subsidiary of SEI,
acts as the Trust's Distributor pursuant to a distribution agreement dated
June 1, 1993. SFS is paid no fees by the Trust.
Certain officers of the Trust are also officers of the Administrator. Such
officers are paid no fees by the Trust.
The Funds have paid legal fees to a law firm of which the Secretary of the
Trust is member.
5. LINE OF CREDIT
The Fund has a bank line of credit. Borrowings under the line of credit are
secured by investment securities of the Fund, which may not exceed 10% of the
Fund's total assets. No borrowings were outstanding at May 31, 1996.
13
<PAGE>
MAY 31, 1996
NOTICE TO SHAREHOLDERS OF THE
1784 INSTITUTIONAL U.S.TREASURY MONEY MARKET FUND (UNAUDITED)
================================================================================
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATIONAL
PURPOSES ONLY.
Dear 1784 Funds Shareholders:
For the fiscal year ended May 31, 1996, the 1784 Institutional U.S.
Treasury Money Market Fund is designating long term capital gains, qualifying
dividends and exempt income with regard to distributions paid during the year as
follows:
<TABLE>
<CAPTION>
(A)* (B)*
LONG TERM ORDINARY (C) (E)**
CAPITAL GAINS INCOME TOTAL (D)** TAX- (F)**
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
(TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1) INTEREST TAX CREDIT
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL
U.S. TREASURY
MONEY MARKET 0% 100% 100% 0% 0% 0%
<FN>
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF THE FUND'S TOTAL
DISTRIBUTION.
** ITEMS (D), (E) AND (F) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME
DISTRIBUTIONS OF THE FUND.
</FN>
</TABLE>
Please consult your tax adviser for proper treatment of this information.
14
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
ANNUAL REPORT
MAY 31, 1996
=====================================================================
1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
BOARD OF TRUSTEES
David H. Carter
Tarrant Cutler
Kenneth A. Froot
Kathryn Flacke Muncil
Robert A. Nesher
INVESTMENT ADVISER
The First National Bank of Boston
Boston, MA 02110
ADMINISTRATOR
SEI Financial Management Corporation
Wayne, PA 19087
DISTRIBUTOR
SEI Financial Services Company
Wayne, PA 19087
LEGAL COUNSEL
Bingham, Dana & Gould LLP
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Boston, MA 02109
CUSTODIAN
The First National Bank of Boston
Boston, MA 02110
FOR MORE INFORMATION, INCLUDING A PROSPECTUS,
CALL 1-800-252-1784.
[LOGO]
1784 FUNDS
SOUND CHOICES. STRAIGHT TALK.
INVESTMENT MANAGEMENT STRENGTH.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUNDS NAMED ABOVE.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN A FUND UNLESS
PRECEDED OR ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS.
BKB-F-031-03
